Is your organisation implementing new ways of working? If so, what implications does this have for your HR department?
Society is constantly changing, and production processes are continuously optimised to make the road from idea to product launch as short as possible. For this very reason, the agile management style is gaining ground and spreading to areas that go far beyond digital development. It allows businesses to make quick decisions and transformations, matching a rapidly changing marketplace and giving them a competitive edge.
But what does this restructuring entail for HR when parts of the company suddenly switch to working in autonomous teams in flat management structures?
Agile transformations in organisations
Although the agile leadership approach is popular, the demands on support functions such as HR and Finance are often overlooked when the time comes to implement the changes. Because, what exactly does it mean that an organisation becomes more agile, and what impact does it have on the way you structure the governance processes?
When we talk about adapting to the agile organisation structure, we can speak of a "hyper-awareness", where all departments must have a 360-degree orientation towards internal and external factors in order to be able to follow up on what is happening in the marketplace. Whereas in the past, the annual wheel mapped out the course for your company, now we are talking about a new work approach that can change from one month to the next, depending on what is happening in the industry. Previously, you had rigid decision-making procedures in a visible leadership hierarchy, but now the decision-making process is in the hands of individual teams or decision-making forums.
Therefore, adaptability is the keyword for the organisation – across all departments. Choosing to transform only parts of the value chain in the company is not an option. No, in order to establish a successful agile transformation, a new business-wide collaboration model must be supported to expose all opportunities and risks.
An agile transformation in the organisation means that the organisation is gradually transformed to accommodate and thrive in a more flexible, self-organised and changing environment. It is essential that the entire organisation – every manager and employee – understand and know the definition and value of an agile transformation.
The same goes for HR. But it can be challenging to figure out how HR should adapt to and support the requirements for a new and successful agile organisation. The agile management style disrupts the traditional approach to HR. Naturally, this has consequences for the entire work procedure because it puts completely new demands on the internal cooperation within the company. But what are the implications? And does it even make sense for HR to facilitate annual appraisals and annual KPIs for team members whose teams plan only extends three months into the future?
The importance of the traditional organisational structure
To better identify how HR should adapt its structure to the agile approach, it is essential to first look at the characteristics of a traditional organisation and HR department. We need to know the starting point when we talk about adapting and transforming HR's practices.
Most organisations are built around a solid manager-employee relationship, where the manager is fully responsible for his or her team's performance. The manager is in charge of personnel, can hire and dismiss employees and ensures adequate professional competencies within the team. The manager is financially responsible and signs off on departmental expenditure. The manager is responsible for the professional standard of work and is thus the top guarantor of the quality of the team’s performance. In short, the manager is responsible for leading and distributing the work in all its aspects. In HR terms, the team leader is responsible for recruitment, approval, employee development and performance.
HR's workflows and practices are similarly built around the manager-employee relationship in the traditional organisational structure. This is evident in Dave Ulrich's classic HR model (from 1995) in which ‘Strategic Partners’ are, among other things, supporting management with strategic and organisational issues, while ‘Administrative Experts’ assist the individual employee with administrative tasks such as leave or work permits.
In this way, the entire HR organisation and processes are often constructed around the managerial hierarchy. When the leadership hierarchy is disrupted during an agile transformation – it literally pulls the rug from under the HR function – and HR can effectively hinder the agile transformation if the department refuses or is unable to adapt.
The agile disruption and new talent definitions
When a company undergoes an agile transformation, the individual employee will typically no longer be assigned to just one manager. Instead, employees work in cross-functional and more or less self-managed teams. The classic employee-manager relationship is no longer so rigid and allows for new roles to come in and have a significant impact on the managerial functions in the teams.
Thus, the employee can have many roles, each covering some of the traditional managerial relationships. Below is an example of agile roles adapted from the “Spotify” model:
- The ‘Chapter Lead’ is responsible for the team’s professional development and setting the bar for professionalism.
- The ‘Product Owner’ is the customer’s representative within the team and ensures that the customers’ needs are met.
- The ‘Scrum Master’ coordinates the team deliverables and facilitates allocation of employees to each task.
- The ‘Agile Coach’ coaches on processes by aligning the team with the agile practices, values, and mindset.
In addition to the above-mentioned agile roles, there are also peers and teammates who collaborate with the employees on the products on a day-to-day basis.
The talent definition also usually broadens within the companies working agile. Previously, many companies focused on developing tomorrow's leaders – typically generalists with solid business understanding and highly developed skills for leading and distributing. Some knowledge-intensive companies had a parallel specialist track to nurture the specialists of the future.
In an agile company, future success mainly depends on the power of innovation. Here, talent is recognised as the potential to become an innovator of the future – usually with a high degree of specialist knowledge, combined with a profound understanding of consumers and their needs. Traditional personnel development, career and remuneration models based on a hierarchical organisation are thus entirely inadequate.
How should HR respond to the agile transformation?
The new work structures call for new processes and a new HR organisation. We have spoken to several agile teams, managers, and HR departments in agile organisations, and they all point to the same questions that they need to find new answers to "Who is now in charge of hiring and firing people?", "Who heads up development and personal KPIs, and are they even relevant now?", "How do we meet employees' personal development and career progression requirements in a flat organisation?" And how should HR regroup to support all these new needs, roles, and relationships in our organisation?
We have identified three areas where HR should respond to the agile transformation to achieve a structure that caters for all departments in the company:
1. The workflows in your organisation
When there is no longer one leader with the power to make all decisions in all areas, new decision models and decision-making forums must be defined, encompassing all relevant roles and stakeholders in the organisation. It is essential to ensure that the right people make decisions on talent.
2. The organisation of HR
You should also look at the way your HR is structured. It no longer makes sense for HR to focus on supporting management and individual employees’ needs, respectively. On the contrary, HR can benefit from shifting its focus to the teams of employees and supporting the different areas of expertise instead of the departments, thus gaining an in-depth knowledge of the teams. Going forward, recruitment, salary and career counselling may be carried out by a professionally-oriented HR employee who knows the different talent markets, the competition out there, and the dominant motivators within the different talent segments.
3. The HR work method
You also need to adjust your work method. It is not conducive to an agile work structure to have a "centre of expertise" that develops your organisation's policies and processes based on an analysis-design-build-implement-model, allowing only for a small and very late involvement of the rest of the HR organisation and other key stakeholders. Rather, HR should implement more agile workflows with high user involvement from the start, continuously tweaking and adjusting as the organisation evolves and changes.
Within each of these three areas, there are several examples of how you can organise the management structure and workflows in HR to be more adapted to the agile process. If management asks you to take a helicopter view and a strategic perspective, then one thing is for certain: the old ways are not agile and no longer represent a solution. Rather, HR should embrace a transparent organisation and way of working that is consistent with what the workflow required from the employees, allowing the department to support the agile management structure to the best of its ability.
This article has been abbreviated; you can find the full version at: https://implementconsultinggroup.com/article/agile-transformations-in-organisations/