I recently explained the idea of Agile Leadership: the cycle of Focus – Enable – Align – Empower. It’s time to introduce some tools for this. Our tool of choice is OKRs. OKRs – short for Objectives and Key Results – is a goal-setting methodology for organizations that fits agile practices perfectly and provides effective focus.
We believe this will help us clarify a few aspects about focus and alignment that have been plaguing us for some time. In particular, it allows me to operationalize the squishy topic of mindset. This has been in my stomach since David Snowden dubbed the mindset discussion “the lastest action-avoiding bullsh*t”.
OKRs in five minutes
OKRs are very simple: an organization sets goals (e.g. for one year) and measurable Key Results. Objectives are qualitative and ambitious. They ensure that organizations and individuals have the right focus. Key Results are concretizations in shorter intervals, e.g. per quarter. These Key Results are measurable, that is quantifiable, we can determine by them whether we have achieved the goal. Objectives and Key Results belong to the problem space, they are not activities or tasks that belong to the solution space.
What’s new about it: goals are developed for individuals, teams, and the entire company and then negotiated (as opposed to: passed down/cascaded from the top). And they are transparent to the whole company.
Objectives can be necessary operational goals, but OKRs also encourage ambitious goals that are not certain to be achieved – stretch objectives, so-called “roofshots” for goals that may be achievable. Mature organizations also venture into “moonshots” that are very unlikely to be fully achieved, but where the attempt alone has positive effects.
For this to work, OKRs must not be tied to personal rewards or a goal achievement, or the effect will almost certainly set in of individuals optimizing their personal rewards rather than looking for the best contribution to company goals.
These two elements: Alignment rather than cascading and transparency have the potential to be a key catalyst for changing company culture.
Taylor, Drucker, Grove and Google
Management principles at the beginning of the 20th century were characterized by a clear command-and-control mindset. The concepts of Taylor and Ford demanded a clear separation of managers – whose job was planning – and workers, who only executed and had nothing to do with planning.
Peter Drucker formulated the concept of “Management by Objectives” in 1954, which focused attention on individual strengths and responsibilities while establishing a common direction with organizational goals. This gave employees a view of the overarching goals, which is a much better structure for knowledge workers. Unfortunately, MBO is now often reduced to KPIs, locked into silos, lacking transparency and – absolutely lethal to alignment on common direction – linked to bonuses.
What we now call OKRs were developed by John Doerr based on the management principles of legendary intel CEO Andy Grove. Doerr later became a venture capitalist and brought this with him to Google. At Google, they became the structuring organizing principle.
Agility and OKRs
Agility and OKRs are a perfect combination for me:
- Agility provides the mindset to collaborate with each other at eye level
- Agility requires transparency to make it work. OKRs represent a significant factor in changing an organization.
- Negotiation instead of cascading, alignment and autonomy, accountability are important drivers in agility and are translated into concrete activities with OKRs