3 Model

Deep Dive Leadership & Culture with iCoachAndrew

To construct a model for the agile team network, we turned to the broadest financial measure for indicating quality of management and leadership--return on assets. Its famous acronym is ROA.

The widely used financial ratio indicates the quality of management decisions and leadership action that went into utilising the assets of a business unit to generate last year’s operating profits. Bloomberg calls it management effectiveness.

In order to achieve sustainable profitability, your organisation faces twin challenges: strategic excellence and operating excellence.

Strategic excellence means making the right decisions about the business. Producing the right products. Serving the right markets. Covering the right geographic areas. Using the right technologies and ways to convince customers to choose your offering over others. The right decisions place the business in a position of advantage relative to competing forces. It is called relative strength.

Operating excellence means executing strategic decisions in the right way. Attracting, training and grouping the right people around key assets. Building winning teams. Building the capability to execute processes with agility and flexibility. It is called absolute strength.

To properly address those twin challenges in the digital economy, we redefined assets to include human energy and data. And then classified assets into two broad categories, namely operational resources and strategic resources.

Operational resources are employed to generate yearend profits, using an inward-focused mindset aimed at building the right capabilities. Strategic resources are employed to generate future profits, using an outward-looking mindset aimed at ensuring external survival.

This way of classifying resources is in line with the standard accounting practice of differentiating expenditures on the basis of the timing of their incurred benefits. Thus operational expenses, or OPEX, are accounted for in the profit and loss statement. And capital expenditures, or CAPEX, are accounted for in the balance sheet, with only the appropriate depreciation and amortisation expenses charged to the profit and loss statement.

The resulting agile version of return on assets can be visualised like this.

To build relative strength, a strategy management team applies the management of strategy using available strategic resources. This team is charged with articulating the organisational vision, mission and values. The team is responsible for strategy planning, implementation and evaluation.

Strategic programs are executed by project teams. A project team applies the science of project management to execute strategic initiatives using available strategic resources in line with a strategic funds budget.

To build absolute strength, an operating management team applies the management of operations using available operating resources. This team is charged with setting operating goals and standards. The team is responsible for implementation plans, budgets and controls.

Operating processes are managed by process teams. A process team applies the science of enterprise process management to execute key management processes for conditions of operating excellence. This team is charged with orchestrating the execution of operating functions.

Operating functions are executed by function teams. A function team forms a link in one of the key management processes. The collaboration that they need to execute excellent cross-function work is performed through their membership in process teams.

Sustainable optimum profitability is achieved when the twin challenges are addressed by a network of agile teams who are orchestrated to work in seamless harmony and organisational rhythm.