Work Teams With More Freedom Perform Better

Software teams improved productivity and customer satisfaction when the company took a hands-off approach.

Based on the research of Indranil Bardhan

A growing number of companies are making room for an agile approach to software development, where project team autonomy and flexible processes are preferable over standardized central processes.

In a real-world policy experiment at a major software company, Texas McCombs professor of information, risk and operations management Indranil Bardhan, with Narayan Ramasubbu of the University of Pittsburgh, recently tested the performance of both agile and traditional project teams.

They found that an organizational policy that gives teams the freedom to build the structure and processes that work best for their projects — rather than adhere to centralized standard structures and processes — can result in greater performance. In other words, when project teams have the latitude to set things up the way they want to, they’re more successful.

“We show there’s no one right way of achieving superior project performance, no one-size-fits-all,” Bardhan says.

“There may be situations where, by giving greater autonomy to your teams, you allow them to exercise greater judgment about what would actually work based on their project requirements.” — Indranil Bardhan

Analyzing Agility in Practice

Previous studies have focused on isolated aspects of agile teams, identifying and understanding their processes and operations. But there has been little rigorous data-driven analysis of how converting to this approach may affect project performance in practice.

Drawing on their previous research in organization design, the researchers built their study on a framework of equifinality, which recognizes that different project configurations can achieve the same final outcome. Using this framework, they relaxed long-held assumptions that project functions should mirror specific operational structures.

Bardhan and Ramasubbu conducted a longitudinal study of data provided by a large Indian software development company with clients in Europe and the U.S. The company had 125,000 software developers around the world working on projects that adhered to an ideal operations profile closely monitored through a central unit.

Senior company directors wanted to learn whether greater autonomy for these teams would hurt or help performance. For the study, they put skin in the game, implementing a policy change granting greater autonomy to certain teams and agreeing to provide data on key performance measures — for both autonomous and nonautonomous teams — before and after the policy change.

“Managers of autonomous teams could each choose what type of structure worked well for them and their project team, versus having something dictated to them by a central point of contact.” — Indranil Bardhan

Over 50 months from 2013 to 2018, researchers tracked performance measures on 461 projects, focusing on two main variables: productivity and customer satisfaction.

Managers on 146 projects were granted autonomy to design their projects the way they wanted using three main controls: location and time differences among team members, level of process diversity (such as lean or structured), and level of managerial control.

Software developers measure productivity in function points — a useful proxy for functionality of the software developed. The more function points a product has, the more value it adds to the company. The researchers found teams with greater autonomy created products with more function points, thus creating more value in key ways than traditional teams: Value added increased by 39% for these teams after they switched to an autonomous structure compared with projects that did not.

Customer satisfaction also increased, according to aggregated self-reported survey data. The agile teams’ ratings increased 2.95% as a result of the policy change, “which was pretty substantial,” Bardhan notes.

The research suggests organizations that take a hands-off approach to the structure and governance of project teams create an environment of creative flexibility. This built-in flexibility makes teams more responsive to needed changes in the software they’re building, boosting performance and customer satisfaction.

The researchers want to scale up their research framework with more in-depth field study at multiple companies and industries. Collaborations and access to sensitive internal data, as they had in this study, will be key.

“We want to see how these results can be generalized across other software development environments,” Bardhan says.

“Reconfiguring for Agility: Examining the Performance Implications for Project Team Autonomy Through an Organizational Policy Experiment” is published in MIS Quarterly.

Story by Sally Parker