Thursday, May 24, 2018

The two blind spots of business agility: Allocating resources and accountability

Agile leadership conferences are popping up; there is apparently a need how to lead so-called autonomous teams and team-of-teams. Of course organizations need management functions to support these viable teams and the question is what are these management functions? Leadership is not one of the pillars in the age of agile described by Steve Denning, how come? Cross functional (self-organized) teams are rightly so in the picture but then only when intimately linked with delighted customers in a complex business environment (see previous article). Variety is an important indicator for complexity and only variety can absorb variety, learns the requisite law of variety developed by Stafford Beer for viable systems. Beer’s model is based on the maximum autonomy of operational or frontline teams; they should be viable to be able to absorb variety and deal with complexity. I ask myself how a network or ecosystem could be dynamic with autonomous viable frontline teams and also be vertically aligned with strategy. In agile we say goodbye to pyramid bureaucratic organization structures and inspired by Intel and Google companies introduce OKR performance systems and surprisingly a new pyramid top-down structure is created. Strategy alignment overwhelms values like empowerment, autonomy, trust and it frustrates experimenting. The agile mindset is horizontal in orientation, argues Steve Denning and that sounds rather vague. All well and good, but teams or their team leader should also be 'accountable' to ... management? And in order to obtain extra resources (talent, time or money) to better serve the customer, the frontline team is asked to write a well-founded business case and then, due to the slow procedures, they would have to wait months for an answer. In this way agility vanishes like smoke in the wind. Hamel fulminates against bureaucracies and proposes to move from a hierarchy of authority to a hierarchy of competences. And how does accountability fit in Hamel’s view? What is the role of leaders in a system or network of viable teams? It is time the business agility community bites the bullet about accountability and allocation of resources and that will pave the way for appropriate agile leadership.

I believe we need guidance or something to fall back on, that makes it easier to structure business agility with viable operational teams and appropriate leadership, based on the agile values. It is time to consult the experts on organization, like Mintzberg or the system builders of the Cybernetics like Stafford Beer. Beer introduces management functions to support and facilitate the viable frontline teams. Management then has the task of nurturing the team and the team-of-teams, providing them decisively with resources; to ensure that these teams can be highly successful instead of drying out. 

The Viable System Model( VSM ) of Beer describes four management functions that are minimally needed so that a system or operational unit (1) can function 'viable' in a changing and complex environment; these management functions are:
2. Coordination and communication,
3* Audit, information & data,
3. Integration & alignment, management in the moment: a. Accountability, b. Resources,
4. Intelligence & strategic planning,
5. Purpose and values.

Since the (relative) autonomy of the operational team is the starting point, the task of the other four functions is to provide support and services to the team. Beer uses nature as a source of inspiration and in a living system is no hierarchical power model. The communication between the (sub)systems is never one-way traffic but happens via closed information loops. For the tribe or department, you can visualize it as follows:
Viable system model (Beer, 1979)
In the picture there are three operational teams that have a relationship with their customers. These three teams are in three ways connected with the management function: Integration & alignment: coordination (2), audit & information (3*) and the 'hierarchical' relationship with resources and accountability (3). It is a complicated picture and in the course of this article I will highlight the parts, thus making it easier to understand. A remarkable feature of Beer's model is that the organization with management functions and operational systems connected with the environment are repeated in the subsystems. Besides it is not the case that the management functions 3, 4 and 5 would be higher or more important, even though the picture might suggest this. Therefore, Beer introduced the word recursion levels. I have adjusted the figure slightly to make it current: I replaced the word audit with audit, information & data.

The management function 4: 'strategic planning and intelligence' concerns also the exploration of markets for the future: to develop market-creating innovations. Beer relates intelligence (innovation) mainly to the external environment and to the R & D department of the past. Building up intelligence can now be found at all levels, it is a function and that means that team members also develop activities in the field of management function 4: strategic planning & intelligence. I will return to this in a next article, in which the MT and operational teams build intelligence on business development models. In this article I focus on management functions 3 and 3*. I discussed coordination (2) in my former blog.

Note, a viable system is about functions and not about people. It is common agile practice that a person operates in the operational team as well as in management function 3: Integration and alignment. For example, you can often see this with product owners performing regular team tasks. And since informal leadership is encouraged with all team members, it makes sense for team members to take on management functions from time to time. At Riotgames for example, they separate roles and responsibilities and team members can take on certain responsibilities which belong to the management function.

At team level the picture of Beer looks like this:

The leadership team with their leadership roles, like the product-owner, chapter-lead and agile coach operate in the management functions. The visualization shows that the operational team interacts with its customers and not just the product-owner. The product-owner has the responsibility to record customer (user) stories in the backlog. In the sprint planning meeting the team is in management function 4: planning. The team is responsible for the minimum viable products and in the review and retrospective meeting the team operates in management function 3: integration & alignment. She is accountable to herself and the customer. In addition to the responsibility of having developed a product in accordance with the agreements during the sprint planning meeting, the team checks whether they have developed a product in line with the wishes of the customer and whether they are still working on the right track. In other words, they collect new information for the next sprint planning meeting. The Agile & Learning (A&L) advisor (organization coach) facilitates the smooth cooperation between team members and monitors that individual activities do not interfere negatively with the activities of other team members (coordination 2).

Integration and alignment (3) 
System 3 optimizes the internal business environment and the synergy of the (sub)systems. A point of attention in the organizational structure is the vertical alignment between teams and the organization. Teams will have to coordinate their activities, to fit into the bigger picture. And that is not always easy. At the tribe level, the leadership team has an important task to monitor and promote the alignment with the organization through targeted (management) information provision for example in team-of-team meetings. In other words, it creates conditions in such way that teams have the ability to arrange alignment as much as possible themselves (Kniberg, 2015). The teams check whether their products are 'aligned' with the strategy. It is up to every team to anticipate on that information. And sometimes that information from the Management Team will look like an order. It is important that teams digest information about new directions, after all, they are viable systems. It is also possible that the team has crucial information from its customer world, which is important for other teams and for the strategy choice of management. The crux is that teams are involved in the strategy choice of management and management is hopefully aware that frontline teams have to offer a lot to build up new business models and an effective strategy. The entire organization need to have a voice in creating strategy (Hamel), see also the strategic agility case of Sri in book Denning

The team-of-teams must of course have a clear and sharp target (management function 4) and the tribe leadership team ensures that everyone has a clear vision. Since it is a management function, the representatives of the teams, usually the product-owners, participate equally in the determination of tribe goals and strategy. At this higher recursion level, participants analyze whether the result of the sprint is 'aligned' with the products of the other teams. Alignment is not just about goals and strategy; it can also be about the 'architecture' to align the products made in the different teams, see the SAFe approach.

'Accountability' is also part of the management 3 function: the tribe holds the teams to account for their results, for the teams themselves, for the customer and for the other teams. Operational teams are held to account about their contribution to the company. However what can you expect when accountability is an attenuation of high variety happenings (Beer, 1985) ? Also, it is said that the team holds management to account, the purpose of management in any agile organization would be to accept accountability for results. This would help to assure that the focus of management remains on the support, care and feeding(resources) of their frontline teams. In other words how can a team be hold accountable when she depends on resources provided by management and when she has no control or influence all the environmental variables that influence a set of OKR’s? Also I ask myself how to understand accountability with agile values like trust and empowerment. Below I will elaborate on the allocation of resources and accountability.
Figure: Accountability loop (Beer, 1985)

Allocation of scarce resources 
A viable system needs food and that comes from outside. By purpose Haier and McCrystal speak about “watering plants” by management as a metaphor. The operational team needs time, money and sometimes extra manpower with specific expertise. For a viable frontline team, it is crucial that she has the time to carry out activities and experiments in coordination with her customers. This means, for example, that the team members' agenda is not completely sealed and there is room for flexibility and experimentation. In the sphere of agility there is a lot of experimenting and then the team sometimes need extra funds which is not budgeted. Sometimes the team needs specific expertise from 'outside' to make activities a success and often it is about people who are being questioned by many teams.
There is a shortage of mental healthcare nurses in the neighborhood teams. In consultation between the district teams, it will be discussed how these nurses can be useful in the various neighborhood teams. The district team manager mainly has the task of helping the team representatives to come to a workable decision-making process. 
The hierarchy has the power over the distribution of scarce resources. The resource bargain is the deal by which some degree of autonomy is agreed between senior management and operational teams. Management provides negotiated resources for certain objectives. The bargain itself constitutes a variety attenuator. When the management handles requests for additional resources from operational teams in slow procedures, the viable system quickly dries out with all its consequences. This will have to be done differently, otherwise there will be no results of the micro-battles together with the customer. The management positioned in the management unit has to take care about feeding the frontline teams. The challenge is to use resources mainly in those teams that (might) generate most value.

But, who assesses which potential product would generate most value? The strategy analysts at C-level? With regard to allocating extra resources for a team, the temptation is to lay down decision-making in the hierarchy. You can read the degree of autonomy on the freedom levels of the agile teams in terms of access to scarce resources. In practice, teams often have little room for maneuver and management limits the resources in its limited wisdom, since it does not oversee the variety in the team's business environment. For example; when a team comes to the conclusion that certain expertise must join the team, to what extent can they recruit a new team member themselves or receive extra money avoiding time consuming procedures? It is obvious that the team justifies the application; this is also important in the negotiation with the management. But the management must also have confidence, otherwise there is a risk that the team is busy for weeks to write a bulky document and then you put the cart before the horse.

It becomes even more delicate when a frontline team creates new business.
In the 'founders mentality' approach of the Bain & Company, teams with their 'franchise player' as lead, implement micro-battles in the market. The management will think up three times to refuse a request for more resources, such as money, expertise or time. James Allen argues that the application of extra resources for micro-battles is often of small order (Bain & Company, 2017). In a 'founder’s' organization you often see that the 'franchise player' has short lines of communication with the CEO.
The open dialogue between frontline teams (the franchise-players) and top management is key to decide about the allocation of scarce resources. And a bit of friction between the actors is OK, acknowledge it openly and deal with it.

 A tribe leadership team or the company must have the resources to be able to anticipate the requests from the frontline teams. For such situations, McGrath (2017) argues that there should be a separate group in the organization that falls directly under the CEO that can make small amounts of resources in short time available for experimentation and that may open doors to future opportunities, even if they can’t be assessed in conventional financial terms. In this way the resource channel will also amplify the variety absorb capacity of the team and not only attenuate it.

What do we mean with accountability when we talk about viable systems and business agility? Agility opinion leader Ahmed Sidky from Riotgames spoke several times about accountability at conferences. I agree with Ahmed that accountability is a key factor in business agility but remarkably at the moment it seems not to be a hot topic. Ahmed argues that in the scrum design or agile framework no one is authorized to hold teams to account: not the team itself, not the product owner, not the scrum master, not the chapter-lead. You cannot say that the product-owner is accountable for the performance of the team.

Ahmed Sidky (Riotgames) distinguishes between responsibility and accountability:
  1. Accountability To hold someone to account and question their fulfillment of the duties and tasks assigned to them. Accountability acquires answers and entails consequences. 
  2. Responsibility A strong feeling driving someone to willingly perform their duties with total ownership (no excuses, no blame). Do whatever it takes to make it happen attitude. Ownership is a collective responsibility and the team is responsible for its results. . 
To hold oneself accountable is a crucial task of a person, a team, a system, to take time for reflection about the results and team members should ask themselves now and then if they are still working on the good things.
Every self-employed person is accountable to him/herself in his/her own time. I mean that he/she will occasionally reflect about whether he/she is still busy with the right things and whether the products are in accordance with the expectations and wishes of customers. The self-employed person does this at the higher recursion level: management function 3 Integration & alignment. 
A key element of accountability is that a team presents its minimum viable products to someone external: to avoid groupthink and to reveal the blind spots. In presenting a product to someone external the team will feel an obligation to present a well-founded argument of their story. This means that teams are not held accountable, they make themselves accountable to other people in the management function 3. And since you know that the external party will ask questions, the team can also prepare for this. A team reflects on the sprint results and in the review meeting the team presents and discusses the minimum viable products with their customers. And since the frontline team is the best informed about the variety in the customer’s environment, the review with customers is of great value. In agile terms this sounds so obvious: the customer holds the team to account. The team answers questions from customers and entails the consequences in their backlog. However, in many so-called agile work environments customers or end-users are not invited to the review meeting. I ask myself if representatives of customer service or management are good replacements for customers. Large companies sometimes use the argument that hundreds of teams cannot all consult with the customer. And before you know it, the customer or end-user is not invited to any team.

In the review meeting the team presents its minimum viable products to the product-owner operating in management function 3. The product-owner checks if the minimum viable product meets the expectations set in the planning meeting and collects information for the next sprint. Accountability starts with clear and visualized expectations and commitments. It is not self-evident that expectations are clear and, in that case, to hold the team to account is tricky. The team also holds the product-owner to account. However, you cannot say that the productowner is an external person, he/she is part of the team system.

The team, often represented by the product-owner, presents its minimum viable products and the feedback of customers also in the team-of-teams. The team is held to account. It is important to inform the higher recursion levels to facilitate horizontal and vertical alignment. The participants in the team-of-teams consultations are also 'accountable' to each other (McCrystal). Also, tribe leadership is empowered to get the job done; a team-of-teams needs rituals and triggers to hold tribe-leads to account.

Accountability is the ultimate learning tool, argues Ahmed Sidky, if structured properly. indeed.Accountability means questioning for learning; it gives the product-owner the role to ask questions in the review meeting, it gives tribe leadership the right to ask critical questions in the team-of-teams meetings, it invites all participants in team meetings at all levels to ask critical questions to each other. Asking critical questions in a psychologically safe work environment is key in excellent teams. Next to safety Daniel Coyle (2018) distinguishes openness & vulnerability as a key pillar for team excellence. Vulnerability appears to be key for tough and seasoned navy-seals, with openness in the after-action-review in which all is said what has to be said, for learning and to perform better next time. You do not need a leader for excellence; after action reviews for navy-seals are not led by commanders but by enlisted men (Coyle, 2018). You need an appropriate culture, working methods, rituals & triggers to build up excellence. A smart team asks external smart people for help, they are open and show vulnerability and they apply the hierarchy of 'competences'. The A&L-advisor (organization coach) has a major role to strengthen a team’s culture (safety and vulnerability) and learning climate for excellency.

Management in the founder’s mentality holds franchise-players to account, not to leave management’s mark but to listen, learn, ask many questions and try to understand the variety of customer’s environment, the dilemma’s and the reality of frontline teams. They try to assess patterns as input for broader organization issues, together with franchise-players (team leader frontline team). The franchise-player recognizes that he/she should invest time and energy in management; to give them the opportunity to fulfill their management role. In this way, the word accountability gets a different meaning.

At the Business Agility Congress 2018 in New York, I asked Ahmed Sidky (Riotgames) about accountability and I interpreted his answer also as follows: someone should be authorized to act when a team does not perform or when a team does not come to an agreement or decision. How to act as leadership when a team is not functioning properly and the results are not in line with expectations? And when this is the case, poor results do not mean automatically that a team performs badly; maybe the team is confronted with a complicated persistent problem. or the team decided in sonsultation with the product-owner to spend a considerable amount of time on a promising experiment and postpose delivery of the minimum viable product. So first ask questions and explore the subject matter.
 At Haier the team has to deal with poor results; it is their concern to deal with less sales or less profit and subsequently less income for each team member. In this way you immediately solve the issue of accountability. 
Poor results may have to do with the market (there is less demand for the product or the team does not really understand the needs of the customer), with problems in the team (process) and with problems in the management functions and especially at higher recursion (management) levels. A smart team in trouble asks external smart people for help, they are open and show vulnerability and they apply the hierarchy of 'competences'. And in line with the ING orange culture code; other people jump in to make teams asking for help successful. When a company labels this culture code as a guiding principle and a team does not ask for external help while struggling with a huge problem, then the team risks its viability. She should be aware that she is breaking basic principles of agility, with all that this implies. The A&L advisor will also be alerted when this takes place and will address it in the team. In case of friction or conflicts between teams or between team members, people who mainly operate in the higher recursion level will have to resist the temptation to seize the hierarchy of authority. They have a supporting role so that both teams can reach an agreement. To this end, they will check, among other things, whether all arguments are on the table and whether the balance between these arguments is correct. And last but not least, it might be possible that certain impediments cannot be solved and then together with the tribe-lead in all openness an action plan will be made.

Also tribe leadership might call for help and show vulnerability. People from operational teams might jump in to make tribe leadership successful (executives need reports in 24 hours, because …..). Practice what you preach! In former times these requests would have sounded like an order, in agile times with a hierarchy of competences operational teams will feel pleased to help. Hopefully it is experienced as fun and people will tease tribe leadership: “is the manager back?” and then it is OK. Please note: these requests should not be daily practice, because requests from hierarchy are a sensitive topic and asking for help can be experienced as quite compelling.

Audit (3*) 
But what to do when the team does not call for help or is not aware of a problem? First of all, tribe leadership needs information to become aware of poor performance; she has to be mindful with regard to significant weak signals of poor performance. Then she will have to be able to collect information in the team to get a good insight into the team problems; she enhances her capacity to absorb variety. People in the management function 3* at tribe level will perform an audit in the viable team concerned. All teams know that tribe leadership may decide to undertake an audit. It is not obvious that the tribe-lead should conduct the audit; consider if some people from other teams perform the audit. In that case they operate in the management 3* function. Subsequently the audit team discusses the collected information with the team concerned; also, to understand all the variety and complexity in relation to its environment. Together they will develop an action plan.

If the team with all the support and extra information does not change or even worse is not willing to recognize that there is a problem or if the team is not able to anticipate strategic choices, then a decision has to be made. Of course, as tribe leadership you will not let a team struggle with a known expert but dysfunctional team member, even if that person is of great value. The tribe leadership team, team leader, captain lead (Riotgames), franchise-player (Founder’s mentality) then takes the decision: the hierarchy of competence then makes room for the hierarchy of authority. Team memebers know that management can use this authority sporadically. I suspect that teams in such cases are often relieved that a decision has been taken. The tribe leadership team can ultimately decide to withdraw the resources. Be aware that this leadership behavior should occur only rarely in an agile organization, if not all the all alarm bells have to go off! Than the agile culture is in danger.

Information and data (3*) 
There must also be a transcendent function that monitors the greater good. The whole must be optimized and not the individual parts. Organizations collect information to know whether the system as a whole is capable of absorbing the variety; municipalities check whether all their activities are still in line with the intention and companies check whether customers are still optimally served. Data is collected in the teams and is intended to gain more insight and to learn from. Tribe leadership has also access to these data, without interference of the team. Due to good coordination and communication there is less need for monitoring and control, but there is still some need. After all, self-interest and groupthink can consciously or unconsciously ensure that communication is not free of biased information. A team may have a blind spot for certain issues.

In management function three*, information also flows to the operational teams; it mainly concerns information from management and from other tribes. It may also include information about possible new market-creating innovations, which teams will try to connect with their own customers or market segment. Of course, Artificial Intelligence and smart profiling might help to send relevant information.

The viable system model from Beer provides a framework to position the viable operational team supported by management functions. More and more, I come to the conclusion that an appropriate organization and consultation structure with a sharp view of the roles of people, resulting from the agile core values, plays a major role for successful teams and team-of-teams. The five functions of Beer provide a helpful framework to support viable systems. I plea for a more open constructive dialogue with regard to the vertical alignment between operational teams and management function 3: integration & alignment. Operational systems can only be viable when we are clear what we mean with accountability and when resources like talent, time and money can be allocated quickly on request. With regard to accountability I distinguish between external consultation in line with the hierarchy of competences and decision making by leadership in case of huge problems in teams. Build up a culture based on safety and vulnerability where ownership, questioning, learning and asking for help is normal work practice. In the learning approach of business agility, the hierarchy of competences is leading but you need an escape in case of huge problems in a team or team-of-teams. Top management and in fact everyone should be alerted when this escape is applied regularly; in that case it is not an escape anymore but common practice and then all alarm bells have to go off. Than the culture build on safety and vulnerability vanishes like smoke in the wind. Be mindful about these weak signals for the cause of excellence and success.

Thursday, May 3, 2018

Viable systems in network of teams for business agility in a complex environment

The network of teams is promoted in many places. Steve Denning presents in his new book: The age of agile, for example the 'law of the network' as one of the three pillars for a work environment with an agile mindset or for business agility. Recently, the Scrum Alliance also added its contribution with scrum@scale. Another movement focuses on teams with a lot of self-management that characterizes the self-organization. It is not that difficult to visualize a network of teams, but then you do not solve the question of how well a network of teams could turn out. I ask myself how a network could be dynamic with autonomous frontline teams and still be vertically aligned with strategy. In agile we say goodbye to pyramid bureaucratic organization structures and inspired by Intel and Google introduce OKR performance systems and not surprisingly a new pyramid structure is created. Strategy alignment often overwhelms and values like empowerment, autonomy and trust seem to fall by the wayside. All well and good, but teams or their team leader should also be 'accountable' to ... management? And in order to obtain extra resources (talent, time or money) to better serve the customer, the frontline team is asked to write a well-founded business case and then, due to the slow procedures, they would have to wait months for an answer. In this way agility vanishes like smoke in the wind. Hamel fulminates against bureaucracies and proposes to move from a hierarchy of authority to a hierarchy of competencies. And how does accountability fit into Hamel’s view? How to organize the information flow and which consultation or meeting structures are relevant for business agility? The perspectives of organizational and learning psychologists offer too little perspective, even though learning has been promoted to strategy (in the platform economy). I think we need a guidance or something to fall back on, that makes it easier to structure business agility. It is time to consult the experts of organization, like Mintzberg or the system builders of Management Cybernetics like Stafford Beer. In this post I will elaborate further on the interaction between operational teams and customers. In my second post I will elaborate on the management functions.

Customer delight 
We live in the era of artificial intelligence and agile. Steve Denning describes in his recent book that business agility has three pillars:
  1. Customer delight 
  2. Cross functional team 
  3. Network 
  4. I add a 4th pillar: strategic agility, also mentioned in Steve’s book
The 'law of the customer' is not by coincidence number one. Denning refers to Peter Drucker, who argues that the only reason for the existence of the company is the customer. The customer should be leading in everything companies do and how the organization is structured. In his new book, Denning makes it clear that many companies say they are customer-oriented, but that they do not coordinate their processes and the organization of the company accordingly.

In the agile manifesto the highest priority is to satisfy the customer. In the agile methodology or agile framework, the product owner is responsible for the customer stories (user stories) and in the review meeting the team justifies its minimum viable products to the customer. Sounds good, but in how many companies is the customer actually participating in the review meeting? How often do you not see that customer service represents the voice of the customer? Are teams afraid to present an unfinished, a minimum viable, product to customers and end-users? Is the reputation of the business at stake? Barclays gives a good example with agile teams on the stock market floor and in municipalities the purpose teams would organize review sessions in the municipality. Organize the review sessions at customers’ place with the post-it wall at the customers’ place and not at the companies’ office. Be transparent starting with customers, that is the basic idea behind the agile manifesto.

In the business agility conference 2018, James Allen of Bain & Company presented an impactful approach. Bain & Company aptly describes that growing companies often fail to keep the pioneers (founder's) and entrepreneurial mindset, while they need that 'insurgency' in a rapidly changing environment. Companies with a pioneers or 'founders' mentality have three overarching elements:
  • an extraordinary feeling for insurgency, 
  • a frontline obsession (customer delight), 
  • owner mindset.
What appeals to me is that Bain & Company focuses on the interaction between the frontline team with customers and that the rest of the organization is in fact at the service of this interaction. These are also the first two pillars of Denning and they become extra powerful when they are connected to each other. The pillars and the connection between frontline teams and customers form the foundation for building a viable, agile business.

Interaction between frontline team and customers is the core 

Viable system model
Time to switch to the Viable systems model (VSM) of Stafford Beer. The model offers a solid framework that provides guidance for smartly organizing and strengthening the network. The VSM is about the capabilities of a system, read the team, an organism, a department, an organization, to be viable. Beer defines viable as the ability of a system to continue to exist independently, balanced with its environment. Beer uses nature and cybernetics as a source of inspiration; where each organism must be able to deal with the complexity of its environment. The model is based on maximum autonomy of each (sub)system and that fits into agility. The Beer system approach provides insight into the dynamics between teams. He emphasizes that organizations facing disruptions must intervene on the interaction between teams (systems), at all levels of the organization. According to Beer, the clue is who interacts with whom (which (sub)system with which other (sub)system) and how all parts of an organization in a flat and self-organizing structure would work together in order to achieve resilience, flexibility and excellence. Beer offers a guidance to facilitate flourishing interactions. The USA army in Iraq became painfully aware that the interaction between teams is the key factor for successful operations:
General McChrystal experienced the enormous disadvantages of a bureaucratic army. The superior American army suffered enormous losses against a very flexible and poorly armed enemy. The US Army was far too slow. He saw that the problem was not in the cooperation within teams, but rather in the cooperation between teams. The cooperation with partner organizations was much worse. The solution was a network of teams with a team-of-teams.
Variety as indicator for complexity plays an important role in the viable system model of Beer. A system is viable as long as it is able to absorb the external variety. Teams are viable systems and as such autonomous and they independently process the information from the environment. Finally, they have the context specific knowledge about the environment. The starting point of Beer is that the capacity to absorb is the greatest where the variety comes in. Here the law of the so-called 'requisite variety' applies:
Only variety can absorb variety

The (frontline) team absorbs as much as possible all the variety that its rich environment has to offer. Diversity in operational teams would be helpful to be able to absorb the variety.
The frontline team then filters its information for the management. This means that the management can only partly understand the reality of the environment in which the team is operating. Also, the management can in turn add extra variety to the team; for example, with information from other departments or tribes or from the strategy drawn up by management. The team can in turn add new information to its environment. And of course, the subject matter specialists work in the frontline teams; for example, in banks the mortgage specialist works in frontline teams, it is in the business interest that these specialists interact with the variety of the environment.

Beer argues that the team absorbs the variety from its environment and ‘higher’ levels in the organization should not interfere. If they interfere, it will affect the viability of the team. You can ask yourself whether it is legitimate to intervene in a viable system. The operational team is therefore responsible for the relationships and coordination with their customers in their market segment.This applies also for municipalities:
In the complex environment of the municipality with a purpose-oriented approach, the youth purpose team for example has the knowledge, expertise and information about youth in the municipality. This team is also very aware about what is happening in the municipality regarding the youth issues. In line with the Beer approach, the purpose team absorbs the external variety. The hierarchy, read managers, the alderman or the city council support the purpose team and provide information, so that the purpose team can absorb the variety from the environment even better. The hierarchy should not want to interfere with the interactions between the youth team and inhabitants. Unfortunately, this often happens and it is not surprising that the ability of teams to properly absorb all external events is restricted or limited. In the terminology of Beer, you ask for difficulties.
The Chinese company Haier is also a striking example.
Haier uses the platform concept and defines a network organization as an ecosystem without borders with a management without managers. They created self-organized units (micro-enterprises). Haier does no longer try to delegate to, or ‘empower’ employees; every employee is his or her own boss. Ownership is so obvious and it avoids all those complicating accountability discussions. There are no hierarchies and managers: the platform owner, and that is often the CEO, is for example a servant responsible for feeding (watering) the ecosystem (see also McCrystal). What makes Haier outstanding is that an autonomous team, a cell, can recruit and dismiss people themselves and that the income of team members depends on the sales by the team. The team manages its own scarce resources and fits seamlessly within the Beer approach.

Teams at Haier absorb external variety

In Bain & Company's Founder’s mentality approach, everything is focused towards ensuring that the teams with their 'franchise player' can optimally handle the variety from the environment in their micro-battles and can immediately anticipate on new information. The management lead is supporting, listening and learning from the frontline team. This attitude from the management lead is a logical choice when the organization wants to understand the variety in the environment and is willing to act upon. In business agility vertical alignment and business strategy will be positioned differently; the business strategy will result from patterns distracted from the frontline teams and for example a cascading of OKR’s from the top does not fit into this.

You could also consider a network of teams as a system, where the operational frontline teams are connected to their customers.
Viable system model

The 3 teams in the tribe, visualized above, absorb and handle the variety from the environment. The cooperation between the teams is organized in such a way that all changes in the outside world are optimally anticipated. The management unit of a tribe consists of the tribe leadership team organizing periodically team-of-teams meetings. They create conditions that teams are able to absorb the variety from the environment.

Coordination and horizontal alignment (2) 
Teams in a network of teams (tribe) are dependent on each other and this requires coordination (2). Rules are required to deal with disruptions from one subsystem (team) that affect other subsystems; or in terms of Beer the oscillations of a team that affects other teams must be damped. This coordination takes place between teams and also takes place at a so-called higher recursion level: in team-of-teams consultations and with the tribe (department) leadership team. The tribe leadership team has the function to monitor the cooperation between teams; to check whether the horizontal alignment is well organized by the teams and facilitate optimal cooperation. They create conditions that teams have the ability to arrange alignment as much as possible themselves (Kniberg, 2015). The added value of this higher recursion level is that this function has a broader overview; since there are people who have information about what is happening in other teams and in the organization. Beer's starting point is that managing dependencies between teams requires no insight into what happens in the teams themselves (Beer, 1979).

Teams (operational units) work together to achieve desired results and they make the mutual dependencies manageable. Therefore, they make meaningful and effective mutual agreements and they set up the processes that are serving and not leading and are immediately adapted if the circumstances require it. The Coordination (2) function organizes the information flow to signal when rules and agreements between teams are violated. In addition, it is crucial that all parts communicate with each other and share all relevant information with each other and agree when consultation is necessary. The better this goes, the less the management function has to interfere and the greater the stability in the organization. In case of friction or conflicts between teams, people who mainly operate in management functions, the higher recursion level, will have to resist the temptation to seize the hierarchy. They have a supporting role so that both teams can reach an agreement. To this end, they will check, among other things, whether all arguments are on the table and whether the balance between these arguments is correct. It is the task of an A&L-advisor at the tribe level to support and facilitate the interactions between the teams and strengthen horizontal alignment; you could call it a senior Agile &Learning advisor (agile coach).

In business agility a frontline obsession is vital. The law of 'requisite variety' provides an additional argument that operational teams are the actor to absorb variety from the rich environment allowing to respond to the complex business environment for customer delight. The management then has the task of nurturing these teams and the team-of-teams, providing resources with decisiveness; to ensure that these teams do not dry out but can actually flourish. The viable system model from Beer provides a guidance to position the operational team well. Beer defines viable as the ability of a system to continue to exist independently, balanced with its environment. The meaning of viability refers to autonomy and self-management. I come to the insight that the organization and meeting structure with a sharp view on roles of people resulting from the agile core values, plays a major role allowing teams and team-of-teams to be highly successful.

Next blog
Beer distinguishes three management functions. In my next blog post I will describe how these functions can work, allowing the viable system of a team and of a team-of-teams to perform and excel. There seems to be an incongruity with a management unit and an operational team absorbing the variety. What is the role and tasks of leaders in a system of viable (sub)systems? How to understand accountability and how does this relate to autonomous viable systems? And how to organize resources for frontline teams in the moment of need, like: talent, time and money?