A lack of skin in the game for employees

Last week, I discussed three cultural factors that can make an agile implementation challenging.  I also spent some time catching up with some of my contemporaries, discussing the application of Agile at different firms.  It was a disappointing discussion.  This week, I want to talk about agile and the lack of follow-through in many organizations.

I started thinking about the inability of the organization to improve its agile maturity when fellow agilest David Koontz posted an article from the Harvard Business Review about the failure of digital transformation at many firms. It opened my eyes.  I then noticed a new book published by the author Nassim Nicholas Taleb called “Skin in the Game,” about the uneven relationships we create in the labor market.  The most telling passage was the following.

“True, a contractor has a downside, a financial penalty that can be built into the contract, in addition to reputational costs. But consider that an employee will always have more risk. And conditional on someone being an employee, such a person will be risk-averse. By being employees, they signal a certain type of domestication.”

In short, being an employee of a large company makes people afraid of risk and rocking the boat. The company, through its leadership and culture, incentivizes particular behavior.  The employee trades their skills and dependability in exchange for a paycheck.  It creates situations where conscientious people tolerate ignorance and inefficiency because they say, “…that is how we have always done it.” Thanks to this submissiveness, large firms stagnate and die.

It also explains to me why agile coaches are contractors.  In the words of Ken Schwaber, agile holds a mirror up to an organization.  Many organizations are not equipped professionally or psychologically to look at that reflection because they would see the incentives they have created are perverse. The services they offer are not meeting customer needs.  It is like being in the Jean-Paul Sartre novel “Nausea.”  The world we know crumbles away, and we see the disorienting reality of how things are working. Confronted with this, we have three choices:

1. Wallow in despair and impotence
2. Ignore the truth and pretend nothing has happened
3. Take action and try to make change

The modern corporation incentivizes employees to make the first two choices.  Those who choose the third option either quit, or the company fires them.

So, as a scrum master or agile coach, we are stuck making a change at the margins and moving on when we cannot do anymore.  The global economy continues to spin, and nothing seems to change. It is easy to get discouraged, but the size and diversity of the agile reformation continue to grow.  According to Scrum.org, over 100,000 people are trained at Scrum.  Figures from the Agile Alliance and Scrum Alliance are harder to come by, but eighteen years ago, the manifesto began with fifteen people in a ski lodge.   The movement's growth has been increasing, and today’s consultants and practitioners will become tomorrow’s managers, directors, and executives.  It is a matter of time before the Agile reformation will drive reform inside the business establishment.

Perverse incentives prevent businesses from being more innovative and agile. The good news is that the agile reformation is growing, and with this growth will come increasing acceptance. It will not be easy, but it will be worth it.

Until next time.