If any organizations had doubts about the virtues of agility, the COVID-19 pandemic has dispelled them. Companies that emerged stronger—or were harmed the least—appear to be those that were most organizationally agile.
Organizational agility is the ability of organizations to make timely, effective and sustained changes when and where they result in a performance advantage, says Pepperdine University research professor of management Christopher Worley.
John Deere's information technology organization adopted the Agile operating model, one of the most widely used methodologies for achieving organizational agility, over the past two years. It has enabled the Moline, Ill.-based equipment manufacturer's information technology and business partners to pivot much more successfully in the wake of the COVID-19 pandemic than would otherwise have been possible, says Ganesh Jayaram, vice president of information technology at John Deere.
Jayaram notes that the use of Agile allowed the rapid development and deployment of digital services that were important to supporting customers during the pandemic. The efforts have paid off: Deere & Co. (the organization's formal name) has reported dramatic growth in net sales and revenue since the public health crisis began. "We could not have deployed those solutions at scale during COVID-19 conditions without our Agile operating model," Jayaram says.
Making the Transformation
Studies have linked organizational success and agility. A McKinsey & Co. report released in May 2021 and based on a survey of more than 2,100 organizations found that a highly successful agile transformation tripled the likelihood that an organization would be a top-quartile performer when compared to organizations with no agile transformation.
The report, The Impact of Agility: How to Shape Your Organization to Compete, also found that 65 percent of organizations that were highly successful in agile transformations reported a significant impact on their financial performance after the transformation. But only 15 percent of companies that underwent less-successful transformations reported strong financial results.
Agile transformations occur when companies start from traditional operating models and transform largely or in totality to work under the Agile operating model, in which networks of teams are organized around a business-focused mission and connections among teams and digital technology facilitate more iterative, collaborative, entrepreneurial and rapid work, notes Christopher Handscomb, a London-based McKinsey & Co. partner.
The report found such transformations are becoming more widespread. Of the organizations surveyed, 44 percent saw agile transformation at their companies, though only 14 percent reported that such transformations were happening enterprisewide.
It also found that different economic sectors are becoming more agile at different rates, with telecom and financial services leading the way and public- and social-sector organizations and professional services coming in last. Industries that are leaders in agile practices tend to have been exposed to disruptive events, such as regulatory changes, to a higher degree. They also are increasingly focused on producing digital products, Handscomb says.
"Amazon, Google and Netflix are invading more and more spaces," says Peter Hildebrandt, a Boston Consulting Group (BCG) managing director and partner based in Los Angeles. "Their agility, as demonstrated by their ability to bring new products quickly to market, gives them a huge advantage over more traditional organizations in any space they enter. We are seeing less-agile incumbents attempt to catch up and struggle."
Definitions of agility and its components vary. McKinsey describes organizational agility as the ability to quickly reconfigure strategy, structure, processes, people and technology toward value-creating and value-protecting opportunities.
Others note that the organizational trait of agility tends to encompass a variety of necessary attributes, including:
- Use of digital technology to expedite the collection and dissemination of knowledge throughout the organization, enhance analytics and automate routine functions.
- Dedication of people and processes to innovation.
- Regular realignment of objectives throughout the organization.
- Capacity to recover from adverse conditions while capitalizing on opportunities.
- More flexible, iterative and purposeful work processes by employees.
Worley notes that a common misunderstanding of agility is that it simply represents the ability to make decisions more quickly. Rather, he says, agile organizations often can make the right key decisions more quickly because they are better prepared.
To determine the best way forward, they have tested potential solutions to various challenges long before the optimal time to deploy them. When the trajectory of growth becomes clearer, these previously developed tools and approaches are taken off the shelf, adjusted slightly for new circumstances and pressed into service.
This requires an organization to have more comfort with experimentation and failure than many organizations have, Worley says. Essentially, businesses must have a dual nature: one component that carries on day-to-day business and another that is enabled to pursue what is essentially research and development.
The agile transformation of health care company Cambia Health Solutions is a case in point.
For Cambia, with operations in Idaho, Oregon, Utah and Washington state, legal and regulatory mandates fueled the initiative to imbue the company with greater agility. With 4,700 employees, Cambia adopted major organizational changes as Congress was considering and passing what would become the Affordable Care Act, which resulted in major changes to the design and delivery of health insurance in the U.S.
The business potential that emerged from the law drove home the need for change and greater agility, says Mark Stimpson, the company's senior vice president and chief human resources officer. "We had to figure out how we would thrive in this new environment," Stimpson says. "We needed a model where whatever emerged, we'd be independent and we could thrive."
Cambia created a parent holding company to house Regence, its traditional, breadwinning insurance business, and a new subdivision, Direct Health Solutions (DHS). DHS was a newly created incubator business unit charged with developing or investing in innovative products and services, such as other lines of insurance, alternative forms of health care access, and free-standing health and wellness solutions, notes Worley, who as a consultant assisted the organization with its transformation. (DHS has since spun off as its own company, Echo Health Solutions.)
Two and a half years into its journey, a survey of the organization's leadership found significant improvements in all dimensions of design and agility, including leaders' ratings of the extent to which the culture was more change-friendly.
"You learn that being agile is a process," Stimpson says. "It is never over.
"The biggest thing I have learned," he adds, "is that you can have all the processes and systems—and those are important—but if you don't have the right people, your change effort will not be effective."
There are several approaches to achieving agility. The Agile operational methodology is one of the most common. In existence since 2001 when a group of software developers announced the creation of the Agile Manifesto, it features small teams working discrete components of larger projects on tight deadlines and frequent check-ins with management and/or clients. Agile is a way of working that emphasizes collaboration and responsiveness. Cross-functional teams break down walls within organizations while iterative cycles mean feedback and improvements are incorporated quickly.
Among key Agile terms is "scrum," which is a process that uses an agile mindset for developing, delivering and sustaining complex products. Another term is "sprints," which are short-term project development events. They usually last one month or less and are aimed at achieving a project goal.
Agile also features frequent check-ins with product or service consumers and/or company management about interim project deliverables and goals, which drive further changes to project design and team focus.
Agile is not the only agility and efficiency methodology in town. It shares much with a variety of project management practices generally categorized as lean methodologies, such Toyota Production System, Six Sigma, Lean and total quality management. These generally aim to increase efficiencies by cutting down on wasteful actions, reducing the amount of inventory in the pipeline and making continuous production process improvements.
SAFe is the most widely used framework for scaling agility in large organizations, notes Deema Dajani, a product manager at Boulder, Colo.-based Scaled Agile Inc. and co-founder of Women in Agile, a nonprofit organization focused on promoting inclusivity in the agile community.
For Proximus Group, which has been adopting Agile techniques over the past several years, the path toward agility has been deliberate. "We are still in our agile transformation journey," says Thomas De Rycke, agile transformation leader at the 11,400-employee telecommunications and technology company.
"Our journey so far has been a journey of gradually scaling agile in the organization, building upon learnings and adapting," he says. "As with most organizations, Agile started in IT, where we changed traditional managed teams to cross-functional, empowered teams which would work following an agile methodology. Quite rapidly, we started to experiment in other business units where customer centricity, adaptability and speed are considered important."
A slow and steady approach has helped the company adapt. De Rycke says the organization has taken the transformation one step at a time and has incorporated learning, which comes mostly through failures, from previous steps while also taking other steps forward. That "really helped us to continuously improve while limiting the operational impact that such a big change would otherwise have," he says.
Still, there are some who say there are costs associated with Agile that must be carefully weighed against the benefits. Agile skeptics, such as Kurt Cagle, a software developer and an editor at the Data Science Central website, says that for many organizational functions, building an Agile approach can add administrative steps with little benefit—forcing a focus in incremental steps to satisfy Agile metrics while doing little to advance the product as a whole. —D.T.
To succeed in its initiative to become more agile, Cambia's had to undergo staffing changes. "We told people that we had to bring new and major changes to the organization, and a large number self-selected [and said] that was not what they wanted to do," Stimpson says. "At one point, 60 percent of directors and above were new to the organization over the prior five years. And as key leadership positions came open, we replaced them with the needed different types of people. More than 80 percent of our leadership hires don't come from health care." Stimpson says Cambria looks for "people who are comfortable in ambiguity, who are action-oriented and who have the courage to drive change."
Worley says agility is best approached incrementally. "People see this as all or nothing, that if parts of an organization are not agile, this is a problem," he says. "The truth is that some parts of the organization need to be stable, reliable and predictable. You don't want front-line people at your restaurant telling customers they can have anything they want."
Leading the Way
The path toward agility is not easy. "Moving past the tipping point requires a true leadership commitment to scale rather than standing up one more team here or there," Hildebrandt says. "Organizations have to decide to adopt organizational agility from the top down, including mindsets, structures, principles and processes."
Many organizations never take that step. "The agile concept has been around a long time, and almost every organization has started on the journey, but only a few have gotten to the point where they're getting the full results from it," Hildebrandt continues. "They may think they're agile, but often they're really just going through the motions."
McKinsey's Handscomb says that while organizations' HR, IT and financial divisions should be heavily involved in an agile transformation, business leaders should be the champions in leading its implementation.
Worley notes there is little hope that rank-and-file employees will make the disruptive changes needed to improve agility—adopting Agile project management technology, discretely experimenting and failing fast, and other hallmarks of agility—unless senior management embraces them and clearly communicates the need to do the same throughout the organization.
Denver-based Agile management consultant Eric Willeke also stresses the importance of leadership buy-in. "Executives need to lean in because they will be having people report to them at every level of the organization who are collaborating in ways that they never have before," he says. "And the executives showing those teaming behaviors with their peers and disparate groups is the single most powerful behavior to give people permission to do so."
HR professionals are key in efforts to attain agility given their workforce management, administrative and training expertise, as well as their role as custodians of organizational values.
"If Agile does not cause you to change the shape of how people organize in your company in order to deliver value, you have not yet done Agile; you have not yet made the journey," Willeke says. "Agile is change. It forces people to work together across boundaries in ways they never have before. And that's the messy point where people start to show resistance, where bringing it back to HR, communications and employee support becomes crucial."
David Tobenkin is a freelance writer based in the greater Washington, D.C., area.
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