The Agile Organization: Empowering People Without Losing Control

(in conversation with Dr. Constantinos Markides)

Good morning, Constantinos. Thank you for joining us today. You’ve been at London Business School for 30 years, and you’re here to talk about a critical topic: agility in organizations and the role HR plays in fostering it. Can you start by explaining why agility is so crucial in today’s rapidly changing world?

Good morning. It’s a pleasure to be here. Agility is no longer a “nice to have”; it’s essential. Things are changing so fast around us that organizations need to respond quickly to disruptions, adapt their strategies swiftly, and rapidly evaluate new ideas. Quickness and agility are paramount for survival and success.

You mentioned there are many ways to become more agile, but you’re focusing on one key ingredient. Could you elaborate on that?

Absolutely. The single most important ingredient for agility is giving autonomy to people. This means empowering individuals to continuously monitor what’s happening, quickly decide what needs to be done, evaluate actions through quick experiments, and implement them holistically so everyone benefits.

Imagine the alternative: if every decision had to go through a long chain of command, by the time a decision is made, it might be too late. A classic example is the Chinese company Haier, a global manufacturer of appliances. When COVID-19 started in December 2019, it took them just two months to have all their factories working at full capacity. Here in Europe, many companies are still struggling to reach that stage two years later. Their secret was a highly decentralized structure that allowed local managers to make rapid decisions without headquarters getting involved. Every region and subsidiary had the power to make quick decisions, leading to an incredibly swift response.

The Challenge of Autonomy: Control vs. Chaos

That sounds straightforward: give people autonomy, and you get agility. But you also brought up a critical challenge: how do you give autonomy without losing control? It can’t mean chaos, where everyone does whatever they want.

Exactly. Autonomy cannot mean anarchy. You don’t want someone making a decision that costs the company millions because they were given too much free rein. This brings to mind the story of Stanislav Petrov, a Soviet army officer in 1983. In the midst of heightened Cold War tensions, the Soviet early warning system indicated a nuclear missile attack from the United States. The protocol was to retaliate immediately. Yet, Petrov, looking at the data – only six missiles detected – rationally concluded it was a mistake. He decided not to retaliate, and it turned out he was right; it was a false alarm caused by cloud formations. He saved the world from a nuclear holocaust.

While it was a happy ending for humanity, consider it from an organizational perspective. If that were your employee, would you be happy with that decision? Was it his decision to make? What if he had been wrong? This isn’t the kind of autonomy you want, where decisions can lead to strategic disasters. The challenge isn’t just to give autonomy; it’s how to give autonomy without losing control.

Parameters for Empowered Decision-Making

So, how do we strike that balance? You suggest a simple answer, one we already practice at home with our children.

We do it all the time with our children. When teenagers want to go out with friends, we give them autonomy. We don’t follow them around to monitor their every move. Instead, we give them parameters. We say, “As long as you operate within these parameters, you decide. Do whatever you want. But if you face a decision outside these parameters, you have to call me, ask permission.”

The principle is simple: if a decision falls within defined parameters, the person is free to make it. If it falls outside, they don’t have the autonomy to make that decision.

What are these parameters, both at home and in a business context?

At home, these parameters are mainly of two kinds:

Values: The values we instill in our children. When your daughter is at a disco and offered something harmful, her decision making should be guided by the values you taught her about right and wrong. These values are in their hearts because we spend years, through our own behaviors, educating them.
Rules and Regulations: Simple, clear rules like “be home by midnight” or “keep your mobile phone on.”

In business, the parameters are very similar:

Organizational Values: Just like at home, company values should guide employee behavior.
Clear Strategic Choices: The company’s strategic decisions, e.g., “we sell Volkswagen cars,” define the scope of action. Employees can’t suddenly decide to sell a competitor’s products.
Rules and Regulations: A few, clear rules to guide behavior.

The Current State: Where Organizations Fall Short

That brings us to the core of your message. You argue that organizations often fail in implementing these parameters effectively.

Precisely. While the theory is clear – agility through autonomy, guided by parameters—the reality is that these parameters often don’t truly exist in organizations, or they are poorly implemented.

Values: For values to guide people, employees must know them and truly buy into them. What companies often do is hire consultants to write five or six “bullshit words” on a piece of paper, call them values, and put them on a wall. This is a waste of time. True leadership involves moving values from the wall into people’s hearts, through consistent behavior and education, just as parents do with their children.
Strategy: How many of your employees truly know and understand your strategy? Surveys show that while 96% of CEOs believe they have a clear strategy, less than one-third of their employees actually know what it is, and most of those are mistaken. If employees don’t know the strategy, how can it guide their autonomous decisions?
Rules and Regulations: Organizations tend to have far too many rules. Imagine giving your daughter a 200-page HR document of rules before she goes to a disco! The UK Highway Code for drivers has thousands of rules, but you only remember a few essential ones to drive well. The more rules you put around people, the more you take away their personal responsibility, making them behave like robots. Hans Monderman, a traffic engineer, revolutionized road design by removing signs, traffic lights, and even police. He found that when drivers had fewer rules, they slowed down, looked at other drivers, and navigated traffic like human beings, leading to fewer accidents. We create hundreds of rules that nobody knows by heart and thus cannot guide behavior.

HR’s Pivotal Role in Fostering Agility

So, if these three parameters are often missing or ineffective, what is HR’s role in promoting agility?

HR has a crucial role to play in instilling these three things into the organization:

Values: Don’t just prepare values and put them on the wall. Your role, along with leadership, is to move those values from the wall into people’s hearts. This requires sustained effort and a commitment to living those values.
Strategy: Help the CEO and leaders communicate the organizational strategy in a clear and understandable way to all employees. If you don’t know it, nobody else will.
Rules and Regulations: Review your HR policies and procedures. Do you need all those rules? Identify the truly essential ones – perhaps 10 commandments, like Moses had – that genuinely guide behavior. Remove the rest.

By focusing on these three areas, HR can empower leaders to give people the right kind of autonomy, which in turn will allow the organization to become truly agile. It’s a fundamental shift, but one that is absolutely necessary for success in today’s dynamic environment.