Agile Transformation Requires Agile Leadership

It is an open secret that turbulent times have begun for banks and financial service providers. The market environment is more volatile than ever before – external conditions change often, quickly and extensively. Challenger banks, for example, have been on the advance for some time and are increasing the competitive pressure on traditional banks by providing innovative and attractive product solutions (ZHAW, 2019). As a result of these constant changes, ambiguous and often even contradictory information is increasingly circulating, and uncertainty and complexity for banks are growing (ZEB, 2019). How can banks nevertheless be successful in this environment? The key is agility – the ability to develop and ensure an adaptable and customer-centric organization. Admittedly, agility has been a megatrend in the financial industry for several years now, but it is often unclear what exactly it means.

In science and practice, no generally accepted definition of the term has yet been established, but on the basis of our research and the close exchange with representatives from both camps we have defined the term as follows: Agility is the ability of a company, team or individual to act in a customer-centric, fast and flexible manner and to anticipate changes in the business environment (Goldman et al., 1994; Yusuf et al., 1999). Agile companies consistently focus on the needs of their customers and involve them in the development of new products and services. Interdisciplinary teams work out the appropriate product solutions under their own responsibility within set guidelines. This requires each individual to rethink and abandon established routines and processes. Managers guide their employees within this system by giving them a vision and values, while at the same time handing over responsibility and power to them (Manz, 2018). This change represents one of the greatest challenges for the management of banks and financial service providers and can only succeed if the leadership style, which has a significant influence on the personal attitude, mindset and behavior of employees, is also appropriately agile. The question that arises in this context is: What characterizes an agile leadership style and how can the transformation to this leadership style be successful?

Agile leadership is essentially characterized by eight principles which form the basis for the successful application of this leadership style (Diehl, 2019):

  • Goal orientation: Clear, transparent, and measurable goals that are communicated in such a way that all employees understand where the journey is going and why the goal is being pursued.
  • High value orientation: The creation of added value for employees and customers takes center stage.
  • Customer focus: The customer’s perspective is crucial in order to create corresponding added value.
  • Transparency: Information and knowledge are proactively shared across departments and hierarchical levels.
  • Autonomy: Agile employees work autonomously and self-organized.
  • Clarity: Roles and processes as well as the type of cooperation are clearly defined.

These principles show significant differences to those of classic leadership styles – in terms of executive power and the degree of self-responsibility of employees. While traditional leadership styles concentrate power centrally in one leader, an agile leadership style redistributes this power. For example, in Scrum leadership power is distributed between the Product Owner and the Scrum Master. At the same time, the line manager takes greater responsibility for the personal and professional development of the employees (HR Prioneers, 2018). The second aspect is the degree of self-responsibility of employees, which is higher in agile managed teams than in traditionally managed organizations. Rather than telling individual employees what to do and by when, agile leaders encourage them to take responsibility for and handle individual tasks independently. In this context, agile leadership consists primarily of coaching and team development, ensuring good cooperation among employees, promoting motivation and helping people help themselves (BKI, 2018).

At its core, an agile leadership style thus involves creating an environment that allows for a high degree of autonomy and a strong orientation of employees towards higher goals. In practice, this can be implemented through various agile behaviours. We have summarized the most central ones below:

  • Encourage employees to think about problems: A dynamic and complex environment requires a precise analysis of business challenges, as their causes are often not obvious. Agile leaders encourage their team and employees to talk constructively about problems and give them the freedom to analyze their causes beyond departmental boundaries. Only when the problem and its causes have been sufficiently analyzed will a solution be sought. Methods such as design thinking and hackathons can support problem analysis in the team (Andreas Diehl, 2019).
  • Agree or disagree but commit: The increased personal responsibility of agile employees means that they are allowed to make independent decisions within a defined framework. The task of the agile manager is to define the framework by means of limits and rules (Ramseyer, 2017). In addition, the so-called “consent principle” applies to decisions made autonomously in a team, which means that decisions are considered to have been made when there are no more objections based on content. This means that if a manager has an objection to a decision by the team, but cannot justify it by stating that the decision is detrimental to the company or employees, the decision is deemed to have been made (Andreas Diehl, 2019).  
  • Exemplify the culture of error: Agile teams need leaders who enable their employees to learn from mistakes and adapt their actions to avoid making the same mistakes in the future. To achieve this, agile leaders must exemplify this error culture and encourage employees to deal consistently with their own and others’ mistakes. Agile techniques, such as retrospective meetings or lessons learned workshops, can support managers in this process by systematizing and institutionalizing the critical reflection and development of improvement measures (Fuhrmann, 2019).

It is fair to say that managers play a key role in defining the framework for successful agile working. In doing so, they contribute significantly to the success of the agile transformation of the entire company and also support the necessary cultural change in the company.


Sources:

Manz, S. (2018). Digitale Transformation im Banking–lessons learned. In Praxishandbuch Digital Banking (pp. 161-187). Springer Gabler, Wiesbaden.

Goldman, S., Naegel, R., Preiss, K.: Agile Competitors and Virtual Organizations: Strategies for Enriching the Customer. Wiley (1994)

Yusuf, Y.Y., Sarhadi, M., Gunasekaran, A., 1999. Agile manufacturing: the drivers, concepts and attributes. International Journal of Production Economics 62 (1), 33–43.

ZHAW (2019). Neo-Banken verändern die Bankenwelt. https://www.zhaw.ch/de/ueber-uns/aktuell/news/detailansicht-news/event-news/neo-banken-veraendern-die-bankenwelt/

ZEB (2019). Agilität – Das grosse Missverständnis unserer Zeit. https://zeb-consulting.com/files/media/documents/2020-02/zeb_agile_readiness.pdf

Andreas Diehl (2019). Agile Führung – Acht Maßnahmen, um agiler zu führen. https://digitaleneuordnung.de/blog/agile-fuehrung/

HR Prioneers (2018). Was ist eigentlich agile Führung? Teil 1: Organisationale Führung. https://hr-pioneers.com/2018/01/agile-fuehrung-organisationale-fuehrung/

BKI (2018). Agile Führung. https://www.bki.ch/files/ciattachment/BKI-Artikel-2018-Agile-Fuhrung_v22.0.pdf

Ramseyer (2017). Entscheidungsfindung in einem agilen Team: Wer entscheidet? https://pragmatic-solutions.ch/entscheidungsfindung-in-einem-agilen-team-wer-entscheidet/

Fuhrmann (2019). Fehlende Konsequenzkultur macht agile Teams träge. https://www.springerprofessional.de/personalfuehrung/agile-methoden/fehlende-konsequenzkultur-macht-agile-teams-traege/16604358

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