April 30, 2021
Human Resources may not be what comes to mind when you think Agile. In fact, Human Resources is often used as the butt of the joke in many companies. Scott Adams has famously skewered HR many times in the past with Dilbert comic strips like the one below.
This view of Human Resources is limiting and not very accurate. Consider the example of Human Resources at Netflix. Patty McCord was the Chief Talent Officer at Netflix from 1998 through 2012. Her book Powerful, Building a Culture of Freedom and Responsibility describes the strategic partnership she shared with CEO Reed Hasting through the growth years of Netflix. The policies created by the HR team at Netflix were innovative and a key enabler to growth and agility. I will share some of the relevant insights from the book here as inspiration for you to stretch your thinking and try your own experiments.
McCord and Hastings together created a presentation about Netflix culture called Freedom and Responsibility which has been widely shared and has influenced HR policies in many other businesses. That presentation has evolved and can be found today on the Jobs page on the Netflix site.
But you aren’t Netflix, right? Can your HR team shape the culture and create agility? Certainly!
There are at least two key ways that HR can lead the organization in enabling agility. While the first is helpful and necessary, it is the second way that will have the deepest and most strategic impact on enterprise agility.
The first way that HR can embrace agility is in the delivery of their services. That is, the HR department can use agile ways of working to support their customers.
This starts with a focus on the customers of the HR department and a deep understanding of their needs. So who exactly are the customers and what do they need? I’m no expert in this area but the following seem to be the obvious ones:
Interestingly, McCord describes the “customer” at Netflix as the paying subscriber, not the managers and leaders or the employees.
Once the customer and needs are identified, HR can use common agile ways of working to satisfy their needs. This includes frameworks like Scrum or Kanban as well as specific techniques like visual task boards and daily standups.
In my experience, Kanban tends to be a more effective tool for the department-like work that is needed in Human Resources.Kanban is big on making work visible and managing changing priorities which is perfect for HR work. The HR team can use Kanban to complete high-priority work or shift their team around to respond to changing needs.
On the other hand, Scrum is better for cross-functional teams who can plan and execute in sprints. That is not how a typical HR team works.
While being an Agile Human Resources Department is great, the real leverage and impact comes when Human Resources is the enabler for organizational agility. What does that mean exactly? How can HR enable agile?
First, let’s distinguish between “doing agile” and “being agile”. HR may help with both but the real benefit is creating a culture of being agile. And that is where HR can shine.
There are at least 5 areas for HR to consider as shown in the diagram below. Let’s walk through each of these to see some examples of how HR improves agility.
Flexible dress codes may be the last thing that one thinks of when they think of agile. After all, what bearing could dress have on my ways of working?
Flexible dress is just one example of empowering employees – of giving them autonomy. We can certainly dictate a dress code. I remember hiring on at IBM in 1985 and needing a blue suit and red tie. I wore a suit to work every day at IBM, even though I was not in a customer-facing role. Did that help my performance? No, I don’t think so. It was just one way for the organization to dictate to me and control me. IMB may have perceived or anticipated a benefit but I as an employee did not.
Other examples include time reporting, vacation time, and expense reporting. Most organizations have established elaborate rules for these that are intended to protect the organization and perhaps to keep things fair. What if instead of elaborate rules for reporting time worked or requesting time off, what if were to simply trust in adult behavior. Take off the time you need. Stop reporting your time each week.
Some leading organizations have already stopped restricting vacation times and now offer unlimited vacation time. That list includes Netflix, Visualsoft, Evernote, Github and LinkedIn.
In 2015, LinkedIn shifted to offering unlimited holidays in a bid to give their employees more flexibility and a sense of empowerment – befitting of one of their organizational values of ‘Act like an owner’.
In 2015, LinkedIn began offering unlimited holidays called ‘Discretionary Time Off’ (DTO). There was no set minimum or maximum amount of time that an employee could take in a year. Instead, staff work with their manager to request time off when they need it. Pat Wadors, then SVP Global Talent Organisation for LinkedIn wrote:
“We believe DTO… will give our employees the ability to better meet their personal needs, which will then allow them to bring their best self to work.”
— Pat Wadors, LinkedIn SVP Global Talent Organisation
Time off is just one HR policy that should be evaluated and “leaned out”. Patty McCord of Netflix explains:
You should operate with the leanest possible set of policies, procedures, rules, and approvals, because most of these top-down mandates hamper speed and agility. Discover how lean you can go by steadily experimenting. If it turns out a policy or procedure was needed, reinstate it.— Patty McCord, Powerful; Building a Culture of Freedom and Responsibility
How can HR apply agile to the hiring processes? Here are a few simple examples of what others have done.
In agile organizations, teams are the basic building block. Most work gets done by cross-functional teams and people are expected to work in teams. This stands in contrast to most traditional organizations which are organized around functional silos. There are a few obvious implications:
Hire for Teams – Something to consider when hiring new talent is how well they will work with their team. Evaluating whether someone is a team player can be difficult but important. Even newhires with little or no professional experience should be able to provide an example of teamwork that was great and others that wasn’t so great. Did they play on teams in their extracurricular work? Work in teams during their university studies?
Let Teams Hire – Another consideration is to have the team with a need interview the candidate. After all, it is the team that is going to have to live with the newhire.
I supported Agile teams at Bank of America to do this as a coach in 2014. At first, teams are cautious about hiring. Interviewing and looking for fit is not a skill that all team members possess. But, the new person is going to be their teammate, so they have a vested interest in getting the right person.
Provide Low-Risk Ways to Try Out Employment – Menlo Innovations includes an internship as part of their permanent hire process. The candidates that pass a one-day paired programming audition get invited back for a paid day for “extreme interviewing”. Those that pass the extreme interview will be invited to a 3-week trial engagement. This extended hiring process allows both Menlo and the candidate to really get to know each other and determine if there is a fit.
Reviewing and rewarding people is another key area that HR supports. To do this in an agile way, some organizations have tried the following:
Include Team Performance – If we expect people to work in teams, wouldn’t it be a conflict to reward them only on individual contribution and not on the performance of the team? Unfortunately that is exactly what happens in many organizations with results that are not surprising.
LetTeam Members Review Each Other – Do you know who understands best the contributions you are making? Your team members who are working alongside you for 40 hours a week. They should be providing you feedback through informal conversations, retrospectives and through coaching and mentoring sessions. They should be one input to your performance review.
At Bank of America I helped facilitate team 360 reviews. These were face to face reviews where the team members rated each other across 14 different dimensions. There were few surprises – the teams had been working together for over 6 months at the time of the review.
Of course a key dependency for this to work is dedicated teams. If you have spread your people across multiple teams, they won’t have the same exposure and common goals of all their various teammates. Plus it is just a bad and unproductive approach as I have described in For High-Performing Teams, Stop Assigning People to Multiple Teams.
Separate Performance Reviews from Reward – Some innovative companies have found it helpful to separate performance review discussions from the annual compensation and bonus process. They make performance reviews more of a collaborative and ongoing discussion that is separated from pay.
One of the first things I did at Netflix was to decouple our pay system from the feedback process. I appreciate that it’s difficult to accept that this is possible, let alone advisable. The systems have become seemingly inextricably intertwined. Indeed, the tight bond between the performance review process and salary increase and bonus calculations is one of the main factors holding companies back from doing away with the review process. Which is one of the good reasons for decoupling the systems.— Patty McCord, Powerful; Building a Culture of Freedom and Responsibility
You would be surprised how many organizations I’ve worked with who adopt the Scrum Framework, train and recruit Scrum Masters but lack any sort of job description or career path for that agile role within their company. Or they try to adopt the Product Owner role from Scrum but already have project managers, program managers, and product managers.
If you are going to use Scrum, you should make some accommodations for those roles. There should be a job description and an appropriate career path. The project management career path is NOT appropriate for Scrum Masters, which is another common mistake that I see.
Focus on Skill Growth vs. Titles – The other key concept with career paths is to support skill-building and advancement along technical paths. People should not need to wait for their manager to die or retire before they can be promoted. After all, there will always be a limited number of manager and leader positions. And using agile ways of working pushes decision-making down to the team reducing the need for managers and putting more people into working roles rather than overhead roles.
So using a promotion to management as a carrot for advancement is a failing strategy. Better to provide a path for people to advance and be rewarded for building their skill sets and learning more areas of the business.
20% Learning Rule – While on the topic of Talent Development, an Agile HR department will stress continuous learning and development. We want to foster an environment of curiosity, learning, and experimentation. Some agile teams leverage a 20% rule. It is implemented in different ways. Some dedicate at least 20% of the teams’ time to learning. Others allow people to work on whatever they want for up to 20% of their time. In any case, there is an expectation that some portion of an individual’s time is up to them to use (another example of allowing autonomy).
One way that some organizations provide options is to allow people to sign up for gigs or short projects. There is a project board where opportunities are posted as “gigs” and people are allowed to sign up.
Another area where HR can make an impact is rewards. There are several facets to rewards but a key one is aligning rewards to agile ways of working and in particular, working in teams. After all, teams are the basic building block of agility.
Individual vs. Team Rewards – I already mentioned the importance of team performance. One of the first agile transformations that I was involved in was in a financial services firm. A large portion of each individual’s annual compensation was their bonus. There was a bonus pool and it was divided based on individual contribution. As you might imagine, this led to all kinds of gaming activity and competitiveness to see who could maximize their individual bonus at the expense of others. That single policy undermined all the work to create cross-function, self-organizing teams who collaborated for the best customer solution.
Skill Growth – Another aspect of rewards is paying people for growth and development. In an agile context, that usually means secondary skill development. Everyone brings with them a deep primary skill such as business analysis, accounting, Python development or automated testing. For strong agile teams, we want to recognize and reward growth in secondary skills. Those secondary skills complement the primary skills and provide flexibility and agility for teams to deliver end to end. The growth in skills taps into people’s intrinsic motivation and serves as a reward in itself.
What Would it Cost to Retain Someone – Finally, consider paying people based on what it would cost to retain them. As radical as it sounds, this has been the policy at Netflix since it was founded. Netflix encourages employees to go out and see if they can get a better offer at another company. They believe that to get the best talent, they need to pay top of market and offer what it would take to retain each employee.
Apart from how ridiculously time-consuming and ineffective the annual performance review system is, the method of calculating compensation fails to take into account some key factors that should go into salary decisions. One is how valuable the skills employees have developed while they’ve been working for you have become.
— Patty McCord, Powerful; Building a Culture of Freedom and Responsibility
Certainly, the Human Resources department can leverage tools like Scrum or Kanban to deliver their services. The real leverage exists in being the enabler of enterprise agility.
I am not advocating for dramatic and revolutionary change and I would not encourage you to simply cut and paste what Netflix did. [Similarly, I discouraged people from copying Spotify in There is No Spotify Model.] A key takeaway from Netflix is that you need to run your own experiments and evolve your culture:
At Netflix we did away with virtually all of the hidebound policies and procedures. We didn’t do it in one fell swoop. We did it experimentally, step by step, over the course of years. We approached developing the culture in the same way we approached innovating the business. I understand that such a radical transformation is simply not feasible for some companies. And many team leaders are not free to do away with policies and procedures. But every company and every manager is free to institute the practices we used to instill the core set of behaviors that made the Netflix culture so limber.— Patty McCord, Powerful; Building a Culture of Freedom and Responsibility