Innovation, speed, customer centricity and productivity are at the core of why many companies are starting to evolve into dynamic, “team-based” organizations using the agile, helix or micro-enterprise models. These work quite differently than traditional, hierarchical organizations and require a fundamental shift in the underlying “people model,” or the set of management processes to align, assess and develop people resources.
No single “off-the-shelf” people model exists for team-based environments, but organizations can start by considering the themes of alignment, motivation and craftsmanship.
Align individual goals to business outcomes
The key to achieving performance objectives is the ability to align people resources to business needs and ensure they deliver the desired value. Agile ways of working create increased transparency into the performance of teams and individuals, tempting organizations to link the achievement of key performance indicators (KPIs) and objectives and key results (OKRs) to individual performance reviews and compensation.
However, doing so can have adverse impacts, such as sandbagging (convincing others to set lower targets), risk inertia (inability to set ambitious goals and targets due to the fear of personal repercussions) and lower psychological safety (not speaking up and challenging status quo due to fear of interpersonal risk). Instead, the processes of setting and tracking performance against KPIs and OKRs should encourage teams to stretch and learn.
For example, one financial services company undergoing an agile transformation created a process where OKRs are set by teams (as opposed to individuals) to create ownership and risk-sharing, with input and alignment from senior leaders to ensure the right focus. Additionally, OKRs are reviewed and refreshed on a quarterly to semi-annual basis to create accountability.
Leverage non-financial rewards to unlock intrinsic motivation
The traditional “carrot and stick” approach to motivation does not work. A McKinsey survey (see Exhibit 2) from a decade ago shows this as it illustrates that the factors resulting in job satisfaction are not purely external (e.g., financial), but rather internal motivations such as achievement, professional development and transparency. Once table stakes have been met (e.g., creating fairness around rewards), the people model should support intrinsic motivation, providing individuals with opportunities to grow in competency and responsibility and to achieve greater impact for the organization, its customers and society.
One telecom company shifted away from incentives and bonuses based on individual performance to a compensation model based on the group’s performance relative to the entire organization. This resulted in an increase in ownership, clarity of purpose and autonomy to make decisions that created most value for its customers.
Continuously develop individuals to cultivate craftsmanship
In an organization where roles may change, and matching people to needs is based on the applicable skills they can deploy, we return to the idea of “crafts.” As in law and medical professions, crafts are about continuous learning and growth towards achieving mastery. For example, a software developer could continue to achieve mastery in their craft, instead of moving into a manager role.
The key to instilling craftsmanship in the people model is developing a consistent set of overarching competencies and behaviors to leverage for selection, performance management, development and advancement. The aforementioned financial institution defined competencies across business and technical knowledge, agile expertise, individual skills (e.g., problem solving), and mindsets and behaviors (e.g., servant leadership). They then designed the remainder of the people model against these with, for example, structured interviews for talent selection, and role-specific learning journeys. The above telecom company so fully embedded the concept of craftsmanship in its people model that performance appraisal and advancement decisions are made entirely based on progression along the contribution model.