Lean organisations tend to be very flat with few layers of management. They rely on self-organisation and leadership. In this context, then, what is the role of the middle layers in the organisation? This is one of the points Ken Schwaber addresses in "The Enterprise and Scrum". The answer is amazingly simple.
The middle layers are Scrum teams that prioritize the work for the subteams and integrate the results.
In other words they prepare the product backlog for the subordinate teams and provide leadership, coordination, infrastructure and support for the teams below. This means that the integration teams are complete, cross-functional Scrum teams with full delivery capability. Compared to many traditional organisations this means that release engineering activities, QA, etc. move up in the organisational hierarchy, making the downstream steps in the value stream the integrators and bosses of the earlier steps. We are, in effect, a creating kanban system for the whole development process. Through this we create flow and remedy the common failure of deferring integration work to the end only to learn too late that the parts do not fit well together.
This organisation of Scrum teams builds on lean principles such as frequent integration and "jidoka" - stop-the-line bug fixing. Every team is responsible for integrating its own work and that of its subordinates. If a subteam delivers something that is not good enough, the work is pushed back down and not accepted. This way, we make sure the details are always correct and shippable. As a result, the whole product remains integrated and shippable.
The ScrumMaster on the integration team is facilitates the removal of impediments that cannot be removed by the front-line teams themselves. This creates a system for multi-layered kaizen where the change is always initiated by the people who experience the problems and escalated to the proper level of authority. Through this the integration teams switch from command-and-control to serving the teams below.
One of the benefits from this structure is that the Product Owner on the integration team defines the product backlog for the subteams based on the coarser-grained backlog and priorities from the next level up. In this way the integration team and its subteams is treated as a virtual, cross-functional team. Since we are not allowed to produce loose ends, it forces us to actually start only activities that can be completed in a sprint with the necessary coordination between subteams. We have to begin with the end in mind.
For example, if a backlog item for adding a new report for to a reporting application is selected, we have to make sure to request the whole feature - both the new GUI (a pretty diagram, maybe), and the necessary updates to the back-end server application to provide the data. If there are separate teams working on this the feature is split across different team backlogs. In many cases this requires coordination between multiple teams when planning. The key point is to never commit anything to the integration sprint backlog unless all aspects of it are committed to the sprint backlogs of the subordinate teams.
If this is not possible we have to break it down into smaller pieces or leave it in the product backlog. We never accept work that cannot be completed and demonstrated at the end of the iteration.
When we implement Scrum in organisations this is something that it usually perceived as quite frustrating in the beginning. Many people have a strong habit of doing for partial work. However by only committing completable work we reduce one the great time-consuming activities in project management, namely managing dependencies between projects, trying to get features done in isolated, non-integrated layers and the coordination and "expediting" work to lobby different teams to change their plans to get it all correct and integrated on time.
The end result is a system where business goals and priorities flow from the top down and demonstrable business results flow from the bottom up. Every iterations ends with completely integrated realisations of the top level backlog items. It means goodbye to, "we're done with the new report, but we have to wait three months for the database team to expose the data for us", and hello to, "here's your new report, ready for use". That's a pretty good return on eliminating bureaucracy.