Increasing the Value of Your OKRs and KPIs

LeadingAgile
36 min readSep 27, 2023

Recorded By Mike Cottmeyer and Andrew Young

Andrew Young comes from a strong product background and is considered our resident expert on OKRs and KPIs. Today, Mike Cottmeyer sits down with Andrew to discuss how LeadingAgile is talking about OKRs and KPIs, the impact governance and teaming strategies have on your ability to run them effectively, why your project mentality might be getting in the way, and how you can get started using them in your business.

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Video Transcript

I’ve got a client that I’ve been recently working with, and for them, they feel that organizationally they have not invested into the employee experience and employee happiness. And of their top 10 OKRs right now, three of them are all somewhat centered around or adjacency to around employee experience in an employee workplace and employee effort score. And so they’re really signaling to the employee front. We know that we’ve been short on this for the past four or five years. This is where our attention is going. Clearly there’s still two or three around market penetration where they need to go and revenue targets and those things, but they’re spending 33% of their top level strategic objectives on internal employees. They really want that story to come through. And so you see the KPIs have shifted a variety of things. Now you can argue if that’s the right or wrong strategy. OKRs are not declaring that your strategy is good or bad. It’s just a way for you to articulate to the organization where you want your strategy to go.

(Musical Interlude)

Creating Clarity Around OKRs and KPIs

Mike Cottmeyer

Okay, everybody, welcome. We’re going to do something a little bit different today. Normally I get on these videos and do a little bit of the talking head stuff about things that I consider myself a domain expert in, but we were having a conversation with my leadership team a couple of weeks ago around the idea of OKRs KPIs. I talk about those things thematically quite a bit when I’m on client sites or in a sales call, or maybe even in an onstage presentation or something. But it’s not something that I consider myself like a really deep expert in. So I brought Andrew Young onto the call with us today. Andrew is one of our advisor level consultancies that’s on my leadership team. Helps me go out and set up new accounts and set strategic direction on the different accounts that we have. And so today, Andrew and I are going to have a conversation around OKRs and KPIs. Hey Andrew, how are you doing, man?

Andrew Young

Well, Mike, great to chat.

Mike Cottmeyer

Thanks for joining me today. I really appreciate it.

Andrew Young

Yeah, of course. It’s a fun topic.

Mike Cottmeyer

Yeah. Well, so tell me a little bit about your background. And I don’t, maybe passionate isn’t the right word, but how did you come to develop an appreciation for this topic?

Andrew Young

Yeah, I’m a little bit maybe more of an outlier than some of our other consultants. I’ve got a design and a product background, and you’ve heard me say this, and I’ve said this publicly on stage before that I think that the first product and the first artifact that an organization’s responsible for putting into the world is their teams and the way teams operate. And you can assess a lot of an organization by how they structure their teams, how they talk about it, and most importantly, how they drive alignment. And so if I just apply my design background and my design thinking background, how we create safety and space for teams is really important. And I think that there’s a lot of popularity coming back into right now around team, team, autonomy, all stuff. We’ve talked about, the persistent ness of teams, but there’s new flavors and new attributions, and there’s a lot of momentum around these things. And so I got really curious at just like what is the uniqueness and difference in it? And lo and behold, most of it’s the same stuff we’ve seen just packaged differently. But there is some nuance and some flavors of stuff that deeply aligns with leading agile. And so that intersection, Mike, has been really interesting for me for the past four or five years.

Mike Cottmeyer

One of the things that you brought up as we were preparing for this talk was the idea of teams and teams autonomy as it relates to OKRs and KPIs. That’s something I want to explore with you in a minute. But before we go too deep into that, why don’t you bring us up to speed on maybe what an OKR is, what a KPI is, how are they the same? How are they different? What are your thoughts on that?

Andrew Young

Yeah, we’ve recently had a large inbound question around OKRs. What are they? How are they different? And what really is this thing? At the end of the day, I think we can overgeneralize OKRs. It’s just another goal setting framework if I subordinate it. But the power in OKRs is creating space for hypothesis. So it could be similar to a project plan, but I want to make sure that we don’t call it a project plan. An OKR becomes an objective and just as we do with our teams backlogs at the team level, there’s just a stack rank of these objectives, a thing we need to actualize an opportunity, we can capitalize on a place we need to go. So it’s an objective. And then there’s key results along the way, and the difference between the KR piece of OKRs and a lot of the other goal setting frameworks. These aren’t output milestones. So they’re not just project leads, they’re not delivered this service at a certain time. It’s what impact on the business doesn’t make. So our key result says we expect to see a shift in X, Y, and Z. So key results unlikely hire five people or unlikely deliver the new CRM on certain day. But the key result is that team members or the activities needed with that CRM can now be deployed and they can use it. And we’ve created efficiencies or CIE or optionality.

Mike Cottmeyer

So I’m going to take a little bit of a risk here, but one of the hallmarks of our methodology that if people have been following our approach for a while, we talk about the idea of expeditions moving to base camps up underneath that we have a notional idea of an outcomes, outcomes-based plan where every two or three weeks through the course of engagement, we want something of tangible value being delivered. Is there a parallel there in an OKR? Is that what you mean is almost like a work package and a traditional P M I project plan, something that has value, something has economic value?

Andrew Young

Yeah, I think there’s a lot of overlap, Mike, in the way that we have internally used the branding of outcomes-based plans. I would assume if there was an overlap between an OKR and an outcomes-based plan, the OKR, the O of the OKR is the equivalent of the headline. We give a chunk of the outcomes based plan. So objective form teams, outcomes-based plan form teams, both of those could carry the objective title. And I would assume that those major cluster of activities that we do, or what we call plays or events inside of our outcomes-based plans would be the pieces of the key results story. But they wouldn’t actually be the headline of the key results. The headline would be what they can do now that play or that activity or that event has occurred. What new, I don’t necessarily want to call it a capability because I don’t want to index of the word capability, but what new behavior or capability outcome has been emerged because of that. I think that’s super true.

Mike Cottmeyer

Yeah, it’s crazy how it’s so easy to overload all the words that we’ve got going on here.

Andrew Young

One we didn’t clarify is what’s the difference with the KPI? And so I think this is the fascinating one for me, that when I’m with teams and with leaders, everybody understands what an indicator is, right? You say KPI, oh yeah, I’ve got it. I’m a seasoned career professional. I know what indicators are. I think that the piece that falls apart is people mix up a metric, something you can measure with a KPI, something that’s the most important thing to pay attention to. And so we use that language. KPIs are the indicators that help us understand how our business or our department or our team is performing. Some of them might be output metrics, but we want to continually operate them as much as possible as outcome metrics. So customer satisfaction, customer retention, customer behaviors. We get into the nuance of leading and legging indicators at different parts of the organization.

They’re going to feel more legging. The higher up you go in the organization, those KPIs are more legging revenue forecast versus actual, those types of things. But what happens? And so getting people aligned with, oh yeah, the things you can measure that are important are KPIs is not the hard part. The hard part is helping teams and organizations understand when your KPI list is a manifest of 10,000 KPIs, are you actually able to pay attention meaningfully to any of them and respond to them? What we see with teams is they put future project changes or future desires as a part of a KPI, and maybe that’s an aspirational state you want to get to, but the work to change our organization to where it wants to be tomorrow, that’s objective work. KPIs for us are really focused on what does it take to operate the business?

And we advocate for a language that says a KPI has a healthy value. And so if we use weight, I think this is a really good one. If you take it to your personal life, then a KPI, we all fluctuate in weight. I know what my healthy range is. I want to be between 185 and 195, and if I’m in there, I don’t really pay attention to it much. I just kind of know that I’m performing where I need to. But as soon as I cross the 1 95 threshold, it goes yellow. Hey, you’re kind of at that outer skirt of where you want to be. You’ve broken past the healthy value. You might want to start being more sensitive to your behaviors. And then at some point, we’ll call it two oh five, two ten, you say that’s the red value. As soon as I hit that, I need to take urgent and reactive behavior shifts in my status quo. And so we talk about those as traffic lights, red, green, yellow with KPIs. And I think that’s what’s missing for a lot of people. If they can’t identify the red, green, yellow, the healthy, the slightly unhealthy, and then we need to react values. They just have a metric. They just have something they’re measuring and they’re not actually using it to make daily decisions. That’s what we’re really focused on with the KPIs is can you identify a small subset of metrics that are super important to the near term performance and health of the organization?

Mike Cottmeyer

So you characterized the idea of a KPI as being almost like in the realm of keeping the lights on. So to use your analogy, day to day, just going about my business, living my life, then use example weight. Weight gets in a certain range. I’m not paying aton attention to it outside. I have a caution indicator hits red. I have to take drastic action. So if KPIs are like to keep the lights on and how we’re measuring the performance of the organization, giving an analogy for the OKR, would that be an intervention something that we want to do, or is it like, Hey, I want to go pay attention to my metabolic health and my blood work or something like that? Mean?

Andrew Young

Yeah, it could be both. We tend to think about the OKRs as two patterns. I’ve got a KPI that has once turned red, but I was quickly able to get it back to green again, kind of ignored it. But if I have a KPI that’s habitually performing yellow, red, you use the word intervention. That might be a good word here. We need to change what we’re doing. We might need to invest new approaches, new workflows, new people even to that, keep the lights on shift. And so recovering KPIs could be objective work. You have a red that’s habitually red, intervene with it, change the team, change the investment, change the processes of tool. All of that’s a reasonable thing. But then you also have the other one. If we stay at the personal level, let’s say weight is something that I pay attention to.

It’s my keep the lights on thing. And let’s say I have been an avid basketball player my whole life. I play pickleball every weekend, don’t really care about it, but with my weight, I’ve noticed I have an interest or there’s an opportunity in this whole pickleball movement that’s coming up. So everybody’s playing pickleball, but I’ve never done it. And so that’s a new thing for us. But my weights in check weight’s not my limitation. So my KPIs are performing well, but I need to go learn this new thing or we need a new capability. I’ve never picked up a paddle or a racket sport. And so an objective might be become a amateur pickleball player or at least win my local clubs pickleball tournament championship. Underneath that. There’s a whole bunch of work I have to do. I have to build some establishing capabilities. I need to do some repetition on practice.

I probably need to figure out where to go and do all this stuff. And at some point I might turn that into a KPI. Once I’ve learned pickleball and I’m playing on a regular basis, I might have some sort of KPI around my pickleball performance to figure out if I need another intervention or not. But it’s a new thing. And so objectives can be innovation. If I throw that word in there and I think about our world, I assume some of our objectives in K o work would go to a Basecamp five innovation team. Those are the horizon three type things. But there’s also just things we know on the horizon that will make our organization better, that are different than the way it’s operating today. And that’s also objective work. And so major shifts in tool or services could all be objective work.

Mike Cottmeyer

You want to have some fun with me for just a minute? Yeah. So your ski instructor? Yeah, past life. So I learned how to ski three years ago. I started skiing when I was 50. So that in your analogy is that was a new outcome that I wanted in my life. So now that I know how to ski, what would be a KPI? Help me think about, yeah,

Andrew Young

So there’s a whole bunch of fun ways we could think about this. It all gets into the where do you want to take it. So what is the vision? If I try to stay loosely aligned to a company, what’s the vision of Mike as a skier? Is it Mike wants to be an all mountain skier or Mike wants to do those half pipes and all the flips and tricks, two different flavors. All mountain. All mountain,

Mike Cottmeyer

Mountain, different conditions.

Andrew Young

So, Mike’s got an all-mountain different condition approach, and so probably a KPI that’s just reasonable to pay attention to is how many days are you getting out in the season or a month, right? So there’s an output thing. We talked about some output still early in your career. Mike, I think was skiing. So I might throw in a KPI. How many times have you fallen off the chairlift? That might be an indicator. We need to go back to basics on some things, but we need some of those super safe green KPIs. It also might be just a ratio. How many times did Mike in the late afternoon after lunch choose to take the green rundown versus challenge himself through a tree run? So there might be some sort of ratio of post-lunch behaviors because we know Mike gets lazy after lunch.

Or maybe there’s a pre-lunch. You don’t warm up and therefore you’re constantly finding yourself in too much fatigue and hurt. So maybe we actually put a KPI in that. When is the average first black run of the day? Is it your first run, your second run, your third run, and we set healthy targets for those things, all things that will incrementally get you better, but towards your objective. Yeah, you check the box, you can label yourself as a skier. Now your next objective is an all mountain skier, and so maybe your next objective is how do I ski outside of a groomed or patrolled run? How do I get into your next objective? Might be my first back country ski or your first heli ski. And so we’ll have some things we have to work up into. So you’ve got your KPI showing you on a daily basis, but one of the things in that new OKR or the new objective, and here’s some key results.

Mike has successfully completed 10 trips down a side run at a resort. So you took the chairlift up, but you might’ve done side trips, so that might be a milestone. Your other milestone, Mike, I don’t even know if you know this yet. Most people who are backcountry on mountain skiing, they don’t have chairlifts. So do you even know how to walk up a mountain and skis? So maybe that’s a key result. Mike knows how to go up the mountain on a skis. He only knows the skis go down the mountain. Things that we’re adding to the future world all shifts kind of in the same domain, but you’ve never gone up a mountain on ski. So how could I have a KPI for you yet? You got to establish that learning.

Mike Cottmeyer

Okay, that was a fun diversion. Thank you for that. I appreciate it. Now you’ve given me a whole new set of things to think about in December when I did my first trip out to Colorado.

Andrew Young

That’s right. I think the simplest K P I is how many pairs of skis do you have? Right? Because all mountain skiers have multiple skis. So if you only got one, might need something else.

The Role of Governance in OKRs and KPIs

Mike Cottmeyer

Yeah. Okay, cool. So let’s get back. That was awesome. Thank you. So we were talking about, right, so leading Agile is really in the encapsulation orchestration business. If you think about it, the change management business, taking big things, breaking them into small things. I think about that a lot. One of the things we were discussing was the idea of teaming strategies and ownership and things like that. So talk to me a little bit about why OKRs and KPIs are so important in the agile transformation space and why are teaming strategies and governance models so important to the successful articulation and execution of these metrics?

Andrew Young

Yeah, I think this is probably the biggest invisible part of the conversation right now. So I’m going to meander for a second. I’m going to drop through four topics and then tie them back. There’s been a lot of dialogue and traction and movement around where OKRs are developed and in the world today, there’s a couple of schools of thought, right? There’s the whole, they were created at the top. You decompose them, you tell the team below what their new objective is and then that gets decomposed and you tell. So this story of hierarchical telling is an objective approach. There’s some schools of thought out there that says start at the lowest level, the organization, the things closest to the team members or the customers they know, have them build objectives, and then you aggregate them back up to tell a big story. So there’s risk in both of those approaches.

If you only take the top-down approach, you’re missing a lot of the feedback loops. And we talk a lot about feedback loops. So we can build in some compensating controls, but at a certain point, if it’s just one direction, your feedback loops are weak. But if you start with the teams and let them develop it, we’ve found, and it’s time and time again, it’s not always aligned work. And what we’re trying to do and what the world is trying to do with OKRs is not to be prescriptive with what’s to do, but give outcome oriented alignment framework, tools, statements, methods to teams so that they could drive it.

Mike Cottmeyer

So the idea is that maybe the organization sets the outside boundaries and then as you cascade that intent, the lower levels or teams get to decide how to implement within that boundary is

Andrew Young

Yeah, that’s close. We definitely use those languages. And the misinterpretation though that I could hear in what you said or possibly hear is as you get lower, we’re not getting any more prescriptive. We’re tightening the guardrails of where you can play, but we’re still creating opportunity statements for teams with the objective. The objective is to actualize on this. It’s not to deliver the CRM if the new CRM is the most critical thing, sure, we need to be prescriptive about it, but the more we can write these things as the outcome of the new CRM and have the team own that,

that team fills to ownership of the work. And then it also allows to where you started the orchestration to occur because one downstream risk and problem with OKRs where teams are allowed to establish them and they create them from the ground from the closest to the customer up is there’s a lot of duplication and there’s a lot of waste because you’ve given teams this autonomy and they’re getting to make decisions and move quickly and swiftly, but at the cost of low orchestration, at the cost of duplication, at the cost of not having all the right information. And so what we’re trying to create with the OKR framework, and this is the enhancement in shifting that maybe some literature right now is a little soft on, is as it relates to transformation, as it relates to change, as it relates to healthy systems of delivery, we want OKRs to be the guardrails you called it out.

We want them to be able to talk about opportunity within constraints, but we also want them to be so that teams know where to get other information and how to cross-functionally work. We’re not trying to create siloed departments with this. We’re not trying to create siloed functional projects. We’re trying to get, if the objective is for Mike to go skiing and be the best allbound skier, your wife probably has some work in there and how she’s going to support you. Your kids have some work, your ski instructor has some work. It’s not just about Mike and his silo of myness, right? It’s the other things that need to come together in those key results that emerge. It also gets into this notion of, one of the things we talk about Mike is backlogs, and this is just a backlog at the highest abstraction of objectives should be treated like a backlog.

Now, you’ll run some in parallel because you’re servicing a whole organization, but we’re not trying to identify that there’s 85 number one priorities and 85 number one objectives. Common failure pattern we see is too many objectives. And so what we’re trying to get the leadership teams to understand is this is their backlog, this is their backlog, and your objective might be an agile operating model that might be an OKR. You guys are project oriented and burning a lot of it, and maybe your largest outcome and objective is a better way of working. It also might be we need to shift into this new market because the market is completely changing and might need to be that we need to exploit our cash cow. All of those are reasonable objectives from an investment lens, from a top level of the organization, and we teach that you stack rank OKRs, they need to be stack ranked and there’s relativity in them.

And at some point you can’t invest in everything. And what we really want to teach is the same way we teach the delivery teams or product teams or portfolio teams. You got to make a trade-off decision. It’s your trade-off decision because you don’t have enough resources or because of orchestration costs or because of a lack of clarity. What we’re trying to do, and this is something when I’m coaching all this, I talk about OKRs and KPIs being just a storytelling moniker. It’s the way the organization is telling a story. The number one objective right now is this. The second most important strategic objective is this. It should signal to the organization where we’re going, our KPIs, we’re paying attention to these things. This should be the narrative. Hey everybody, this is what’s up here. I’ve got a client that I’ve been recently working with, and for them, they feel that organizationally they have not invested into the employee experience and employee happiness.

And of their top 10 OKRs right now, three of them are all somewhat centered around or adjacency around employee experience in an employee workplace and employee effort score. And so they’re really signaling to the employee front. We know that we’ve been short on this for the past four or five years. This is where our attention is going. Clearly there’s still two or three around market penetration where they need to go and revenue targets and those things, but they’re spending 33% of their top level strategic objectives on internal employees. They really want that story to come through. And so you see their KPIs have shifted a variety of things. Now you can argue if that’s the right or wrong strategy. OKRs are not declaring that your strategy is good or bad. It’s just a way for you to articulate to the organization where you want your strategy to go.

Mike Cottmeyer

So a lot of times when we’re thinking about system of delivery within the leading agile, large scale, agile operating model stuff, we tend to think in tiers, right? There’s the team level execution tier, there’s a program or product tier, there’s a portfolio tier. And so what I’m hearing you say is that at the top level really OKRs in KPIs or an investment tier token moving through a combine, something like that.

Andrew Young

Yeah, that’s right. I guess it’s implicit. When I say stack rank, it means that something’s going to move because it can only be in a state and only so many things. So yeah, this is for me in our model, the top tier and at risk of getting a little messy for a second, if we say it’s a four tier system, the three tiers you just said, the system of delivery and the system of delivery is putting, working, tested stuff to customers and users, the difference is at this top tier, we’re starting to blend where hopefully a lot of the objective work is trickling into the system of delivery. We want that to be there, but there’s some other work that’s being invested into at that top tier that we need to represent that doesn’t end up being visible or aware to our client’s customers.

Mike Cottmeyer

What I was hearing, this is kind of where I was heading with the question. It’s almost like there’s a little bit of an in the system, on the system kind of angle. There’s things that we’re doing to the product that would be first order concerns, epics features, user stories kind of a thing. What I’m hearing you say is that there’s room for on the system, OKRs, KPIs. Absolutely. So in all world, would that be like system of transformation work?

Andrew Young

Absolutely would be. And I think it’s probably the biggest missed opportunity for some organizations implementing OKRs. They make it just about the stuff that’s in the system of delivery and they forget that they still investing hundreds or millions of dollars over here on what you just called system of transformation. So this could be coaching services, this could be investment into communities of practice or guilds. This could be as complex with some of our clients of we need a whole change management office or some of our clients and some organizations maybe have never invested in their internal communications capability, not something the customers of that organization will ever see, but it is still taking a large investment. We need to reflect that as an investment token as well. So all of that gets put into that top tier for us.

Mike Cottmeyer

Interesting. Yeah. I’m kind of riffing thinking out loud a little bit for everybody listening to this. One of the things that we talk about internally quite a bit and language leaks out probably needs to be a little bit more explicit. We talk about like when we think about agile is scale as a system of delivery. It’s like how do we run the software factory or the product factory, for lack of a better word, but we distinguish the idea of system of transformation, system of continuous improvement, system of engagement, and it gives us an internal pattern language for really distinguishing things that often get blended. And so I guess just to geek out for a minute, it’s almost like there’s system, there’s OKRs for the system of delivery that feed the system of delivery. Epics features user stories. There could be system of transformation, OKRs, KPIs. There could be system of continuous improvement, OKRs, KPIs. That’s fascinating. Okay, cool.

Andrew Young

So, there could be, the only risk though, Mike in the way that I heard you just present it. So I’m going to regurgitate back because I wouldn’t classify that. I wouldn’t classify them and say, I need so system of transformation OKRs and I need system of delivery OKRs and I need systems. What I would do is, and the way we coach this when we’re implementing it, is what’s the biggest gap in the organization that occurs today and we don’t have a product in this market or we’re failing it effective delivery, therefore we need to go through this transformation at the O K R level. Those are all interchangeable and where they stack rank. And so we’re going to create this apples and bananas and monkeys prioritization model that normally doesn’t get stacked ranked together, but we’re forcing the organization to say, what we need to invest in is our delivery capability or our research capability, or this product is just underperforming and we’re losing customers because they’re going to our competitor at the top tier of our system.

We’re going to stack rank them and then we might want to attribute them so that you at least look at the ratio. So not all of our objectives are system of transformation. If you had all of your top 10 objectives as system of transformation, you’re signaling to the organization, we’re kind of falling apart and we got to get our house in order, or you’re signaling our product’s so amazing in market that we don’t actually need to pay attention to it. I don’t know that any of our clients have ever said that. And so we do need the attribution, and I would love to see the ratio, like 70% of stuff at the OKR level is going to trickle into the system of delivery. But that’s not a steadfast rule. But what I do see other companies do is put 100% of their objectives for system of delivery stuff and forget, and then it gets devalued and then it forgets never invested in. And this is why a lot of organizations that are playing with OKRs right now end up with two classes of OKRs. These are the OKRs for our products. These are the OKRs for organization. And I would just challenge why the separation if it really is your investment strategy.

Mike Cottmeyer

What I’m really hearing about is it’s a common queue, right? Because we’re all taking organizational capacity, so it’s like we just have to decide how they prioritize against each other.

Andrew Young

And I think that’s one of the biggest values as we’ve coached leaders through this is what you just said is it’s a common queue. It takes money, it takes people, it takes time. And if you put all your money, your time and your people into building the next product, including your SVPs and your executives, you’re never going to invest into your organization, and you need some of that blended story.

The Importance of Teaming Strategies for Effective OKRs and KPIs

Mike Cottmeyer

So, I don’t know if we got to a final place on this, but why is the organizational design, the teaming strategies so important for effective OKR satisfaction or KPI satisfaction? We were talking a little bit about is it an orchestration problem? Is it a clarity of purpose problem? Is it an ownership problem? Explore that. Just one click down for me if you wouldn’t mind.

Andrew Young

Yeah. Yeah. And I’ll start with the last one. I think it starts with an ownership problem. If you don’t have effective team and teaming structures or persistent natures, this OKR world can divulge into all teams get to create whatever they want, and then there’s many instances of a thing versus going to the sanctioned thing that exists and talking about it with the team that’s responsible for owning that and enhancing and advancing that. So persistent teams important to understand where the objective will most densely be concentrated around teams versus team members having to go find, learn, and reinvent those things.

Mike Cottmeyer

Okay, I think I got it. I think I can tie it back to what you’re saying because normally when we think about teaming strategies in an organization where typically we roughly use the metaphor of a business capability, and so we organize teams and technology people process around these business capabilities that ultimately get decoupled from the rest of the organization can operate autonomously or independently. So what I’m hearing you say is that if I cascade an OKR into a capability, it’s very clear that that capability is owned by that team. If I cascade an OKR out into an organization isn’t capability aligned, I might get duplication of capabilities because ownership isn’t super clear around it.

Andrew Young

That’s right. And then I’m going to Yes, and that, yeah, cool. When you don’t have teams that have domain ownership, and so now I’m going to go even larger than just delivery, the concept of winning in a new market isn’t just building a good product, it also is inclusive of the go-to market. It’s inclusive of the sales, it’s inclusive of the customer support. And so that’s a highly cross-functional domain that’s now needed to participate in this objective. The objective isn’t authored at go deliver new product, it’s go deliver new product the customers love and are successful against. And so the other purpose of the teaming as it relates to OKRs is you get the right representation from the different functional domains so that you can do something truly cross-functional because we’re trying to write every objective as a cross-functional outcome, not as a functional delivery.

And so if you don’t have persistent and a clean or at least aware teaming structure, I could see teams trying to go do all of that. We built the product, we’re going to do the go to market, we’re going to sell it. It’s such a small team responsible for something that they’re probably not capable of doing or it becomes over the wall. We built it, now you guys sell it, you guys sold it, now you guys support it. And we don’t actually have that true outcome oriented mindset. It moves back to more of an output by function.

How Project Mentality Gets in the Way of OKRs and KPIs

Mike Cottmeyer

Okay, cool. Probably related, but we talked a little bit about the idea of project-based work versus product-based work, and you were telling me that the idea of project-based funding sometimes gets in the way or maybe a project mentality gets in the way of effective OKR implementation. Talk to me a little bit about that and tell me why projects can sometimes be a problem for us.

Andrew Young

Yeah, I think it’s actually the largest limitation in mindset for people to feel comfortable with this OKR stuff. What I hear, I’m going to tell you, the fable is, oh, we have to deliver this thing where also our company’s going to fall apart new institutional tool, new CRM platform, whatever. It’s cool. I don’t know that I disagree with that, but just delivering the thing isn’t yielding the right answer. A lot of the times when we see project bound funding our project bound prioritization, we see two things come out of that. Here’s the scope, you’re going to deliver all of it, and we don’t give you an option to change that over time. And OKRs are a hypothesis driven with what we know now, here’s where we’re going, here’s what the key results look like, tell you with the OKR framework, it should be pretty common that the original envisionment shrinks over time as you learn because hopefully you’re in a divergent moment when you offer that OKR, you’re kind of boiling the ocean and over time you’re converging into the right cone of uncertainty vector. And so project-based funding typically doesn’t support that. If I think about it, it’s the

Mike Cottmeyer

A lot of times I think of a project as like a token in an investment portfolio or something that moves through a Kanban, right? Is it that the conceptualization of a project as time cost and scope, so it has an expected investment, an expected duration, and a specific set of things that we’re going to go do. It’s almost like the hypothesize, the hypothesis has already been translated into requirements. That’s right. And what we’d like to do is to delegate intent rather than a set of things to go do or go build.

Andrew Young

That’s exactly right. The project, and let’s say the project and your narrative, there was a two year long project. It’s fixed time, fixed scope. We know how many people, we know the requirements for that same, I’ll call it outcome over two years with OKRs. The way that we would coach that is what’s your outcome? What are your key results? And do you want to invest into this? And every quarter or every six months, we’re going to ask the same question. Is this still the number one premise opportunity thing to capitalize on that we want to invest into and do we have the right makeup of the investment? And that might ebb and flow because of other things that occur. We want to create that optionality within the construct of the project where a lot of project prefixed time scope requirements just don’t allow for that.

The second thing maybe with projects is you have a dedicated group of people focused on that project, and it’s less likely, I think this is my premise, that they then take ownership of that thing and then are persistent with whatever that thing is. OKR is trying to create autonomy for that team to say, look, we built the thing cross-functionally or functionally, it’s ours. We retain it. We have delivered it from an OKR lens. Here’s the KPIs now to showcase that it’s still healthy and happy and we’re responsible for it. So we took it from the envisionment to the operationalization of it, and it’s within a contained group of people. Now, you might rotate people in and out of that team, and that team might change over time, but in concepts where from a teaming structure where the center of that gravity lives,

Mike Cottmeyer

It’s really fascinating, man. Like I think you alluded to this earlier, but it’s all fundamentally the same concept. It’s like the difference between a user story and a requirement. If you go back to just the earliest agile, the most basic agile concepts, user story was a placeholder for a conversation. I’ve got a customer, I have some capability or function I’d like to have in the app, and this is how I know it’s done. And the team collaborates on an ongoing basis with the product owner or the customer, whatever the actual thing that gets built is emergent. It almost seems like KPIs and OKRs are almost like investment tier, organizational level user stories. You could almost take that conceptualization. Am I thinking about it the wrong way?

Andrew Young

Yeah, I’m not going to say almost. I’m going to say it’s, and so I’ve got a smirk smile on my face here because I don’t come from the agile background. I came from the design, the product side. So leading agile was my grand reveal in the foray into the agile stuff. And I’m going to make an unpopular opinion claim here because of my background. I’m going to claim OKRs. And what you just said is the rest of the world adopting all of those things that the agile movement was trying to create, and it got maybe constrained into system of delivery software, IT delivery. I think this is just, and I’ll quote the business or the other side of the house or the other parts of the organization who don’t have a relationship getting caught up with those beliefs, and I’m with you. It’s just the same patterns of belief branded or story told underneath the moniker of OKRs and KPIs, but it’s trying to create optionality. It’s trying to create alignment. It’s trying to create hypotheses. It’s trying to move tokens across the board. I am with you on that, an objective and okr, do we want to invest in it? We’re now investing into it, we’re now delivering on it. Now we’re measuring our effectiveness. And that choice, that’s just the top level, the super simplified version of a user story. But in a complex world, you

Mike Cottmeyer

We’re talking about something about persistence of the hypothesis, and it’s a little bit like maybe I go off to build an epic. I break it down into features. I break it down into user stories. I start building the user stories, I start to validate the hypothesis. And as long as that hypothesis is winning in market, maybe I keep going down that path. At the point that I learn that I need to shift gears. I have that optionality to either change the OKR change, the epic, change the feature change, whatever, because, okay, so projects fix that mental mindset. This is what we’re going to go do, where an OKR creates space for the business and technology, whatever cross-functional team is necessary to really inspect and adapt their way into the actual outcome or the actual performance indicator that they’re trying to achieve.

Andrew Young

Spot on. Yep, that’s exactly the way we coach all that.

Two More Key Takeaways

Mike Cottmeyer

Okay, awesome. So any takeaways that you want to leave our listeners or our viewers with before we wrap up here today?

Andrew Young

Yeah, there’s something we didn’t deeply hit on, and I’ll leave it as a takeaway because it’s pretty straightforward forward. It’s OKRs, KPIs. The initial work to get these things established is high, right? It takes time, it takes debate. We all have opinions, but once you establish that and you have a working platform, one of the common things we see is it becomes additive. We release some new things, we add some new KPIs, we release some more things, we add some more KPIs, and then at some point that KPI list is no longer the top 20 things to pay attention to. It’s growing back into the top 500 things. And with OKRs it’s, oh, we learned something about a market. So we’re going to kind of slide this thing in here because it’s also important. And then we’re going to slide this one in and we’re going to slide this one in.

And so KPIs, OKRs, just like every other backlog process has to have a limited amount. You can only focus on where your capacity will allow you to. So how many KPIs, if something’s performing healthy for two years or it’s fading away, I don’t need to see our fax ability to accept facts. KPI, we know it’s healthy and green also. Nobody’s using it, so we should just take that one out. So one of the things in this process, in your incremental and IT with feedback loops is it’s okay to remove things. It’s okay to remove things as long as the statement is no longer the most important, or we have actualized. So

Mike Cottmeyer

Always, I think the operative word and KPI then is key, right? Because they’re all performance indicators. We just clear about which ones are the key performance indicators

Andrew Young

And key doesn’t mean everything, and I think that’s been the biggest, for me, coaching this stuff, the hardest activity to get people to go through is K P I rationalization, and it’s not everything, and at the organizational level, it’s legging and at the team level, it’s leading. That takeaway is really important. You don’t need to be tracking everything, and even though you can, we’re in this maybe insurgence right now of we can track it, therefore we do track it and we put it in a data lake and at some point somebody might look at it, okay, cool. Those aren’t KPIs. Those are just things we’ve measured. We’re going to put them over there. What are you going to, I use this phrase when I coach, what are you going to obsess over when that thing goes red? You’re going to obsess over my weight, your happiness, the uptime of our system, revenue, customer churn, whatever those things are, that becomes the item you index towards.

The other thing I might do as a takeaway and just kind of the headline here is it doesn’t have to be time bound like projects, right? These things ebb and flow. What is good? I get this question all the time as we’re coaching Mike, is this a good OKR? And my response is, well, is that what your organization needs? Now, what might be the perfect KPI or OKR for LeadingAgile as an organization will look different to our clients, will look different to even another consultancy. It’s where we’re going, the vision, the direction, the story we’re telling, and that’s going to change over time. An acquisition might change your KPIs. A merger might change your KPIs. A collapse of a market might change your KPIs and organizations. We have a client, the real estate world might dramatically impact how they can focus their attention, so their strategy might shift, therefore, their KPIs and OKRs need to be able to shift with it. These have to be dynamic in nature. I think that’s the other big thing.

How to Get Started with OKRs and KPIs

Mike Cottmeyer

So, at the risk of injecting a shameless plug here. How do you typically get started? What does it look like to get kicked off in the development process of this thing? And then maybe if you want, what does it look like to maintain them over time?

Andrew Young

Yeah. We have been finding, again, shameless plug, we’ve been finding our most success when we can start with leadership teams. We have so many organizations we’ve seen where the middle parts of the organization and even teams are advocating for these things. They’re reading about it in a blog. They’ve got a friend at an organization that are using it. It’s not advocation the organization that’s needed. It’s getting a group of wildly successful leaders who are lighter into their career, who have never seen this style or have used alternative models before, get comfortable with the dynamic nature. And so just as we talked about teaming structures, starting with the leadership team and getting clear on what is the organization strategy? Can we articulate it in 10 or 15 OKRs? Can we identify the top 20 things that the organization needs to pay attention to? That can take days, weeks, months of internal debate and just good facilitation with a leadership team to find agreement on, here’s the story you want to tell.

Without that, it’s almost impossible to go down to the team level unless you just do team bottom up first approach. And again, we’re going to see wild divergence in that. So establishing it takes committed time by a leadership team to whiteboard, which is sometimes an activity that they’re used to delegating out, and we are asking them to actively participate in it. Don’t delegate three levels down and have them tell you what the five KPIs are. We want the organizational KPIs. We don’t want the most important functional KPI. We want organizational KPIs. That’s been the toughest part of getting these things started. Once it’s established, I’ll tell you the sustaining piece is, and I’m going to use our language governance moments that bring up the KPI dashboard for the organization so they can all get a look at what’s happening with this organization.

It can’t be a tool that’s on a shelf that the PMOs looking at or leader X and Y are only looking at if it’s not integrated into corporate governance in the town hall, just flashing it up. Look, our heat map mostly green. We got a yellow density here. We need to talk about that. If the whole organization doesn’t have access to it, the sustaining stuff’s hard. But to sustain it, visual access for most teams and team members has been a really important sustaining factor. And then just how you think about what a team prioritizes with. And so getting that into the prioritization model, team-based prioritization, how does this team make their decisions for the next two weeks? If they are reinventing their own prioritization model and they’re not using the KPIs and they’re not using the OKRs and they’re not using that decomposed cross-functional strategy, I don’t know that it sustains. You have to get teams to buy into, this is where we’re going strategically. Here’s what we have to influence. And as soon as that flywheel has started for most teams, it then becomes the limitation of can people write in a language of outcome versus output? And that’s probably the hardest teaching moment at the team level.

Mike Cottmeyer

Okay. I’ll tell you, one of my biggest takeaways that I really appreciated out of this conversation was that a lot of what the software community started figuring out in 2001, maybe 10 years before that, encapsulation and orchestration, small batch, more emergent behaviors, more product thinking over project thinking, your observation that this is really kind of companies and businesses kind of coming up to speed with the same kind of ideas. So maybe as Agilists, maybe we can figure out how to be, I don’t know, not so scared or maybe conversant in these ideas. Because in a way it’s just user stories at a company level, and it’s probably an oversimplification, but it sounds like that’s what we’re sniffing down.

Andrew Young

Yeah. I’ll invite anybody who self-identifies as an Agilists to have this chat with us because that’s exactly right. I’m not trying to take anything away from those movements or those perspectives. What I think this and people are leaning into here is, oh, for 20 years, for 40 years, we have had this separation of lean manufacturing, optimize, lean out, and then incremental iterative delivery of things, and that we can actually bring it all back together into a common language, common tool, common framework that isn’t feeling threatening to the non-ag because there is 20 years of baggage at this point for a non-ag Agilists to have Agilists language. It’s just a new home field we’re playing on that we can all come to. And I would invite any Agilists to have this chat because if I look at my LinkedIn feed, I’ve got two cohorts of people talking about this Agilists who say, this is just the same stuff, the conversation we just had. And they’re now starting to say, look, I can use this as my advocacy in my bridge to be a better partner. And then I’ve got the other non-ag world saying, this is just another version of goal setting frameworks we’ve done for years. It’s just branded differently. Why is this one working better? Oh, it’s because it allows us to connect back into fast incremental software delivery, and people are starting to see that connection.

Mike Cottmeyer

Right. Well, Andrew, thanks for your time, man. We really appreciate it. Absolutely. It was a great conversation. I know I learned a few things. Hopefully everybody else learned a few things as well. So we’ll do this again sometime.

Andrew Young

Yeah, thanks for having me, Mike. Fun chat. Yep, you got

Mike Cottmeyer

Okay, talk to you later. See you guys. Bye.

About Mike

Mike serves as LeadingAgile’s resident champion of core agile values and principles. He is passionate about solving the challenges associated with adopting agile in larger, more complex enterprises and is passionate about leading large-scale agile transformations…Read More.

Originally published at https://www.leadingagile.com on September 27, 2023.

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