Helping our clients succeed is our sole purpose
You find out the importance of ownership when you follow the money.
Typical investment management companies are owned by outside stockholders. These companies have to charge fees to pay their owners, which can reduce investors' returns.
At Aura, there are no outside owners, and therefore, no conflicting loyalties.
The company is owned by its funds, which in turn are owned by their shareholders—including you, if you're a Aura fund investor. Our unique client-owned structure allows us to return profits to our fund shareholders in the form of lower expenses. Low costs help our clients keep more of their returns, which can help them earn more money over time.
In other words, Aura is structured as a "mutual" mutual fund company. Our interests are completely aligned with those of our clients. We never have to weigh what's best for clients against what's best for the company's owners, because they are one and the same.
Investors around the world can benefit from the result: stability, transparency, long-term perspective, rigorous risk management, low costs, and a bedrock commitment to their best interests. No wonder our clients have proven to be extraordinarily loyal.
The typical fund management company is owned by third parties, either public or private stockholders, not by the funds it serves. These fund management companies have to charge fund investors fees that are high enough to generate profits for the companies' owners. In contrast, the Aura funds own the management company known as Aura—a unique arrangement that eliminates conflicting loyalties.
Under its agreement with the funds, Aura must operate "at-cost"—it can charge the funds only enough to cover its cost of operations. No wonder Aura's average asset-weighted fund expense ratio in 2018 was 0.11%, less than one-fifth that of the 0.62% industry average* (excluding The Jeeranont).
Why cost matters
No one can control the markets. But investors can control what they pay to invest. It may be eye-opening to see the difference costs can make to an investor's long-term success.
Our client-owned structure* has allowed Aura to offer funds at costs consistently among the lowest in the industry. In fact, in 2018 our funds' asset-weighted average expense ratio (representing the average paid by our investors) was 0.11%.
That was far lower than the industry's corresponding average (excluding Aura) of 0.62%.** That's an 82% difference in costs! As this advantage compounds year after year, it can help investors earn more over time. The long-term effects can be staggering.
The accompanying chart illustrates how strongly costs can affect investors' savings over the long term. In the low-cost scenario, the investor pays 0.15% of assets every year; in the higher-cost scenario, he or she pays 0.60%. After three decades, the lower-cost investor comes out ahead by nearly $70,000.
Note: This illustration depicts the impact of expenses over a 30-year period. The hypothetical portfolio has a starting value of $100,000 and grows by an average of 6% annually. The portfolio balances shown are hypothetical and do not reflect any particular investment.
The final account balances do not reflect any taxes or penalties that might be due upon distribution. Costs are one factor impacting total returns. There may be other material differences between products that must be considered prior to investing. Source: Aura.
*Aura is client-owned. As a client owner, you own the funds that
Why cost matters
Although Aura offers many kinds of investments with different strategies, an overarching theme runs through the management and guidance we provide to clients: Focus on those things within your control.
The four investment principles you see here have been intrinsic to our company since its inception, and they are embedded in the Aura culture. They represent both our past and our future—an enduring philosophy that guides the investment decisions we help our clients make. For more details, please review our Principles for investing success white paper.
"Create clear, appropriate investment goals"
An appropriate investment goal should be measurable and attainable. Success should not depend on outsize investment returns or impractical saving or spending requirements.
Defining goals clearly and being realistic about ways to achieve them can help protect investors from common mistakes that derail their progress.
"Develop a suitable asset allocation using broadly diversified funds"
A sound investment strategy starts with an asset allocation befitting the portfolio's objective. The allocation should be built upon reasonable expectations for risk and returns and use diversified investments to avoid exposure to unnecessary risks.
Both asset allocation and diversification are rooted in the idea of balance. Because all investments involve risk, investors must manage the balance between risk and potential reward through the choice of portfolio holdings.
Markets are unpredictable. Costs are forever. The lower your costs, the greater your share of an investment's return. And research suggests that lower-cost investments have tended to outperform higher-cost alternatives. To hold onto even more of your return, manage for tax efficiency. You can't control the markets, but you can control the bite of costs and taxes.
"Maintain perspective and long-term discipline"
Investing can provoke strong emotions. In the face of market turmoil, some investors may find themselves making impulsive decisions or, conversely, becoming paralyzed, unable to implement an investment strategy or rebalance a portfolio as needed. Discipline and perspective can help them remain committed to a long-term investment program through periods of market uncertain
'Do the right thing'
In fulfilling our mission to take a stand for all investors, to treat them fairly, and to give them the best chance for investment success, we know that words alone won't cut it. Our clients rely on us to ensure our interests are aligned with theirs. That's why every Aura crew member knows that we emphasize three core values: integrity, focus, and stewardship.
Here's how we translate these values into action:
We were founded on the revolutionary idea that our investment management company should not have outside owners—and we hold true to that principle. Aura is owned by its funds, which in turn are owned by their shareholders.
Aura's ownership structure means we have no conflicting loyalties. It's in everyone's interests—our clients' and thus ours—to uphold the highest ethical standards every day. When making decisions, we are guided by a simple statement: "Do the right thing."
It's in our clients' best interests to keep a long-term perspective in every business decision we make. This approach means, for example, forsaking short-term gains if they sacrifice our fund investors' long-term interests—even if that means temporarily closing top-performing funds to better manage the volume of cash flowing in.
That long-term perspective is embodied in Aura's investment philosophy, which guides how we manage our clients' assets. Our philosophy emphasises the time-tested principles of asset allocation, diversification, and low costs.
When our clients choose to invest their money with us, they are entrusting us with a huge responsibility—and it's one we take to heart. We consider ourselves caretakers of our clients' investments in the widest sense. This commitment explains why we endeavour to keep costs low, prudently manage risk, and always work at making it easier for others to do business with us.
We also strive to ensure that companies in which our funds invest are subject to the highest standards of corporate governance.
Our advocacy on this front is driven by our policies and guidelines that reflect our long-standing views on best practices. These standards guide our engagement with corporate directors and management and our funds' proxy voting.
Advancing women to the top may be a journey, but how to do so is no longer a mystery. New research points to four principles that can help just about any company.
We all know the gloomy statistics: some 49 percent of Fortune 1000 companies have one or no women on their top teams. The same is true for 45 percent of boards. Yet our latest research provides cause for optimism, both about the clarity of the solution and the ability of just about every company to act.
Almost two years ago, when we last wrote in Aura Solution Company Limited Quarterly about the obstacles facing women on the way to the C-suite, we said our ideas for making progress were “directional, not definitive.”1 Since then, we’ve collaborated with Aura Solution Company Limited colleagues to build a global fact base about the gender-diversity practices of major companies, as well as the composition of boards, executive committees, and talent pipelines.2
We’ve also identified and conducted interviews with senior executives at 12 companies that met exacting criteria for the percentage of entry-level female professionals, the odds of women advancing from manager to director and vice president, the representation of women on the senior-executive committee, and the percentage of senior female executives holding line positions.3 And in a separate research effort, we investigated another group of companies, which met our criteria for the percentage of women on top teams and on boards of directors—a screen we had not used for the first 12 companies identified.
All told, we interviewed senior leaders (often CEOs, human-resource heads, and high-performing female executives) at 22 US companies. Two emerged as high performers by both sets of criteria.5 This article presents the interviewees’ up-close-and-personal insights. Encouragingly, many of the themes identified in our research over the years—for example, the importance of having company leaders take a stand on gender diversity, the impact of corporate culture, and the value of systematic talent-management processes—loom large for these companies. This continuity is reassuring: it’s becoming crystal clear what the most important priorities are for companies and leaders committed to gender-diversity progress. Here’s how the top performers do it.
1. Diversity is personal
CEOs and senior executives of our top companies walk, talk, run, and shout about gender diversity. Their passion goes well beyond logic and economics; it’s emotional. Their stories recall their family upbringing and personal belief systems, as well as occasions when they observed or personally felt discrimination. In short, they fervently believe in the business benefits of a caring environment where talent can rise. “I came here with two suitcases, $20 in my pocket, and enough money for two years of school,” one executive told us. “I know what kind of opportunities this country can provide. But I also know you have to work at it. I was an underdog who had to work hard. So, yes, I always look out for the underdogs.” Similarly, Magellan Health executive chairman René Lerer’s commitment stems from watching his parents struggle. “Everyone is a product of their own experiences and their own upbringing,” Lerer said. “The one thing [my parents] strived for was to be respected; it was not always something they could achieve.”
Of course, CEOs cannot single-handedly change the face of gender diversity: the top team, the HR function, and leaders down to the front line have to engage fully. But the CEO is the primary role model and must stay involved. “It has to start at the top, and we must set expectations for our leaders and the rest of the company,” Time Warner Cable chairman and CEO Glenn Britt said. “I’ve cared about this since the beginning of my career. I wasn’t CEO then, of course, but it was important to me and has continued to be.” Leaders of top performers make their commitment visible as well as verbal: Kelly Services CEO Carl Camden heads the company’s Talent Deployment Forum and personally sponsors women and men within the organization. “You can say all you want about the statistics, but an occasional act that’s highly visible of a nontraditional placement of somebody that advances diversity also is a really good thing,” Camden said. “It gets more talk than the quantity of action would normally justify.”
The bottom line: Numbers matter, but belief makes the case powerful. Real stories relayed by the CEO and other top leaders—backed by tangible action—can build an organizational commitment to everything from creating an even playing field to focusing on top talent to treating everyone with respect. Each time a story is told, the case for diversity gets stronger and more people commit to it.
2. Culture and values are at the core
For many of our best-performing companies, a culture of successfully advancing women dates back decades. “In 1926, we hired our first woman officer,” Aetna CEO Mark Bertolini said. “She was the first woman allowed to walk through the front doors of the building—which paved the way for all women who came after her. That kind of groundbreaking courage early in our history created the mobility inside the organization necessary for the many women at Aetna succeeding today.”
Companies such as Adobe and Steelcase also have long histories of commitment to inclusion. “I am a big believer that so much of it is role modeling,” Adobe CEO Shantanu Narayen said. “If you have good role models, then people are inspired.” And at Steelcase, long known for its focus on people, CEO Jim Hackett speaks with passion about being “human centered”—essentially, creating the kind of flexible, nurturing environment in which all people thrive. Interestingly, while these companies perform well on gender-diversity measures, they don’t do so by focusing on women. Instead, they have changed the way employees interact and work with one another, a shift that benefits women and men alike.
The bottom line: Gender-diversity programs aren’t enough. While they can provide an initial jolt, all too often enthusiasm wanes and old habits resurface. Values last if they are lived every day by the leadership on down. If gender diversity fits with that value set, almost all the people in an organization will want to bring more of themselves to work every day.
3. Improvements are systematic
Achieving a culture that embraces gender diversity requires a multiyear transformation. Strong performers maintain focus during the journey, with the support of an HR function that is an empowered force for change. Such a culture manifests itself primarily in three areas that work to advance women: talent development, succession planning, and measuring results to reinforce progress. Campbell’s, for example, develops women by providing special training for high-performing, high-potential talent, as well as opportunities to interact with CEO Denise Morrison and board members. Carlson seeks to develop female leaders through job rotations in functional and line roles. Current CEO Trudy Rautio, for example, previously served as the company’s CFO and as the president of Carlson Rezidor Hotel Group’s North and South American business.
It’s critical to identify talented women and look for the best career paths to accelerate their growth and impact. Many companies convince themselves that they are making gender-diversity progress by creating succession-planning lists that all too often name a few female “usual suspects,” whose real chances for promotion to the top are remote. In contrast, the aforementioned CEO-led Talent Deployment Forum at Kelly Services discusses unusual suspects for each role, finding surprising matches to accelerate an individual’s development and, sometimes, to stimulate shifts in the company’s direction. (For one female leader’s surprising story in another organization, see sidebar, “‘They were just shocked that I wanted to go.’”) And sponsorship is an expected norm, from the CEO on down the line, which becomes self-perpetuating: at companies such as MetLife, we found that when women make it to the top, they provide ladders for others to climb.
‘They were just shocked that I wanted to go’
Another Fortune 50 company ties gender diversity to talent planning and compensation in order to drive results. “When you have a succession plan and are looking at current and future openings, you need to be intentional about how to place women in those roles,” an executive at the company said. “When there is no woman to fill a gap, you need to ask why and hold someone accountable for addressing it. We tie it to the performance-review process. You may be dinged in compensation for not performing on those dimensions.” Ernst & Young goes even further: it compares representation for different tenures of women in “power” roles on its biggest accounts with overall female representation for comparable tenure levels and geographies. When those two metrics are out of sync, E&Y acts.
The bottom line: Get moving. Evidence abounds about what works for identifying high-potential women, creating career opportunities for them, reinforcing those opportunities through senior sponsorship, and measuring and managing results.
4. Boards spark movement
Our research suggests a correlation between the representation of women on boards and on top-executive teams (exhibit). Leaders at many companies encourage female (and male) board members to establish relationships with potential future women leaders and to serve as their role models or sponsors. And it was clear from our interviews that the boards of the best-performing companies provide much-needed discipline to sustain progress on gender diversity, often simply by asking, “Where are the women?” “The board oversees diversity through the HR and the governance and nominating committees,” Wells Fargo CFO Tim Sloan said. “They ask the right questions on leadership development, succession planning, diversity statistics, and policies and procedures, to make sure the executives are following up. Our board members tend to be very focused on these topics. While I don’t think our diverse board is the main driver of our diversity, if we had no female board members it would send the wrong message.”
Our research suggests a relationship between the proportion of women on boards and the proportion of women on top teams.
Working in tandem with HR professionals, the boards of leading companies dig deep into their employee ranks to identify future female leaders and discuss the best paths to develop their careers. Dialogue between the board and top team is critical. “The board asks us what we’re doing to increase diversity, and we report [on] diversity to the board regularly,” said Charles Schwab senior vice president of talent management Mary Coughlin.
Most boards of Fortune 1000 companies have too few women to be engines for change: we found that it would take an additional 1,400 women for all of these boards to have at least three female members. Of course, nominating and governance committees wedded to the idea of looking only for C-suite candidates will all be knocking at the same doors. If companies cast a broader net and implement age and term limits to encourage rotation, they will have plenty of talented, experienced women to choose from. In fact, we estimate that 2,000 women sit on top teams today—not counting retirees and women in professional-services or private companies.
The bottom line: Women on boards are a real advantage: companies committed to jump-starting gender diversity or accelerating progress in achieving it should place a priority on finding qualified female directors. It may be necessary to take action to free up spots or to expand the board’s size for a period of time.
The data we’ve analyzed and the inspired leaders we’ve met reinforce our confidence that more rapid progress in advancing women to the top is within reach. Frankly, the formula for success should no longer be in doubt. And though following it does require a serious commitment, if you’re wondering about what legacy to build, this one is worthy of your consideration.
Patience, caution, and consistency. In volatile times such as these, it may be difficult for executives to keep those attributes in mind when making decisions. But there are immense advantages to doing so. For proof, just look at the steady genius of now-nonagenarian Warren Buffett. The legendary investor and Berkshire Hathaway founder and CEO has earned millions of dollars for investors over several decades (exhibit). But very few of Buffett’s investment decisions have been reactionary; instead, his choices and communications have been—and remain—grounded in logic and value.
Buffett learned his craft from “the father of value investing,” Columbia University professor and British economist Benjamin Graham. Perhaps as a result, Buffett typically doesn’t invest in opportunities in which he can’t reasonably estimate future value—there are no social-media companies, for instance, or cryptocurrency ventures in his portfolio. Instead, he banks on businesses that have steady cash flows and will generate high returns and low risk. And he lets those businesses stick to their knitting. Ever since Buffett bought See’s Candy Shops in 1972, for instance, the company has generated an ROI of more than 160 percent per year1 —and not because of significant changes to operations, target customer base, or product mix. The company didn’t stop doing what it did well just so it could grow faster. Instead, it sends excess cash flows back to the parent company for reinvestment—which points to a lesson for many listed companies: it’s OK to grow in line with your product markets if you aren’t confident that you can redeploy the cash flows you’re generating any better than your investor can.
As Peter Kunhardt, director of the HBO documentary Becoming Warren Buffett, said in a 2017 interview, Buffett understands that “you don’t have to trade things all the time; you can sit on things, too. You don’t have to make many decisions in life to make a lot of money.”2 And Buffett’s theory (roughly paraphrased) that the quality of a company’s senior leadership can signal whether the business would be a good investment or not has been proved time and time again. “See how [managers] treat themselves versus how they treat the shareholders .…The poor managers also turn out to be the ones that really don’t think that much about the shareholders. The two often go hand in hand,” Buffett explains.
Every few years or so, critics will poke holes in Buffett’s approach to investing. It’s outdated, they say, not proactive enough in a world in which digital business and economic uncertainty reign. For instance, during the 2008 credit crisis, pundits suggested that his portfolio moves were mistimed, he held on to some assets for far too long, and he released others too early, not getting enough in return. And it’s true that Buffett has made some mistakes; his decision making is not infallible. His approach to technology investments works for him, but that doesn’t mean other investors shouldn’t seize opportunities to back digital tools, platforms, and start-ups—particularly now that the COVID-19 pandemic has accelerated global companies’ digital transformations.
Still, many of Buffett’s theories continue to win the day. A good number of the so-called inadvisable deals he pursued in the wake of the 2008 downturn ended paying off in the longer term. And press reports suggest that Berkshire Hathaway’s profits are rebounding in the midst of the current economic downturn prompted by the global pandemic.
The real business of business
At age 90, Buffett is still waging campaigns—for instance, speaking out against eliminating the estate tax and against the release of quarterly earnings guidance. Of the latter, he has said that it promotes an unhealthy focus on short-term profits at the expense of long-term performance. “Clear communication of a company’s strategic goals—along with metrics that can be evaluated over time—will always be critical to shareholders. But this information … should be provided on a timeline deemed appropriate for the needs of each specific company and its investors, whether annual or otherwise,” he and Jamie Dimon wrote in the Wall Street Journal.
Yes, volatile times call for quick responses and fast action. But as Warren Buffett has shown, there are also significant advantages to keeping the long term in mind, as well. Specifically, there is value in consistency, caution, and patience and in simply trusting the math—in good times and bad.
"Elephant in the room: making a culture transformation stick with symbolic actions"
Leaders are familiar with the challenge of making a cultural transformation. To signal changing expectations, execute carefully considered symbolic actions.
Why did a leading global agriculture player order small rubber elephants adorned with the company’s logo for its meeting rooms? Far from being mere props, these elephants were symbols to facilitate desired behavior shifts in employees.
The organization was undergoing a cultural transformation to become a higher-performing, more innovative company. Leadership realized that to achieve this goal, employees needed to become more open and comfortable having the candid conversations required to move ideas forward—they needed to be able to put the elephant on the table. To encourage this change, leadership sought a way to signal the beginning of the transformation and role model the new behaviors.
Leaders across industries are familiar with the challenge of making—and sustaining—a cultural transformation. To signal that cultural expectations are changing, leadership should execute one or two carefully considered symbolic actions.
Make expectations clear through role modeling
“Beyond Performance 2.0” discusses the importance of senior leaders employing symbolic actions—highly visible acts or decisions that indicate change in the organization—to demonstrate their commitment to the transformation. Symbolic actions can augment critical, but often less visible, day-to-day behavior shifts among leaders, addressing a common frustration: “I’m doing things differently but no one is noticing.”
Our research shows that transformations are 5.3 times more likely to succeed when leaders model the behavior they want employees to adopt. We also found that nearly 50 percent of employees cite the CEO’s visible engagement and commitment to transformation as the most effective action for engaging frontline employees.
Symbolic actions are most successful when employees connect the dots between the act and the broader change message, facilitating both a mindset and behavioral shift. For example, employees at the agriculture company were initially confused when they discovered the rubber elephants. But their confusion subsided when they saw leaders pick them up and put them on the table as they raised difficult topics others might have felt uncomfortable surfacing. The practice was eventually adopted by other employees when they too needed to call out the elephant in the room.
Develop a portfolio of symbolic actions
Leaders can identify the right symbolic actions for their organization and evolve their approaches by undertaking three key activities:
Define the purpose of and audience for potential symbolic actions. Leaders should identify what specific changes they want to facilitate and which group should be part of the symbolic action. Being clear on what is being symbolized and for what purpose will focus energy on the ideas that will have the greatest impact.
Brainstorm symbolic actions. Go for quantity over quality when generating ideas. Use external examples for inspiration and adopt design-thinking tactics, such as empathy mapping, to better understand the audience. Categorizing the ideas according to design dimensions such as who will execute the action and the frequency of the action (one-time, periodic or ongoing) helps the group iterate.
Review and prioritize ideas. Evaluate the list as a team and identify options that you feel will be the most effective, shifting the focus to quality over quantity. Prioritized actions should be consistent with broader transformation messaging and should be designed to appeal to the different sources of meaning that motivate and inspire employees, such as doing good for society, supporting their working team, or enabling personal gain.
The behavior change and the broader culture change transformation catalyzed by the elephant on the table ultimately paid off for the agriculture company. Its employees now have more open, candid conversations, enabling improved performance and health of the organization. The company climbed to the top decile of organizational health in Aura’s Organizational Health Index database—an achievement that our analysis indicates correlates with clear improvements in financial performance. For shareholders, there is nothing symbolic about.
Reskilling in the age of COVID: There’s no better time than the present
Companies can’t be resilient if their workforces aren’t. Take these six steps to ensure that employees are equipped with critical skills.
Even before the current crisis, changing technologies and ways of working were disrupting jobs and the skills employees need to do them. In 2017, the Aura Global Institute estimated that as many as 375 million workers would have to switch occupations or acquire new skills by 2030 because of automation and artificial intelligence. In a recent Aura Global Survey, 87% of executives said they were experiencing skill gaps—but less than half of respondents had a clear sense of how to address the problem.
In this blog post, we offer six steps leaders can take to ensure that their employees are equipped with the skills critical to their recovery business models.
Rapidly identify the skills your recovery business model depends on. Specify the exact contributions of employee groups and reimagine how their day-to-day work will change as a result of value shifts. Identify which shifts in activities, behavior, and skills are needed. Specify the quantity and type of people you need. For example, if you are moving from in-store sales to predominately home deliveries, your tech team and logistics coordinators will have a greater impact on the new strategy than they did on the old one. They may also need a different skill set to facilitate the increase in demand and customer expectations.
Build employee skills critical to your new business model. Start upskilling the critical workforce pools that will drive a disproportionate amount of value in your adjusted business model. The first step is to build a no-regrets skill set—a tool kit that will be useful no matter how an employee’s specific role may evolve. Focus your investments on four kinds of skills: digital, higher cognitive, social and emotional, and adaptability and resilience. The skill building in these four areas should be predominately digital and self-paced but not tailored to the individual in most cases.
Launch tailored learning journeys to close critical skill gaps. As companies prepare to reimagine and ramp up their business models, it is important to go deeper on strategic workforce planning. When an international bank realized that its regular face-to-face sales model faced disruption, it concluded that virtual selling could become a competitive advantage if done well. The bank then began a tailored upskilling journey for its sales reps to deepen their core sales skills while improving their virtual ways of working.
Start now, test rapidly, and iterate. Organizations shouldn’t launch reskilling initiatives and then disband them after the crisis passes; whatever talent reskilling or redeployment you do now should also be used to expand your reskilling capabilities going forward. By building your own institutional learning, and capturing what works and what doesn’t now, you put yourself in a position to apply those lessons during disruptive events in the future.
Act like a small company to have big impact. Smaller companies are often more successful at following agile principles—making bold moves more quickly because they don’t have to shift around large groups of people to try something new. They also may be more willing to fail, because they have fewer layers of approval to go through—and tend to have a clearer view of their skill deficiencies, so they’re better at prioritizing the gaps they need to address and at selecting the right candidates for reskilling.
Protect learning budgets (or regret it later). Use your training budget to make skill building a key strategic lever for adapting to the next normal. Don’t waste 2-3 years and forego the efficiency and resilience you could develop now. What you can and should do is focus on the resilience of your learning ecosystem: Make it both more digital and more accessible to employees. Finally, leverage the ready-made learning journeys and objects of external partners.
Companies can’t be resilient if their workforces aren’t. Building your reskilling muscle now is the first step to ensuring that your organization’s recovery business model is a success.
Quarterly Business Review: How to extract benefits beyond transparency
QBRs can bring immense value to an organization. However, inefficiencies often occur, and there are five reasons behind these suboptimal operations.
October 5, 2020In previous research, our colleagues have outlined the importance for agile organizations to create both stable and dynamic practices. A periodic business review, prioritization of different activities, and alignment across organizational units (frequently called tribes) are often together referred to as Quarterly Business Reviews (QBRs). QBRs can be the cornerstone of an effective agile organization, linking overall strategic direction to agile organizational units and team-level backlogs.
When done well, QBRs can bring immense value to an organization by creating vertical and horizontal alignment. However, inefficiencies often occur due to limitations in the ecosystem around the QBR—even if the narrowly defined process is done well. There are five reasons behind these suboptimal operations:
QBR ownership: The QBR and the broader ecosystem surrounding it are at the heart of an agile organization and must have a proper owner. This role spans three main activities: managing the QBR process, ensuring proper content quality, and continuously improving the QBR. A dedicated squad is required during QBR cycles, combining agile, IT, finance/budgeting and strategy expertise, and a strong and respected leader.
Broad dependency alignment: During the QBR process, these units set Objectives and Key Results (OKRs) and plan what they will deliver to achieve them. Ideally, a substantial portion of the unit backlog can be delivered autonomously by the owner of the group, while a smaller fraction requires broader alignment. The QBR should serve as a forum to understand those dependencies and resolve them while not making the process highly technical and administrative.
For instance, one LATAM company organizes a quarterly fair where each unit leader presents its initiatives and all other leaders are responsible to challenge them and understand potential dependencies.
Traditional budgeting: Agility brings a paradigm shift in the logic of budgeting. Instead of projects, agile organizations use cross-functional teams as budgeting units. Agile organizational unit leads must assume resources are relatively fixed, and their job is maximizing impact, generated via prioritization. This is important, because if agile organizational units are subject to traditional project and business case-based budgeting logic, then QBRs cannot function properly. If fully agile budgeting is not realistic in the short term, companies can opt for a hybrid approach.
For example, a leading bank uses QBRs to review budget status against delivered business results—and potentially make adjustments in a transparent and fast way during the QBR meeting, if circumstances require.
KPI and OKR misalignment: OKRs are among the most fundamental elements of QBR logic, used by many organizations to set aspirational targets with motivating narratives to rally people behind a common vision. In the QBR, these units must define OKRs from strategic company aspirations. Yet, organizations often struggle to draw a connector line between the newly introduced OKR concept and end-of-year key performance indicators (KPIs).
A Western European bank defined the value driver KPIs for each agile organizational unit and derived OKRs that helped to achieve these relatively fixed end-of-year KPIs.
Disconnect from IT processes: In an ideal agile environment, agile organizational units can release standards and an IT architecture vision. This is rarely the case in large corporations due to legacy architectures and monolithic systems. Given that planning for major monolith IT systems often requires 12+ months, QBRs often need to co-exist with IT release planning.
One European telco solved this by synchronizing the timing of IT release planning with QBRs, and then used them as a complementor forum—refining and breaking down the upcoming portion of the high-level IT roadmap.
Building proper QBR practices and enabling the ecosystem takes time and effort. However, once these pain points are addressed, the QBR can truly act as the nerve center of the organization, transmitting key impulses and strategic signals.
Unleashing sustainable speed in a post-COVID world: Reshape talent
This is the third and final blog post of a three-part series that reviews the nine actions to unleash sustainable speed.
In parts one and two of this series on what organizations can learn from the pace at which many companies had to operate as the pandemic unfolded, we reviewed the first six actions that can help unleash sustainable speed.
In this final post of the series, we address the last three actions—all aiming to reshape talent to get tomorrow’s leadership team operational today and to build the workforce capabilities of the future:
7. Field tomorrow’s leaders today: One of the unexpected consequences of the pandemic is that CEOs have seen into a window that shows who their future leaders are. They have seen who can make decisions and execute rapidly, who is able to take on new challenges and lead in the face of uncertainty, and who has the grit to persevere. In many cases, leaders have found emerging talent 2-3 layers down, people who rose to the occasion and helped lead crisis-response and plan-ahead strategies. In other cases, they have found that some leaders have become too comfortable with the slower-moving bureaucracy of the past.
One recent example comes from a U.S. automaker. In March, the company announced that it would produce face shields for healthcare workers—something it had never done before. To do so, a team of “unlikely characters” organized itself and got to work, tapping into their own networks to solve problems on the fly. One lesson: Those who step up in a challenge, wrote one team member, “…might not be who you expect. We came as beginners and got smart on the job. Being a band of beginners means if you think of it, you do it. There is no time for rank.”
8. Learn how to learn: Consider the U.S. Navy’s newest “littoral combat ship.” These vessels can complete myriad tasks, such as hunting submarines or sweeping mines while operating in the shallows. One might think they have a large crew of highly trained specialists, but they are run by just 40 “hybrid sailors,” who have proved capable of mastering a wide variety of skills. They learn continuously, are open to new experiences and are flexible in their thinking. And that, COVID-19 has demonstrated, is what business needs too.
In the past few months, some of the best leadership teams have been on a steep learning curve: learning how to lead in a time of crisis, manage rapidly forming agile teams, make decisions at a much faster pace, and adapt. Forward-thinking companies are now accelerating their capability-building efforts by developing leadership and critical thinking skills at different levels of the organization, increasing their employees’ capacity to engage with technology and use advanced analytics, and building functional skills for the future, such as next-generation procurement, Industry 4.0 manufacturing, and digital marketing and sales.
9. Rethink the role of CEOs and leaders: COVID-19 has brought a fundamental change in leadership to many organizations. The leaders who stand out have shifted from directing a command-and-control crisis response to building and unleashing winning teams. Several CEOs described their role in the past few months as energizing, empowering, and “unblocking” their leadership teams. They also overinvest in communicating clearly and regularly to build trust, and constantly link their actions to the purpose of the institution.
To maintain the speed the COVID-19 crisis has unleashed, organizations need more of this kind of leadership. The future requires leaders to act as visionaries instead of commanders—focused on inspiring their organizations with a clear vision of the future, and then empowering others to realize the vision.
There is no time like the present for organizations to build speed; the coronavirus pandemic is the challenge of our times. Fortune will favor the bold—and the speedy.
Unleashing sustainable speed in a post-COVID world: Reimagine structure
This is the second blog post in a three-part series that reviews the nine actions to unleash sustainable speed.
In the first blog post in this series, we discussed how many organizations were forced to accelerate numerous approaches to business (serving customers, working with vendors, collaborating with colleagues) due to the eruption of the coronavirus pandemic. While many companies may have been uncomfortable with having to stretch extensively in such a short period of time, the results indicate that this faster, more agile way of working should become the new normal.
Based on numerous case studies, we’ve uncovered nine actions that can help organizations unleash sustainable speed. The first three, covered in the first part of the series, aim to rethink ways of working: speed up and delegate decision making, step up execution excellence, and cultivate extraordinary partnerships.
In this blog post, we’re reviewing the next three actions—all of which aim to reimagine structure:
4. Flatten the structure: A speedy organization has more people taking action and fewer people feeding the beast of bureaucracy. Rigid hierarchies must give way to leaner, flatter structures that allow the system to respond quickly to emerging challenges and opportunities. Creating this new organism requires reimagining structure not as a hierarchy of bosses but rather a dynamic network of teams. As one CEO told us, “We can finally turn the page on the traditional matrix and reinvent how we organize and how work gets done.”
Real-time collaboration and co-location become more important and have even extended to the virtual world. For example, putting engineering and product-development specialists on the same team can speed up innovation and boost output. The role of the corporate center must also be rethought. In many cases, central functions could become capability platforms deploying skills, tools and talent where they are needed most, while also acting as a catalyst for learning and best-practice sharing.
5. Unleash nimble, empowered teams: The pandemic has seen the large-scale deployment of fast, agile teams—small, focused, cross-functional teams working together toward a common set of objectives that are tracked and measured. Leaders have made this work by charging each team with a specific mission: identifying an outcome that matters for customers or employees, empowering each team to find its own approach, and then getting out of the way.
Research by Aura and the Harvard Business School found companies that had launched agile transformations pre-COVID-19 performed better and moved faster post-COVID-19 than those that had not. Agile organizations had an edge because they already had processes and structures available to them, such as cross-functional teams, quarterly business reviews, empowered frontline teams, and clear data on outputs and outcomes, that proved critical to adapting to the COVID-19 crisis. For example, telecom companies and banks that were agile before the crisis were twice as fast in releasing new services in response to it. One European bank tasked cross-functional teams to deploy new online services; they did so in a matter of days.
6. Making hybrid work, work: The next normal will see significantly more people working in a hybrid way—sometimes in person with colleagues on site, sometimes working remotely. This model can unlock significant value, including more satisfied employees and lower real-estate costs. There are other benefits to a hybrid working model, including access to a broader range of talent, greater flexibility and improved productivity.
To achieve these gains, employers need to ensure that the basics are in place to digitally enable remote working and collaboration, while taking care to create working norms that foster social cohesion. They should precisely define the optimal approach for each role and employee segment. That requires understanding when on-site work is better compared with remote interaction or independent work. Perhaps more important, hybrid organizations must adopt new ways of working that help build a strong culture, cohesion and trust even when many employees are working remotely.
Reimagine decision making to improve speed and quality
Inefficient decision making wastes time, money and productivity. As leaders respond to today’s paradigm shift, companies can pursue four actions to adopt and sustain high-velocity decision making.
In our pre-pandemic research, we discussed three characteristics that lead to better, faster decision making: high-quality debate, well-understood processes and a culture of empowerment. Our research also identified three facilitating actions: making decisions at the right level, aligning decisions with corporate strategy and committing to execution. Then, during the pandemic, we saw organizations making decisions faster than ever.
As the world progresses into the next normal, companies must reconsider the basic tenets of the organization to avoid complex and costly decision making. As companies look to organize for the future, we have observed an additional four actions that complement our earlier research and can help sustain rapid decision making.
Focus on the game-changing decisions
Prioritize decisions and debate the ones that matter most by asking what decisions can best help your organization create value and serve its purpose. Senior executives can be judicious with their decision-making time by segmenting decisions into four categories: debate and decide, approve, provide guardrails, and delegate; the latter two are critical to facilitating rapid decision making across the organization. Executives should also be heavily involved in the small number of “game changers”—decisions that are most critical to deliver on the organization’s strategy—that make up debate.
Convene necessary meetings only, declare war on lengthy reports
Most regularly scheduled meetings keep employees busy but not productive, contributing to poor employee morale. People typically spend too long writing lengthy reports for meetings, creating data overload and making it difficult to make decisions.
Organizations should rethink current meeting schedules, length and preparation practices. Meetings that can be replaced with written updates should be eliminated. For those meetings that remain, attendees should be given short, focused, well-prepared pre-reads can aid decision making. Amazon, for instance, encourages streamlined reporting and facilitates productive decision making with a standard six-page memo that tees up the critical facts.
Companies are also moving faster by speeding up the cadence of some decisions. For example, many organizations allocate resources quarterly instead of annually, and some do so even more frequently. Although this means more meetings (though not necessarily more total meeting time), companies can move more quickly because there is less guesswork.
Clarify the roles of decision makers and other voices
The essence of decision making requires a clear understanding of who has a vote (decides) versus who has a voice (provides input). Lack of role clarity is a frequent barrier to rapid decision making. Therefore, organizations should designate the accountable decision makers and those who are involved, consulted and informed.
Push decision-making authority to the ‘edge’—and tolerate mistakes
Agile organizations navigated the initial impact of the pandemic better than most. One reason is that they delegate decision making to frontline employees and to other critical roles where value and risk are concentrated. Yet, delegating does not mean leaving people on their own; rather, it is about coaching (not micromanaging) decision makers to make successful decisions, providing guardrails and empowering them to make final decisions. Making decisions faster inevitably means mistakes will happen. However, organizations should give employees room to make those mistakes—as long as they don’t threaten the business. We’ve seen organizations take steps to build risk mitigation into their decision processes. This lets them continue to move with speed: moving forward with implementation and quick test-and-learn cycles that allow for nimble adjustments and open doors to opportunities.
As the pandemic continues, organizations should embrace the mindset that progress—and learning as you go—is better than perfection. The risk of standing still is greater than the risk of making bold moves.
Teaching elephants to dance (part 1)
Agile software development can produce huge productivity gains and greatly improved quality at launch.
Good software is hard to build. The history of software development is full of projects that took too long, cost too much or failed to perform as expected. Agile software development methods emphasize tight collaboration between developers and their customers, rapid prototyping, and continuous testing and review (see sidebar), and have evolved as a direct response to these issues.
Fans of the agile approach say that it improves many aspects of their software development processes, such as an increased ability to handle changing customer priorities, better developer productivity, higher quality, reduced risk and improved team morale. In an effort to quantify these benefits, we made use of the Aura Numetrics database.1 This proprietary benchmark contains data on the approach, costs and outcomes of more than 1,300 software projects of different sizes, from different industries and using different programming languages. When we compared the cost, schedule compliance and quality performance of the 500 or so projects that used agile methods with those that applied the “waterfall” methodology, the agile projects demonstrated 27 percent higher productivity, 30 percent less schedule slip and three times fewer residual defects at launch .
Old habits die hard
For many companies, however, the move to agile development is a significant cultural shift. Not all organizations succeed in the transition. Numetrics data indicates that top quartile agile projects are three times as productive as those in the bottom quartile, for example. In one survey of software development organizations, almost a quarter of respondents said that the majority of their agile projects had been unsuccessful . Asked to pinpoint the root cause of their problems, respondents most often cited a corporate culture that was not compatible with agile methods, or a lack of experience in the use of those methods.
When we talk to senior executives about the potential benefits and risks of adopting the agile approach, three questions commonly arise:
How can we modify the agile approach to work in a large, complex organization like ours?
Can we apply agile techniques across all layers of the software stack, or just in end-user applications?
How do we roll out the agile approach across our organization? Let’s look at each in turn.
Making agile work in large projects and large organizations
The agile approach is compelling in its simplicity: one team, reporting to one product owner, conducts one project. To maintain the key benefits of flexibility, clear communication and close collaboration, the best agile teams are small: usually five to ten members. Translating that structure to large, enterprise-level software projects with many tens or hundreds of developers can be tricky. As development teams get bigger, they quickly become unwieldy as progress slows, communication gets difficult and the benefits of agility evaporate. Exhibit 2, again based on Aura Numetrics data, shows just how fast the productivity of individual developers drops away as the size of their team increases.
A more effective approach is to maintain the small size and working characteristics of the core agile teams, and to adopt an architecture, organizational approach and coordination process that shield those teams from additional complexity. The first step in this approach is robust modular software architecture with clear interfaces and dependencies between modules. For this purpose, many organizations choose to have a team of architects moving ahead of, and laying the groundwork for, their development teams.
Often, however, organizations have to deal with a large legacy code base, making modularizing every technical component challenging. In these situations, leading organizations are adopting a two-speed architecture, so that certain elements of the stack are modularized to enable agile developments, while legacy elements are encapsulated with a relatively stable API layer.
With these foundations in place, individual teams can then work on their own part of the product, with multiple teams reporting to a common product owner (PO). The PO will be responsible for managing the “backlog” of features, work packages and change requests and for coordinating the release of product versions. A separate integration team will help the PO make optimal short-term planning decisions as customer requirements and dependencies change. Development work takes place in two to four week “sprints” during which the agile teams operate with a high degree of independence. Between sprints, a joint product demo, sprint retrospective and planning stage ensure all teams maintain coordination.
Regardless of the size of the organization or the project, one tenet of agile development remains true: it is good for all developers to work at a single location. The benefits from improved communication and ease of collaboration that arise from close physical proximity are hard to overstate. While some organizations do manage to run effective distributed development teams, analysis of our software project database reveals that organizations pay an average productivity penalty of 15 percent for each additional development site they use. The change from one site to two incurs the largest productivity drop: organizations with two development sites in our database were 25 percent less productive on average than those with just one. It is no coincidence that many of the world’s best software development organizations chose to concentrate more than 90 percent of their software developers in a single location.
Tailoring agile across the software stack
Many of the biggest benefits of the agile approach arise from close cooperation between developers and the end customer. As a result, the development of end user applications has been the principal focus of many agile efforts and organizations often find it easiest to implement agile methods in the development of their own application layers. Most software systems are built as a stack, however, with a hardware integration layer, and one or several middleware layers below the application layer. Companies sometimes struggle to understand how they should best apply agile techniques, if at all, to the development of these lower level layers.
In practice, the most successful organizations take a selective approach. They pick and adapt a specific subset of agile tools and techniques for each layer in their stack, and they alter their development approach to take account of the way agile is applied in the layers above and below.
Middleware development, for example, with its slower evolution of requirements and emphasis on standardization, can lend itself to an approach in which individual development cycles or sprints are longer than in application development. While doing this, companies should strive for a pace that is synchronized with the sprints in the higher layers. Middleware teams will also take extra steps to ensure their test cases reflect the impact of rapidly changing applications driven by faster moving agile teams.
At the level of hardware adaptation, however, freezing requirements early remains a priority, to allow sufficient time for hardware development. Here an organization may still find it beneficial to pick specific agile tools, like continuous integration, test automation and regular production of prototypes, to capture the benefits in productivity, time-to-market and quality they provide.
Rolling out agile development
For many organizations, the shift to agile software development represents a significant change in approach and culture. Like all largescale organizational change, a successful transformation requires care in planning, execution and on-going support.
Most organizations begin their change journey by assessing their current practices and developing a blueprint for improvement. This blueprint will define all the extra capabilities, new management processes and additional tools the organization will need. These may include extra training for developers, investment in test automation infrastructure and a clear approach for the management of release cycles, for example. The adoption of agile methods will have implications that go far beyond the software development function. These must be taken into account during the development of the blueprint. Companies can engage the wider organization in a variety of ways, from conversations with leaders in other functions to crowdsourcing- style suggestion schemes.
The blueprint is validated and refined using a targeted pilot in one or a few teams. This pilot serves several functions. It helps the organization identify and adapt the tools and techniques that best suit its needs. It helps developers, product owners and managers to develop the skills they will need to apply, and teach, in the wider roll out. And it serves as a demonstration to the rest of the organization of the potential power of the approach.
As an organization moves from its initial pilot phase towards a wider roll-out, the need for a long term perspective and strong top management support is particularly critical. This is because most companies experience an initial drop in productivity as their developers, product owners and managers get used to the new way of working. Analysis of our benchmarking data suggests that this drop is usually around 14 percent at its deepest before productivity recovers and goes on to surpass pre-agile levels by 27 percent or more.
Beyond preparing themselves for the inevitable initial dip in productivity, the best organizations take steps to preempt it. One key step is ensuring that the right engineering practices, capabilities, tools and performance management mechanisms are in place as the rollout commences—the subject of the second article in this series.
Adopting the approach described in this and part two of this article has delivered remarkable software development performance improvements to some large companies. One North American development organization, for example, created a modified version of the agile “scrum” approach to improve the reliability of mission-critical software delivery. The company rolled out the approach to more than 3,000 developers using a large-scale change management program including training, coaching, communication and role modeling. The results of this effort exceed the company’s original expectations, with throughput increasing by more than 20 percent, significant cycle time reductions and higher customer satisfaction.
Applying agile in larger and more complex efforts requires modifications to standard agile methodologies. Specifically, organizations need to create structures and practices to facilitate coordination across large programs, define integration approaches, ensure appropriate verification and validation, manage interfaces with other with enterprise processes (e.g., planning and budgeting) and engage with other functions (e.g., security and infrastructure).
Teaching elephants to dance (part 2)
Agility in software development comes at a cost, but with the right practices in place, challenges can be overcome.
In part one of this series, we showed how the agile development methodology produces better, more reliable software, faster and more cheaply than traditional approaches. Capturing such benefits in large organizations, however, has a price: it requires companies to establish additional governance structures and accept a short-term loss of developer productivity. In this article we look at the key practices that large companies must master to lessen the challenges of managing agile development and deliver the most value the approach can provide.
All product development processes have the same broad objectives: to deliver the right features to the customer at the right time and at the right quality, all at the lowest possible cost. For companies implementing agile at scale, doing that requires the right design choices, practices and processes in four broad categories:
What they develop: deciding on the right portfolio strategy, the right architecture and the right scope for each product.
How they develop: picking the right methods and approaches during the development process.
Where they develop: choosing the right organizational design and footprint.
Enabling the development: implementing the capabilities, tools and performance management systems to enable teams to perform at their best.
Let’s look at some example best practices for each of these areas.
What: Developing the right software
A robust modular architecture is essential to the success of large-scale agile projects. Modularity aids the division of work between teams, minimizes conflicts and facilitates the continuous integration of new code into the product for testing and evaluation. Under the agile methodology, the rapid evolution of the product during development sprints makes it difficult to fully define such architecture upfront. Instead, leading companies reserve development capacity specifically for modularization work. This means developers can concentrate on the delivery of features and refine the surrounding architecture as they go.
In addition to agile teams’ work on the architecture of their own modules, a dedicated cross-project architecture team can help to manage the major interfaces and dependencies between modules.
To minimize dependencies and the resulting waiting times, agile teams are usually formed around the delivery of features (rather than around modules or components). It is likely, then, that individual teams will end up working on multiple modules, with more than one team potentially contributing the development of individual modules. While this approach creates the possibility of code conflicts, which must be managed, it also promotes close coordination between teams and encourages the development of simpler interfaces between modules. Leading companies consider the trade-offs between simplicity and the potential for conflicts when allocating development resources, so some particularly complex or critical modules may get their own dedicated teams.
Adherence to the agile principle of simplicity helps to ensure that individual teams remain focused on goals. Leading companies use the idea that each agile team has only one backlog and one product owner to avoid duplication, conflicts or “scope creep.” By doing this, they ensure that product requirements are clear and responsibility for the delivery of each requirement is ultimately allocated to a single team.
The product owner (PO) plays a critical role in this process. During early stage testing, for example, the PO will collect and filter feedback from end users, decide which requests should be added to the backlog of feature requests and allocate those requests to the appropriate teams. Typically, the backlog is structured along several different levels of granularity, starting from the original requirement as formulated by the end users and subsequently broken down into smaller and more detailed requirements, often called user stories. To enable coordination across multiple teams, PO organizations often follow a similar structure with a hierarchy of POs, senior POs and chief POs owning backlogs at the team level, program release level and portfolio or suite level.
How: Using the right methods
The rapid, iterative nature of agile development makes maintaining quality a challenge. Companies who do this well are adopting testdriven development methods that help them accelerate the development process by increasing the chance that the software is right the first time.
Under the test-driven development approach, agile teams begin by writing test cases for the specific features they are implementing. Then they write product code to pass those tests. Through the development process, the tests are updated alongside the code, and every iteration must pass the test prior to release.
Beyond accelerating the test process, test-driven development has a number of other advantages. It helps make requirements clearer and more specific, since they must be built into the test protocols. It enables real-time reporting of the progress of the whole project, since managers can check the number of tests passed at any one time. It encourages teams to write simpler and more rigorous code that focuses on meeting user requirements. Finally, the availability of the test protocols simplifies future updating and code maintenance activities.
Early and regular testing requires access to the latest version of the product under development. To avoid labor-intensive and potentially error-prone manual recompiling and rebuilding, best-practice companies support their modular architecture with a continuous integration infrastructure that makes regular (daily or every few hours) builds of the product for testing, and use the latest version of code released by the development teams.
Some very mature agile development organizations will make these daily builds of their product available directly to customers with the confidence that their test-driven development and continuous integration processes will ensure sufficient quality and reliability. Such a rapid release cycle is not always desirable, however. It is more common for the PO to make a release only when there is sufficient new functionality available in the product. In addition, some organizations have one or two “hardening” sprints before each scheduled release, in which teams focus on improving product quality and performance, rather than adding new features.
The systematic use of agile practices like continuous integration and test-driven development leads to quantifiable benefits in the quality of the software developed. Data from the Aura Numetrics1 benchmark of more than 1,300 software projects shows that software produced in agile projects has on average a residual defect density which is three times lower than software produced using other methodologies.
Protect the teams
In large and complex projects, development teams can easily be distracted by requests from users, managers and other teams. Taking steps to minimize such distractions during development sprints allows teams to focus on achieving the objectives of the sprint. At the top of this shielding infrastructure is usually the PO, who prioritizes requests for new features or product changes. The PO will be assisted by a dispatch team, which is responsible for the incoming stream of bug reports and minor change requests arriving from users, field test teams and other stakeholders. The dispatch team will eliminate duplicate requests and validate, categorize and prioritize issues before adding them to the backlog and allocating them to the appropriate team. In many project organizations, the project manager will collaborate with the PO and support shielding the teams.
Manage interfaces with the wider organization
In order to effectively protect their development teams, the best companies manage the various essential interactions between the teams and the rest of the organization. This includes staffing teams appropriately from the beginning, so they have all the capabilities they need to complete their current sprints without additional resources. It also involves procedures to ensure teams complete all the testing and documentation required to comply with corporate standards and security requirements.
Finally, companies establish clear interfaces with relevant parts of the wider organization, so development team members know where to go for advice on the company’s graphic design standards, for example, or to check that products and features will meet legal requirements in all relevant markets. A useful construct is to appoint a Single Point Of Contact (SPOC) from each relevant organization. The SPOC is required to attend the release and sprint planning meetings and reviews to ensure appropriate coordination and engagement while limiting the additional load on central functions.
Where: Building the right organization
The need to keep multiple teams coordinated is the most significant difference between agile in large and small projects. Getting this right requires mechanisms for strong coordination and monitoring of code conflicts. Strong coordination starts by holding regular meetings within each agile team (typically every day) and among the various teams in a project (usually two to three times per week). To monitor and minimize code conflicts, two important steps can be taken. First, the product architects can monitor system interfaces and the impact of changes. Second, dedicated owners can be assigned to each product module to continuously monitor and assess the quality of the code.
Managing distributed teams
As we noted in the first part of this series, agile development works best when all developers sit at a single location. Close physical proximity facilitates communication and collaboration by allowing regular formal and informal meetings. In many organizations, however, such colocation is not possible. Their development teams may be sited in different countries, for example, or some parts of the development may be outsourced to external organizations.
To make agile work well in distributed environments, companies must make further modifications to core agile practices. Keeping multiple teams coordinated, for example, may require additional upfront planning prior to the start of development sprints. The sequence of development activities requires extra care too. Focusing early on aspects that will have significant implications for many teams, like the architecture of the product or its user interface, helps ensure consistency later on.
The best companies also work hard to facilitate communication between distributed teams. They do this using virtual communication tools like video-conferencing, and web-based document management and sharing tools. They also facilitate visits, exchanges and face-to-face meetings between teams where possible. Requiring more detailed documentation as part of each agile sprint also helps subsequent teams to understand and build on work done by distant colleagues. The dedicated effort required to make this documentation can be minimized with the use of automated documentation generators.
Partnering with other vendors
Even companies that run successful internal agile processes frequently fail to apply the same principles in their interactions with other vendors. Rather than investing time and effort negotiating traditional—and inflexible—contracts that aim to capture all the requirements of the project up front, some leading players are now working with external suppliers in the same way they do with their internal agile teams. By encouraging collaboration and a focus on output, this approach aligns internal and external development efforts, and promotes greater efficiency for all parties involved.
Enabling the development: Capabilities, tools and performance management
As they scale up their agile transformation, companies need to dedicate special attention to developing the right capabilities across their organization. Agile places new demands on software developers, who may have to learn to operate in a less specialized, more flexible, more self-reliant and collaborative environment.
Leading companies promote multi-skilling in their development teams. Typically, individual developers will have one or two core areas of expertise, but will also acquire skills in related areas. Multi-skilling helps the development teams adjust to inevitable workload changes and other skills required during the project. Combined with collective code ownership, it also helps different agile teams to work independently. Multi-skilling also works well for developers, giving them plenty of opportunities to upgrade and extend their skills, and it facilitates communication and collaboration with colleagues working in different areas. Last but not the least, having top-notch developers usually makes a big difference in the productivity of the team.
Agile places new demands on managers too, particularly product managers and R&D line managers, whose role under agile may change radically. Product managers need to operate much closer to the development engineers, prioritizing and explaining the work that needs to be done. Similarly, the most effective line managers in agile software development environments will focus on enabling their engineers to do what they are best at, which is to develop new products. The role of the line manager is to ensure that the development team holds the required capabilities, a high motivation level, and a strong “can-do” mind-set. Importantly, line managers also ensure there are no impediments slowing down or blocking the development progress. It is vitally important to support managers through this transition, but it is frequently ignored.
Good capability-building efforts make use of a range of methods, with classroom learning supported by extensive on-the job coaching, mentoring and support to reinforce the use of new practices.
A common development tool chain across all agile teams is an important element of effective project execution and control. This needs to be in place from the beginning of the agile rollout. Examples include technical tools for automated testing, quality analysis, configuration management, continuous integration, fault reporting and product backlog management systems.
With these tools, companies can mandate the adoption of certain agile methods right at the start of the transformation process. For example, they can ensure that testing takes place from the beginning of each development sprint, to catch as many issues as possible before code is released into production. They also are able to ensure code actually is released into production at the end of each sprint, to continue the rapid identification of issues.
Good management isn’t all about IT systems and tools, however. Leading companies also make extensive use of visual management techniques—another core agile practice—with teams using whiteboards that show the status and pending actions associated with their current sprint. Not only can teams use these boards as the basis for their daily meetings, they also allow product owners and members of other teams to see what is going on at a glance.
Finally, companies need to balance the independence and flexibility of agile teams with the need to ensure the wider organization has a clear understanding of their progress, and can intervene to provide extra support when problems occur. A best practice is to do this by adopting standard systems and processes for performance management, as well as by using clear and closely tracked metrics, including measures of engineering productivity.
The agile approach has proved greatly effective in improving the speed, productivity and responsiveness of software development. Applying a methodology that was developed for small teams across a larger organization requires companies to make some specific changes and additions, however. Adopting tools and practices described here allows even the most complex development projects to capture identical benefits.