Originally published on Vistage Research Center
Written by Bill Fotsch and John Case
These days, management thinkers and big-company executives are all touting the virtues of agile. But what is agile?
Agile is a philosophy and a set of management tools that first took hold in corporate IT departments. Instead of following conventional approaches to software design—one step after the other in carefully planned lockstep—developers broke projects down into small, shorter pieces of work. They set up self-managing teams and attacked those pieces simultaneously. They did the work in time-limited efforts dubbed “sprints.” They usually created prototypes, or “minimum viable products,” and they tested the prototypes directly, with customers.
It all worked: the software turned out better and cheaper, and the developers themselves were happier and more engaged. Over time, other departments took notice, and agile principles and techniques gradually spread into areas such as product development, marketing, even HR. Corporations began sponsoring large-scale agile training programs, complete with all of the approach’s tools and terminologies.
Agile vs. transparent, team-based management
Most entrepreneurial companies can’t afford extensive training of that sort, and so aren’t likely to be formal practitioners of every agile process and procedure. But here’s the secret: You don’t need the training or the buzzwords to enjoy the performance boost agile can provide. In many ways, agile is just transparent, team-based management.
We learned this lesson several years ago, before anyone outside of software even knew about agile. Ironically it was in one of the relatively rare instances where we were working with a Fortune 500–size company. The company was Capital One, and we were called in to help an executive named Dan Mortenson transform the firm’s back-office unit, known as Production Services, to operate more efficiently and better serve its customers.
At the time, the unit was seen as a cost center. But Mortenson wanted the people in his organization to think the way they would if they were in a profit center. That meant a change in mindset: “If Production Services is to be a business,” Mortenson said, “then the people who work for it have to learn to think like business people.”
So he launched a transformation under the label CEO, or “Committed Engaged Owners.” Just as with agile, teams broke down Production Services’ jobs into a series of value-added operations. They consulted their internal customers to determine which elements were most highly valued, and they established “virtual contracts” with each of those customers. Then the teams began brainstorming ways to improve the key elements, testing and implementing their new ideas on the fly.
They also rigorously tracked their results, just as agile teams do. And they shared their ideas and accomplishments through articles published on the company’s intranet. Over 18 months, Production Services’ costs dropped by $5.6 million, and both employees and customers were pleased with the performance.
Principles and practices
Autonomy, self-managing teams with responsibility for innovations, clear definitions of goals and progress toward those goals—these principles and practices made the unit more agile before agile was a thing.
The same ideas very much apply to entrepreneurial companies. Indeed, implementing them is often easier in a smaller business, because the whole company may constitute itself as one team. Team members track key numbers that link directly to financial results. They brainstorm ways to improve, sometimes using lean techniques such as kaizen events. These are companies whose employees learn to think and act like owners, which means they are agile almost by definition. Employees are able to make quick decisions and improve the company’s operations, because they understand the impact of their moves on the economics. We have seen this happen at engineering firms, landscaping companies, health-services organizations—you name it.
We call our approach open-book management, but it’s agile in all but name. There’s only one difference, and it’s an important one. We think that the incremental economic value teams create should be shared with team members. We believe a well-designed incentive plan is not only fair but also provides economic motivation. Agile, like so many business techniques, addresses the how of improvement. Open-book management, with its built-in incentive systems, addresses the why. It answers the time-honored question, “What’s in it for me?”
So here’s our advice about agile: go light on the buzzwords and the hype, but go heavy on the basic principles of transparency, team self-management, and employees learning to think like owners. It will make a huge difference to your company.