In today’s dynamic environment, companies must adapt to rapidly changing technological shifts that continue to reshape the future of commerce. As organizations are under constant pressure to remain relevant, senior leaders are starting to recognize the important role that organizational agility plays in their success. To compete in this changing market, the Human Resources department must reinvent itself and become a critical driver of agility. HR professionals can champion this transformation solely by understanding the concept of agile, the benefits of organizational agility, and their role in agile transformation.
For many decades, businesses were depicted as ‘machinery’ that relied on the scientific method to produce output in a predictable manner. Since Ford’s 1913 installation of the first moving assembly line, corporations worldwide chose to maximize productivity along Taylorist and Fordist principles, ideologies placing authoritarian and mechanistic organizations on a pedestal. As a result, businesses became increasingly hierarchical and workers were denied participation in decision-making processes.
There is currently a paradigm shift taking place as a variety of forces redefine the way organizations operate. With the advancement of technology and democratization of information, modern organizations must adapt to today’s rapidly changing business environment. Companies that failed to transform their businesses in the changing landscape suffered an early demise: less than 10% of the non-financial companies in the S&P 500 in 1983 remained in the index as of 2013. Businesses who continue to align themselves with the outdated machine paradigm risk becoming ‘irrelevant’ in the new future of work. As a result, more companies are recognizing the importance of agile organizations.
Before HR enables a new type of organization, it must first understand what ‘agile’ means. The concept of agility arose in 2001 via software development, as leaders wished to enable a more customer-centric digital strategy. The adoption of agile innovation methods improved the quality of software products, accelerated the time to market, and increased the productivity of IT teams. With agile’s success in the software development industry, business leaders began increasingly embracing and applying agile development to every aspect of their business. As a result, agility now “encompasses more broadly an organization’s capacity to respond, adapt quickly and thrive in the changing environment.”
Organizations implement agile in different forms to align with their goals, principles, and strategies, and researchers have identified over 70 different agile practices. However, these implementations all adhere to three core principles: the law of the small team, the law of the customer, and the law of the network.
Businesses who continue to align themselves with the outdated machine paradigm, risk becoming ‘irrelevant’ in the new future of work
The first characteristic of an agile organization is the law of the small team, which suggests replacing traditional hierarchical structures in the workplace with small teams who performs smaller tasks and deliver value to customers. The most commonly observed teams within agile organizations are cross functional teams, composed of various skills and expertise and include a project manager that prioritizes the work, self-managing teams, where team members decide how to work and are held accountable against key performance indicators, and “flow to work pool”, where individuals are assigned tasks on a full-time basis. Particularly, agile teams perform their work by constantly reporting to clients, autonomously determining how to complete tasks, and continually learning to enhance their work.
An agile organization is also characterized by the law of the customer, which emphasizes the importance of creating a customer-centric company strategy. Specifically, organizations must consider how to deliver value to their customers, and every team member must understand how their work helps customers and why their work is being completed. This drastically differs from the 20th century approach, where firms exploited and manipulated their clients. In the current competitive market, customers can readily find other companies who offer solutions matching their needs; therefore, it is imperative for organizations to generate continuous value for their clients.
The third characteristic of agile consists of having an interactive and transparent network of empowered teams. Practitioners prefer networks because they stimulate both collective and individual creativity to achieve the goal of creating value for customers. As a network, teams are driven to become innovative and to interact with multiple stakeholders. This model ensures that there is continuous learning as teams grow and adapt to resolve common problems and meet their shared goal.
In the face of persistent industry disruption, HR must redefine itself and make changes in the job design, performance management system, and the experiential learning cycle
Unsurprisingly, executives adopt agile methodologies for the potential benefits that an agile organization and culture can offer. HR professionals must seek to understand the advantages of organizational agility to guide employees through successful transformation. An important advantage is that organizations can quickly recognize when to adjust or adapt processes based on learning. Additionally, companies who effectively implement agile tend to increase customer satisfaction, engage employees, and reduce development costs by 15-25%. Most notably, an agile organization creates “an unbroken chain of why,” establishing a link between the overall business strategy and individual teamwork that must be completed. This ensures that employees get clarity on why their work creates value for customers, thus, enabling the organization to deliver better outcomes.
Firms that begin to redesign their businesses in accordance with the agile paradigm will necessitate changes to the structure and role of the HR function. For many companies, the existing HR solutions and responsibilities continue to pose obstacles to organizational agility. In the face of persistent industry disruption, HR must redefine itself and make changes in the job design, performance management system, and the experiential learning cycle.
In the current marketplace, job descriptions are becoming ineffective and obsolete. Formerly, job descriptions facilitated both employee selection and compensation, as recruiters hired from a pool of candidates with the required skill set, and compensation managers paid employees equivalent salaries based on similar occupations. Furthermore, job descriptions empowered HR professionals to assess and track the performance of employees performing similar roles. In today’s fast-shifting competitive landscape, teams and individuals face changing roles and assignments. According to an Accenture survey conducted on 557 individuals, 55% of the participants indicated that they now perform very different tasks from their peers who possess the same job title.
If employees can only perform duties within the job description and the environment is constantly changing, they will not be able to continue to deliver value to their customers. Moreover, they will not learn to adapt and use their skills in different circumstances. An ineffective and costly approach to this problem involves constantly updating and revising job descriptions as to reflect these new realities. However, even if job descriptions are regularly updated, it is still possible that by the time they are released, the nature of the job has changed once again. For this reason, HR professionals must rethink how they define job roles and tasks to create a truly agile organization. Some organizations are currently adopting a new method that relies on empowering employees to define their roles and tasks for each new assignment. Other companies decide to define responsibilities in terms of small assignments and projects. These approaches enable employees to adapt their skills to changing trends and customer demands.
Moreover, HR can boost organizational agility by modernizing the performance management system to reflect today’s volatile business environment. Since the 1980s, General Electric Motors’ “rank and yank” system has heavily influenced performance management practices. CEO Jack Welch’s system consisted of rating employees based on their individual attributes and ranking them against their peers. HR practitioners were then required to dismiss employees ranked at the bottom 10 per cent since they were the ‘poor performers.’ Since this system proved to be successful in an era obsessed with reducing costs, many companies imitated this approach. As a result, this system has left employees feeling disposable.
The shifting competitive landscape poses significant challenges in talent retention, as employees can easily walk out the door. Therefore, HR must bring about performance management practices that value their employees. To develop a more agile performance management system, HR professionals must strengthen the “why link.” They must ensure that workers understand why their jobs are relevant to customers and the organizational strategy. HR can lead this change by defining the long- and short-term strategies that drive the business. Moreover, it can establish quality standards to enable employees to measure, reward, and appraise each other based on daily tasks. In addition, HR can transform its performance management system by encouraging improvement rather than avoidance of failure. Encouraging teams to work smarter will create a culture of innovation, where employees can grow through feedback and feel valued as they communicate with different stakeholders. An agile performance management system will provide employees with insights on why they are performing their duties and on how they can succeed.
An agile culture is characterized by having the willingness and ability to learn from past experiences. As a result, HR must extend learning and development opportunities to foster a culture of innovation. HR professionals must carefully evaluate and consider the development needs in an organization in order to develop a well targeted training program. They must also leverage technology platforms to allow employees to share their acquired knowledge and skills in a quick and transparent manner. Some organizations are currently investing in corporate universities, which are entities that assist parent corporations by providing tools to further develop talent. Finally, HR practitioners can stimulate development practices by developing agile leaders who inspire their followers to learn. Laszlo Bock, the former head of Google’s Operations, describes the role of managers as individuals who serve and inspire the team. Agile managers empower teams by asking guiding questions rather than providing orders. During WWII, General George S. Patton described an agile leader as someone who didn’t tell people how to do things; leaders were those that were expecting to be surprised by their follower’s ingenuity in performing a task. HR practitioners can specifically develop agile leaders that promote continuous learning by creating a leadership-transformation team that navigates executives throughout the agile process, and by ensuring that C-suite executives develop their own capabilities from the get-go.
Currently, the concept of agile organizations is displacing the old ‘machinery’ organizational paradigm. As organizations look to become more agile, HR must become a critical driver of transformational change. Transitioning to an agile organization requires HR practitioners to comprehend the meaning of agile, recognize the benefits of agile development, and redefine their roles and responsibilities. As agents of change, HR practitioners must lead the agile transformation, which will enable companies to stay relevant in today’s changing environment.
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