Banks and insurers are seeking to become more agile, more digital and human-centred. Traditional organisation models are insufficient. There is no silver bullet on organisation design. Financial services firms should consider multiple archetypes against their unique needs and avoid adopting any one model blindly.

In many of my previous blogs, our recent research and our ever-popular Talking Agility podcast, we’ve discussed how banks and insurers continue to develop their enterprise agility. The stakes are high, including survival in a disrupted world and differentiated financial and strategic performance. To do this means more than just speeding up product development or embracing agile in IT or change projects, but rewiring the whole business to be both fast and stable. Like riding a bike, you need both to be truly agile.

One area that typically needs work is the organisation. The organisation sets the frame for many activities, behaviours and decisions within the business and so is important in moving towards agility. Yet organisation changes alone are not sufficient to become more agile, more digital and more human-centred. To achieve these things requires a more fundamental shift in business model, propositions, customer experience, operations, technology, workforce, leadership, funding, decision making, vision and, most of all, culture and ways of working. Put simply, organisation design is not a silver bullet for agility.

Nevertheless, organisation is an important factor that can support agility or get in the way. Certainly, traditional hierarchical structures limit the extent to which an organisation can become agile and these structures often impede unlocking the full human potential of colleagues. In response, some players such as ING have adopted the ‘Spotify model’, which has a number of key characteristics and advantages.

What is the Spotify model exactly? The Swedish music company Spotify uses an organisation design archetype that clusters employees into ‘tribes,’ ‘chapters,’ and ‘squads.’ We call this model the ‘agile squad’ archetype. Using this model, Spotify was able to meet both its internal organisational needs and respond to its external market environment, which is why it became so popular. Other organisations, most notably ING, adopted the concept with similar nomenclature—‘circles,’ ‘cabals,’ ‘pods’ and ‘teams’—referring to autonomously organised working units that collaborate with other teams in an agile environment. This model is particularly effective in moving decisions into self-managing and multi-disciplinary teams where the work gets done, rather than further up a management hierarchy. However, the risks increase when this model gets implemented with insufficient discipline and/or as a one-off standalone change.

While this model is not the right choice for all organisations, there are a number of alternative archetypes emerging. Simplifying the world somewhat, Spotify’s ‘agile squad’ is one of six basic organisation design (OD) archetypes we see most often. Let’s take a quick look at the five other models:

Hierarchy is the traditional model that provides stability, efficiency and consistency. It can be aligned in multiple ways based on product, geography, customer segments, brand, channels, etc.

Project-based OD relies on cross-functional teams that are aligned to projects. This archetype works best when there are clear timelines and project outcomes.

Holacracy is driven by distributed authority and decision-making, and consists of self-organising teams, called ‘circles,’ based on strategic priorities.

Microenterprise is an OD model that is comprised of multiple autonomous ‘mini businesses,’ each dedicated to an outcome and running its own P&L.

A dual model combines traditional hierarchy with the limited authority of a creative network structure. The network structure can be an agile squad, project-based, or any other additional archetype. This is often used in more complex global organisations that operate within a legal entity and market licence structure, or in banks and insurers that want to embrace new structures without creating regulatory or internal disruption.

These archetypes are not exhaustive and the right model tends to be unique to each business. It also needs to adapt over time and to different market conditions. As I stated above, it is important to avoid the ‘Spotify Myopia’ of blindly adopting a single model. In particular, when selecting the best options, FS leaders need to consider what creates value for both their customers and their business.

Truly agile banks and insurers are intelligent organisations—they adapt and self-tune to disruption, an evolving strategy and changing market conditions. Our research has identified five common traits of truly intelligent organisations: living, enhanced, modular, liquid and human. In my next post, I will delve into these five essential characteristics.

To find out more about intelligent organisations, please contact me here, or @andyyoungACN.

I’d like to acknowledge the work of Kent McMillan and his team in developing our cross-industry research into intelligent organisations, and Neetu Mishra for her work in bringing this into a financial services context.

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