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Building Flat Organizations with Cross-functional Teams and Fewer Managers

| Posted by Ben Linders Follow 26 Followers on Nov 30, 2015. Estimated reading time: 9 minutes |

“Hierarchical organizations can't react to new market opportunities and changes fast enough, this impedes the company’s survival in the long run”, says Michael Dubakov, founder of Targetprocess. “Organizations should distribute managers’ responsibilities among cross-functional teams and boards to become flatter and increase their overall agility."

InfoQ interviewed Michael Dubakov on how agile transformations impact the role of managers, how to change the culture in order to increase agility, why organizations should become flatter and how to flatten an organization using cross-functional teams, as well as what benefits organizations will get from increasing their agility.

InfoQ: Culture is often mentioned as a reason why an agile transformation is not succeeding. Do you agree with this?

Michael Dubakov: Absolutely. You can take several Agile practices, apply them to several teams and observe a productivity increase. Sounds good. In practice, though, you are likely to end up in a local minimum. When you try to implement something more significant you will hit a company culture wall and most likely crash. Most companies were not designed to embrace change, they hate changes since historically changes were accompanied with "staff optimization". The best thing a company can do is to promise not to fire anyone in the transformation process and try to find a good place for everybody. It may sound insane, but Lean transformations in many manufacturing companies have used this rule with great success. So I strongly believe it can be done with agile transformations as well. With this rule people are more willing to change the culture and to experiment.

InfoQ: When agile is adopted the role of managers can change a lot. Managers often fear that they will become obsolete. Any suggestions on how to deal with that?

Dubakov: What do managers usually do? They coordinate teamwork, review, hire and fire people, improve processes, plan/track work and mentor people. All these activities are important, but quite many of them can be delegated to teams. Managers should participate in value-adding activities. They can lead process improvements, educate people, help them get better, participate in hiring, get closer to customers or product development. There are tons of things any intelligent person can do in a company.

InfoQ: Can you elaborate what enterprises can do if they want to change their culture to increase their agility?

Dubakov: Agility is not the goal by itself, it is a method to solve a problem. External environment for many organizations changes more rapidly now and they have to change their pace as well. I personally don't believe you can take a traditional company and implement Scrum or Kanban easily. You have to transform the company as a whole on all levels. To be honest, there are not so many known formalized approaches how to do that, they are emerging right now via various experiments.

Don't get me wrong, you can increase company productivity with Scrum in a traditional company, but most likely it will not be a significant gain. True agility demands more global changes which can affect: organization structure and hierarchy, information flows, people roles and responsibilities, decision making processes, review processes, feedback loops, etc. A company should re-define its fundamental principles, regularly review and tune itself according to these principles. The set of several principles can vary, here is just an example:

  • fast feedback (on all levels, to react faster, find problems faster and spot opportunities faster)
  • decentralization and transparent information flows (to solve problems faster)
  • learning and knowledge sharing (to solve complex problems)

It takes years to transform a company and embed these principles into its culture.

Another approach is bottom-up, where you, let's say, transform several teams and try to spread this culture through the whole company eventually. I personally don't believe this is the best way. Most likely you'll end up with an isolated agile cluster that doesn't fit into the current company culture and will suffer from the poor integration and a fundamental conflict of the cultures. I believe more in the top-down approach which we discussed in the beginning of this session.

InfoQ: Agile retrospectives are used by organizations to reflect, learn and improve. Do you think that they can also be used to change the organizational culture? How?

Dubakov: Yes, but it demands an extremely high level of trust and if trust is not in the company’s DNA most likely retrospectives will not work. In theory you can run a retrospective and try to define new company values. But if top managers don’t share them it will lead to nothing. For example, people may agree that transparency should be one of those values. It means quite sensitive information should be open to anyone anytime. It may put some people in danger, since it will become obvious that they do nothing valuable to the company.

Retrospectives will reveal dysfunctions, but only if people are ready to talk honestly and openly. Which is not always the case.

InfoQ: Why do you thinks organizations should become flatter? What are the benefits that it can bring?

Dubakov: This is a very deep question and a good answer most likely will fit into a book, I can just scratch the surface here. We should start from the beginning: Why organizations exist? We believe these structures help to achieve more and solve problems that can't be solved by individuals. The problems are getting more and more complex and we tend to have larger organizations to solve them. For example, the LHC project has 10,000 people involved. The main goal of an organization is to solve problems. You can be more specific here and add a specialization, like to solve problems in ground transportation, but that is not so important in fact. A secondary goal, in my opinion, is to solve the problem in a human-friendly manner. That is not so easy to formalize, but I think an organization should do everything to stimulate intrinsic motivation and align people dreams into a solution.

We have different societies and even now there are many authoritarian countries. But I believe with time democracy will win the world. It may take centuries, but so far this is the best known way to run a country. That is why I believe the same will happen with organizations eventually.

Every sane person wants to work in an open, transparent, honest, democratic environment, where their knowledge and voice mean something. The traditional hierarchy with middle management usually can't deliver this. It can be still quite efficient in problem solving, but it is often an inhuman place. But this is a secondary goal, let's get back to problem solving.

I see two main trends in problems:

  1. Complexity increases
  2. Pace of changes increases

It all means that organizations deal with more complex problems in a rapidly changing environment. It demands intelligence and mobility. This leads to so many changes within the organizations! Command and control barely work for intelligent people, so you have to invent new ways. Hierarchy can't react fast enough to new market opportunities and it impedes company survival in the long run. Hidden and obscure information flows reduce mobility, so you have to invent new ways to broadcast information and be more transparent as a whole company. The company strategy can't be created by a single person, since he or she doesn't know everything, it should emerge from successful initiatives at the lowest levels.

Flatness is just one characteristic of a “new generation” companies. It helps to make decisions faster, run more experiments, fail faster and find new solutions faster.

The truth is that we don't have proven best practices how to create flat organizations and what "new generation" means in general. We have just some working examples and many critique quarrels. I personally believe the critics are wrong and this is the new major trend. It takes 20+ years to run such experiments, so by 2030 it will be a mainstream (or not). Agile was in a very similar situation 15 years ago. Now agile practices form a mainstream approach in software development.

InfoQ: If organizations become flatter this most probably will impact middle management. Chances are big that they will resist. Do you have solutions for dealing with this?

Dubakov: Middle managers are usually the most experienced people in some functional area, so they can quite easily transform to coaches and help teams improve. Soft skills are important as well to glue the team together and mentor people. Middle managers will lose power to promote and fire people, most likely, but that is for the better. Leadership should be earned and not given with the title.

InfoQ: What are your suggestions to create a flat organization?

DubakovThe most complex thing is to decide what to do with the responsibilities usually performed by the managers. Suddenly you have to answer questions like: How do we hire and fire people? How do we do reviews and set salaries? How we do resolve personal and cross-teams conflicts? Usually managers do all these things, but without managers you should have proper processes in place. That is not an easy thing to do, since there are not so many examples. Holacracy provides some mechanisms, Valve is an another example along with Buffer, but in general you will have to think and discuss these processes for weeks to nail them down.

Another important thing is independent units. For example, a fully cross-functional team is an independent unit that can complete a project or a major feature alone. Functional teams just can’t work without middle managers, since they demand daily coordination.  

Third, the product architecture should be aligned with the company structure, Conway’s law holds true. When you have independent cross-functional teams, you have to break software into independent components, services or microservices, otherwise coordination is still required and managers will pop up by themselves.

Is it possible to create an organization without upper management? In theory it is possible, but I don’t think it will work at this stage of organizational evolution.

InfoQ: Can you elaborate how cross-functional teams can help to flatten organizations?

Dubakov: It just requires fewer middle managers. Suddenly you don’t need to have a QA manager and a UX manager, for example. Teams are independent and can follow their own rules that don’t contradict the core company values.

However, cross-functional teams alone can’t create a flat organization. The main idea is to distribute managers’ responsibilities among teams and boards, we do something like that at Targetprocess.

InfoQ: Can you give examples of the benefits that you have seen in organizations that have increased their agility?

Dubakov: The main thing is probably a culture shift and a feeling that “everybody does care”. People become more passionate at work, help each other more actively, have more fun together. This spirit is priceless.

Communication flows are usually improved, since there are fewer borders between departments and people share ideas, problems and knowledge better. Still it is required to design communication flows to make that work.

Decisions are faster as well, since more agility often triggers decision making delegation and teams become more autonomous.

People tend to work longer in such companies, retention rate is higher, since there are more options to focus on interesting things and there is less bureaucracy.

However, such changes are not free. For some people the whole system looks like a very chaotic and unstable thing that changes rapidly. They are just not used to an unstable environment and struggle initially. With time this feeling usually passes away, though.

Revolutions are hard. I have a feeling that a revolution in management is happening now.

About the Interviewee

Michael Dubakov is the founder of the agile and flat company of 80 people who work on Targetprocess - a software tool to visualize and manage Agile projects according to Scrum, Kanban or a custom approach. 

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