The first thing you notice when you walk into the Chicago offices of Total Attorneys, which provides software and services to small law firms, is the number of people on their feet. Every morning, the company's 180 employees gather around the office in groups of five to 10. Close your eyes, take in the often raucous banter and laughter, and it's easy to mistake Total Attorneys's headquarters for a college cafeteria. But these meetings, which last for about 15 minutes, are more than mere employee chitchat. They are intended to create what CEO Ed Scanlan calls controlled chaos.

The inspiration for the gatherings comes from a process for designing software called agile development, which aims to promote flexibility, speed, and teamwork. But rather than limit participation to software engineers, Scanlan has deployed agile development concepts companywide, in a drive to make the seven-year-old business act more like the start-up it once was.

Scanlan became interested in agile development about a year ago. He had grown increasingly frustrated with his company's software-development process. When he founded Total Attorneys in 2002 to make customer-relationship-management software for law firms, he and a handful of employees would write code on the fly. Projects were completed quickly, and employees often worked late nights and weekends to launch new features and fix bugs. But as revenue grew to $24 million, the company abandoned the fly-by-the-seat-of-your-pants approach in favor of a more formal system. Sometimes referred to as the waterfall model, this system divides a software project into sequential stages, in which the work is handed off from designers to coders to quality-assurance testers.

But Scanlan found that the waterfall model made Total Attorneys move a lot more slowly -- so slowly, in fact, that in some cases clients' needs had changed by the time a piece of software was complete. "We had more than a hundred employees, but we were getting a lot less done than when it was just me and three other people," Scanlan says. "Morale was suffering as well." Employees felt disconnected not only from the projects, Scanlan says, but also from their colleagues. Designers rarely interacted with developers, let alone anyone from the accounting department or the management team.

Scanlan's search for a solution led him to Getting Real, a book about agile development published by the software company 37signals. "I learned about cutting the 'big picture' into small pieces," Scanlan says. "You have to be able to change course as often as your customers' needs or market conditions dictate."

One way to accomplish this is by breaking down large departmental silos and creating small, cross-functional teams instead. A typical team might be made up of one project leader, one designer, one coder, and one quality-assurance tester. Large projects get carved into lots of mini projects, often with deadlines as short as a couple of weeks. Each team focuses on one mini project at a time and is given the freedom to make decisions. The teams hold daily meetings -- or "scrums" -- to discuss each member's progress and daily objectives.

Scanlan adopted the strategy and found that the software team's productivity improved. What's more, employees seemed happier. That got Scanlan thinking: Could he use agile development to change how the rest of his company operated as well? He decided to find out.

He grouped all employees into about 35 small teams. The 85 call center employees, for example, were divided into about 15 groups, which review calls and analyze performance metrics every morning. "We teach all of our customer reps to be open to change and to be ready for one day to be different than the rest," says Scott Hogan, the company's call center trainer. "We give our reps talking points instead of scripts so that they can adjust on the fly to help the customer. Whenever someone finds an effective way to connect, we share that with everyone else." Although call center reps aren't often on teams with software developers, Scanlan moved the departments to the same floor to bolster communication. "Now, rather than waiting to see how effective the latest changes to the call center software are, developers need only stand up to see how the reps are reacting to it," says Scanlan.

Another key to the agile approach is shorter deadlines. In software, that means building smaller pieces over shorter periods and evaluating them rapidly rather than waiting months to see if they hit the mark. In Total Attorneys's sales department, it means setting three-week sales goals instead of annual targets. That way, the sales team can more easily adjust its strategy and forecasts if the company introduces a new service or experiences fluctuations in demand. At the beginning of each three-week period, the company's sales managers, each of whom is responsible for a five-person team, set goals for their squads, such as landing a certain number of clients in a new sales territory. At the end of the period, the teams evaluate their results and devise new goals for the next three weeks. Because commissions are based on meeting targets set just three weeks prior, salespeople can strive for realistic objectives, which has boosted morale. "Sales jobs can get stale fairly quickly," says Brian Pistorius, the company's 2008 salesperson of the year. "But we are constantly changing and doing things differently to hit our goals. It makes a real difference to get a sense of achievement and recognition every three weeks rather than waiting until the end of the year."

Another strategy Scanlan has borrowed from agile development involves inviting a few customers to test and provide feedback on a product as it is being developed. Last fall, for example, Scanlan decided to launch a new service, legal process outsourcing. The service is aimed at clients like bankruptcy lawyers, who often must complete dozens of forms for each of their clients. Launching the service required hiring a team of paralegals and transcribers as well as building new software. "In the past, we might have developed a fancy system and just announced it to our customers," Scanlan says. "This time, we used agile development to put together a pilot program in less than three months."

For the pilot program, Total Attorneys created teams made up of operations employees and call center reps. The teams collected feedback from five firms that agreed to participate in the pilot. "We learned that not all our customers work the same way," says Scanlan. "Today, we have about 50 customers who love our product because we built it, step by step, using their input." One of those customers, Rustin Polk, a bankruptcy attorney in Dallas, can't wait to see what Total Attorneys comes up with next. "A lot of companies try to forecast or guess what their customers want," he says. "Ed Scanlan just listens to what his customers are telling him."

One downside to changing things on the fly, says Scanlan, is that it has become increasingly difficult to make accurate financial projections. That's why the accountants now like to sit in on daily scrums to keep better tabs on where the company is headed. "We are moving so fast in so many directions," Scanlan says. "But if we focus on communication and transparency, we can control the chaos, even when it seems like everyone is running in different directions."

For more on agile software development, read Practices of an Agile Developer: Working in the Real World, by Venkat Subramaniam and Andy Hunt. To read a free digital copy of the book Getting Real, by 37signals, go to gettingreal.37signals.com.