What you can learn from businesses that do agile right
Technological advances, globalisation, climate change, and, not least, the coronavirus pandemic make for a world of rapid changes and uncertainties. One way for businesses to keep up is to become agile.
Steve Berez is a partner at global consulting firm Bain & Company, and a senior leader in the consultancy’s agile practice. He and his colleagues Darrell Rigby and Sarah Elk co-authored Doing Agile Right: Transformation Without Chaos to dispel myths and misconceptions of agile business methods. The book is based on hundreds of case studies from around the world and across industries and dozens of third-party research reports.
In an interview with FM, Berez outlined the commonalities he and his co-authors found among companies that successfully used agile methods.
The book is based on experiences at lots of companies. Can you summarise those experiences?
Berez: Companies we’ve seen be most successful with agile have agile leadership teams. Those leadership teams understood their job is to build an agile business system.
That agile business system does three things: It runs the business reliably and efficiently, making sure operations that need to be consistent are consistent. It changes the business or innovates rapidly and effectively. Then it harmonises those two objectives. So, the agile leadership team is thinking about doing all of those things.
What’s an agile system? What’s part of that system?
Berez: Every business has what we think of as an operating system, the way that it functions. That includes things like the strategy that it follows, the leadership and culture, the talent engine, and the business processes.
For each of those dimensions, this system can be static. Static strategy is very detailed and planned far in advance. Or it could be at the other end of the spectrum — chaotic. That means plans are uncoordinated and undisciplined.
In the middle is an agile strategy with adaptive road maps. The idea is that you don’t need a detailed map for your entire journey, but it is important to develop a map to your nearest milestone, something that’s more clearly in your sights. Once you get there, you can select your next milestone and map your route to it. This way your map is constantly evolving as you are learning the best routes along the way.
What does that mean for the finance function? How is an agile CFO different from a traditional CFO?
Berez: What we find is that in many traditional large businesses, there’s an emphasis by the CFO on running the business — the control and reliability — but not as much on effectively changing the business. For example, the core processes of generating financial reports, paying invoices, controlling the spending of the company — those things are all high on the minds of many CFOs, and they do them very effectively. In the process of doing those things effectively, they sometimes slow down innovation. For example, they fund projects for long periods, and they require detailed specifics on what a project is going to do and the features and functions of the way it’s going to work.
They get a lot of control out of doing that, and it might feel like that’s a better use of the shareholders’ money. The problem is that a lot of projects end up not really generating the value that was promised, because they’re not flexible enough to take into account what’s learned along the way.
A CFO in an agile business or a CFO practising agile principles will work more like a venture capitalist, funding projects for short periods, understanding how those projects are producing results, and then doubling down on the bets that are giving better results and cutting back on those that aren’t.
On the mindset side, this is something we want all leaders to be exhibiting. It would be things like trusting people and empowering people at the frontline to do the right thing. That is, to believe the people closest to the customer, the information, or the data are going to be able to make better decisions than much more senior people further removed from those things. Or the idea that it’s OK to take smart risks in the service of learning as opposed to ensuring that a product or an idea is perfect before it’s rolled out.
But a CFO also has a role in assuring that the parts of the business system or the operating system they control are able to support agile teams and the funding model — the way the budgeting is done.
I suspect it’s important to keep a balance between the agile and the traditional if you want the finance function to function. How do you do that as a CFO?
Berez: Balance is really one of the core principles that’s required. For example, I was working with a large airline last year that was changing the way it did funding of its technology projects. Historically, it funded large projects for multiple years. Even when those projects weren’t generating the value promised, they would just continue going.
They moved to a model where teams would be funded around different themes — for example, improving the check-in process or improving the efficiency of turning around airplanes at the gate. There would be specific business outcomes that each of those teams have been looking to achieve. The CFO was able to monitor those outcomes on a quarterly basis and adjust funding accordingly.
That provided the flexibility of being able to make those changes, but at the same time, there still were budgets, controls, and processes for hiring people and so forth that allowed the control side to work. That’s the balance I’m talking about.
When agile is applied and the balance is OK, is that reflected in key performance indicators or goals, but they might be different? Different things get measured?
Berez: Yes. An important part of measuring agile teams is thinking about specific business metrics that are going to achieve the value the company wants.
For example, we worked with a healthcare company that was trying to improve the number of people going to high-quality, cost-effective doctors. There wasn’t a single team that could really fully achieve that objective, but there was a team that was responsible for creating a directory and rating physicians. There was another team responsible for the app which a consumer would use to find a physician. Then there was another team responsible for setting up the incentives of the way that healthcare plans were designed. As each team made progress toward its team objective, the enterprise objective would be realised.
The way they set up the metrics for each of the teams was to optimise the things they were able to control. For example, the team that helped a patient pick a doctor using an app would be measured by the percentage of the time the consumer made a decision to see a high-quality, low-cost physician.
In a more traditional model, you might just be measuring things like the average medical cost or average administrative cost, which isn’t of much help in guiding the activity of individual teams.
How do you monitor whether you have that balance right on an ongoing basis, that you’re going in the right direction?
Berez: An agile system is set up very well to monitor and adapt. You’re constantly looking at the way you’re doing things and improving them. CFOs look at the results that they’re getting from the different teams and see if they’re achieving those results. If they’re not, they look at the underlying reasons. Are we perhaps not funding the right projects? Are we not taking enough risks? Are we not giving the teams the resources they need to succeed?
In addition to measuring business outcomes, they might be surveying teams to understand whether they’re getting what they need. They might be doing external surveys of the market to understand why customers are behaving the way they are. All those things together will provide the information to decide whether the system is in balance or whether there is some part that isn’t working the way it ought to and needs to be refined.
What does that look like, an agile CFO working within an agile C-suite, and how does that differ from a traditional setup?
Berez: Individual leaders can still make progress toward agile goals, but they’ll definitely work most effectively as part of an overall agile leadership team.
Agile leadership itself functions as an agile team, though not as much as a conventional agile team, because the agile leadership team at the C-suite is responsible for a number of different things. Each C-suite member, of course, is responsible for his/her own function. The CFO is responsible directly for the financial organisation.
As a leadership team, they are also responsible for building the agile business system that I was describing before. As they work together as a team, they’re able to help each other. The CFO can help the other members with the financial metrics, to let them know whether their functions are operating well. The CIO can provide some of the data and some of the technology capability for the tools to track the value. The chief marketing officer can help the other leadership team members understand the external customers better and ensure that their functions are supporting those external customers in the best way possible.
An important aspect of what each leadership team needs to do is create a backlog or a list of the priority opportunities for the business. Those are the initiatives that the team will undertake to make improvements in the business. Initiatives should be prioritised based on the business value and how quickly they can be achieved.
You don’t have to be a big company to do this?
Berez: Any size company can do this. The size of the company just impacts the scope of what the leadership team works on.
Did you see anything surprising, anything you didn’t expect to result from an agile system, from agile leadership?
Berez: The agile leaders enjoy their jobs far more than they used to. Previously, they were spending all sorts of time in meetings that felt very unproductive, where decisions might be made one day and questioned another day, where they found themselves spending a lot of time in reviews and they weren’t necessarily creating a lot of value for the business.
When they moved to this agile model, they could spend much more time on the things that only they could do, most importantly around business strategy, around building this agile operating system that helped improve the business. They spent less time micromanaging and directing their teams. They were doing higher-value work and finding it more fulfilling.
They were doing things that were having greater impact on a daily basis than they used to when their job involved much more mundane and routine work.
Can you do agile wrong?
Berez: There are a number of companies that, when they take on this agile journey, opt for an approach that could best be summarised as, “Let’s have you folks do agile.” The senior team comes up with a grand plan to make the company agile, and they go through all sorts of detailed projects plans. They set up a project office to administer all of this, and they dictate that all of these teams be set up and that people start working in agile ways.
This is exactly the opposite of agile behaviour. The leadership team is not listening to customers. They’re not testing things on a small basis, improving them, and only then scaling them up and rolling them out. That’s a really important thing to avoid.
As CFOs and other executives embark on this journey, we would want them to start with smaller pilots, demonstrate value, get energy in the organisation around that value, and then scale up as the demand grows.
— Sabine Vollmer (Sabine.Vollmer@aicpa-cima.com) is an FM magazine senior editor.