Five Traits of an Agile Enterprise – Part 1

Transparency is vital because agility starts when everyone in a company knows what’s happening; when they have reason to care about what’s happening (usually because they get bonuses tied to performance); and when they have authority to act so as to continuously improve what’s happening (so they can earn higher bonuses). That means everybody needs access to timely and relevant information so they can act in real time to optimize their performance as conditions change.

People need to see key performance indicators for the company as a whole, and they need to see in depth operating statistics for the performance of their particular units. Agility is a real-time game; people have to see if they are on course or off course, and they have to see if their actions are making things better or worse. Unlike the old saying, what they don’t know will definitely hurt them.

[ I do lively presentations on this and related topics - mhugos@yahoo.com ]

This full disclosure of on-going operating results is also the transparency that breeds trust. And trust is the common bond that holds an agile enterprise together. Just as it is trust and transparency that makes the operation of free markets possible, it’s also trust and transparency that makes the operation of agile organizations possible.

Trust is critical because an agile enterprise must motivate and develop entrepreneurial behavior in all its members, and that happens only when everyone has a stake in the outcome. In other words, it happens when there are programs that allow everyone to share directly in the prosperity they generate. Those same programs also require everyone to sacrifice their bonuses when the company does poorly. People will only buy into such programs when there is trust and that means there must be transparency that gives them the evidence they need to believe they are being fairly treated.

Because of these bonuses, base salaries in an agile enterprise are not as high as in companies that pay no bonuses (or only token annual bonuses). So when an agile enterprise has a bad year, it does not have to lay off so many people to lower its fixed operating expenses. That means more people can keep their jobs, and it means they are also highly motivated to figure out how to deliver better profits in the future so they can increase their income again. The experience they gain this way becomes a major company asset; it is how people get better and better at generating profits. Two excellent examples of companies that operate this way are an American company, Springfield ReManufacturing Company and a Brazilian company, Semco SA.

This is grass roots entrepreneurship. It is aimed directly at addressing the cynicism in the workforce and the trap of commoditized jobs that strip work of much of its value. It addresses those things that make employees in many companies worried and unhappy and distrustful of their senior managers. Transparency enables entrepreneurial behavior and entrepreneurial behavior is what drives agility.

QUESTION: What kind of systems does a company need in order to deliver this kind of real-time transparency to its people (how do we make sure BI doesn’t turn into BS?)?

[Michael Hugos, principal at Center for Systems Innovaton [c4si], finding elegant solutions to complex problems; mentoring teams in agile systems development and strategies for business agility. See his book Business Agility: Sustainable Prosperity in a Relentlessly Competitive World.]