And increase business agility by anchoring the relationship between leaders and teams at the strategic level rather than the tactical level.
Key take-aways:
"Speed is of the essence" is true for most companies in the 21st century
One of the most effective ways to increase speed is to remove organizational blockers that drag teams down, such as approval loops
When teams have to work through tight approval loops, their speed of value creation is limited by the speed of the approval process
Organizations that maintain control through approval loops become slow, unresponsive, less innovative, and less fun to work for
Leaders can get rid of most approval loops by anchoring the relationship with their teams at the strategic level instead of the tactical level
Leaders who engage with their teams on the strategic level can continuously assess how the resources invested in a team translate into customer and business impact
Meanwhile, the team can use their expertise and understanding of the customer context to autonomously decide HOW to deliver on the strategic priorities.
Teams that enjoy more autonomy and responsibility are more engaged, more creative, move faster and ultimately create more value for customers.
Commitment to speed
In 2014 Elon Musk decided to open up Tesla patents to the world.
In a Tesla blog post, he said
“Maybe patents were good long ago, but too often these days they serve merely to stifle progress, entrench the positions of giant corporations and enrich those in the legal profession, rather than the actual inventors”
He sees patents as a liability rather than a source of long term competitive advantage.
He then further explained in an interview with the Wall Street Journal that
“You want to be innovating so fast [that] you invalidate your prior patents…If a company is truly relying on patents it means they aren’t innovating, or not innovating fast enough…”
Elon’s rather extreme decision illustrates his commitment to speed.
With that move, he took his foot off one of the structural brakes that could limit Tesla’s speed of innovation and sent a very clear message to his teams:
“Don’t dig your heels in the ground, don’t worry about protecting the past, focus on creating the future”
What’s true for Tesla is also true for most companies in the 21st century
“Speed is of the essence”
Speed of innovation, however, is only a part of what matters, a.k.a. the speed of value creation which, beyond innovation, also relates to our ability to grasp time-sensitive opportunities, adopt disruptive technologies, track and adapt to shifting consumer preferences or react to emerging competitors.
And just like the speed of a flock of birds is a function of the speed of each bird, the speed of an organization is determined by the speed of its fundamental engines of value creation, its teams.
Two opposing forces determine the speed of a team.
Internal propulsion power, which sets the team’s maximum theoretical throughput. It can be increased by attracting more talented members, sourcing additional expertise, improving internal processes, using better tools, systems, and equipment, etc.
External forces of friction, that drag the team throughput down to its actual value. Some of them come with the territory, for example in industries with heavy regulations (e.g. pharma), however many of them are self-imposed, such as organizational complexity, and internal bureaucracy.
Hiring people and buying stuff is more fun, so organizations tend to focus on increasing propulsion power over reducing friction.
However, increasing a team’s maximum theoretical throughput is costly and time-consuming, while removing organizational blockers that drag them down can be done at very little cost.
Approval loops are one of the most common organizational blockers and one of the easiest to get rid of.
What’s the point of more power when the limiters are still on?
A Ferrari is much more powerful than a Punto, so on a highway, the Ferrari will leave the Punto in the dust.
But additional power (and style) comes at a cost, and when cars are stuck in traffic, the difference in power doesn’t matter anymore (the Ferrari still looks better though).
Teams are like cars, organizations are like roads and approval loops are like tolls and traffic lights.
Better cars can't move any faster when the roads are too small, confusing, with too many red lights, and too much traffic.
When tight approval loops are in place, the speed of value creation of a team is not determined by its raw power (max theoretical throughput), but by the speed of the approval process.
Leaders, if you want to increase the speed of your organization, you need to give your teams the freedom to run as fast as they can.
You can do that by getting out of the approval game.
Approval loops are NOT a necessary evil
Approval loops exist to help leaders maintain a sense of control over the organization.
While there is nothing wrong with the desire for control per se, when it’s done through tight and frequent approval loops, it comes at the cost of teams’ ability to make autonomous decisions, which eventually translates into slower decision making, slower execution, and missed opportunities.
An approval meeting is like a toll or a traffic light, and when those pile up, leaders become bottlenecks.
Approval loops create an organizational tax that everyone has to pay, leaders and teams alike.
Leaders end up spending most of their days stuck in meeting rooms, while teams spend time away from their customers to prepare presentations for various stakeholders.
Meanwhile, execution slows down while teams wait for days, weeks or even months to get a green-light.
The irony is that nobody likes approval loops.
They are time-consuming and frustrating for leaders and teams alike. They can be so disruptive and demotivating that they lead to worse outcomes for the team, the business, and the customers.
Organizations that maintain control through approval loops become slow, unresponsive, less innovative, and less fun to work for.
Thankfully it is possible to get out of the approval game of death.
Leaders who anchor the relationship with their teams at the strategic level instead of the tactical level can maintain a high level of control over their organizations while giving their teams the clarity needed for them to make autonomous decisions within the boundaries of their opportunity space.
Moving from the tactical to the strategic level
The jobs of a leader and of a team are complementary.
The job of a leader is to choose WHAT bets to make and WHY, how much resources to invest in each bet, and then support the teams to successfully deliver on those bets.
The job of the team is to figure out HOW to win their bet, given the resources they are given.
Approval loops creep in when leaders get too involved with the HOW.
WHY questions relate to the purpose of the team, its reason for existing. Including questions like:
Who are the customers this team exists to serve?
What problems or goals do those customers have?
What would happen to this customer if this team didn’t exist?
WHAT questions relate to the impact the team is expected to deliver. Including questions like:
What part of the customer experience is this team responsible for?
How should the experience change over time? By how much? By when?
How should customers feel about the experience? How will we measure customer and business impact, quantitatively and qualitatively?
How do we know that we are winning? What does success look like?
Clear, explicit and transparent answers to the WHAT and WHY questions define the scope and boundaries of the opportunity space (the bet) that the team is responsible for and can be measured against.
The Most Important Question - How do resources invested in the teams translate into customer and business impact?
Ongoing conversations, check-ins, or business reviews help leaders keep the pulse on the relevant strategic variables to assess how the resources invested in the team translate into customer and business impact.
They can then decide to adjust their investment strategy accordingly, in other words, decide whether to invest more, less or differently in this team.
Leaders who continuously align with their teams on strategic variables (WHAT and WHY) have the tools to maintain the appropriate level of control over their organizations.
At the same time, they provide their teams with a high level of clarity on strategic priorities and an explicit description of what “winning looks like”,
Teams have the expertise and an intimate understanding of the customer context necessary to translate strategic variables into tactical decisions. They are able to decide autonomously HOW to deliver the impact.
HOW questions relate to the set of activities, projects, and outputs through with the impact is delivered. They include questions like:
How is the team structured?
What should we make vs. buy?
What should we insource vs. outsource?
What projects, activities and outputs should we prioritize?
How should we distribute our resources among those priorities?
What technology should we use?
etc.
To wrap up
Leaders who anchor the relationship with their teams at the strategic level can outgrow what looks like a zero-sum game between control and autonomy.
They can maintain a high level of control over their organization at the strategic level AND create the space for their teams to decide autonomously how to deliver at the tactical level.
Teams that enjoy higher-level autonomy and responsibility are more engaged, more creative, move faster, and ultimately create more value for customers.
Fewer approvals are not about letting go of control, it's about establishing control at the right level.
It's good for the business, the teams, the leaders, and ultimately ... the customers!