The Most Guaranteed Way to Improve the Bottom Line
Culture eats strategy for breakfast, but it’s leaders who generate the culture – leaders at all levels, not just at the top; and yet few receive leadership training
In a product development organization, the most effective way to improve efficiency, productivity, and financial health long term, is to improve the ways that leaders at all levels lead.
Common ways that leaders try to improve efficiency, productivity, and financial health include,
Efficiency programs or process improvement.
Managing utilization.
More cost controls.
Simplify and focus on core products or capabilities.
These are often great approaches, but where is “improving people”?
That sounds fluffy. Some reactions to it include,
“We can’t measure that”, or
“They will then just leave”, or
“It will take too long”, or
“I don’t know if that will actually make a difference.”
But if someone gave me these responses in person, I would say, “Do you hear yourself?”
Because while all of these responses seem reasonable at first, just a little thought reveals how wrong they are.
First of all, yes you can measure it. In fact, Agile 2 Academy has dashboards that actually track changes in behavioral performance, in the aggregate.
On number 2, sure, some will leave, but they won’t leave if they work in a great place and feel appreciated. As we wrote in the book Agile 2,
“Yes, some will leave when they acquire new skills, but if you have a positive environment, others will come to take their place. People who are creative and natural learners do not want to work in a place where they are not able to learn new things.”
[Berg, Cliff et al. Agile 2: The Next Iteration of Agile (p. 376). Wiley.]
About number 3, that it takes too long for people to improve, it won’t take any longer than any other deep remedy. And finally, about it making a difference, it will have a bigger impact than anything else you might do. Anything.
When I say “improving people”, I am talking about how people lead, and also their knowledge and skills. A product development organization is not something that can be run with an operations mindset. Product development is fundamentally creative. There are operations aspects, such as maintaining infrastructure, balancing work, and planning, but the factors that go into decisions about these things need to be deeply informed by the impact on people’s creative output.
People are not machines, and if they are experiencing toxic anxiety, their creativity plummets. Their creativity also suffers if they are unaware of things they need to know, or have difficulty collaborating with those who they need to collaborate with.
These factors always matter, but they matter less when the work consists of repeatable tasks such as assembling a car or processing insurance claims. But product development is not composed of repeatable tasks: an engineer or programmer never designs the same thing twice. Every decision made is unique, and engineers and programmers make hundreds of small decisions every day. Each decision is a creative one: for example, each line of code is creatively crafted to solve a problem, and the overall design of the solution is creatively crafted by the programmer – it is not a repeat of the last solution.
Product development also requires continuous learning. The tools are constantly changing. The recent arrival of LLMs has been a visible introduction of new kind of tool, but it is just the latest in a long series of new tools that have impacted engineering and programming: before LLMs there were Agile, cloud computing, DevOps, microservices, and pre-LLM machine learning. Staying current requires a learning mindset and inspiration: people who are not inspired don’t usually want to learn.
For these reasons, improving the people of a product development organization, in terms of their leadership abilities and their knowledge, is by far the most powerful way to improve outcomes – it will make more of a difference than anything else you might do.
What Makes People Effective
There is a lot of research on what makes people effective in teams. It turns out that most of what makes them effective is what happens outside of their team.
That’s because it is the environment outside the team that provides the incentives and the culture. The culture is the set of expectations created by managers, such as “If you make a mistake, you won’t get promoted”, or “If you show creative courage, you will be promoted”. People take their cues from what managers say, but also from what managers do – everyone knows that these don’t always match.
Culture also includes patterns for “how we do things”, such as a custom of using certain tools, or certain technical approaches.
To maximize creativity, the culture needs to be positive. In terms of the Human Synergistics culture model which has been used with 30,000 organizations spanning 50 years, the culture must be “Constructive”. It is management behavior that generates the culture: specifically, it is a combination of the incentives and the leadership styles of those who are in positions of influence. That begins at the top, and propagates down all the way to team leads. As Harvard researcher Amy Edmondson writes in her book Teaming,
“Leaders seeking to facilitate teaming and produce organizational learning must frame their project in a way that motivates others to collaborate. Researchers agree, however, that many of our spontaneous frames at work are inherently about self-protection. These self-protective frames dramatically inhibit opportunities to collaborate, learn, and improve. However, people can learn to reframe and shift from spontaneous, self-protective frames to reflective, learning-oriented frames. Doing so involves interdependent team leaders, empowered teams, and an aspirational purpose.”
[Edmondson, Amy C.. Teaming: How Organizations Learn, Innovate, and Compete in the Knowledge Economy (p. 89). Wiley. Kindle Edition.]
You might think that changing culture is hard, but it amounts to changing the behaviors of the people in leadership roles. Most people want to be effective, yet most people in leadership roles have not had any training on how to be an effective leader. Often, they don’t even know what that means – they might equate “leader” with “boss”, or they might have a single model in their mind of what a leader is, not realizing that leadership is a broad spectrum of behaviors.
Our own research into companies that have demonstrated extreme effectiveness and agility at scale revealed that none of the companies shared common methodologies or practices. What they did share, however, was a range of common behaviors among their leaders. (See figure.) These were very different companies, and yet leadership style generated the culture that enabled each to master its market and be able to quickly make changes to adapt to the market and other situations.
Leadership spans things like how you communicate, how you form relationships, how you mentor and coach, how you find out what is going on, how you make decisions, how you delegate, how you keep things moving, how you encourage learning and innovation, how you inspire confidence, how you build relationships, and so much more. It even includes the kinds of ideas you have and whether you provide thought leadership.
Most people are not effective in all of these forms of leadership, but they can get better. A program for improving leadership in a systematic way begins with learning, then practicing in real situations, and finally by reflecting on what happened – again and again over time. That’s why our leadership program, which is designed for leaders at all levels – not just the C level – includes both a cognitive learning part and a developmental part in which people practice and reflect on their own behavior.
The initial cognitive learning part is important because it provides a conceptual foundation. That’s very useful for the learning lifecycle: without the cognitive foundation, people flounder and learn much more slowly. They might even learn the wrong lessons. For example, they might try mentoring someone, do so ineffectively, and conclude that they cannot mentor others.
The lesson here is: People need leadership training, and then they need leadership development, which consists of them providing leadership to others but with the support of a coach or mentor who has broad, deep, and successful leadership experience of the kinds that the organization wants to encourage. This scales because leaders who go through the program can then serve as coaches and mentors for others who go through it.
Leadership Is Not Enough
Leadership is mostly about behavior: how people in leadership roles – or even not in a role – behave in different situations that affect others. But another factor that is equally important is knowledge: Do people know what they need to know?
I am talking about both technical skills for the work and also organizational patterns such as how to set things up so that they will be efficient – things like Lean patterns.
For example, researcher Nicole Forsgren found that the highest performing teams in tech companies tended to be teams that had “transformational” leaders: those with strong traits in vision, inspirational communication, intellectual stimulation, supportive leadership, and personal recognition.
Yet, paradoxically, she also found that when she looked at the teams that had leaders who were the “most transformational”, those teams were not high performing.
In other words, the best teams had great leaders, but the teams with the greatest leaders were not great teams.
That’s like saying that the best baseball teams have star hitters, but the teams with the best hitters are not the best teams.
Her explanation was,
“leaders cannot achieve goals on their own. They need their teams executing the work on a suitable architecture, with good technical practices, use of Lean principles, and all the other factors that we’ve studied over the years.”
[Forsgren PhD, Nicole; Humble, Jez; Kim, Gene. Accelerate: The Science of Lean Software and DevOps: Building and Scaling High Performing Technology Organizations (pp. 175-176). IT Revolution Press. Kindle Edition.]
In other words, good leadership is a major factor, but it is not enough, and even a great leader cannot draw performance out of a team that lacks skills in the work itself.
How AI Impacts This
It doesn’t.
AI will not change this until the day that people are no longer working together. When that day comes, we can all go home.
As long as people need to communicate, collaborate, make joint decisions, create things that are used by others, and be responsible for outcomes, all of this applies. Even if people are using AI to create starting points for their work, or to review or check their work, it doesn’t matter. AI enables people to do more, and it eliminates some grunt work. But organizations are still composed of people working on collective endeavors, and as long as that is true, leadership and human skills are the central issues to solve – at least in the context of product development organizations.
Conclusion
What about the common approaches for improving efficiency and productivity?
Efficiency programs or process improvement.
Managing utilization.
More cost controls.
Simplify and focus on core products or capabilities.
Efficiency programs might help, but only if people are engaged and strongly committed – but that is strongly impacted by the culture, which is generated by the leaders.
Increasing utilization will help if there is a lot of wasted capacity, but if it is an attempt to wring another few percent out of people who are already working hard, it will be counter-productive, because it will increase toxic anxiety and make people less creative – remember that engineering and programming are creative activities.
Cost controls will help if there is a lot of waste, but if the new controls make it difficult for people to do their job, or learn new skills that are important, then the controls will be counter-productive, not only because they will make people less efficient, but also because they will generate a culture of feeling controlled.
Simplifying and focusing on core products and capabilities is usually a good thing. But one should ask oneself the question, Are we innovating? Innovation relies on having engaged people, which again relies on the culture being Constructive, which – again – is a result of how leaders lead.
So it all comes down to leadership abilities and styles; and not just for the people at the top, but for everyone in a leadership role. And today that might be anyone, because today organizations are increasingly non-hierarchical in how they operate: teams are often set up that cut across organization boundaries. People who did not expect to be leading suddenly are learning a cross-functional team; and the members of those teams need to be engaged: they need to be willing to speak up and take the initiative – and that is a form of leadership. So everyone needs to be a leader. Leadership is not just for managers: it is for everyone.
In a product development organization, you won’t have effective performance unless you have effective leaders – throughout your organization.