Beyond Agile — How to Craft Better Organisations?

Uniting Leaders For a More Sustainable Future

Transcript of my marginally updated presentation on the evolution of Agile learning organisations, with more details on Performance Management and OKRs — supporting a stimulating dialogue and knowledge exchange with the executive Leaders of a world-leading agile engineering and technology company

Thank you very much indeed! It’s a pleasure and privilege to be here and sit with you around your virtual leadership campfire in such exceptional times. I am especially grateful to join a company like yours as we have been — albeit remotely — partners in crime on our quests to create better organisations. And we have probably all experienced that organisational change is hard work at the best of times — but especially in these days of pressures and uncertainties. So, I am really inspired that in all my interactions with your colleagues so far, I have sensed great curiosity and a willingness to go further. Hence, when kindly asked to join you today, I immediately agreed and I hope we can fruitfully expand our historic collaboration.

In the next twenty minutes I have set myself a challenge to offer you three things: firstly, my own thoughts on what it means to build better businesses, as a hopeful reference map and to provoke our thinking. My simple belief is that we need to understand and change organisations intentionally and holistically, especially through the way we lead. And we must accept that we have a greater responsibility to the world, beyond our own budgets. Secondly, specifically during our Q&A, I hope we can discuss a few more concrete and practical lessons learned about Agile and beyond. And, finally, I would love to help you kick off what hopefully will be a much brighter 2021 with positive energy!

So, without further ado, let us dive into that wonderful world of business transformation. Our world has become very complex and I would like to ponder with you about a conundrum that has kept me personally awake during the last ten years: How can we craft organisations where work is truly meaningful and where we enjoy our daily jobs, generate appropriate returns and contribute to a sustainable future for our company, our sector and society at large?

And I believe this is important. Whilst this so-called Fourth Industrial Revolution is literally “taking the world by its ears”, our organisations have collectively produced numerous outcomes that nobody really wanted — burnout and loneliness, inequality and hunger, and ecological collapse. And by some estimates, more than 7 trillion dollars are wasted every single year, globally, due to employee disengagement.

And if that was not enough — whilst mankind is facing a historic inflection point, 56% of global citizens believe “capitalism does more harm than good”.

Hence, we urgently need to take a step back and reflect, and I would like to share with you a few thoughts on three simple questions: Why are we really here? How can we evolve our organisations further to achieve both performance and purpose? And who do we, as leaders, need to become in order to make it work?

Interestingly, I very often encounter people who tell me very earnestly that they deeply desire to become more Agile or “Teal”, without ever really asking themselves the question why.

That is not surprising, is it? We have created a seductively materialistic and individualistic narrative in our western society, where self-interested growth, productivity and stock prices have become ends in themselves.

In a “pandemic of busyness” we have often succumbed to that hedonistic treadmill of money for money’s sake. People start to work ever longer hours to attain status, social acceptance and wealth, just to find out that it does not really make them happier.

And in creating ever greater riches, arguably for far too few, we have often ignored ecologic externalities, just to discover that our mother planet is at the brink of bankruptcy and the collapse of global climate will threaten the livelihoods of millions.

So, what do we really believe in? What do we really stand for?

These questions are both existential and fundamental. We create organisations for a purpose, to achieve something together which individually we could not achieve. And I strongly believe that 50 years after Milton Friedman’s famous essay on business, both personal and organisational “success” must transcend a quest for money and shareholder value.

· As Colin Mayer maintained at the WEF last year, the true purpose of organisations is to “solve the planets problems, profitably”. It is not just about profit and endless growth, but also about an inclusive and sustainable economy for all stakeholders, and about becoming good ancestors for generations to come. Not just bigger, but better.

• And in a world where traditional communities of churches and neighbourhoods have been eroded, where scientific management has filled gaps of meanings with a gospel of growth, and where work has become so central in our lives, I believe we as businesses as well have to step up. As Immanuel Kant warned us a century ago: “human beings must always be treated as an end in themselves, never as means”, never as cogs in a machine.
• Not as a question of marketing or charity, but as a matter of morality and justice. Exploitation and inequality are not economic laws, but inherent failures of our economic system. We must evolve societal and organisational purpose and success measures beyond GDP and PBT.

And therefore, I believe we must ask ourselves: are we and our companies net contributors to a “quadruple bottom line”? Are we making a meaningful and measurable difference? Do we have processes in place to evaluate and balance major projects against values?

Here I often encounter a tendency of leaders to suggest that this is the fluffy stuff and HR should deal with it. That simply is not true. Leadership is ethics. Leaders cannot remain morally mute when our very existence on this planet is at stake. And btw in my experience, it often turns out that the “fluffy stuff” requires a lot more courage and stamina than some of those supposedly hard things.

Today, we need human-centric and eco-centric organisations more than ever to provide a place of meaning and community, where people can grow and flourish, and attain a positive collective purpose, together.

Actually, I do believe many people today agree with such an ambition, but struggle to understand how to evolve from where they are. As a result, change is slow. And, whatever consultants might sometimes suggest to us, I think we all know there are no simple answers — like people, every organisation is different.

However, I do very strongly believe that we cannot simply continue as before. We live in an ever more complex world — facing ever-faster changes, advances in technology and data, shortening half-life of knowledge, and ever greater global interdependencies. Some researchers maintain that “65% of future professions of people entering primary school today do not even yet exist”. So, in these New 20ies we must let go of the illusion that work can be predicted or planned in detail. As BCG suggested, the companies that will win in the 2020ies are those who can “compete on learning”.

From a paradigm of “scalable efficiency” that has dominated our businesses since the industrial revolution we need to transition to a new world of “scalable learning” and development. From competitive to “adaptive advantage” and from closed systems to boundaryless ecosystems.

The simple truth is that our world has become too complex to be controlled through bureaucracy. Hence, we must revise how to create organisations that can do both — compete successfully and attain the purpose we desire. The problem is mostly not unknown-unknowns but unknown-knowns — things the executives don’t know, but the organisation does. Our agile organisations of the future must be able to create an environment where people can and want to make a difference, in order to harness ideas from everywhere. In order to thrive, we must both embrace uncertainty and maximise human flourishing at work, rather than just driving efficiency and productivity.

But how do we get there? In my experience, in order to enable self-organisation and organisational learning at scale, we must have the courage to re-design work, adapting the context for our teams at multiple levels — in terms of structure and management processes, and organisational practices.

• In terms of structure and power, central authority simply does not lend itself to decentralised experimentation and learning. At ING, we were one of the first banks to roll out Agile at scale, globally. And as we demonstrated, and I believe you have seen the same, Agile can provide more flexibility within the pyramid, enabling self-organisation and cross-functional flows of information and decision-making. Following on from Agile we are seeing more and more “ambidextrous” organisations that seek to enable both exploitation of the existing BAU and exploration of the new — in ING for example we created an integrated innovation division and deployed a global change investment governance, but it won’t stop there. We are already witnessing experiments with meshed and adaptive networks of teams like Buurtzoorg, market-oriented ecosystems and micro enterprises like Rendenhayi at Haier, and experiments with interconnected circles based on holacracy and sociocracy. In my global team, for example, we are leveraging sociocratic structures and decision-making to enable co-creation.
• Secondly, in terms of management processes — organisational learning requires both order and freedom. Bill Torbert speaks of “liberating structures”, like principles, roles, routines and rituals, methodologies — to enable and host “generative dialogue” involving as many people as possible. This is what we do for example in Agile ceremonies and Agile coaches — and maybe interesting for you we have about 1 coach per 3–4 squads, aiming for 9. Yet, it is not only about having weekly standups — learning also entails mechanisms to manage creative tensions and conflict — in ING we have 40 different countries with a lot of valuable expertise but also many different priorities and opinions. Innovation at its core is “creative destruction” and if we just sweep disagreements under the carpet we will be ruined by our own empathy. Interestingly, Danfoss for example has used psychologists to train their teams in conflict management and Michelin actively promotes “constructive impertinence” in its meetings. By its very nature, total consensus would overwhelm complex systems and hence we need procedures to explicitly foster collaboration across diversity and attain not consensus, but consent.
• Finally, we must adapt sometimes anachronistic HR and finance practices. Support functions must become agile — but not just by organising in tribes and squads, but by adapting their support process to truly enable learning at scale.

One process I want to focus on is Performance Management, as it is often the cornerstone of an outdated behaviourist worldview –

• Target Setting: Rather than a top-down cascade of numerous KPIs at the beginning of each year, trying to control the uncontrollable, we need to separate retrospective performance management to measure efficiency and quality, with KPIs, and adaptive alignment of change objectives across teams and even externals, with OKRs — moving from annual goals towards recurrent sprints. OKRs are a collaborative management approach, not a new MBO and I will revert to it in a second.
• Secondly, we need to enable honest conversations and contracting, for individuals and teams, not only of what we do but also what we expect from and how they work with each other.
• Finally, in Finance, we need to evolve sometimes rigid financial mid-term planning and resource allocation processes towards “beyond budgeting” — in ING for example we are now mostly using rolling forecasts.
• In terms of Performance Feedback: engagement needs to become continuous and facilitate self-reflection, nurture the rebels and evolve from “feedback” towards strength-based “feed forwards”. In my team we have for example invested in coaching skills of our leaders and agile coaches and launched systematic peer-coaching and team reflection. Focus moves from individual high performers towards team dynamics. The truth is “many leadership teams are dysfunctional”.
• For Performance Appraisals: we must revise and let go of those rankings and ratings! There is ample literature clearly showing that ratings simply do not work. And we must measure more attitude and less compliance.
• Finally, leadership development and promotion must strongly reflect moral agency and relational skills, not just conformity and ability to control. And in L&D we should explore peer-to-peer learning and transparent, skills-based compensation — again, something we are working on with external support.

A few more words on OKRs to maybe trigger some interesting Q&A. For us, the primary objective of OKRs is to provide focus and speed for our transformation, and align the organisation behind it. And whilst we are still experimenting, some lessons are already quite clear: Here are my personal top six -

• 1. OKRs are about purpose and impact, not tasks. KRs should be measurable and linked to epics, but the idea is that we keep flexible on how we achieve key results. We want a value-centric culture, not ticking boxes.
• 2. Its all about focus and less is more. Teams should be both selective and clear on what they do, ideally 2–5 KRs per max 3 objectives, but also very explicit about what they don’t do.
• 3. OKRs don’t cascade, but must be owned by the team. We use both annual strategic objectives — our Must-Win Battles set with contribution across levels – and tactical quarterly objectives. And we had to install some exceptions for regulatory objectives which are mandatory — so that roughly 60% of OKRs are chosen today by the teams. And of course, leaders are fully involved and have an equal right to influence and bring objections.
• 4. Regular ceremonies are key. We use weekly check-ins and obeya sessions to review progress and impediments, and quarterly retrospectives to update OKRs and lessons learned. Btw, we don’t score KRs as suggested by Google, we simply measure. And maybe interestingly, I recently spoke to a company using a 4-monthly rhythm where a whole month is used for retrospectives.
• 5. It’s critical to have everybody involved to avoid silos. OKRs are public and we have deployed what we call Quarterly Business Reviews and marketplaces to actively share and manage objectives, dependencies and resources globally and locally.
• 6. Finally, ambition is crucial. Here we must be clear that OKRs are not about performance management or compensation and this takes some maturity: whilst in Google it was accepted to only reach 30% of objectives, in most organisations it is not. We are still experimenting and currently mix roofshots and moonshots.

Again, we must be aware that we cannot just copy and paste “best” practices — as I said earlier, every organisation is unique. And let us be careful: instead of moving the proverbial “deck chairs on the Titanic” and redrawing org charts and job titles, we must above all consciously revise the distribution of information, knowledge and power. Fact is that existing systems often distort or suppress information. Knowledge is power. And I have seen many agile implementations struggle because they never dealt with existing power or ownership structures. In the future, we will need to move information not just upwards, but everywhere — Wholefoods for example shares all operating and financial data proactively across the business. Or as the say at Viisi, the mortgage provider, “radical transparency” should prevail: “Everything is public unless its harmful”. So that strategy becomes a firm-wide conversation.

In a nutshell, I strongly believe that more than providing simple answers we must enable an environment where our people can and do ask the right questions and collectively experiment and evolve — not only in terms of how they deliver, but also in regards to how they organise.

So that over time, our organisation become true laboratories of ideas, integrating “action and inquiry” into everything we do, always sensing and exploring and experimenting whilst we are moving — in teams and in “peer communities” of learning.

But there is more. In my experience, adapting the context does not necessarily mean that people will accept ownership or set audacious OKRs. In other words, not having a leader at the centre will be problematic, if teams haven’t got strong interpersonal communication, trust and competences. So how can we avoid OKR theatre and truly unleash the creativity of our people?

Frankly, I don’t believe there are any shortcuts. For decades, we have been trained to see humans as strictly rational consumers in economic markets. In our businesses, we have treated people like easily replaceable human “capital” or as exchangeable “resources” to be controlled. As a result, more than 75% of employees feel disengaged. Going forward, in order to build adaptive learning organisations, we truly must put people first. We must re-learn to cherish their uniqueness and design our organisations to fulfil their basic human needs: their sense of orientation, belonging, autonomy, self-esteem. There is no trade-off between business and people: true success is only when every human being at work has the ability to develop, use their creativity and have impact. When agency becomes activism.

This won’t be automatic. I believe people naturally develop, but in a world where we are all ‘required’ to wear many different masks, our public identity has become disengaged from our inner life and it has become challenging just to ‘be’ with ourselves and with each other, resulting in dualism and tensions. Therefore, firstly, in so-called deliberately developmental organisations we deliberately invest in helping people to go below the proverbial iceberg, individually and collectively, and recognise their own biases and needs, anxieties, attachment styles, defense and copying mechanisms — to grow their ability to work with and care for others, and co-generate meaning and value in service of the community. Our “inner game is our outer game”. Or as Frederique Laloux says: “We can only go far into the “we” if we fully inhabit the “I””.

Secondly, by intentionally matching desires and skills of individuals with meaningful activities we can enable personal development, “flow” and ultimately happiness @ work. It crucially matters how people think about their work: when people are happier, they “don’t just act smarter — they are smarter”.

And this brings us to culture. So let me ask you, do you feel you can truly bring your ideas to the front rows of your organisation? I truly hope you do, but if not, you are not alone. Based on a recent study only 20% of employees believe their opinion counts and 70% report new ideas are met with hostility! And as people often suggest, culture is “the way we do things around here”, which arguably is not very precise. For me personally, culture relates in particular to how we treat each other and what we truly care for.

If we want to develop human-centric, high performance and innovative organisations, we need to actively foster an environment of psychological safety, openness, community and compassion where people truly commit to co-elevate and take risks to be entrepreneurial. Culture is not just a poster on the cafeteria wall. Always remember: no one can really empower others — being empowered is a choice. So, do have a look at your own calendars and verify how many hours you are spending “on culture” with your team every month, especially in this new way of working!

The bottom line is that we have to become intentional and conscious about culture, not only inside the organisation but across our entire ecosystem, not only from the top but inclusively across all teams. We need to collectively create a space to revise and explicitly contract organisational culture. As they say, culture eats strategy for breakfast: if we fail to manage our culture, then our culture manages us. And “we become that breakfast”.

Yet, I strongly believe this requires a change in metaphor — instead of optimising organisations as “machines or behaviourist training grounds”, dividing information and power, specialising and ruling with carrots and sticks, we need to start acknowledging organisations as complex developmental systems, as “living organism”, with minds and hearts and souls. Where deep emotional bonds of community and trust matter as much as outcomes and where individuals and teams experience, learn and develop together — in service of a meaningful purpose. Where influence and authority are different from rank and position and where employees have freedom to experiment — where many more people have agency to become their “own CEOs”. More than in structures, methodologies or tools, the difference lies in core principles. In Humanocracies, “the business of business is people.”

This is where in my experience many organisations get stuck. Why? I regret to say so, dear colleagues, but I believe it is often because of us — in fact, my number 1 lesson learned in Agile is that leadership becomes a lot more difficult.

Notably, the maturity of an organisation can never transcend the maturity and consciousness of its leadership. If greater consciousness doesn’t operate, a system does not possess the stability to let go of the past and transition to a new model.

• If our definition of success is “going up that ladder from VP to SVP to EVP”, hierarchy prevails. If we dominate others to uphold our own ego, people around us won’t flourish. If we seek to control an uncertain environment with ever more rigidity, self-organisation will perish. And, finally, if we try to shrink the complexity of the world to our own cognitive limits, we will fail.
• In a world of self-organisation, there simply is no place anymore for patriarchal Commanders in Chief who rule by positional power and dominance. Agile leaders focus on the why, not the how. Decisions are always made at the lowest possible level, close to the customer.
• Rather than telling people what to do, leaders today need to become experts in building, sensing, caring for and influencing organisational systems; in coaching individuals and teams; and in enabling that co-creation and emergence of shared purpose.
• In such a new world we need Chief Communicators who earn the respects of their people by making personal sacrifices to serve the collective good. And Chief Connectors who can create a “cultural force field of energy” — placing their needles a bit like acupuncturists to facilitate the energy flows in an organisational body. Fostering psychological safety and trust; reinforcing transparency and embracing failure; role modelling gratitude, compassion and kindness.

Such a new “transpersonal” leadership paradigm is more than just EQ — it integrates intellectual, emotional and spiritual intelligence. Servant leaders “lead beyond the ego”, allowing time for awareness and reflection, rather than jumping into action. Letting go to become vulnerable “imperfectionists”, holding the space for others to attain self-mastery and meaning.

As John Quincy Adams once posited: “If your actions inspire others to dream more, learn more, do more and become more, you are a leader.”

For traditional leaders who have risen the corporate chain by being in control, this is a difficult challenge: “what brought us here, won’t bring us there.”

So how can we transcend? What’s that breakthrough? Like I’m sure many of you, I’ve spent most of my career trying to become a “good” leader. Yet, nevertheless, if I am honest, for a long time, “being right” was probably often more important than to accept uncertainty and to deeply listen and learn.

I still don’t have all the answers, but in my personal experience, progression requires a conscious commitment to vertical development, facing our own shadows and our emotions, letting go of restrictive mental models, hearing our “soul knocking at the ego’s door”. Good leaders, above all, must become “good” people. Responsible leaders, says Manfred Kets de Vries, are not only born — but “twice born” through painful individuation — where every victory of the self feels like a “defeat for the ego” — until we can compassionately see all the facets of an interconnected whole.

But, above all, I believe we need to take time to reflect and tap into what really matters to us. We need the faith to look inwards, not just outwards. Feeling how everything is profoundly connected. Loving ourselves and others for mutual growth. Serving life beyond the confines of our own ego.

Similar to adopting a new metaphor for our organisations, I believe that means we need to reframe the meaning of our own contribution. Turning the profanity of work into the vital flourishing of life. Accessing that essence of who we are and what we stand for allows us to let go of fears and the desire to control. As Mark Twain once quipped: “The two most important days in your life are the day you are born and the day you find out why.” And I can assure you: once you fully commit yourself to serve a greater purpose — synchronously the world outside you changes, too.

And, suddenly, leadership is not a tribe of special individuals with special traits, and not even a role, but about letting go of authority and unleashing the unique potential in everyone. About people no longer being victims of circumstances, but thriving in the creation of new possibilities. About learning together how to shape a more responsible future.

Coming to the end, let me offer you a final insight. I am almost fifty now and I started working with Agile and business transformation 20 years ago. I don’t know how many leadership seminars I attended or how many projects I ran. Fact is that it took myself almost 15 years to acknowledge that sus­tainable organisational transformation is only possible through concurrent individual trans­formation. We are the system.

Yet that also means that we all have that power — and I believe the responsibility — to transform our organisations and our relationships from who we are and how we show up. We can all spark the transformation of our organisations — gradually crafting the structures, processes, and cultures needed to attain an environment for individual development and the evolution of an emergent collective purpose.

And beyond our own businesses, we can stand up as leaders for a new collective narrative to overcome the limitations of the social materialism we have today. Where work has dignity and success is not only about money, but compassion, community and character.

So, I do wish you that you will seize this truly historic moment to evolve your company, and also to reflect on your own bearings. The current pandemic lays bare the frailty of our social contract and the economic lockdowns shine a glaring light on existing inequalities — and even creates new ones. Hence, today is an important time for all of us to occupy those “front rows of our lives” and make conscious choices. Not only driving productivity, but also growing to serve a greater cause, not with a perfect plan, but starting somewhere and adapting and evolving fast whilst we go…. We cannot think ourselves into a new way of acting — we must act ourselves into a new way of thinking!

So, let us together roll up our sleeves and jointly reimagine our organisations for positive impact in 2021, to recover better, recover stronger, recover together! We are not leaders, because we rule. We are leaders, because we truly care.

Thank you very much.