Lateral leadership in the digital transformation

Lateral leadership in the digital transformation

Do we actually still need leaders in times of digitalization? In recent years, we heard many voices calling the end of the hierarchy. One reason for this is the rising speed of technological progress, wherefore, those who have the expertise should make the decisions. We are living in a know-how economy. The average level of education has increased over the decades. Experts have gained more power within the company because they get more job offers from competitors. Whether a person with certain know-how feels comfortable in the organization or not has to do a lot with the leadership culture. Good arguments should prevail. If a leader shows off his hierarchical power, the willingness of the expert to leave the job increases. The impact of decisions can also be much easier and faster evaluated since most relevant information is available within a click on the internet.

Nevertheless, hierarchical leaders don’t need to be afraid that they will die out like dinosaurs one day. This has good reasons:

  • Managing directors have legal responsibilities and have to delegate some of them. In the case of a work accident or insolvency, it is the responsibility of the top management to deal with it and not the responsibility of the experts.
  • The hierarchy also has an important efficiency function, which is: resolving stalemate situations. Probably most of us know similar situations: different opinion-makers repeat their points of view and arguments but do not adequately respond to the arguments of the others. As a consequence, not only valuable time passes but also the working climate gets worse in protracted stalemate situations. Maybe both approaches could work well, maybe it’s just that different values and personalities clash together. The more complex our world becomes, the more likely, decision-making processes can turn in circles. In this case, it is the task of the line manager to bring about a decision or to make the decision himself/herself.
  • The leaders who are legitimized by the owners tend to be responsible for the corporate strategy as well. If employees from as many levels as possible are involved, there is a higher change of identification but the leaders must coordinate this process. In some cases, they even have to give clear instructions: for example if the employee and company goals do not match when it comes to change processes.
International leadership development

In some situations, a hierarchical leader is needed, for instance in stalemate situations. In this case, the leader has to facilitate the decision-making process or make decisions herself/himself.

 

Although lateral leadership is on the rise, it still needs both leadership approaches. How many consistently democratic company government systems (e.g. holacracy) have survived for more than 10 years? Very hierarchically organized companies are currently not in the winning position either. The right balance seems to count. And what representatives of situational leadership have said for a long time already, it depends on the specific situation.

O’Reilly III and Tushman went in a similar direction with the ambidextrous idea: Businesses are facing two quite different challenges during the digital transformation:

  1. To disrupt themselves through innovation and thus avoid being disrupted by others and
  2. as soon as the innovation arrives in continuous implementation, ensure that the relevant processes fit and are actually being lived.

Innovation management needs more lateral leadership, while process management needs more of hierarchical leadership. However, when processes are being defined and continuously improved, it takes again the input of many, especially from the people who work with it on a daily basis. In that case, lateral leadership can help. Even the control of the implementation of processes can be mostly done by transparent self-monitoring, for instance using KPI boards. On the other hand, it is also helpful for the innovation management if the company or the divisional management set strategic guidelines to move the development in the direction of the company’s vision.

Summary: We can say that the right balance between lateral and hierarchical leadership increases the probability that the best solutions prevail, that the employees are happy to participate which in combination usually leads to business success.

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Implementation of OKR – Experience report from a CEO

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Experience report from Mag. Gunther Fürstberger, CEO of MDI Management Development International.

At the end of 2016, a big car manufacturer invited us to help with the implementation of the OKR system – objectives and key results. It is important to us that our work is based on personal experiences. Therefore I decided to implement OKR at MDI from the beginning of January 2017.

2016 was not a very successful year for us anyway. We did not achieve our sales target and had a higher staff turnover than wanted. Responsibilities were not clear, employees were overstrained, the productivity was decreasing, the conflict culture was aimed at prevention and the management was not very happy about that.

Together with OKR, we introduced a new team structure and a rolling budget. The new team structure contributed to the reduction of complexity as it reduced the number of contact persons for the employees and trainer at MDI. The “rolling budget forecast” helped us to get rid of this rigid annual plan, which is usually out-of-date after the first quarter already. It gives us the possibility to adapt our resources to current developments.

At the same time, there are different kinds of views on the realization of OKR. I opted for an agile 80% approach: even though not everything was prepared yet, we started nevertheless. I visited a one-day-seminar, watched a series of YouTube videos, for instance about the implementation at Google, and defined some important cornerstones to start with the implementation of the OKR system.

Levels:

  1. Organization level,
  2. Individual OKR’s with the people who report to the managing level,
  3. Individual OKR’s of all other employees with their executives

Amount of the objectives: 3 – 5 objectives, max. 4 key results per objective

Ambition: achievement of objectives: 70%

Transparency: Google document and a poster with all the OKR’s in our kitchen: everyone can see each other’s OKR’s and grading, as well the achieving objects of the management.

Frequency: every quarter

All hands OKR meeting

Monthly meetings give employees the chance to talk about their individual objectives and to see where everybody stands at the moment

Meeting structure

 

OKR meeting:
  • Frequency: every quarter
  • When? Just before the new quarter starts (4th Thursday before the end of the quarter)
  • Duration: 6h meeting (from 10 am – 5 pm with a lunch break)
  • Purpose: to assess the company’s OKR’s from the quarter and define new ones
  • Who: one representative of all divisions: all in all 6 people

 

All hands meeting:
  • Frequency: monthly
  • When: 4th Thursday of a month at 10 am.
  • Duration: 30 minutes
  • Purpose: every employee talks about their OKR’s and where they stand at the moment
  • Who: every employee

 

Individual OKR meetings:
  • Frequency: every quarter
  • When: last week or first week of the quarter
  • Duration: 1h
  • Purpose: check and definition of your personal OKR‘s
  • Who: every employee with his/her executive

 

Jour Fixe:
  • Frequency: every or every second week
  • When: agreed individually
  • Duration: 30min
  • Purpose: check of the OKR’s and support for your everyday working life
  • Who: every employee with his/her executive

In December I wrote a temporary strategy for 2 years and invited the representatives from the most important divisions at MDI to the first company OKR meeting. We did not have an OKR-master back then (role as driving force, meeting moderator), therefore I was the presenter of the first meeting.

The meeting was planned to last 6h and we needed every single minute but we achieved quite a lot in the end:

  • We had one “volunteer” who wanted to take over the role of the OKR-master
  • We worked together on a concept “how OKR should look like at MDI”
  • We defined 4 objectives with each 4 key results
  • About 60% of the final OKR’s were suggestions from the team, the rest was suggested by the management

Even though we were quite exhausted afterwards, we were convinced that the OKR’s can help us to focus on the essential things. We put a poster in our kitchen with the OKR’s, which we wrote down on 4 flipcharts, our mission-vision-value-statements and our 2 years strategy. From January on we started with our individual OKR meetings. We only had one hour to define individual objectives but it worked out in the end.

To set priorities and to formulate ambitiously, measurable key results was quite an effort but saved us valuable time in the end because we knew exactly what our focus was.

We wanted to know more about OKR and therefore our OKR master attended a 3-day OKR-master-training at another institute and came back with a lot of new ideas.

Some of them were for instance:

  • A preparation template for the “all hands meetings” to increase their relevance.
  • Team OKR’s instead of individual OKR’s for every employee
  • Starting with the second quarter, we defined 3 objectives with each 3 key results instead of 4 objectives and 4 key results.

My colleague will explain more about this in another blog article.

Current results evaluation:

It looks like 2017 is going to be the best year in the company’s history. The incoming orders rose by 26% compared to the previous year. The profit has more than doubled and the staff turnover has decreased. However, the challenge now is the expansion and development of the team to keep up with the current growth. Let’s see how the journey continues.

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Scrum is probably the most known and oldest agile method and it was introduced by IT companies in the 1980s. By now not only IT companies are working with this method but many others as well. We talked to Susanne Spath, who is a Scrum certified OKR Master, about the benefits of Scrum and the difference to other agile methods.

 

What exactly is Scrum?

 

Susanne Spath: Henrik Kniberg, Agile & Lean Coach at Crisp in Stockholm describes Scrum in only a few words:

“Divide the project in small, concrete functions and prioritize them according to the business values. Now try to put each function in relation to another one and valuate them.”

Scrum is about dividing the time in repeating loops, which last no longer than 30 days. At the end of every loop, all previously defined functions must be finished and implemented. The development and functionality of the product increases with the growing number of loops (“sprints”). Despite “command and control”, Scrum’s guiding principle is “inspect and adapt”.

 

What are the similarities of Scrum and agile leadership?

 

Scrum is the mother of all agile leadership methods in many people’s opinion and was introduced by IT companies more than 20 years ago. Nowadays, many companies are working with Scrum tools and structures – also besides the IT sector. Scrum can be used in a variety of ways and is especially useful wherever knowledge work and development is happening and where complex tasks have to be done. It can be for instance used for the product development, in marketing, or for the definition of strategies, the mission and vision of a company.

 

Are there some best practice examples, companies that work with Scrum successfully?

 

Yes, many big companies, such as A1 Telekom, T-Mobile, Siemens or Audi AG.

 

Why do you think there is a need for agile methods nowadays?

 

We are living in a VUCA world (VUCA = Volatility, Uncertainty, Complexity, Ambiguity) and therefore living in a constant change. An objective we define today could be obsolete in two months from now because the market, the customer’s need or the target group could have changed. Using agile methods, stakeholders and (internal) clients are involved in the whole process in the end of every loop at the review meeting. They get informed about the current status, which can then be adapted, if necessary, to a final, valid and best possible result or product. You can find this in every agile method.

 

Can you give us an example for a practical and a possibly quickly implemented method from the scrum setting?

 

Very important are agile meetings. They have a flying agenda and fixed time frames in which the following points are clarified:

 

  • After the check-in of all attendees of the meeting, following questions must be answered: which problems do I have at the moment? What do I need to be able to finish my tasks in time?
  • The team has to decide who will contribute in which way to realize the next objective until the following review meeting. This is not about right or wrong.
  • The next point is the “integrated decision making”: team members make decisions about their distribution of work and the prioritization of the tasks themselves.
  • One task of the leader at this meeting, the so-called daily stand up meeting, is to provide missing information and resources.
Scrum Daily Stand up meeting

The daily stand-up meeting: one essential aspect of Scrum

What are the role/functions/tasks of a leader when it comes to Scrum methods?

 

You have different roles in the scrum framework. There is the scrum master who acts like a coach and who is responsible to look after the employees and their interaction with each other, to motivate and communicate with them and to manage conflicts. Another task of the scrum master is to ensure that the scrum framework and the process are being followed.

A further role is the one of the product owner. The product owner is responsible for the business success and acts as the interface between the stakeholders and the team. Therefore the product manager has to constantly communicate with the stakeholders.

In theory the product owner and the scrum master are two different people, in reality you often find one person playing both roles.

 

One key question of Scrum is „How little results do I have to deliver to make the customer happy?“ What is the thought behind this unusual question?

 

Agility! If the team has already thought through the end, the stakeholders have no possibility to touch up or co-create something. Now they have the possibility to find  resources that were used unnecessarily or other weak spots in time.

 

What fascinates you about Scrum and why do you improve yourself in this field?

 

Like I have mentioned before, Scrum is often seen as the mother of all agile methods. Scrum has been around for more than 20 years and it is an internationally valid method. Knowing a lot about scrum gives me a better feeling of understanding other agile methods such as OKR or design thinking.

Interview partner:

We interviewed Susanne Spath, who is an international trainer for managers and leaders and is working together with MDI for many years already. She is a certified SCRUM and OKR-Master and offers webinars and workshops in the field of agile leadership, SCRUM and OKR.

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Susanne Spath OKR

Guest article

This article was written by Susanne Spath. She is an international trainer for managers and leaders and is working together with MDI for many years already. She is a certified SCRUM and OKR-Master and offers webinars and workshops in the field of agile leadership, SCRUM and OKR.

Where does the need for this agile method come from?

Our today‘s VUCA world (note: VUCA = Volatility, Uncertainty, Complexity, Ambiguity) is constantly changing. For a company, this means that it must be more flexible and future-oriented to cope with future challenges in the best possible way. One opportunity is to implement a new as well as approved method. OKR exists for over 10 years already and is used by companies such as Google, LinkedIn, and Twitter. However, the method is relatively new and unconventional.

OKR is an agile system and has a 100% transparent framework which helps you to set the right focus, to use resources in an output-oriented way, to make the right decision at the right time and to rethink about your tasks and goals.

  • O’s (Objectives) – describe the target state
  • KR´s (Key results) – describe concrete measurement criteria -> the „how“

A journey to Nice

To visualize this method, I would like to share a story with you I heard about in my OKR-Master training.

Imagine you and your friends spontaneously decide to go to the South of France. Everybody wants to have fun and wants to enjoy some unforgettable spring days together. Everyone gets on the bus. This is your vision. 

Now you have to find the strategy how to get there: do we take the highway or the country road? Both have advantages, both involve some risks – you have to decide. Let’s say you take the country road because it is more charming. But: many people say that the French do not build any traffic lights. Instead, they have roundabouts, one after another. Additionally, there are no detailed signposts, only some with the next big cities such as Paris. So if you want to go to the South of France you have to decide at every roundabout, approx. every 500 meters, where to go. Sea or mountains? Somewhere quiet or fancy? You decide that you want to go to Nice. Therefore you have a focus as well.

Journey to Nice OKR

In the past, you had maps which you could get in advance (alias business plan). But the road network and driving conditions are constantly changing. For your trip you have to get along with the idea of being in an uncertain situation: is the road passable when we get there? For sure we drive at full speed between the roundabouts. After 500 meters we can decide again which exit to take, which way to go. Perhaps to the excellent winery? But if we do so, we have one day less to spend at the beach – so should we leave it? Or does it start to rain? Now the thought and decision could be: before we spend some rainy days in Southern France, we rather go to the winery.

There are so many possibilities, again and again. The important thing is to make a common and flexible decision

Sources: Murakamy

OKR in a nutshell

Let us summarize where there are parallels between the story and the OKR thus for the company context:

  • The vision is fixed but vague: a vacation in Southern France – in the company for instance: biggest supplier for the product x in area y.

 

  • A focus is essential: trip to Nice – in the company for instance: focus on sale, focus on promotion or maybe the focus on product development

 

  • The intermediate goals to realize the vision – the O’s, objectives – are constantly redefined: for the journey, for example, you have to decide at every roundabout which way to go. For a company, this could mean: which market do we focus on? Which department has the greatest leverage effect? What is the preferred product? In the story, you have to make a new decision every 500 meters. In the company, new decisions are made every 3 months at the leadership meeting. Participants are the management and representatives from various divisions.

 

  • Key results are derived directly from the objectives and are measurable: in consideration of the current resources, concrete key results are defined up to the next quarter. On the way to Nice, this would be the tank filling and the fuel price, a decision about the winery or the tires of the car. In the company, there are concrete actions: sales training, advertising campaign, product redesign and so on.

 

Implementing OKR in the company

In contrast to many other agile methods, it doesn’t make sense to implement OKR in only a few teams or departments. There would be conflicts between the OKR and regular system regarding resources and objectives. A policy decision and commitment from the management are essential to implement the system successfully in a long-term.

Those are many:

  • The company’s vision, mission, and strategy will be transmitted into short-term and therefore achievable steps
  • An understanding of the big picture is given to every employee
  • Rise of the clarity and understanding in the daily business
  • Motivation through participation
  • 100% transparency leads to better communication (everyone knows everybody’s tasks and can understand their objectives)
  • Concrete and ongoing success measures
  • Clear instructions are possible even with short resources.

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Individual, team and company – agile leadership on three levels

Individual, team and company – agile leadership on three levels

Euphoria on the one and uncertainty on the other hand: In terms of agile leadership you can see great enthusiasm and thirst for action on the market. More and more companies are playing with the thought of implementing agile methods. However, if you ask for more detailed information, many people are uncertain about what this agile concept really is and how meaningful it is for their company. Here are a few thoughts from three different perspectives: the one from an individual, a team and an organization.

 

Agile leadership picks up speed

In my opinion there are three resons why agile leadership picked up so much speed in the last few months.

First of all, companies and teams are becoming more and more aware that they can no longer rely on the state of facts, at least not in the long-term. This means that not everything which is right today, will be right tomorrow. That is the reason why companies need to find a way to react quickly to changes and learn what is relevant and what is not.

The second aspect why this topic is currently gaining importance is that the increasing complexity and uncertainty of the market and the entire company-, product-, and brand world. To be future-oriented, companies must not only be flexible but also try to create innovation and products or services under complex circumstances. By letting people from different teams work together, companies are hoping to find the best solution to this challenge. Interdisciplinary work is a key factor of agile leadership:

Complex markets

Complex and fast-changing markets – companies must learn how to react to those changes

The third reason is a changed view of the leadership culture in general. In the last few years, it has become clear that people want to think and work more independently than they have been allowed to in companies with classic hierarchical structures. Just think about the generation Y and the upcoming generation. The classical understanding of leadership is no longer contemporary. Modern work demands new models and approaches. Agile leadership is one of them.

 

Implementation of agile leadership: top-down or first in the team?

 

When we talk about agility, we generally talk about three levels: the individual level, the team level and the organizational level. Companies must first weigh up whether and how agile methods can be meaningful for them. In this way they can avoid rushing into this topic and subsequently fail with the implementation. Therefore it is important to know that agile leadership does not always have to be introduced throughout the whole company in order to be successful. In the beginning it can make sense to introduce it only to particular teams or divisions. Especially if a team has to deal with very complex and different tasks or has to cover up different topics. The level of complexity is an indicator that makes agile methods either meaningful or not.

 

If the company’s goal is an agile corporate culture, a top-down approach is certainly needed. Therefore, a complete cultural change must take place, which is impossible without the management level on board. The company has to find answers to questions such as who, where, when and how to participate in projects and decisions, how to deal with information release internally and how much the existing hierarchies should be softened. Transparency is a very important factor as well.

 

There is one central question before deciding whether to introduce it top-down or in individual teams: How far do we want to go and how far do we have to go to stay competitive and sustainable?

 

Agile leadership on three levels

 

To recognize potential resistance and prevent them at an early stage, a company should first analyse the three different levels of agile leadership: the individual, team and organization level.

 

Agile leadership on the individual level

As an individual, I have to ask myself following questions: how transparent am I at the moment, how much can I work independently and how much responsibility I bear and can bear. If I currently work in a very hierarchical-oriented team, where there are almost exclusively instructions from the supervisor, the introduction to an independent and agile way of working can be relatively difficult. If I already have a lot of freedom and work almost independently the difference to agile methods is perhaps hardly noticeable.

Secondly you have to question the status quo: How self-responsible and transparent do I want to be? There are certainly many people for whom agile leadership is not (yet) the declared goal and perhaps will never be.

The third point at this level is an open error culture. As a member of an agile team the willingness to acknowledge mistakes very quickly and openly is important because otherwise you might make the work more difficult for all other team members. And for a previously established leader it can be quite difficult not to be the declared leader anymore but to be an equal member of the team. Therefore you renounce power and status.

 

Agile leadership on the team level

The most challenging part for the team in an agile setting is the communication. Constant coordination, exchange and communication among each other are crucial. This requires openness and extraversion of all the team members on the one hand and the right tools on the other hand. When agile methods are introduced to a team, it is worth investing in the communication structure and skills of all members, otherwise many difficulties could arise.

Constant communication – this is absolutely essential in an agile team

Constant communication – this is absolutely essential in an agile team

 

Agile leadership on the organization level

The entire organization must be ready for the establishment of agile structures, to soften hierarchies and to question the status quo. It is important as well to let the employees question the status quo repeatedly. We must remember that not everything that is right today, will be right tomorrow. For the management level of a large company this constant questioning combined with much flatter hierarchies can be of course presented as a loss of control, which is instinctively something to avoid. That is the reason why the introduction of agile methods is probably most challenging on the organization level. It takes a lot of openness and real commitment to move away from rigid rules and procedures in order to become really agile at this level.

 

The role of leadership and the leader in an agile world

Now, you could get the impression that leadership has become useless or counter-productive in this agile world. In fact, one strongly discussed question is whether and how far classical leadership is still meaningful in an agile setting. Personally, I believe that leadership will always be needed – and I am talking about leadership in the sense of controlling and setting framework conditions. However, there is one thing that is different in the agile world: leadership is no longer the job from one individual, but from several people. It is not important who sets the framework as long as one is set. This is necessary so that everyone knows how far he or she is allowed to go and what budget and resources there are available. Thus there is no elimination of the classical leadership but a change in the roll definition and allocation. Leadership is no longer the responsibility of one leader but of all team members. For this, individuals must be willing to hand over control to a group.

 

Conclusion: the right self-assessment as a requirement for agile leadership

The more familiar you are with the topic, the more you realize that agile leadership is not a tool-box or method you can simply introduce, but more a mindset that starts with oneself. The interaction of all participants with each other as well as the relation to their own tasks and the work in general are central. What drives us? How do we work together? How do we deal with each other? How much transparency do we allow? How much control are we willing to take?

Introducing agile methods only makes sense if the answers to all these question already show a glimpse of “agile thinking and if the people who are involved have the right self-assessment: as an individual, team and organization.

Guest author

This article was written by Alexandra Sock for our blog. She is currently living in Vienna and is a managing partner at MDI Management Development International, as well as a passionate trainer, consultant and coach with many years of experience. She is dealing with the topic of agile leadership for a long time already and has now designed an orientation workshop together with MDI. If you are interested in agile leadership you get some insights and targets of the workshop with Alexandra Sock in this video. You are also very welcome to contact her for further information.

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