# How To Evade Coordination Tax By Organizing Around Outcomes: transcript Automatic transcript of the published podcast audio. Recognition errors are possible. Speakers are unlabeled; do not attribute a passage to Yuval or a guest without checking the audio. Episode: https://yuvalyeret.com/scaling-ai-podcast/how-to-evade-coordination-tax-by-organizing-around-outcomes/ Source RSS GUID: substack:post:164652105 Source: published Riverside RSS audio enclosure Transcription: faster-whisper base.en, English ## Transcript [00:00:00] How can we evade coordination tax by organizing the wrong outcomes? [00:00:04] Welcome to a Skilling with Agility on Evolve here. Picture this. [00:00:10] You have a break for a strategic initiative that's tied to one of your [00:00:13] company level goals that impacts 10 teams across two product groups, [00:00:18] as well as your go-to market organization. These are all busy overloaded teams [00:00:24] that are also juggling five other initiatives [00:00:28] and the business as usual will lead. You pull this work into the backlogs and [00:00:33] roadmaps for all of these teams, structural slices of people across these teams [00:00:39] will work on this initiative, which means it will take a while. [00:00:44] Probably many months. Leaders involved with all these teams will need to be [00:00:49] involved as well in order to coordinate. How lucky are we that we have [00:00:53] nickelisms in place to coordinate all of this? [00:00:57] Whether it's a complex network of cascaded OKRs, planning increment or [00:01:03] quarterly planning, tools like JuraAlign, product owners with team backlogs, [00:01:09] solution trains, choose your poison. Does this sound familiar? [00:01:16] This is what I call the coordination tax. The hidden cost of trying to innovate [00:01:21] across organizational boundaries that weren't designed for the outcomes that [00:01:25] you're currently pursuing. They were designed around a functional [00:01:30] structure than your product architecture. [00:01:35] When we worked on the geotextfoliating razor, we tried something different. [00:01:40] Instead of accepting the coordination nightmare, we asked a simple question. [00:01:45] If we had free rein, what's the minimal number of people [00:01:49] would need if they could really focus? [00:01:53] The answer was about 55 people from across the R&D commercial, [00:01:58] marketing, finance, platform manufacturing teams. [00:02:03] Instead of fitting the work into the teams all these people belong to, [00:02:08] we created what you might call a virtual value center or a scale scrum. [00:02:15] A certain number of virtual teams that existed solely to figure out a [00:02:19] winning proposition and get it to market. Same amount of brain power spread [00:02:25] over fewer people, concentrated to a shorter time, [00:02:30] with less managerial overhead, both because people were already working with [00:02:35] the people they needed to coordinate with, as well as the shorter times that. [00:02:42] This requires some top prioritization trade-offs. [00:02:46] It highlights some islands of knowledge where you have a certain person [00:02:51] that is needed on this program but is also needed on five other initiatives [00:02:57] and there's nobody else that can do what they're doing. [00:03:01] So you need to make a choice. Do you delay other work in order to prioritize this thing? [00:03:09] Do you ask this person to work on multiple things? [00:03:12] Those are the kind of choices that this forces you to make. [00:03:17] But it was worth it. The exfoliating razor became one of Gillette's most successful products [00:03:24] in many years. They developed and brought it to market faster than anything they done recently. [00:03:33] And it's not about the process. It's not about agile ceremonies that we introduced or new tools. [00:03:38] Those were useful but the biggest impact, the order of magnitude impact was the coordination [00:03:45] and collaboration architecture. Designing the team topology, the team structure or architecture [00:03:53] so that people can concentrate on the work. They spend as little time as possible [00:04:01] coordinating with other people. It's much easier to coordinate with people that are [00:04:07] on the same team with you, than people that are on the neighboring team, not to say [00:04:12] another division where you need to go through different leadership layers to get things done. [00:04:18] Most organizations strive to optimize resources. Keeping everybody engaged across multiple initiatives [00:04:26] just to try and get everything done. They think about it like a Tetris picture, [00:04:34] where maybe there's a hole and we can fit one more piece into the hole [00:04:40] so that we can maximize the amount of work that we're doing. But innovation and knowledge [00:04:47] work requires optimization for flow. Getting the most valuable outcomes through the system [00:04:54] as quickly as possible. And what that means is optimizing for flow of the work and defriding [00:05:01] the organization so that the people are closer to the people that they need to work with. Now, [00:05:08] let's be honest about the constraints. Carving out these focus teams isn't trivial. [00:05:13] You'll hit knowledge islands where somebody needs to split their time. You'll face resistance [00:05:19] from leaders who don't want to lose their people to a cross-functional network. And you'll discover [00:05:24] dependencies you didn't even know existed. Some of the time there are dependencies that you know [00:05:31] exist, but this would just reinforce how big of a dependency it is. And maybe re-indigorate you to try [00:05:40] and decouple these dependencies, build some stronger knowledge spread, the knowledge across [00:05:49] more people or change the architecture of your product to make it possible for more people to [00:05:54] do the work. And like we had some advantages, executive colleague named these trade-offs possible. [00:06:02] Even then, certain specialists couldn't focus 100% and had to play floater all across initiatives, [00:06:09] which laid it hard for them and made it hard for the team members that depended on them. And [00:06:15] we needed to be flexible with the processes and the events that we used to make sure that we don't [00:06:22] actually make life even harder for these people by forcing them to participate in a lot of coordination [00:06:30] efforts that were very valuable to the team. One of the things that helped us was that we did it [00:06:36] just for one strategic priority at that time, not across the board. This made it an easier [00:06:43] intervention to swallow at the beginning. And that's an intervention pattern that I've seen work [00:06:48] identify a strategic priority that requires intense cross-functional collaboration, [00:06:55] face of significant feasibility or desirability risks, making it a more complex initiative that [00:07:02] benefits from being adaptive, more tightly collaborative, and experiment with this approach for that [00:07:10] initiative, where there's clear concern that the current ways won't deliver the desired outcomes [00:07:16] or would be too painful to manage because of the spread. If you're not even ready for that, [00:07:23] here are some easier interventions that I've seen work that can help you identify and build a [00:07:28] conviction for more meaningful interventions. One is to knock your current people to the initiatives [00:07:37] that you're running and count how many people and teams are working on multiple efforts in [00:07:43] all 10. You can even send that as a KPI, maybe call that your focus factor. [00:07:50] And work to improve it over time. Please track it over time to see that it's stable, [00:07:55] is it improving through some interventions that you're trying? Would most of the time improve your [00:08:02] focus factor is to use a portfolio level con land that looks at all of these initiatives that [00:08:08] you're working on? And over time, start conversations about managing the amount of [00:08:15] progress, especially those that cut across the organization. [00:08:20] What we know about work in progress is that when we start to limit the amount of work in progress, [00:08:29] the first thing that it does is it what we know about limiting the amount of work in progress is [00:08:37] if you look at Little's Law, it tells you that on average the lead time, the cycle time [00:08:47] for the work in a system where there's fewer things in progress, the lead time would be faster. [00:08:55] What that would do is it would compress the amount of time that people need to be involved in these [00:09:01] initiatives leading to the fact that on average people will be involved in fewer initiatives at [00:09:11] a time, which would have a secondary effect of they are more focused on the initiative that they [00:09:18] are working on. There's less coordination tax and the cycle time is accelerated even further. [00:09:25] Remember, the goal here isn't perfect focus. We're not talking about one piece below the [00:09:33] entire organization focused on one strategic initiative or everybody in the organization only [00:09:40] working on one initiative at a time. That's a nice North Star, but probably unrealistic. [00:09:48] A more realistic goal is to aim at conscious focus, to make conscious explicit decisions about the [00:09:56] trade-offs between focusing on fewer things and working on a larger set of initiatives. [00:10:06] When you start to have more visibility to your level of focus, you can start to make better decisions [00:10:13] about when and where to accept those coordination costs and where to ease it in. [00:10:21] This isn't about implementing a new methodology, new processes, new roles. It's about organizing [00:10:26] around outcomes rather than work charts. The processes I'm talking about, the practices [00:10:34] I'm talking about, whether it's a portfolio level Kanban or using strum or some other pattern [00:10:45] across those teams can support this. Whether you call it value streams and power teams or virtual [00:10:52] pods, the processes that you don't really matter. What matters is creating the conditions [00:10:58] where people can deliver on what you've asked them to deliver. The experience that Gileta taught [00:11:05] to me that sometimes the biggest cause strain to innovation isn't a technology or the market, [00:11:11] it's how we organize ourselves to do the work. When you align your structure, even the virtual [00:11:17] structure around the work with what's strategic for you, remarkable things become possible. [00:11:23] Thank you for listening to this episode of Scaling With Agility, Anuvall.