OKRs From a Beyond Budgeting Perspective
During the last few years we have witnessed the amazing revival of an almost 50 year old management idea called “Objectives and Key Results” (OKR).
The former Intel CEO Andy Grove introduced the concept in this company in the seventies, as described in his 1983 book “High Output Management”. John Doerr, a former Intel employee, later introduced the concept to a young startup called Google.
Although Google and several others, mainly Silicon Valley companies, has successfully applied OKRs for many years, it was Doerr’s 2018 book “Measure what matters” that turbocharged the concept. Now OKRs are on everybody’s lips, especially in the Agile community.
An OKR has two components
- An Objective, a goal — something we want to achieve
- Key Results, 3–5 clearly defined metrics with targets, and key actions to achieve these
Targets should be so ambitious that meeting them is the exception, not the rule. Commitments involving customers should however always be met. OKR results are not tied to bonuses, and the updating cadence is typically quarterly.
There are several aspects of OKRs that fit well with the Beyond Budgeting principles.
There are however other aspects with OKRs that, from a Beyond Budgeting perspective, are more problematic.
Some of you might be familiar with “Ambition to Action”, the Beyond Budgeting inspired management model we use in Equinor, the company I work for. Let me finish with a comparison to OKRs. There are some similarities, but also some key differences beyond those described above.
An “Ambition to Action” starts out with a longer-term ambition statement. Both have objectives, although we call our objectives “Strategic Objectives”, and these will have a medium-term horizon. We then continue with Risk; the risks of not achieving these objectives or other risks coming from our business activities. We then divide “Key Results” in two, Actions and Indicators, where Indicators may have targets. For us these are two different things. Actions are there to take us towards our objectives, or mitigate risk, or often both. Indicators shall indicate that we are moving towards our objectives.
Beyond this, we share the same philosophy of translation, transparency and escaping the calendar year straight jacket.
I hope you don’t read this as a refutation of OKRs. It is much better to have them than to have nothing at all. But no concept deserves being positioned as a silver bullet. There is no such thing. Not even Beyond Budgeting! As with most alternative management models, they can be used and misused. I can easily imagine a mechanical OKR implementation being used to reinforce traditional command and control.
A final word of warning. Watch out for an OKR certification. If it arrives (maybe it already has), it is often the beginning of the end, as we have seen too many times before.
This entry was written as part of the Supporting Agile Adoption program, an Agile Alliance initiative dedicated to supporting organizations and their people in their quest to become more Agile.
This is an Agile Alliance community blog post. Opinions represented are personal and belong solely to the author. They do not represent opinion or policy of Agile Alliance.
Originally published at https://www.agilealliance.org on March 4, 2020.