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What “Agile Organizations” Really Means

 

For years, organizational structures (hierarchies) have defined the formal power architecture of organizations. The org. charts gave us a quick orientation regarding the players in the system on the different levels and we could easily see their authorities. During our business lives, we became accustomed to this management system where we had a clear understanding of who our supervisor, staff and colleagues were (regardless of all reorganizations which changed the holders of these roles faster and faster). And for whatever reason, management suddenly started speaking about agile organization and the need for a transformation in this direction. Do they really know what they are talking about? Are they willing to give up what they have aimed to get all their business lives? 

  

Agile Organizations do not Need a (Formal) Structure

 

At least the generation which is steering most of today’s corporations has made its career through the line organizations. Over the years, this generation’s members got benefits because they attained a certain position–a position which consisted of a defined authority and made the holder more equal than all the others (according to the allegorical novella entitled “Animal Farm” by George Orwell). But agile methods (such as Scrum, etc.) do not really recognize any hierarchy anymore–they just acknowledge roles within an organizational system. The authority is based on a team level which is empowered to manage itself. The power architecture is changing: Whereas the power of function (functions based on the hierarchical level) is decreasing, the power of networks and knowledge is increasing. 

  

The idea is not completely new. Agile organizations are following the basic ideas from network-centric organizations. With a network-centric configuration, knowledge workers are able to create and leverage information in order to increase competitive advantages through the collaboration of small and agile self-directed teams. The main difference now is the customer-orientation. Agile organizations embed the customer needs and adapt their structures based upon the dynamics of the market environment. 

  

Figure 1: Classical structures are transferred to networks in agile organizations 

  

The agile organizations still have their power architecture, but it is based primarily on networks. As we already see in classical structures, the networks are getting more and more important. But these networks are often invisible. The more our business becomes knowledge-based, the more important networks become. Agile organizations just take advantage of this development and make the networks visible with the effect that networks are now ruling the game. 

  

Today, we see many different manifestations of agile organizations. A best-practice example is Spotify. In 2008, this start-up company launched its first music player. The development was based on the Scrum method. By the time Spotify became more popular, the company decided to make agile principles more important than any Scrum rules. Figure 1 illustrates Spotify’s agile solution. No hierarchical levels exist anymore, but rather the organization is structured by tribes which consist of squads and chapters. Cross-sectional collaborations are organized into guilds. The required knowledge to fulfill the customers’ needs is the focus of team-building. Therefore, agile organizations will force people to constantly learn as they would otherwise lose their functions within the networks when they can no longer contribute to their respective company’s business success. 

 

The Key to Transformation is to Challenge Ourselves

 

Agile organizations’ design is not only applicable to start-ups. A good example is the ING Group, a banking and financial services corporation. In 2015, they were the first bank to implement “The ING Way of Working” which is based strongly on agile methodology and they created squads, tribes, chapters and the centers of expertise. 

 

Of course, in the upcoming years, we will see many different agile organizational designs because our customers are different and so are our markets. Thus, we find ourselves in a very exciting time as organizational designers. However, whatever agile solution will fit our business needs, the key for the transformation will be the willingness to challenge ourselves at the management level. Management has to be willing not only to share its power, but rather to transfer its authority to make the agile teams (e.g. tribes, squads, chapters, etc.) feel empowered. We also have to ensure that none of these agile teams will start grabbing more power than they really need. A continuous self-reflection is therefore required in order to keep the power in agile organizations in balance. If the players in the systems are not willing to follow these rules, agile organizations will never be put into practice.