Has Agile Management’s Moment Arrived?

When IBM recently announced that it was rethinking its work-at-home program for thousands of its employees, the main take-away for workers nationally was what it meant for them. After all, as IBM goes so do many other companies. Working at home was an idea IBM pioneered in the 1980s, and it was the thin end of the wedge. Regular working from home among the non-self-employed population has more than doubled since 2005, and as much as 25% of the workforce now teleworks with some frequency, according to Global Workplace Analytics.

But lost among the headlines about what the switch meant for telecommuters was a more significant signal from IBM about why it is calling workers back to the office: It is embracing a movement known as “agile management.”

The agile approach is one that uses teams to work through a process designed to respond to unpredictability; that allows for and encourages changes in direction; that gives teams great authority and transparency; and that builds in customer or user response to the end product or service while it is still being developed.

The advantages to agile are numerous and promising. “Traditional business models relied on planning, which in turn assumes either that the future will be like today or that we are good at forecasting. Neither has proved true,” says Wharton management professor Peter Cappelli, director of the school’s Center for Human Resources. “Agile does not use a lot of planning tools and it emphasizes responsiveness, so it is better at dealing with uncertainty.”

Agile started in IT as a method for developing software, but it is now seeping into various sectors and organizational functions. “Agile is spreading fast. It is spreading beyond the IT departments,” says Anna Tavis, clinical associate professor of human capital management at New York University. “Companies that implemented agile with full awareness of its implications are remarkably successful. We are learning to use agile at scale with large organizations and in all the business functions, which eventually will lead to the agile revolution.”

Tavis and other agile advocates believe this new way of working and thinking holds out the promise of two qualities that may be appealing to many disillusioned with the current corporate value system: agile puts the customer over shareholder value, while retightening bonds between the worker and the workplace.

“Traditional business models relied on planning, which in turn assumes either that the future will be like today or that we are good at forecasting. Neither has proved true.”–Peter Cappelli

But just adopting agile does not necessarily mean automatic gains, says Eric Clemons, Wharton professor of operations, information and decisions. “The move to telecommuting was based on the realization that a widely accepted belief was false. We realized that highly motivated employees would work, and would work hard, even if they were not being watched by senior managers,” he notes. “The move away from telecommuting is based on a new widely accepted belief, which may ultimately prove to be false again. Companies need agility, which means collaborative innovation to solve unstructured problems. But are companies right when they now assume that collaborative innovation requires face-to-face interaction? Adding or dropping telecommuting alone will not solve the problem of insufficiently motivated employees. Moving employees back to the office will not automatically create innovation, nor will it prevent it.”

Still, IBM has been determined to create the right conditions for it. “Is it possible for a company the size of IBM to have the innovation and pace of the best small tech companies, of the best small teams, but have the scale of IBM?” asked Jeff Smith, IBM’s (now former) chief information officer. As reported in Quartz, he said IBM now believes that leaders and teams have to be in the same room: “The leaders have to be with the squads and the squads have to be in a location.”

The ‘Revolution’ and Its Manifesto

Like many management trends, agile will be interpreted in various ways, and with varying levels of orthodoxy. Technically speaking, notes Tavis, agile is something quite specific, with its own manifesto: a set of values and principles emphasizing an iterative, collaborative process with small teams (seven members is ideal) working in a series of short cycles under conditions of full transparency. From the start, she says, teams incorporate feedback and include client perspectives to deliver emergent solutions.

“There is a strong allegiance in the agile community to agile as a mindset first,” she says. “Agile represents a radically different view of the business or organization goals.”

If the “waterfall” approach to project delivery is one in which the outcome can be predicted and planned in a sequence before development, the agile approach might be thought of as building in improvisation from the start. Says Tavis: “The agile approach is about reframing the organization’s traditional order to an emphasis on the customer as opposed to the shareholder; from individual performance to collaborative team work; from top-down command and control to transparent team culture; from stability and efficiency to innovation and learning from failure; and from planning to experimenting.”

Agile might represent the “jazz” of project management: improvisatory, tolerant of risk-taking, comfortable with no conductor (or top-down direction), reactive to what other team members are doing, and even responsive to how the end user (audience) is reacting.

Because the absorption of agile into the larger organization is just beginning, research into its effects is not voluminous. But one study shows promising signs. Using data from more than a thousand projects from multiple industries and countries, Pedro Serrador of Humber College in Toronto and Jeffrey K. Pinto of Penn State’s Black School of Business tested the effect of agile use in organizations on two dimensions of project success: efficiency and overall stakeholder satisfaction against organizational goals. With an eye on the moderating effects of variables such as perceived quality of the vision/goals of the project, project complexity, and project team experience, “our findings suggest that agile methods do have a positive impact on both dimensions of project success,” they wrote in “Does Agile Work? — A Quantitative Analysis of Agile Project Success,” published in the International Journal of Project Management.

“Moving employees back to the office will not automatically create innovation, nor will it prevent it.”–Eric Clemons

“The likelihood of project success, as measured by multiple perspectives (efficiency, stakeholder satisfaction) was shown to improve through the use of agile,” the study states. “It was also found that the quality of goals and vision of a project are important to the success of projects as expected, but particularly for agile projects. Further, though it has been adopted in multiple industries and across national borders, our findings suggest that it has achieved best success to date within certain settings; notably, high technology, health care, and professional service” — all of which, the study points out, are heavy users of software and IT.

Tavis and Cappelli are working on an article that explores agile’s spread into HR. “Implicit in the agile method is a wholly new set of people management practices,” Tavis says. “We are in the early stages of experimenting with transitioning HR to agile. In my view, agile could never reach its full innovative potential without changing everything about the workplace, from physical environment to ways of collaborative working and a new incentive and recognition system. We are just beginning to implement these new agile people practices and learning how to operate them at scale. No less important is the question of how these new practices will be reconciled with existing goals, principles and values. The answers we are discovering will have implications for all organizations, not just software development.”

About the work ahead, Cappelli says: “We know a great deal about how programming teams use agile, but we know very little else about it. So we need to study almost everywhere.”

Indeed, agile is changing the way firms operate at all levels — and at some very large companies. GE has made the shift to agile, framing it under a set of principles it calls “GE Beliefs” to ensure that “people changed their frame of thinking to the new way,” wrote Raghu Krishnamoorthy, GE Healthcare’s vice president of human resources, in Harvard Business Review. “The GE Beliefs are: Customers determine our success, stay lean to go fast, learn and adapt to win, empower and inspire each other, and deliver results in an uncertain world. They reflect a renewed emphasis on acceleration, agility, and customer focus. Interestingly, the GE Beliefs were crowd-sourced from our employees for the first time — an attempt to drive a culture that the employees wanted to see.”

Agile and tools like it represent the majority approach in most IT departments, so IT companies and those where IT is dominant tend to be the leaders, says Cappelli. But now agile is triumphing well beyond. “Planning-based approaches, especially financial planning, don’t play nicely with agile approaches, so there is a battle as to which is going to be dominant,” he says. “What makes the GE case so noteworthy is that they were the exemplar of a financial control-based company, and yet they have made the shift to agile.”

The introduction of agile comes with its own hurdles, even among the software development community. In VersionOne’s 11th annual “State of Agile Report,” respondents listed some attractive qualities for the method: the ability to manage changing priorities, increased project visibility and team productivity, and the speeding of product to market, among them. On the challenge side, substantial numbers of agile practitioners cited a company culture at odds with agile’s values, a lack of experience with agile methods, lack of management support and organizational resistance to change.

“Agile could never reach its full innovative potential without changing everything about the workplace, from physical environment to ways of collaborative working and a new incentive and recognition system.”–Anna Tavis

(Re)tightening Employer-employee Bonds

Perhaps most tantalizing of agile’s virtues is the claim that it may help restore some of the loosening of the bond between employee and employer, or at least employee and the work. “IBM says we are bringing people back because these loose ties aren’t helping people create,” says Tavis, “because a lot of innovation is collaborative, and it doesn’t happen on a scheduled phone call. IBM is thinking they are losing so much opportunity for these insights and creative solutions because people don’t interact outside of these scheduled meetings.”

In fact, not long ago, the prevailing wisdom was that work could be “deconstructed and disaggregated and farmed out to freelancers on talent platforms,” writes Diane Gherson, chief human resources officer for IBM (which has 400,000 employees) in People + Strategy Journal, published by the Society for Human Resource Management. “The ‘gig economy’ was gaining momentum, as the ‘uberization’ of entire industries became more commonplace, and work at home/from anywhere gaining traction as the global labor market opened and internet and mobile computing became more pervasive. For companies, this was a gift from heaven: Labor is purely elastic with demand, and pay is for output, not input. For employees, their needs for benefits were solved by new players like the Freelancers Union and Stride Health, and their needs for training were met by new boot camps like General Assembly and Galvanize. Their need for colleagueship was filled by the emergence of co-working facilities, complete with Starbucks for coffee breaks.

“This moment has passed,” she writes.

Now, she says, ruthlessly competitive industries demand a new model of work — “one that demands co-location of agile, empowered teams, loosely coupled and tightly aligned to deliver outcomes valued by their end user. Most importantly, the new model demands teamwork and the intentional selection of teams that support it. Unlike the previous era of industrial work design, the agile work model is unsuited to the ‘gig economy.’ It would be slowed down by the friction cost of constant reconfiguration of teams unfamiliar with each other and operating as independent players.”

But agile needs to be nourished by other values in order to be successful, says Clemons. “My sense is agile and face-time are not the same, agile and collaboration are not the same, and collaboration and face-time are not the same,” he says. “Agile often involves recognizing a pattern and responding to it, and that doesn’t so much require face-time as it requires empowerment.”

Other elements are important to the mix. “For instance, the chairman of Capital One, Richard Fairbank, gives a public award every year for the best idea that didn’t work,” Clemons notes. “In other words, in order to be agile, you have to hire creative people and reward creative risk-taking, and you don’t actually get that by putting people in the same room where you can watch them. That alone doesn’t advance agility. Of course, agile has benefits, but part of agility is hiring the right people, part is providing the right training, and part is providing the right motivation.”

“In order to be agile, you have to hire creative people and reward creative risk-taking, and you don’t actually get that by putting people in the same room where you can watch them.”–Eric K. Clemons

Agile also touts weaving the customer tightly into the project development process, “instead of planning development and throwing it over the fence to see what the users have to say, and then it’s much too late in the process,” says Tavis. “In the agile model, the user experience is present from day one. The user or customer is part of the design of the product. If adjustments are needed, if change has to happen, it is fast fail: You course-correct and move on. Philosophically it manifests itself, whereas … still in a lot of U.S. companies, it’s about shareholder value. But the service economy as well as software is realizing it’s all about the customer, and sometimes the customer experience and customer values are not the same as shareholder value. There needs to be that mindset change – around the customer. Agile is still the best-kept secret out there.”

Probably not for long. Tavis and Cappelli are looking how organizations integrate agile into all their functions, such as at IBM, where “they are deliberately designing the whole organization around agile, everything from how the workplace is designed with open spaces even for the most senior leadership, to the rewards system, to assessments, to their recruitment, learning and development, their communications process. They are a 100% agile organization, and they are the test case.”

Does agile mean more companies will be bringing more workers into the office from home? Does the spread of agile mean firms are likely to be moving back in the direction of wanting full-time employees to avoid the “friction” Gherson speaks of that comes with independent players?

“I don’t think we know,” says Cappelli. “It would make sense not to have teams trying to use agile approaches that include a lot of outsiders, though.”

Tavis says that in certain areas, when an organization needs the outcomes that an agile team can deliver, they are going to want full-time employees. “There will be other areas when that creative element could be outsourced to people who are independent contractors,” she says, citing recruitment as one example. “When the internet exploded and LinkedIn, Monster.com, CareerBuilder and many other platforms started to emerge, the general prediction was that recruitment would be fully outsourced and not needed. That is not the case with organizations that rely on agile recruitment, such as GE, IBM and Google. They redesigned the entire recruitment process, as the interdependence between team members is critical to customer success. I would argue that there will be a continuing diversification of options. However, for those companies that are investing heavily in their culture as a source of competitive advantage, the price of admission will still be high.”