Agile HR: Adapting People Processes to Iterative Work

Agile HR means adapting people processes such as goal setting and appraisal, as well as recruiting and development, to the rhythm of iterative teams. The lever sits where HR processes contradict how teams work: a team plans in cycles of two to four weeks, yet the goals run for twelve months, the job description lists yesterday's tasks, and the appraisal measures individual performance in work that is produced by a team.

This article describes which processes change first, how to introduce the change in stages and how to tell whether the change is working. It touches on employment law and co-determination only in passing. This article provides an overview and does not constitute legal advice.

Why is agile work in teams not enough without agile people processes?

Agile work in teams is not enough without adapted people processes, because people orient themselves by what is assessed and rewarded. Steven Kerr described this pattern in 1975 in his paper “On the Folly of Rewarding A, While Hoping for B”: organisations often reward one behaviour and expect another. An example from iterative work: the team is meant to reach a product goal together, but the bonus depends on individual targets. Individuals then finish their own tasks and do not help colleagues at bottlenecks.

The friction shows at four points. Goal setting is fixed annually while priorities in the backlog shift every few weeks. The job description fixes a role that in the team long ago covered several tasks. The appraisal happens once a year and rests on the manager's memory of the last few months. And training follows a catalogue instead of the team's competence needs. The article on the effect of agile rituals shows the same gap from the team's side: rituals without suitable conditions produce effort without results.

The role of HR changes as a result. In “Human Resource Champions” (1997), Dave Ulrich described the HR business partner model, in which HR accompanies business units strategically. Agile HR builds on this and shifts the emphasis: HR designs the framework and the tools with which teams steer their own collaboration, rather than deciding every individual case centrally.

Which people processes change first in an agile organisation?

Goal setting and performance conversations change first, because they create the biggest contradiction with how teams work. Recruiting follows, then roles with their career paths, and finally pay and development. The order results from the ratio of benefit to effort and from dependencies: pay can only be adapted sensibly once goals and roles are clear.

That more frequent feedback works is not a given. In a 1996 meta-analysis, Avraham Kluger and Angelo DeNisi analysed 607 effect sizes on feedback interventions and found that performance got worse in more than a third of the cases. What matters is what the feedback addresses: it works when it relates to the task and the next steps, and it harms when it assesses the person. The rhythm alone improves nothing. A monthly conversation without a clear task focus merely produces uncertainty twelve times a year.

How do companies handle goals and bonuses in agile teams?

It works to tie goals to the team and to separate pay from short-term goal attainment. In the Beta Codex, Niels Pfläging contrasts fixed performance contracts agreed in advance with a model in which goals and pay are set relative to results and assessed only in retrospect. The rationale follows research on motivation: in “Drive” (2009), Daniel Pink summarised findings that financial incentives work for simple routine tasks, whereas for tasks with a creative or analytical share, autonomy and mastery, together with purpose, are the stronger motives.

For a mid-sized company a three-step approach is advisable, one that keeps existing bonus systems for as long as they are needed. In step one, team goals are introduced and take precedence over individual goals. In step two, the share of individual bonuses is reduced and the team share raised. In step three, the company checks whether variable pay should remain tied to goal attainment or to company results. Pay models touch co-determination, so the works council belongs at the table from the start. One method for team-level goals is OKR, as John Doerr describes it in “Measure What Matters” (2018) and as Andy Grove developed it at Intel. The method works when goals are public and pay is kept separate from them.

What does a maturity model for agile HR look like?

A maturity model for agile HR distinguishes four stages, from classic personnel work to self-steering teams. The model helps to locate the starting point and to name the next stage without rebuilding all processes at once.

Companies that have only just begun with iterative work usually sit at stage one or two. The step to stage three succeeds when managers support the change, because in the adapted form managers give up some decision rights. How an agile restart can be organised is shown in the article on agile transformation. The role of external guides is covered in the article on agile coaches.

Which companies have dropped the annual performance review?

Adobe is the best-known case: in 2012 the company abolished the annual review with its ranking and replaced it with a process called “Check-in”, in which managers and employees talk regularly about expectations and feedback and about development. In 2016, Peter Cappelli and Anna Tavis described in the Harvard Business Review how a number of large companies had changed their appraisal systems in this direction. For a mid-sized company the useful finding is that the benefit comes from what replaces the appraisal: more frequent conversations, a link to tasks and a clear responsibility for development.

Checklist: are your people processes ready for iterative work?

A company's people processes are ready for iterative work when you can answer yes to the following questions.

1. Are there goals at team level that are reviewed within the cycle?
2. Are individual goals aligned with team goals so that they do not contradict each other?
3. Does feedback happen at shorter intervals than once a year, and does it relate to tasks and approach?
4. Do role profiles describe responsibilities and competences instead of a task list?
5. Do team members take part in selecting new colleagues?
6. Can a team align training with its own competence needs?
7. Is the works council involved in the design wherever appraisal and pay are touched?
8. Is the effect of the changes checked with a metric, such as attrition in the pilot team or time to fill open positions?

Agile HR with Niehues Consulting

Niehues Consulting is a consultancy for AI management and organisation design from a delivery perspective, based in Düsseldorf. Founder Marin Niehues builds organisations that deliver, in projects ranging from VC-funded scale-ups to DAX 40 corporations and in more than 20 countries on six continents. In the service area of delivery management and organisation design, roles and decision paths belong to the work, along with the interfaces between teams and business units, and with them the question of what demands the way of working places on people processes.

The approach follows the Niehues Delivery Model. For agile HR, three of its review questions matter: which roles and decision paths does operations need, and which interfaces? Are users enabled and processes adapted? Which metric shows after 90 days that the solution is landing? The scope and terms of an engagement are discussed in the free initial consultation, which you can arrange through the contact form.