The Executive’s Guide to Agile OKRs with Evidence Based Management (EBM)

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 achieving tasks as measures for success over impacts, plans become set in stone.

Getting Objectives Right

Objectives aren’t activities. Introducing a new IT system, creating a new product strategy, and developing a new operating model isn’t the end-game in a product environment. 

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.

Objective: Implement a new Learning Management System (LMS)

This is a task-based milestone, not an outcome.

Objective: Enable people to learn from where ever they are, when ever they need it

This is an audacious, inspirational goal with a clear direction.

“When people are rewarded for achieving tasks as measures for success over impacts, plans become set in stone, limiting our ability to adapt to change.”

– Matthew Hodgson, ZXM CEO

Getting Key Results Right

For developing complex products, setting task-based milestones creates a fixed mindset about what is actually required to achieve executive goals. Key Results should measure impacts, not activities or deliverables.

Objective: Improve operational excellence

KR1: Email out agenda 1 day before
KR2: Discussions are timeboxed
KR3: Finish the session on time

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. 

Objective: Improve operational excellence

KR1: Lead time to deliver agendas decrease to 1 day
KR2: 4/5 quality rating from attendees (up from 2/5)

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:

• Use a Product Goal to serve as the purpose for your product teams.
• Set OKR Objectives to give direction to Product Managers and their teams to achieve the Product Goal.
• Create initiatives that are the hypotheses that will deliver against the Objectives.
• Establish Key Result Areas to 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 for investments in existing products.
• Unrealised value for investments in new products.
• Ability to innovate to make investments in capability maturity to solve product problems more efficiently.
• Time to market to make investments in eliminating inefficiencies that improve time to value

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 hypothesess 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 hypothesess 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.

Conclusions

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 rigidly following a pre-determined plan.

Download

References

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.