What are OKRs?
Objectives and key results (OKRs) are a goal setting framework used by many executives to establish definable goals and track progress toward them.
Why OKRs fail
Unfortunately, most OKRs fail because the goals themselves are:
- Hard to measure.
- Hard to quantify in any way other than tasks or deliverable based milestones.
- Linked to vanity measures.
- Hardwired into incentives. And when tasks are measured against goals, the tasks become the focus instead of the impact of the goal.
When people are rewarded for achiving tasks as measures for success over impacts, plans become set in stone.
Getting Objectives Right
Objectives aren’t activities. Delivering a new IT system, designing a new strategy, developing a new operating model isn’t the end-game.
Objectives represent meaningful change, growth and improvement. Effective objectives are:
- Meaningful – It articulates a clear direction.
- Audacious – It will stretch people’s abilities and reflects real change.
- Inspiring – It’s easy to remember and empowers your teams.
Getting Key Results Right
For developing complex products, setting task-based milestones createsa fixed mindset about what is actually required to achieve executive goals. Key Results should measure impacts, not activities or deliverables.
These are poor Key Results as they reflect task-based milestones. While you can easily claim these have been achieved, there is no indication that operational excellence has been impacted.
These are effective Key Results. Without specifying a plan or tasks, they outline a measurable impact
Tasks and deliverables as Key Result areas create a fixed mindset about what is required to achieve an objective. To improve ability to pivot to disruptive change, and encourage adaptive planning, switch to considering:
- What impact does this deliverable create?
- When we reach this milestone, what metrics do we expect to change and when?
Watch out for Waterfalling your objectives
W. Edwards Demming, the creator of the P-D-C-A loop (on which Scrum is based), argued that setting certain types goals can lead to staff cutting corners and reducing quality in order to meet those targets. Others also highlight that the cascade of management objectives to the team and individual level causes “too much of a Waterfall approach”. In itself, this can create the perspective that once goals are set by executive, and plans are created and approved, that we then track progress of the execution of the plan. The focus on the plan is at the cost of adapting to necessary changes in stakeholder, user and customer needs.
This is where OKRs fail.
OKRs, Initiatives and Experiments
In complex environments, OKR initiatives are “experiments” that attempt to realise business goals. In agile terms, each Sprint and Sprint Goal is the hypothesis:
- Teams have a Product Goal. This serves as the reason or purpose of the team.
- OKR Objectives help teams achieve their Product Goal.
- Initiatives are the hypothese that will deliver against the Objectives.
- Key Result Areas measure the impact of the initiatives against the Objective.
Key Result Areas with EBM Measures
There are four agile Key Result Areas or value-based measures in Evidence Based Management (EBM):
- Current value
- New valule
- Ability to pivot
- Time to market
All four areas reflect gaps in customer satisfaction – known and currently unknown ways we can deliver more value either through:
- An external focus to deliver more in current products or through creating new products.
- An internal focus to bring value to market faster, with higher quality, through strengthening or growing capabilities, including agile capability maturity.
Inspecting and Adapting Key Results and Hypotheses
Sprint Review is the perfect time for Product Managers to reflect on progress toward their objectives. During Sprint Review, inspect the measures that reflect the impact each Sprint and Sprint Goal was intended to make:
- Each Initiative was designed to make an impact, a step toward the Objective. Have those hypotheses been achieved?
- Have the Increments made any impact yet? Which measures have changed as a result?
- Does the result reflect a positive and meaningful step toward the?
If there’s been no change in metrics:
- Are your Key Result Areas the right ones? Do you need to change any of them?
- Are your Initiatives and hypotheses the right ones? Do you need to change your initiatives?
- Are you measuring a lagging indicator? Should you add a leading indicator?
If metrics have moved in the right direction:
- Have you made enough progress for now?
- Do you need to continue with additional Initiatives to make further progress toward the Objective?
- Do you need to consider alternate Initiatives?
- Have the Key Results Areas actually changed due to other factors?
Adapting for future Sprints to achieve the Objective
As more is learned about the effectiveness of the Initiatives, any new Initiatives or adjustments to current ones are added to the Product Backlog. This makes it clear:
- Where the focus is and associated priorities next Sprint.
- Where the most value can be added today in order to achieve the Objective.
Most OKRs fail because they establish an explicit set of activities that, upfront, are assumed to contribute toward and make an impact on an Objective. Setting Key Result areas as a set of milestone activities and deliverables turns OKRs into a Waterfall exercise in a complex world that instead needs an adaptive approach to fulfilling executive strategies.
Agile OKRs can benefit from EBM and Scrum’s structure by instead focussing on value-based metrics that show real, tangible, objective, and transparent progress.
Download the OKR + EBM Poster
ZXM’s poster is a visual reminder of the cycle of setting OKRs with value-based metrics based on Evidence Based Management. It couples Scrum’s inspect/adapt cadence to provide opportunities to adapt toward objectives over (blindly) following a plan.
Formgren, J (2018). Power of making a difference at work. 15 October 2018.
Scrum.org (2020) The Evidence-Based Management Guide. Measuring Value to Enable Improvement and Agility.