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As part of a set of research interviews, my colleague at MIT’s Center for Information Systems Research (CISR), Martin Mocker, and I once asked technology staffers at 40 big companies what impact they thought they were having on their companies. Sadly, many said that they didn’t think they were having any impact. They were doing what they were supposed to do, but they could not see how their companies would apply their efforts to become more successful.
What a waste of resources — and a missed opportunity! I suspect that similar scenarios are playing out in many, many companies. Our research on digital transformations suggests that recruiting, directing, and developing talent is more important than ever but is also more challenging.
Traditionally, many management roles have involved defining individual tasks and even specific processes for completing them. The best people were promoted so they could bestow their expertise on those who were performing jobs that could largely be prescribed.
Today, tasks that can be prescribed are more often automated. This means that fewer employees perform repetitive tasks, and more are engaged in personalizing services, innovating offerings, and creatively solving problems.
To maximize the contributions of individuals in this environment, leaders need very different management approaches than were required when tasks — and their outcomes — could be more specifically set down. In particular, companies are relying more on empowered teams, where individuals with a range of skills and experience join forces to solve customer and organizational problems and address new opportunities.
Leading teams of empowered employees demands new management approaches. MIT CISR research has recognized three seismic shifts in managerial responsibilities:
- A shift from defining jobs to establishing missions.
- A shift from making decisions to facilitating decisions.
- A shift from allocating resources to eliminating obstacles.
These shifts will challenge leaders’ ways of working — and possibly their egos. No longer can managers expect to be the smartest people in the room. Instead, they need to cultivate ways for others to shine.
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Leaders Establish Missions
The role of leaders has shifted from defining jobs to setting direction within their organizations. That requires identifying distinct missions for teams, which will balance the autonomy of individual teams with alignment across them.
Because their work involves solving complex problems or addressing emerging business opportunities, the desired outcomes of empowered teams — particularly intermediate outcomes — are typically hard to measure and assess. But that doesn’t make assessment and measurement unimportant. In fact, because teams are working autonomously to achieve joint enterprise goals, continuous assessment of progress is essential to avoiding the pursuit of “cool” ideas that deliver nothing of value.
But while a manager might want to specify expectations, specificity can kill creativity, which is exactly what an empowered team should provide. The way out of this is to make teams accountable for outcomes while also acknowledging that the teams themselves are best positioned to define what they should and can achieve. The critical role of leaders who oversee teams is to provide a clear mission that allows each team to define possible metrics.
Here’s an example of how it works at CarMax, the largest used-car retailer in the U.S. In our conversations with executives there in 2018, they told us that they assign accountability for building and sustaining components to more than 25 teams of seven to nine people. These teams have life-cycle responsibility for what CarMax regards as products, including online financing, search engine optimization, and digital merchandising, as well as platform services. Groups of product teams focus on different stages of the customer journey, such as when the customer searches for a car, buys a car, or sells a car.
To clarify missions and help both teams and leaders track outcomes, CarMax uses objectives and key results (OKRs). For example, the digital merchandising product team might establish an OKR to grow the click-through rate by 2%. Teams define two-week goals targeting their OKRs. Within a group, the teams share customer outcome OKRs, which align individual product teams with the company’s goals for the customer experience.
Defining team missions is a challenging exercise. Teams perform best if they can pursue their goals autonomously. But because they must jointly achieve enterprise objectives, teams necessarily become interdependent. Executives will want to solicit teams’ participation in tweaking and clarifying their missions to minimize tight coupling.
Leaders Facilitate Decisions
Daniel Langdon, director of the Digital Experience Lab at Principal International Chile, a subsidiary of Principal Financial Group that provides financial services for retirement, argues that traditional, hierarchical decision-making processes are pointless in the presence of strong teams. With hierarchical decision-making, he told us, there’s a lot of wasted time: “The team first breaks everything down to a few bullet points so that I, as their manager, can make a decision. Then I, the manager, without the deep picture, get to ask questions that the team has evaluated for weeks. And I start making suggestions that they have already invented, investigated, evaluated against the alternatives, and discarded. We rehash all of those conversations. The only reason that happens is because there’s no real confidence and no real delegation of trust.”
It doesn’t have to be that way. Empowered teams own accountability for an offering or component. They understand better than anyone else what specific actions and activities will lead to successful outcomes, and they are better positioned than anyone else to make decisions about what they do.
Suresh Kumar, former CIO at BNY Mellon, the U.S. banking company, told us that he encouraged his product team leaders to think of themselves as mini-CEOs with total responsibility for the success of their teams’ products. Each team was responsible for functionality, cost, customer and partner relationships, and life-cycle management. In short, the team was responsible for achieving its mission. That involved owning decisions.
Not surprisingly, many team leaders need training and support to develop judgment and confidence. Singapore-based financial services company DBS Bank assigns a partner from its transformation office to the leaders of its autonomous teams in order to help them learn the new “CEO” aspects of their responsibilities. It refers to the partner as a Sherpa — someone to guide team leaders as they adapt to their ever-changing roles. Sherpas provide templates, methodologies, and guidance so that teams consistently improve their decision-making capabilities.
Leaders Eliminate Obstacles
In an earlier column, I argued that traditional hierarchical structures limit a company’s ability to adapt to rapid changes in technologies and competition. Companies like Spotify facilitate agility by allowing teams to determine their resource requirements. Teams at the digital music service grow organically as they take on broader goals, and members determine when a team has gotten too big and needs to be divided — such that two distinct missions replace one. As more companies choose to rely on autonomous teams to define their own requirements, managers become less concerned with allocating resources to teams and more concerned with eliminating obstacles.
Langdon at Principal International Chile describes his role as “resolving friction” so that teams can accomplish what they set out to do. This can involve helping a team navigate existing organizational alignments and decision-making processes. Executives at some companies also look to identify and resolve issues that can arise when evolving team responsibilities start to overlap. They can help reshape missions to reestablish team autonomy.
Defining the manager’s role as the remover of pain points changes the relationship between executives and product team members. At Toyota Connected North America, a mobility services company founded in 2016 by Toyota, an executive leadership team meets daily to support the efforts of the product teams. “Our job isn’t to tell them what to do,” CEO Zack Hicks explained to us. “Our job is to remove the obstacles that are in the way.” He provides feedback in one-on-one sessions, “but it’s not to manage their daily activities.” Product managers make their own decisions about hiring and reinvestment of their profits, Hicks added, which “keeps them focused on what the business wants, and what the customers want.”
Finding the Smartest Idea in the Room
Traditionally, executives earned their positions by being the smartest people in the room. With empowered teams, that is no longer necessary — or even possible. Executives need to push accountability down so it rests with the people who know the most about a product, customer, or situation. It’s those people who will find the smartest ideas in the room.
At DBS Bank, leaders credit their efforts to push accountability downward with helping the company achieve its current success. “You have to set a clear outcome and give people boundaries — what we call the electric fence,” Paul Cobban, the bank’s chief data and transformation officer, told us. Leaders spend a lot of effort communicating the company’s values, he said, “so people know when they are about to grab the electric fence. Anywhere inside the fence, and as long as you’re moving toward your goal, you’re empowered to do whatever you want. We’re trying very hard to coach people and teach people how to empower their teams.”
Digital technologies and increased automation are changing how people work and what they can contribute to organizational success. But to deliver these changes, executives must rethink their roles and responsibilities. Increasingly, successful leaders will own responsibility for clarifying team missions, helping team leaders develop decision-making skills, and eliminating obstacles to team success.