First things first: This article is about strategy. The choices we make are the very core of strategy; therefore we will start with challenging ourselves to make a first choice:
Traditional organizations where “world-class executives” and “wise” powerful businessmen are plentiful, often waste their time, and even more important, the time of the whole organization by planning, organizing, managing and controlling their businesses according to traditional strategic planning principles.
Top managers in the meeting rooms use and re-use if not massage metrics to determine targets that their bosses expect to see; this is a typical example of executives creating strategies and plans without an in-depth understanding of what is happening in the field or on the floor. This is when the data is gathered by middle managers motivated by politics, relationships, and pep talks given by executives to inspire their soldiers so that they hit their annual targets (no matter how…).
This is the traditional approach to strategic planning based on MBO principles. It puts the emphasis on targets with senior managers putting focus on getting things done by continuous push on the reports of their direct associates and the practice of deliberate “results and superficial auditing”. The vision on delivering customer needs is often lost inside the politics and departmental battles. All at once, the bottom line is about the focus on hitting the individual targets and getting the annual bonuses.
The focus on politics and departmental egos degrades the associates to resources that can be moved and used for the benefit of the short-term goal and ignoring the long-term impact of such approaches. This traditional way does not engage associates to deliver customer needs, instead, rely on unconfirmed data and the genius behind it. These companies, sadly, put their survival and sustainability at risk.
Traditionally managed companies have a lot to learn from a completely different approach referred to as OKR. This is the way of “Managing by Outcomes and Means” used by High-Performance Organizations like Google, Adobe, LinkedIn, among others.
OKR is the practice to get the entire organization synchronized by enabling all the associates to contribute their part in achieving common business outcomes. For this purpose, a great OKR Operating System follows these key points as it synchronizes the whole organization.
As you read these points, you may realize the major differences in philosophy and process between traditional strategic planning and OKR. However:
A common mistake that most companies commit is to use the OKR format (the tool) for business planning and not embracing the Agile values and principles by which OKR is rooted upon.
This comparison below will help to understand the differences between the traditional strategic planning versus OKR:
All of the key points of OKR are important, but in this article, we will be focusing on these three:
In contrast to traditional strategic planning, OKR involves a participative process at all levels where respect for people is shown, and it is shown by enabling associates at all levels to contribute to the business outcomes. That results in a system that engages all the organization (from the president to the front-line members) to synchronize the strategy of the company with the core focus and purpose of their daily impacts.
The outcomes defined as OKR of each team become the True North to change whatever is necessary to build the required capabilities to deliver these goals.
However, a deep management respect for people is required, underpinned by the practice of the “Go and See” principle.
The “Go and See” principle is much more than merely visiting the site to examine the facts on site. It entails understanding and acknowledgment of the associates’ contribution exactly where work is done. It is showing respect, which brings about the healthy balance between challenge and support to grasp the situation. It refers to a genuine management behavior of considering the opinion of on-site individuals as well as of individuals who have extensive relevant knowledge as well as recognizing ownership of the process. It creates a culture of making decisions on consensus that ends up with teams continuously achieving common goals at the best speed. This practice of Genchi Genbutsu is a small gesture that brings about big returns in the end.
An example the Sienna design team liked to use to illustrate this practice is the situation when they were designing the Sienna Van (manufactured only in the USA at that time). The Japanese colleagues were not convinced about the size and location of the cup holders (in addition to other features, of course, but the cup holder was one of those contentious issues). They test drove the Sienna from East Coast to West Coast, where they cooped up in the van with stopovers along the way. After several days of ordering fast food, and, for the ultimate test, jumbo drinks that won’t fit the cup holders – the Japanese colleagues finally saw for themselves that what they thought was a perfect design on paper was not practical for the American customers.
Another example, recently explained to us by a test driver from a well-known car magazine, depicts how Lexus (Toyota) usually sends engineers to the car test. He explained how impressed he always is about the engineers´ attitude since they are always really interested to understand what he doesn’t like about the car, how they could improve it and build the best possible product:
“They don’t come to hear compliments and get recognition, they come to understand how I feel when I drive the car, what I like, what I don’t like and they engage me in problem solving to make a better car.”
Also, at Spotify we could see and experience how getting face to face user feedback was a daily practice of many squads. There are even special rooms reserved for this continuous feedback process in their headquarters in Stockholm. They invite users to test their developments in early stages and get Radical Candor feedback from them. It’s amazing to see how they have incorporated that early a continuous feedback is in their process.
Traditional strategic planning, usually MBO and KPI driven, keeps managers obsessed with gaming metrics and reporting financials with great storytelling. In contrast, the PDCA cycle is the driver of the OKR Operating System with hands-on involvement of senior management to make development, improvement and learning the way to continuously hit the targets. Far from gaming metrics, managers at High-Performance Organizations are obsessed with helping the teams set meaningful outcomes, do the work right the first time, improve the workflow and develop capabilities through daily PDCA problem-solving routines to improve the value delivered for each customer.
Organizational development only happens when you build up individual, team and leadership capacities and routines to systematically Go & See what actually happens in contrast to what we expect to happen.
Without learning, you cannot make an organization go further. And learning only comes from consistently practicing PDCA loops to continuously arrive at the Check & Adjust extent at all levels. The learnings have to be focused on improving the value flow for each customer.
In the best organizations of the world, team members are taught to reflect and learn as a team in the Adjust/Act phase. This phase is crucial in enabling team members to identify what worked and what did not work in the process of achieving/not achieving targets. Problems are discussed openly, not to put blame on anyone but to truly solve them. Problems are seen as opportunities for improvement and team members are given the chance to come up with countermeasures thus ownership is established in the process.
In the traditional management world, the executive level does not care about the process as long as results are achieved – they ‘just don’t have time for this’. Firefighting, measuring, and reporting is considered more important than building the capabilities for tomorrow’s sustainability and success.
With the right OKR Operating System built on Agile values and principles, people are taught systemic thinking to continuously improve their way of working. Standards become the current best practices at each moment. At the same time, standards become the basis for comparing, benchmarking and continuously experimenting for a better way to ensure the sustainability, responsiveness and competitive advantage of the company.
The consequent practice of OKR unleashes the talent and passion of the people to work together both towards common outcomes and for a customer-driven purpose. Traditional strategic planning, however, relies on the “commanding and controlling” heroes, waiting for the figures to come in, satisfied with just hitting the targets without ever having gone to see if their processes have dissolved in total chaos.
OKR is about leadership involvement, consistency, capacity, transparency through clear communication and visual management at all levels as well as time – a lot of time and commitment from your side. Time because the organization must be ready; all levels must develop the skills to understand what value means for customers and what is the means to dramatically improve it. Then, they will be able to define meaningful outcomes as OKR, discuss “the how” and, together with their leaders and associates, reach consensus on the way to deliver beyond expectations.s.
No roadmaps, no magic solutions will make it happen – just high doses of leadership, consistency, transparency, trust and customer understanding. Learning this practice by experimenting it step by step will help today’s corporations to move from their “planning, commanding and controlling” process to a directing management that will engage all their associates to work and improve all together towards new and increasingly challenging goals.
Today’s business must not only be resilient, but also be well equipped to adapt in an agile way against adversity and challenges in terms of competitiveness and distinctive innovation.
Organizations can only win if they foster the talent, brains, hands and passion in 100% of their associates to make their ideal a reality. OKR is all about helping us accomplish this.