Big-bang
It is tempting for managers, facing urgent competitive threats, and frustrated by the slow-motion actions of their own firm, to pursue big-bang, everything-at-once, Agile transformations. The motivation is to avoid the long gestation periods that Agile transformations of an entire organization can take—sometimes as long as a decade.
The Case Of The ING Bank
The case of the ING Bank in The Netherlands is often cited as an example of a success story of such a big-bang transition.
At the ING Bank, when an agile way of working was introduced in 2015, there was, according to the Chief Operating Officer, Bart Schlatmann, “no particular financial imperative, since the company was performing well and interest rates were still at a decent level. Customer behavior, however, was rapidly changing… We needed to stop thinking traditionally about product marketing and start understanding customer journeys in this new omnichannel environment.”
The management decided to move aggressively. As Darrell Rigby in his pathbreaking book, Doing Agile Right (HBRP, 2020) explains, the management team “dissolved the organizational structures of its most innovative functions, including IT development, product management, channel management, and marketing—essentially abolishing everyone’s job. Then it created small agile ‘squads’ and required nearly 3,500 employees to reapply for 2,500 redesigned positions on those squads. About 40% of the people filling the positions had to learn new jobs, and all had to profoundly change their mindsets.”
Experience suggests at least three central problems with this approach.
· It confuses and traumatizes the staff in the organization. People aren’t sure where to go or what to do. It assumes that thousands of individuals, most of whom have no experience or knowledge of agile, will suddenly understand and work according to its principles.
MORE FOR YOU
· Although the goal is to keep the “good workers” and let go of the “less good”, the “less good” workers are often well-plugged into the power structure and survive, while the “good workers” can be disgusted by the chaos and leave.
· With 3,500 employees applying for 2,500 positions, a key part of the not-very-hidden agenda is cost cutting and staff reduction—not more Agile management. The danger is thus acute of Agile becoming a synonym for cost-cutting. This has long-term costs in terms of loss of trust and acceptance of future change.
Although managers of such abrupt changes often publicly tout the success, Rigby concludes “overall results frequently failed to meet unrealistic promises; stock prices (including ING’s) have often declined, sometimes by 30 percent or more.” (See Figure 1)
Figure 1: ING Bank 5-year total return vs S&P500
Bart Schlatmann, the chief operating officer at ING at the time, reflected on the experience in an interview: “We chose each of the 2,500 employees in our organization as it is today—and nearly 40 percent are in a different position to the job they were in previously. Of course, we lost a lot of people who had good knowledge but lacked the right mindset; but knowledge can be easily regained if people have the intrinsic capability.”
“He is understandably putting a favorable gloss on the experience,” writes Rigby. “But can you imagine the terror and trauma the initiative must have provoked in the workforce? Why start with such a risky and costly move? Such an approach emphasizes cost savings more than innovation and growth. Fostering a new way of working with people who have been fearing for their jobs—and 40 percent of whom are in new roles—gets the whole project off to a rocky beginning. And that’s not to mention the fact that the leadership team just role-modeled the exact opposite of agile values in doing so.”
Remove Process Constraints Before Blaming The Employees
Big-bang Agile transformations often reflect a management mindset that sees the performance problem as “something out there”, namely the workers. It is a management mindset that is often blind to the constraints posed by the bureaucratic processes for which the top management is responsible, such as budget, HR, as well as limitations on the resources and approvals needed for innovation. Management can be quick to set up a Darwinian process to cull staff, while being slow to remove processes and systems that are hampering staff from doing what is needed.
This is one of the lessons from the ANZ Bank, which also attempted a big-bang transformation, explicitly modeled on the ING model. Here too, the bank required employees to reapply for smaller number of jobs. After a year, some 5000 employees had left the organization.
While the management found that although it then had teams—ostensibly Agile and committed to new ways of leading and working—it had failed to change the funding of the work. Funding continued to be allocated once-a-year and on a project basis. While the teams were iterating on the work, the funding model remained fixed and unable to adjust to the changes being generated. It was “a collision between new ways of working and old ways of financing,” said Christian Venter, general manager of omnichannel at ANZ Bank in 2019 and one of the key executives that led the agile transformation.
While managers point to many internal process measures suggesting that inside the bank some activities and processes are speeding up considerably, the results in terms of overall performance of the bank as seen by the stock market remain disappointing. (see Figure 2).
Figure 2: ANZ bank: 3-year total return vs S&P500
Big Bang Transformations And The Purpose Of Agile
In evaluating the wisdom of launching big-bang transitions, it is important that managers keep in mind that the purpose of Agile is to benefit customers and workers as human beings. The reason why firms iterate is to learn as they go and understand the interactions that are taking place. Big-bang approaches are the very antithesis of this mindset.
The fact that managers have the power to set up Darwinian processes for excluding staff based on an evidence-free hypothesis that a large number of workers need to be abruptly removed from their jobs shows how far we can become prisoners of our own systems and creations. In this way, our own organizations can become Frankenstein monsters, operating according to their own mechanical agendas. They end up not only crushing the human spirit. They also fail to achieve their own financial objectives.
And read also:
