What is an agile organization? A thorough explanation of organizational theory in the DX era!

As social conditions and customer needs become more complex, and the need for DX is being called for, companies are required to build organizational systems that can respond flexibly and quickly to changes. Under these circumstances, a new organizational concept called the “agile organization” is currently attracting attention. In this article, we will provide an easy-to-understand explanation of what an agile organization is.

What is an agile organization?  A thorough explanation of organizational theory in the DX era!

Table of contents

  1. What is an agile organization?
  2. Why do we need an agile organization?
  3. Comparison with traditional pyramid organization
  4. Advantages and disadvantages of agile organization
  5. Benefits of an agile organization
  6. Disadvantages of agile organizations
  7. Key points to transition to an agile organization
  8. summary

What is an agile organization?

Agile organization is a concept that applies “Agile development”, which has spread in the field of system development since the 2000s, to the management of the entire organization. Agile development, which is the prototype of an agile organization, is a method of proceeding with development while reflecting customer needs and improvement ideas in real time by repeating the process of releasing and improving applications in short cycles.

Agile organizations that apply agile development to organizational structure have the advantage of being able to create organizational systems that can flexibly respond to change. Agile organizations place the needs of their customers first, rather than their own routine business processes. We practice continuous improvement by constantly eliciting new ideas and innovation from our employees and optimizing our products, services and business processes.

To achieve these goals, each employee must be flexible and agile. Therefore, agile organizations basically adopt a flat organizational hierarchy, where each employee has the necessary authority and works autonomously. Through this series of organizational development, companies will be able to quickly respond to complex changes in the market and social conditions.

Why do we need an agile organization?

Agile organizations have spread mainly in the United States, and are now being introduced in Asian countries and Japan, where an increasing number of companies are achieving results. The reason why agile organizational structure is attracting attention from many companies is that this new organizational form is suitable for today’s rapidly changing business environment.

Nowadays, due to the spread of SNS, market needs can fluctuate dramatically in a short period of time. Particularly during the coronavirus pandemic that has continued since 2019, traditional business principles no longer apply, and companies are under pressure to flexibly build organizational structures in line with changing social and market conditions. Agile-type organization building is an organizational theory that is in demand in this social and contemporary context.

Comparison with traditional pyramid organization

The traditional organizational structure, which is sometimes ridiculed as “vertical division,” is positioned as an inverted triangular pyramid-shaped organization. Pyramid organizations and agile organizations differ in many ways, as shown in the table below.

pyramid organization agile organization
chain of command Top-down method Autonomous decentralized method
Organizational structure Separate departments by function and specialty Gather diverse human resources for each service
business process Emphasis on advance planning Rapidly iterate releases and improvements
human resources management Emphasis on manuals and rules Emphasis on individual autonomous judgment

First, the decision-making process in traditional pyramid-shaped organizations involves a top-down flow of instructions from top to bottom from a small number of executives and managers. In such an organizational structure, employees at the bottom of the hierarchy are expected to serve as the faithful hands and feet of their superiors, and the reality is that it is extremely difficult to promote measures from the front lines to the top. Therefore, in a pyramid-type organization, employees are required to work according to instructions from their superiors, advance plans, and manuals.

Agile organizations, on the other hand, prioritize responding to change over following a plan. However, this does not mean not developing a strategy, but rather reviewing the plan frequently in the short term to ensure that current activities match current business needs.

Agile organizations have a flatter structure than pyramidal organizations, and different types of authority are more evenly distributed among employees. This is because agile organizations value employee autonomy over leader control, and believe that such freedom is a breeding ground for innovation.

Teams are not organized into specialized departments, but rather into service units, which bring together people with a variety of abilities so that they can carry out projects independently. The teams organized in this way are called squads, and are operated in an end-to-end manner that allows them to independently provide value to customers.

To summarize again, whereas a pyramid organization is organized in a vertical structure and operates rigidly in a top-down manner, an agile organization has teams (squads) distributed within a flat organizational hierarchy and operates autonomously. They move around quickly and quickly turn business processes around.

Advantages and disadvantages of agile organization

Next, we will explain the advantages and disadvantages of agile organizations based on the above characteristics.

Benefits of an agile organization

The main benefits of agile organizations include:

Improved productivity

Agile organizations, which are based on the premise of evolving through short release and improvement cycles, tend to be more productive than pyramidal organizations, which tend to be rigid. Because employees are empowered to act on their ideas, they’re more motivated to succeed and the business can grow with them.

fast decision making

Agile organizations, where each squad or employee has free discretion, enable rapid decision-making. No matter how carefully you consider things, it’s pointless if customer needs have already changed by the time you make a decision. In this respect, agile organizations can enter new markets ahead of competitors by delivering products and services at the moment when customer needs are greatest, even if imperfectly.

Increased engagement

Employees in agile organizations are more likely to find their work rewarding when they are given free discretion and are placed in an environment where it is easy to demonstrate their abilities. As a result, they are more motivated and engaged, and more likely to stay with your company for the long term.

Disadvantages of agile organizations

Possible disadvantages of agile organizations include:

difficult to manage

Agile organizations assume that each team and employee works autonomously. For this reason, when viewed from a broader perspective, it is difficult to accurately manage whether each unit is working in accordance with the overall schedule and objectives. Furthermore, considering the Japanese people’s tendency to rely on organizational behavior, even if they are told that they can act autonomously, they may feel confused or discouraged, which may actually make it harder for them to demonstrate their abilities. Probably.

Close communication with customers is necessary

Agile organizations are based on repeating releases and updates while understanding customer needs in real time. However, in order to do so, close communication with customers is essential. If customers do not understand Agile methods and cannot communicate well with them, agile organizations that have lost the guiding principle of customer needs are at risk of losing their way.

Key points to transition to an agile organization

What points are important when transitioning from a traditional pyramid organization to an agile organization?

First of all, it is important for the top management of the organization to make decisions that will significantly change the organizational structure of the company. As mentioned above, agile organizations operate under a fundamentally different organizational structure and way of thinking than traditional pyramid organizations. Strong leadership and determination from top management is essential to carrying out such organizational reforms.

The next point is to share your company’s vision throughout the company. Shifting to an agile organization may completely change a company’s culture from its traditional one. In order for the entire company to maintain cohesion even as the organization undergoes major changes, a process of sharing a new vision and values ​​between management and employees is essential.

The third point is to be thoroughly purpose-driven. Simply put, purpose-driven means working towards a set objective. In an agile organization, each team operates autonomously, but is expected to work in a way that is consistent with the objectives and interests of the company as a whole. In an agile organization, individual goal settings are constantly updated, and it is important that each employee understands the company’s strategic objectives before approaching their work.

summary

Agile organization is a new organizational system inspired by agile development. In agile development, each employee is given discretion and is able to move business processes flexibly and quickly. In today’s society, where uncertainty is increasing, the importance of building agile organizations is likely to increase.

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