Making the entire organization Agile

At the 2011 Agile Conference, I had the opportunity to attend Stephen Denning‘s session yesterday on Making The Entire Organization Agile and I was wow’d.

Before getting into the details of the presentation, I want to highlight that Steve is not an Agilist – and that’s a good thing. He is the author of many award-winning books (including The Leader’s Guide to Radical Management: Reinventing the Workplace for the 21st Century). Although the main topic covered during the presentation really didn’t have anything to do with Agile per se, it was a very powerful backdrop for coaches attempting the make any organization Agile. Steve has also published a short video that explains his concept.

Now, back to the presentation. [Note that Steve was kind enough to make his slides available to everyone.]

Steve’s presentation began with a simple question “Why do managers act the way they do?“, after all “These are highly intelligent, educated people!“, he said. He then followed by asking a powerful question: “Why did management systematically kill all the creative things in organizations?” To support his point, he provided relevant examples such as: knowledge management, lean manufacturing, innovation, marketing, leadership storytelling, and even Agile and Scrum!

See the connection with Agile transitions now?

The core of his presentation (and of his most recent book) is that “Traditional management rests on five interlocking principles”:

1. The purpose of a firm is to produce outputs that make money - What is produced is much less of a concern than making money. Key point here is that traditional organizations strictly focus on generating money with little (or no) concern for anything that doesn’t generate money for the shareholders.
2. Managers act as controllers of individuals – Traditional organizations need conformity and to get conformity, they need compliance. Having managers control their employees is the preferred method used within those organizations.
3. Work is coordinated by hierarchy and bureaucracy – Historically, it was important to get standardization and compliance. As such, traditional organizations have promoted people who were good at ensuring the work of others was being done in accordance to the plans. The hierarchical structure supported by bureaucracy were great ways to ensure standardization, and hence to generate more money. In such organizations, planning, monitoring and reporting were critical activities.
4. “The main thing is efficiency” – Since the most important thing the organization were focusing on was to make money, creating efficiencies became a critical activity in the system. Efficiency forces the organizations to look inside as opposed to focusing on the outside (the customers).
5. Communicate by directives – The traditional model assumes that people aren’t able to determine the best way to do their work and that they need to be told what to do and how to do it. It also creates a dominating relationship where the one giving the order has more power and authority than the one receiving the order.

Based on an in-depth research from Deloitte (Deloitte’s Center for the Edge: The Shift Index), Steve presented some alarming statistics:

• The rate of return on assets has fallen by 75% since 1965
• The life expectancy of Fortune 500 firms down to 15 years, and is heading towards 5 years
• Only 1 in 5 workers fully engaged

Based on such statistics, he claims that “Management is broken” (and I would agree) and as a consequence “We have to manage differently!” He proposes 5 fundamental shifts that organizations will be required to make.

1. New goal for the organization -> delight the customers (from outputs to outcomes)
2. New role for managers -> from controller to enabler
3. New coordination mechanisms -> dynamic linking
4. Shift from value to values -> radical transparency and continuous improvement
5. New way to communicate -> conversation (adult-to-adult conversations)

Image by Steve Denning

Once Steve presented the five big shifts required for organizational survival, he quickly highlighted which of the 5 shifts the Agile approach are actually impacting, and which areas our community still needs to alter in order to make the entire organization Agile.

Steve rightfully pointed out that the Agile community hasn’t done such a great job at “delighting customers” (not just making them satisfied but really delighting them) and in “altering the conversations”. On this point, that fact that many of the sessions at the 2011 Agile Conference were about coaching, mentoring, and collaboration is a good step in this direction.

Image by Steve Denning

The other interesting observation that Steve had with regards to Agile and the big shifts, is the serious conflict Agile initiatives face (since they only address 3 of the 5 shifts). He explained that Agile transformation are executed while 2 of the required shifts (from “making money for the shareholders” to “delighting customers” and from “top-down commands” to “from commands to conversations”) weren’t being addressed. This situation creates an environment where “organizations are at war with themselves“.

Any Agile coach who has attempted a large scale organizational transition can certainly agree with the statement. The 3 shifts (from controller to enabler, from bureaucracy to dynamic linking, and radical transparency) are the realm in which the Agile teams are successful. Unfortunately, they are rapidly confronted to the remaining 2 traditional perspectives.

This is the area I referred to as the Level 5 – Management Level Maturity and where many paradigms need to be altered (such as the role of the Agile manager in a self-organizing team, among other things).

Image by Steve Denning

In the end, it is very interesting to realize that the shifts that are currently taking place within the software development field are not unique and specific. Many (most?) of the various industries are currently going through such fundamental shifts and we can learn from their experience along with continually improving our approaches.

For those with a systemic perspective, Steve provided a simple comparison between traditional management and the suggested radical management.

The presentation was, by far, the best one I attended during this week… so far!