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Organization

McKinsey Quarterly

The agile manager

July 12, 2018 | Article

By Aaron De Smet

Who manages in an agile organization? And what exactly do they do?

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T
he agile workplace is becoming increasingly common. In a McKinsey survey of
more than 2,500 people across company sizes, functional specialties, industries,
regions, and tenures, 37 percent of respondents said their organizations are carrying out

company-wide agile transformations, and another 4 percent said their companies have
fully implemented such transformations. The shift is driven by proof that small,
multidisciplinary teams of agile organizations can respond swiftly and promptly to rapidly
changing market opportunities and customer demands. Indeed, more than 80 percent of
respondents in agile units report that overall performance increased moderately or
signi cantly since their transformations began.

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These small teams, often called “squads,” have a great deal of autonomy. Typically
composed of eight to ten individuals, they have end-to-end accountability for speci c
outcomes and make their own decisions about how to achieve their goals. This raises an
obvious and seemingly mystifying question for people who have worked in more
traditional, hierarchical companies: Who manages in an agile organization? And what
exactly does an agile manager do?

Lay of the land

The answers become clear once you understand that the typical agile company employs a
dynamic matrix structure with two types of reporting lines: a capability line and a value-
creation line. Nearly all employees have both a functional reporting line, which is their
long-term home in the company, and a value-creation reporting line, which sets the

objectives and business needs they take on in squads.

In agile parlance, the capability reporting lines are often called “chapters” and are similar in
some ways to functions in traditional organizations (you might have a “web developers”

chapter, say, or a “research” chapter). Each chapter is responsible for building a capability:

hiring, ring, and developing talent; shepherding people along their career paths;
evaluating and promoting people; and building standard tools, methods, and ways of

working. The chapters also must deploy their talented people to the appropriate squads,
based on their expertise and demonstrated competence. In essence, chapters are

responsible for the “how” of a company’s work. However, once talent is deployed to an
agile team, the chapters do not tell people what to work on, nor do they set priorities,

assign work or tasks, or supervise the day-to-day.

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The value-creation reporting lines are often called “tribes.” They focus on making money

and delivering value to customers (you might have a “mortgage services” tribe or a “mobile
products” tribe). Tribes are similar to business units or product lines in traditional

organizations. Tribes essentially “rent” most of their resources from the chapters. If
chapters are responsible for the “how,” tribes are responsible for the “what.” They set

priorities and objectives and provide marching orders to the functional resources deployed
to them.

Management roles

In this world, the work of a traditional midlevel manager is reallocated to three di erent

roles: the chapter leader, the tribe leader, and the squad leader. Let’s examine the
responsibilities of each and the challenges they pose for traditional managers looking to

become agile managers.

The chapter leader

Every functional reporting line has a leader. This chapter leader must build up the right
capabilities and people, equip them with the skills, tools, and standard approaches to

deliver functional excellence, and ensure that they are deployed to value-creation
opportunities—sometimes in long-term roles supporting the business, but more often to

the small, independent squads. The chapter leader must evaluate, promote, coach, and
develop his or her people, but without traditional direct oversight. Chapter leaders are not

involved in the day-to-day work of squads; they don’t check on or approve the work of
their chapter members, and they certainly don’t micromanage or provide daily oversight.

Instead, regular feedback from tribe leaders, team members, and other colleagues inform

their evaluations and the kind of coaching they provide. Since they’re not providing direct

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oversight, their span of control can expand greatly, a fact that can eliminate several layers

of management. In fact, chapter leaders often free up enough time to tackle “real work” on

business opportunities as well.

The most di cult challenges facing new chapter leaders are letting go of the day-to-day

focus, and shifting attention to building the right capabilities and helping match talent to
the right roles and value-creation opportunities. Traditional managers are accustomed to

closer oversight of their people. But if they can let go, they will nd themselves in jobs that

call on more of their leadership and creative talents. Not only can they join squads

occasionally, but they can optimize their chapter-leader role in interesting ways. For
example, if a company recon gures squads frequently, reallocating talent to di erent roles

or teams, the chapter leader might create and manage a backlog of “nice to have”

functional work that his talent can help with in between their deployments.

The tribe leader

Since these value-creation leaders borrow or rent most of their resources from the

chapters, they no longer bear the burden of building up their own functional capabilities.
Instead, tribe leaders act as true general managers, mini-CEOs focused on value creation,

growth, and serving customers. They must develop the right strategies and tactics to

deliver desired business outcomes and to determine what work needs to get done, how

much to invest in which e orts, and how to prioritize opportunities. They work with chapter
leaders to match the right people to the right squads.

Like chapter leaders, tribe leaders manage less and lead more. Since they have pro t-and-
loss accountability, they must develop a strategic perspective on their business and their

customers, a cross-functional view of the core capabilities of the broader organization (so

they can e ciently secure the resources they need from chapters), and an integrated

perspective of the company as a whole and how their part of the business ts in with the

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larger enterprise. Those who succeed will develop more of a general-manager skill set and

an enterprise mind-set that can break down silos, enable collaboration across

organizational boundaries, and empower product owners to provide day-to-day guidance

on objectives, priorities, and tasks.

The most di cult challenges for traditional managers tackling the tribe-leader role are
letting go of the need to fully “own” all the people working for them, as well as shifting

attention from micromanaging the day-to-day work to developing the right business

strategies, setting the right objectives and priorities, and making the right business

decisions. Tribe leaders must also wrestle with their reliance on getting their talent from
chapters. They must resist the urge to build their own set of resources and create shadow

functions so they never lack what they need when they need it. That end-around scuttles

the agile matrix, which relies on healthy tensions and constructive con ict to get the right

capabilities to the right opportunities at the right time.

The squad leader

Team leaders, or “squad” leaders, serve a crucial purpose in the agile matrix. They aren’t

the “boss” of the people on their team. They help plan and orchestrate execution of the
work, and they strive to build a cohesive team. They also provide inspiration, coaching, and

feedback to team members, report back on progress to tribe leaders, and give input on

people development and performance to relevant chapter leaders. Think of squad leaders

as individual contributors who have developed leadership skills or at least developed an

interest in learning these skills. The squad-leader role can be more or less formal and can

even change over time depending on what the team is working on. Once again, the

challenge for someone from a more traditional company is to lead without exerting

onerous control. But the rewards can be great. Some squad leaders will grow into tribe
leaders, while others will continue as individual contributors with the additional skill of

agile leadership.

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Something old, something new

The idea of autonomous teams is not new; it’s been around for decades. For instance, in

the quality movement that took hold in manufacturing and continuous improvement 50

years ago, quality circles and high-performance work systems often relied on an
autonomous self-managed team with an informal team leader who was not technically a

boss. More recently, companies such as WL Gore (in materials science) and Haier (the

Chinese appliance manufacturer) have emphasized the empowerment of small teams, even

if they don’t use the language we associate with agility—or focus those teams on software
development, where agile has made some of its most prominent marks.

Today’s agile organizations are building on these ideas (for more on the shift underway,

see sidebar, “The agile revolution”). The squad leader is now a part of an agile matrix,

where the value-creation, or tribe, leaders provide constant direction and prioritization

around where the value is, and the capability, or chapter, leaders focus on ensuring deep
functional expertise, common tools and competencies, and economies of scale and skill. If

these leaders can become e ective, nonintrusive managers, the agile company will enjoy

the best of both worlds: the bene ts of size and scale typically realized in large

organizations, as well as the bene ts of speed and nimbleness often associated with small
entrepreneurial start-ups.

ABOUT THE AUTHOR(S)

Aaron De Smet is a senior partner in McKinsey’s Houston o ce.

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