What’s Missing in the Agile Approach

I’ve been in the business of coaching companies for a few decades, but only recently did I get into the business of research. Management ideas are nice ideas, but they’re just that. If you want to prove what actually drives financial results–and if you care about improving the lives of the employees who drive those results–you need applied research.

My friends at Harvard Business School have been telling me this for a while, so I talked them into helping me test the validity of a management approach we call Economic Engagement. It’s all about partnering with employees to profitably serve customers. We defined exactly what we meant by Economic Engagement, codifying it in five management practices. Three years into the research, we shared the initial compelling results in these pages (more details are provided in the book I wrote with John Case–Partners on the Payroll).

While I’m a die-hard fan of this approach (and growing more fanatic as the research continues to reinforce the correlation between Economic Engagement and profitable growth), I like to remain agnostic about processes. There are a lot of ideas out there, and there’s plenty to admire about them. Agile comes to mind first.

Hailed by management thought-leaders and big-company execs alike, it’s a highly effective set of tools for product design that’s being applied to all kinds of areas of work. Agile forgoes traditional step-by-step planning and breaks work into smaller two-week “sprints,” where self-managed teams focus on a piece they can readily process with what they have on hand. Multiple groups accomplish multiple tasks simultaneously, allowing for early prototype testing with customers.

Back in my coaching days, before anybody outside of the software industry had heard of agile, I was working with Capital One–a somewhat larger client than most of the small-to-midsized privately held companies I typically coached.

We were helping director Dan Mortenson transform the firm’s back-office unit, known as Production Services, which was considered a cost center. Dan thought the unit could serve customers more efficiently if the people in his organization started thinking and acting like it was a profit center. “If Production Services is to be a business,” Mortenson said, “then the people who work for it have to learn to think like business people.”

He and John Mavers, the head of HR, dubbed the shift in mindset: CEO, for “Committed Engaged Owners.” For all intents and purposes, it was agile. The unit’s work was divided into several value-added operations. They consulted their internal customers to determine which elements were most highly valued, and they established “virtual contracts” with each of those customers. Then the teams began brainstorming ways to improve the key elements, testing and implementing their new ideas on the fly.

Just like agile teams do, they also rigorously tracked their results. And they shared their ideas and accomplishments through articles published on the company’s intranet. Over 18 months, Production Services’ costs dropped by $5.6 million, and both employees and customers were happier than ever.

Herein lies the best news about agile. If you run a smaller company or startup and can’t afford the extensive training of a Fortune-500, you don’t have to become a bona fide practitioner to enjoy the benefits of agile principles. In fact, you’ll find there’s nothing magical about agile perse–it’s simply founded in management principles that tend to work, no matter what you call them. In many ways, agile is just transparent, team-based management.

In many ways, it’s Economic Engagement.

Both are grounded in autonomy; individual employees are empowered to think and act like owners. Teams are self-managed by accountability and transparency, and they’re responsible for brainstorming and implementing innovations. Their focus is on better serving customers. Winning is objectively defined, and progress toward goals is visibly tracked. Everybody understands how their role links to overall team performance. All of this made Dan’s Capital One unit, and agile teams everywhere, happier and healthier partners in the business. I’ve seen it do the same at engineering firms, landscaping companies, health-services organizations–you name it.

There’s only one real difference, and it’s significant.

Economic Engagement relies on economic compensation, one of its five key practices. It means incremental economic value created by teams should be shared with those team members. It means employees are considered trusted partners rather than hired hands, and everyone has a chance to learn about the business, to contribute to its success, and to share in the wealth they help create.

If people know their job performance is linked to an incentive like a quarterly bonus, they’ll likely develop new ways to produce better results. They’ll naturally innovate to become more efficient–finding ways to finish work faster or improve quality without sacrificing cost. They’ll seek new approaches to better serve customers. In short, engaged employees live in a world of cause and effect. They understand how their actions contribute to the success of the entire venture. Incentive plans, by definition, are supposed to affect people’s behavior on the job, day in and day out.

It’s not just good juju, it’s smart business. How else can you really expect your employees to think like owners? Economic Engagement doesn’t just show employees how to improve the business, it regularly reminds them why they’re doing it.

There’s a reason agile spread like wildfire when it hit the scene, and why we’re still talking about it. Because it works. Software turns out better and cheaper, developers seem to like the focused work, and customers are more engaged. When other departments notice how unified agile development teams are, they began adopting those methods of operation for everything from budgeting to marketing to recruiting. And even if you can’t host massive training programs, or embrace all the tech and terminology agile offers, you can still board that train. Just make sure you’re taking your employees with you on the journey.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.

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