In today’s VUCA (Volatile, uncertain, complex and ambiguous) corporate world a board is constantly encountering unpredictable events. The Agile movement was born in the software industry, but has made rapid movement beyond it. In Agile organisations, self-organising cross-functional teams experiment, learn and adapt by rapid iterations, incremental with evolving customer needs. For organisations to be Agile, boards have to be Agile. The general idea of Agile was to increase response time by empowering teams to act self-organised within their own domain. Agile originated as a bottom-up culture change with those that do the work. But culture change has to be driven from the top, which is why the board that sets the tone from the top. Contemporary boards must foresee the evolving changes and align the organisation in getting future ready.
The Agile Manifesto is based on 4 values and 12 principles
The 4 values are
- Individuals and interactions over processes and tools
- Working software over comprehensive documentation
- Customer collaboration over contract negotiation
- Responding to change over following a plan
The 12 principles are
- Our highest priority is to satisfy the customer through early and continuous delivery of valuable software.
- Welcome changing requirements, even late in the development. Agile processes harness change for the customer’s competitive advantage.
- Deliver working software frequently, from a couple of weeks to a couple of months, with a preference to the shorter timescale.
- Business people and developers must work together daily throughout the project.
- Build projects around motivated individuals. Give them the environment and support they need and trust them to get the job done.
- The most efficient and effective method of conveying information to and within a development team is face-to-face conversation.
- Working software is the primary measure of progress.
- Agile processes promote sustainable development. The sponsors, developers, and users should be able to maintain a constant pace indefinitely.
- Continuous attention to technical excellence and good design enhances agility.
- Simplicity – The art of maximising the amount of work not done…is essential.
- The best architectures, requirements, and designs emerge from self-organising teams.
- At regular intervals, the team reflects on how to become more effective, then tunes and adjusts its behaviour accordingly.
How can agile values and principles can be linked to corporate governance?
Customer satisfaction is the first principle of the agile manifesto. In 1990’s shareholder’s interests was the primary focus for boards. This approach no longer holds true for board members, as boards serve a broader community these days. Directors need to take into account all stakeholders – shareholders, employees, customers, suppliers, and community as a whole.
Jack Ma, founder and executive chairman of Alibaba Group, puts it clearly: “Customers are No. 1, employees are No. 2, and shareholders are No. 3.” Even Jack Welch, the shareholder primacy era’s greatest maestro as CEO of General Electric, has more recently reflected, “Shareholder value is a result, not a strategy…. Your main constituencies are your employees, your customers and your products.”
Adaptability is an important agile value which is applied to board members. CEO/ board director’s length of tenure is decreasing fast and activist shareholders are multiplying campaigns to embarrass boards that does not adapt an adaptive approach. The Agile value – “responding to change over following a plan”, is probably a fitting answer.
In this constantly changing world, boards will have to reduce uncertainty for shareholders and communicate a clear roadmap for the future with its implementation plan.
The Agile Manifesto principle – Build projects around motivated individuals. Give them the environment and support they need and trust them to get the job done – this is a very important principle for board members as it the board’s job to hire a capable CEO and management team and provide and support their strategic growth ambitions.
These are some of the agile principles and values which we thought an effective board can borrow. Many effective boards are already following Agile principles in the process to be effective. On the contrary, some Agile principles such as frequent meetings can be damaging to the board as it will narrow down the focus of the board from its long-term strategic objectives.
Quite a bite of progress has been made on board effectiveness since 2008, if they are to continue to help their companies remain relevant and sustainable, boards should consider a new governance model: The Agile Board.
An Agile Board enables the organisation to identify and respond effectively to fast and unpredictable changes in the internal and external environment. The journey to become an Agile Board comprises four steps:
- Discover– gather data on today’s board agility levels
- Experiment – develop and test new approaches, such as in sub-committees
- Refine– evaluate success and iterate, taking a co-creation not a play-book approach
- Practice and embed– apply changes to formalise new behaviours into the main board
Amazon’s “one-way, two-way door” model of decision making is one example: where full board governance is required for large complex decisions, which are irreversible, or “one-way”; but for reversible, or “two-way” decisions, the board’s role is to challenge management to distribute authority across the organisation, and increase the speed of decisions, rather than escalate up by default.
Creating an Agile Board takes experimentation, learning and practice. As businesses make inroads into the world of constant changes, adapting relevant Agile philosophy will be mission critical for boards to be effective.