MANAGEMENT SPECIAL....... Unleashing the power of small, independent teams PART I

Unleashing the power of small, independent teams PART I

Small, independent teams are the lifeblood of the agile organization. Top executives can unleash them by driving ambition, removing red tape, and helping managers adjust to the new norms.

What does it take to set loose the independent teams that make agile organizations hum? These teams are the organizational units through which agile, project-based work gets done. The typical agile company has several such teams, most composed of a small number of people who have many or all of the skills the team needs to carry out its mission. (Amazon CEO Jeff Bezos contends that a team is too big when it needs more than two pizza pies for lunch.) This multidisciplinary way of composing teams has implications for nearly every business function. Take IT management. Instead of concentrating technology professionals in a central department, agile companies embed software designers and engineers in independent teams, where they can work continually on high-value projects.

While much depends on the actions of the individual team members, senior executives must thoughtfully create the environment in which teams and their managers can thrive. In a nutshell, senior executives must move the company—and themselves—away from outmoded command-and-control behaviors and structures that are ill-suited to today’s rapid digital world. They must redouble efforts to overcome resource inertia and break down silos, because independent teams can’t overcome these bureaucratic challenges on their own. They must direct teams to the best opportunities, arm them with the best people, give them the tools they need to move fast, and oversee their work with a light but consistent touch. These ideas may sound straightforward, but they go overlooked by too many leaders who’ve grown up in more traditional organizations.

This article explores how senior leaders can unleash their companies’ full potential by empowering small teams and supporting their managers, whose roles have been redefined by agile thinking . Let’s start with a glimpse of what that looks like in action.

How independent teams work

Several years ago, financial regulators in Europe decided to let banks verify customers’ identities remotely through digital video chats instead of relying solely on face-to-face appointments at bank branches. When the news reached one established bank, the team in charge of its know-your-customer (KYC) process recognized that the regulatory change could help the bank win new accounts. It quickly sprang into action to create the needed service. The very existence of this KYC team was a credit to the bank’s leaders, who had previously put small, independent teams to work—improving the performance of many of the bank’s functions by giving them the diverse capabilities needed to address market opportunities like this one. The bank had simultaneously made a series of complementary reforms to remove cumbersome approval, budgeting, and governance processes. Without these institutional refinements, the KYC team’s time to market would have been far less competitive.

Critically, senior executives had endowed small, focused groups like the KYC team with the authority and the resources to carry out projects without first seeking corporate approval. When it came to paying for the development of the digital KYC service, the team was spared the trouble of making a formal budget request and enduring a months-long holding period while the corporate planning committee took up the request as part of its regular planning process. Instead, the team drew on a tranche of funding that it had already been given, funding tied to the team’s contribution to outcomes such as higher customer-conversion rates.

The bank also loosened or completely unhitched its product teams’ dependence on internal support functions. New accommodations in the bank’s HR processes, for example, allowed the KYC team to quickly line up outside contractors for help with front- and back-end development, without waiting for those contractors to be vetted. The IT function had streamlined the bank’s technology systems and operations, too, building a modern architecture platform to more easily connect new customer-facing services with legacy back-end systems. The bank had also eliminated its traditional waterfall-development process, as well as a no-compromises protocol for testing new products before launch. Previously, a central IT group would have had to integrate the digital KYC service with core systems, a drawn-out process that could have stalled the KYC team for months. But now the KYC team could integrate testing with work flows, roll out new services as soon as they were viable, and make incremental improvements over multiple cycles. Together, these reforms allowed the KYC team to develop the new digital services in a matter of weeks, rather than the months it would have taken before the reorganization.

Senior company executives had an integral place in this process, despite the independence they had accorded teams like KYC. They evaluated progress and allocated resources according to whether teams deliver against well-defined measures of performance. But they only intervened in the team’s ongoing work from time to time, and then only to remove roadblocks and provide support. By creating a supportive structure and managing it with a light touch, senior bank executives fostered this kind of innovative spirit in teams all across the institution.

How executives empower independent teams

The challenge for senior executives in an agile organization is clear but difficult: empower small teams with great independence and resources while retaining accountability. As our colleagues have written, an agile organization speeds up decision making by allowing teams that are closer to customers to make day-to-day, small-stakes decisions on their own, and only escalating decisions that could have significant consequences or that can only be made effectively with input and sign-off from multiple parts of the organization. Executives further empower teams by lessening their dependence on support functions such as finance, planning, and human resources. Yet executives still must ensure that teams operate with proper governance, that company resources are aligned in pursuit of strategic priorities, and that midlevel managers get the coaching they need to become better versed in agile ways of working. Our experience helping companies with the transition to agile ways of working suggests emphasizing the following actions:

Unleash independent teams in meaningful areas

We’ve argued that autonomy is especially beneficial to teams working on processes and capabilities that directly affect the customer experience. When executives begin to give their small teams more independence, they should look first at teams that are responsible for features that matter greatly to customers. This way, executives can demonstrate how independence helps teams generate more value. (Skeptics may challenge this approach on the grounds that a new, untested way of managing teams is too risky to try in significant customer-facing areas. In practice, independent teams create less business risk, because they make incremental changes that can be rolled back with ease if they don’t work out.) It’s also important that executives choose teams of people who represent different capabilities. When multiple domains of the company take part in independent teams, executives and managers can test the limits of the decision-making authority that these domains extend to teams, and demonstrate that autonomous teams can be trusted to exercise good judgment.

Put strong performers on independent teams, especially at the outset

Executives can be reluctant to place their best-performing employees on independent teams that aren’t mission critical, because they would rather keep them engaged in “more important” activities. We hold the opposite view: that independent teams are too important to the company’s future for top performers to be deployed elsewhere. Executives whose companies have been through agile transformations say much the same thing. In an interview with McKinsey, Scott Richardson, chief data officer at Fannie Mae, said, “Creating a new team is probably the most important thing managers can do, so make sure you get it right. When we created our initial agile teams, I was personally involved with structuring them and selecting team members. It might sound crazy to get so involved in this level of detail, but it is critical that the early teams become true beacons for success.” Choosing high-caliber people not only sets up the teams to be successful but also teaches managers how to build more independent teams. “By the fourth or fifth team,” Richardson continued, “my direct reports knew what questions to ask and how to structure a proper team, and they could scale up on their own from that point forward.”

Provide teams with a clear view of their customer

At digital-native companies and agile incumbents, an unwavering focus on improving customer experiences provides each independent team, regardless of its area of responsibility, with a consistent understanding of business priorities. Each team’s job is simple: to generate small but frequent improvements in the quality of the customer’s experience. Executives foster this shared sense of purpose by making sure that every team has a clear, unobstructed view of customers.

In the offices of one international retailer, real-time data on the customer experience is on display almost everywhere you go. Walk through the dining hall: oversized screens on the walls bear the latest conversion rates for each of the company’s sales channels. Visit an independent team’s workspace: screens are lit up with measures of customer behavior and satisfaction that relate to the team’s responsibilities, such as revising the script that call centers follow or tinkering with the layout of the web storefront. At any moment during the workday, a product manager might drop by a team room to see what the team is working on, ask how customers are responding, and offer to help.

So that each independent team can track the customer experience in ways that are relevant to its work, companies might need to loosen their governance of data. A “canonical data model” that standardizes the classification of data across the entire company can cause inadvertent delays because all teams have to agree on changes to the model that are required to capture new kinds of data or reclassify existing data. To avoid these complications, independent teams are ideally allowed to work with and define data within their business context.

CONTINUES IN PART II