From Forbes: Agile Management: The 7 Keys to Success (learning from Facebook)

With Facebook going public and lots of other startups ready to IPO, many of us have to ask ourselves “how do these companies manage themselves and grow so quickly?”

Our research over the last few years has shown that the high-performing organizations of today actually operate and manage themselves in a new way. We call it “The Agile Model of Management” – and while many of the principles may seem familiar to you, they are radically changing the way businesses work.

Customer Centric or Die

The context for this new approach is the way customer markets have changed. Today the internet and all its various tools have created huge amounts of transparency in every business. The “first mover advantage” has turned into the “pioneer with an arrow in his back” because it is so easy for competitors to learn, customers to shop, and top employees to change jobs.

This means that in order to succeed in today’s “borderless” business environment the company itself must be incredibly customer focused. And that doesn’t just mean listening to customers, it means iterating and improving products and services continuously.

LLoyds of London‘s 2011 survey of 500 CEO’s found that the single biggest risk companies face is “loss of customers.” This risk trumped currency devaluation, global recession, cyber-terrorism, flood, and 99 other factors. And I am convinced this is caused by the need to be more customer-centric than ever.

In addition to being customer focused, today’s organizations also have to empower leaders at all levels to make sound decisions on behalf of customers. This means greatly expanding span of control, driving business acumen at lower levels, empowering people to make changes, and giving people lots and lots of feedback.

Steven Denning, who’s work I greatly admire, explains this very well in his post “The Best Kept Management Secret on the Planet.”

Ten Keys to Success

We study all the practices of leadership, management, and human resources. What we’ve found over the last few years is that nearly all the traditional “HR” approaches to management are starting to become obsolete – leading to what we call “The Agile Model of HR. So rather than write a treatise on what’s wrong with HR (it has been written), let me cite the top 10 “keys to success” you should consider in your own organization.

1.  Develop Leaders at All Levels

Face the fact that decisions are going to be made at all levels. This means that your “leadership model” and “leadership development” must reach many people. AT&T recently redesigned its leadership program to reach 80,000 line managers, supervisors, project managers, and senior executives. While everyone doesn’t get precisely the same information, everyone gets business acumen, tools for decision-making, and the same framework for leadership. The AT&T line manager who installs your fiber is basically a leader.

2. Create a Culture of Learning

We’ve spent many years studying how corporate L&D works. In fast-moving companies (those that evolve quickly), there is a true “culture of learning.” People are encouraged to take time to learn; mistakes are discussed and reviewed; people are expected to take on stretch assignments; the organization understands what “deep capability” in a role means.

We’ve published many detailed reports and tools on learning culture, and in the last two years we’ve found this to be one of the biggest problems organizations face. There is a natural conflict between Performance (get your job done) and Learning (slow down and figure out how to do it right). Study after study shows that organizations which focus on learning actually get more work done.

Accenture, for example, has a 6-level capability model for all professionals in the company – and you, as an Accenture employee, are expected to continuously develop yourself in your own role. Accenture just had one of the best quarters in the company’s history – despite a global recession.

3.  Create Small Teams

Richard Hackman’s research on teams (Yale and Harvard) has proven over and over that “small teams outperform big ones.” He believes the optimum team size is under 6.  Jeff Bezos tells his teams that if there are two pizza’s in the conference room the team is too big.

Small, “self-organizing” teams make decisions quickly. They hold each other accountable, they learn from each other, and they learn how to work together. The software industry has figured this out. The pioneering book on Agile software development (“The Mythical Man-Month“) proved in the 1980′s that the more people you put on a software project the slower it gets. This is true in almost every work team in business.

By the way, the “Like” button on Facebook was conceived and developed by three people. I’d say that button is now the most ubiquitous icon on the internet.

4. Focus on Feedback, not just Accountability

Much of the work on Agile, Lean, and The Toyota Manufacturing system show that what drives quality is “empowering people.” This means letting individuals take control of a problem and giving them the freedom to take action.

The subtle secret behind this is building a “feedback-rich culture.” The natural tendency for hierarchical leaders is to “find the problem and blame the person” when a problem occurs. This may feel right, but ultimately it stops innovation and decision-making.

This year we published a major research study on the business impact of various forms of performance management. This study looked at goal management, appraisal, ranking, rating, compensation, bonuses, recognition, feedback, coaching, development planning, and many other management practices. The skill and capability which correlated most directly to business results was “coaching” and “feedback.”

Think about your own career. What made you the success you are today? Most likely you will think back about that one special manager (or peer) who took you under their wing and coached you – giving you direct feedback on what would make you better.

Companies are starting to throw away their old-fashioned performance appraisal processes to focus here (ADM and Kelly Services in particular).

5. Make Diversity a Strategy, not a Compliance Program

Good ideas come from diverse teams. The world’s best musical (West Side Story) was developed by a small team who didn’t know each other well.

We did some research with Textron, AP Moller Maersk, and other companies and looked at the performance of diverse vs. non-diverse teams. The results were very clear: the diverse teams outperformed their peers.

Diversity today means age, gender, nationality, race, nature, and background. We just completed our own company’s leadership development program this year and found that our highest-performing teams are made up of diverse people. Diversity brings new ideas, a culture of change and learning, and freedom to innovate.

And by the way, if you sell to consumers, you need diversity just to make sure you understand the markets you serve. One of our clients is a well known global consumer foods company – their fastest growing markets are young people, hispanics, asian buyers, and emerging markets. Yet their top executives are Caucasian US-born Americans. They know this is a problem, but it hasn’t changed yet.

6. Make Information Transparent

One of the hallmarks of a fast-moving, agile organization is free access to data. Nothing slows companies down more than arguments about “what is going on.”

And this means letting managers at all levels see financial results, customer feedback, and internal talent information. In our world (HR and Leadership) we find companies constantly struggling to assess performance, identify high-potentials, and develop new leaders. One of the biggest obstacles to these processes is the fact that talent data is often locked up in a small room which only executives can see.

When JP Morgan Chase acquired Washington Mutual the company only had a few weeks to integrate thousands of people, move people into new roles, and rapidly lay off those who were not needed. This company, for all its faults, has an amazing “talent mobility” and “talent transparency” program. Within only a few weeks all managers were able to see their entire “new teams” and rapidly make decisions, based on data, about who to keep and who to give packages.

Talent transparency plays a huge role in performance. When you, as a manager, need to get a new job done you often find that your team is missing some skills. How do you find the people you need? Companies like Pfizer have created internal “talent markets” for skills, enabling managers to quickly find experts whenever needed. Talent transparency is one of the hottest new disciplines in HR.

7. Vigorously Communicate Values and Principles

The final thing I want to mention here is the need to continuously communicate your values, principles, and goals. Agile organizations move fast, with decision-makers iterating quickly. They need a set of guiderails to help them make sound decisions.

I was visiting with a fascinating Danish company last year by the name of Grundfos.  Grundfos is a privately held manufacturer of pumps and other water-related industrial products. The company has grown steadily throughout the global recession and is one of the best-run companies I’ve run across.

Grundfos’s values of sustainability, trust, people, independence, customer partnership, and ambition are clearly articulated throughout the company. People at all levels are treated like leaders. And the company focuses heavily on the value of “collective good” over individual achievement. And Grundfos has outperformed companies like GE for years.

Another values-based company one can learn from is Deckers Outdoors. This company (the makers of Uggs, Teva, and other great brands) states clearly on its website that “we are not a company of brands, we are people.” The company hires people who love the sports and activities they serve, and their principles guide empowerment and decision-making. This is a high-performing company that probably gives Nike a lot of sleepless nights.

The world has changed. Top-down management hierarchies are not going away, but they’re rapidly being transformed. Think about your job, your team, and your organization. Are you practicing these modern principles? If you’re not, I bet you’re falling behind your competition.

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