I have been involved in a number of Agile transformations across multiple large organisations.  In every case I’ve seen that when adopting Agile across an enterprise, it is vitally important to make sure that you get Corporate Services, particularly Finance and HR, on board from the start.  If you don’t, tension and reasons to resist change are often created.

In this blog I will briefly look at why traditional Finance and HR practices don’t suit the new paradigm and some ways in which they can evolve to fully support continuous value delivery.  I’ve seen first hand how a failure to change how work is financed often leads to Wagile – Agile delivery in a rigid Waterfall wrapper which negates a lot of the benefits and ultimately results in Fragile!

Traditional HR processes can also enforce behaviours and role specialisations of the past, leading to a disconnect between the ‘T-shaped’ skills and collaborative behaviours Agile favours and what is valued according to the organisation.  Lots of research shows that engaged employees produce better results, therefore HR policies that embrace the new talent contract are required.

Let’s start with Finance.  Traditionally, colleagues in Finance ask us to request a fixed amount of money for a defined scope yet these rigid ‘project cost accounting’ processes can end up giving a pseudo sense of cost control.   We all know uncertainty is a fact of life, more so when it comes to development and engineering.  Now combine that with changes to customer expectations and the sheer velocity of change.  It rapidly becomes clear that a financial model which bakes in assumptions about exactly what will be delivered before information is available, is a recipe for resistance to necessary change later.   In many organisations this leads to a situation where a change within the ‘project’ initiates an onerous change request process together with justifications of why such a change was required.  This can potentially lose much of the value of agile approaches, which embrace positive change based on feedback and changing circumstances.

Sticking with the Finance theme, the other aspect to traditional finance is cost centre budgeting.  This impedes ‘systems thinking’ and forces different parts of the same organisation to compete for resources.   It can lead to what the management guru W. Edwards Deming stated was ‘independent profit centres becoming selfish…thus destroying the system’.  (Indeed I have seen one organisation where the deployment of technology to improve customer experience in store was effectively abandoned due to disagreement of whether that sale was going to the Digital P&L or the Stores P&L.  Clearly this isn’t very customer-centric!)  Cost centre budgeting can therefore result in misaligned incentives to the ultimate detriment of the customer.

A final point on Finance before moving on.  How many times have we seen in large organisations a ‘project‘ comprising resources from multiple cost centres leading to a slow, complex and bureaucratic process of managing who worked on what, where and for how long?  Does any of this add value to the customer?   To make matters worse, resources are assigned to projects for a temporary period (the definition of a project) and there is an assumption of how long they will be required for.  This invariably causes issues when a project inevitably overruns – thus impeding other planned work and starting the ‘blame game’.

So what can be done to alleviate some of these challenges?  Well, whilst acknowledging that context and each organisation is different, a simpler solution would be to fund long-lived cross functional teams assigned to key long-lived parts of the business.  For example in Retail, a common pattern increasingly employed is teams assigned to areas like Product Search or Payments or Supply Chain.  Essentially bringing work to the people, rather than people to the work.  Organisations in many industries are now seeing the value of teams arranged in this way, emphasising continuous delivery of incremental value rather than inefficiency and bureaucracy of stop-start projects.

From the transformations I’ve been involved with, the way resources and initiatives are financed is one important part of aligning corporate services departments to support Agile at scale.  The other key part is HR.   People are after all, the most valuable asset in any organisation.   Yet there is a disconnect between traditional HR and lean-agile behaviours.  Contemporary HR practices have been formed to reflect role specialisation, whereas the move is towards ‘T-shaped people’, mutual learning and collaboration.  Traditional KPIs can often still be centred on the individual and may inadvertently prevent collaboration for the greater good.  Consider instead metrics with unambiguous links to customer impact or those that promote team working and collaboration over individual preferences.  Once a year appraisals are costly and anachronistic in an environment where there is an opportunity for continuous feedback throughout the year.   Knowledge workers in particular benefit from collaboration and continuous feedback.  It makes them more engaged and, as much research shows, companies with highly engaged employees perform better.

At one of the organisations I was involved with, HR colleagues themselves realised that role definitions and career paths are different in the new Agile landscape and therefore the job descriptions that accompany them have to be more fluid to reflect the wearing of different hats at different times.  The epiphany moment was when they concluded that this also had an impact on hiring policies and the type of person an organisation wants – Agile is, as many realise, a team sport.   HR practices and policies need to be updated to better reflect the needs of 21st century knowledge workers, working in an enterprise Agile environment.

It won’t be easy to change Finance and HR policies but in my opinion it is mandatory to ensure they are both involved from the start when designing a true transformation.   A commitment to Agile excellence at scale can act as a magnet for talented knowledge workers.  Supporting them to provide continuous value delivery will make your customers happier too.

Sukie Kang

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Article by Sukie Kang