Why PMOs Should Use Objectives And Key Results For Strategy Execution

The following article has been published at Forbes.com on July 22nd 2021 (link to my blog)

In my experience helping organizations with project portfolio management, most have struggled to truly connect to their overall strategy components. In most scenarios, the project management office (PMO) introduces the use of “business drivers” as a way of connecting initiatives with strategy components. However, these are hard to rank, and even harder to measure project success against.

One of the obstacles is that each project quite often comes with its own “business case” for which ROI has been calculated based on the proposed budget and planned business benefits. This means that strategic importance and ROI both drive gate decisions, making it difficult to streamline portfolio prioritization processes.

I’ve also witnessed companies struggling to connect agile (fixed) teams to realize the strategy as a whole. Often, teams are connected to a single product, which means they lack the ability to look across products. In my experience, I’ve never seen an agile team with an empty backlog, nor have I seen a backlog that doesn’t have any high-priority items in it. This means that agile (product) teams are almost always under pressure with something important to work on.

That’s not always the case from a top-down perspective, and leaders must find a way to check if the teams are relevant and looking ahead. This requires more than just looking at a backlog, and brings us back to connecting teams, products, projects and initiatives to the company’s mission or vision.

There are many frameworks out there trying to digitalize and simplify the way management teams can plan, execute and track their strategic plans. Unfortunately, most of these do not explain it in a project portfolio management — or agile teams — context.

When I stumbled upon the objectives and key results (OKRs) approach, I discovered that this is part of the Scaled Agile 5.0 framework that enhances the use of themes. I also found out that companies like Google, Bono and the Gates Foundation use OKRs in their strategies. Here’s what I learned about OKRs along the way:

What are OKRs? The OKR approach is essentially a tool and method that helps organizations set ambitious goals that departments, teams and even individuals can connect to. The goals should be able to be easily tracked in a transparent way. The output from this is a higher degree of alignment with a goal-centric view to measuring success.

What are objectives? An objective is the non-tangible expression of something significant the organization would like to achieve. It should be briefly described in one sentence (up to 14 words), and you should not have more than five total objectives. Examples of objectives include “Amazing revenue growth” and “Best-in-class user experience.”

What are key results? For each objective, you must define a certain amount of “key results.” These are the tangible aspects of your objectives and should, therefore, be tracked as percentages, numbers or currency. Each key result should also contain the current baseline, the target and when you expect it to happen. Examples of key results include “$1.5 million turnover in APAC in 2021” and “Increase user satisfaction by 80% in 2022.” 

How do projects and initiatives fit in? My experience from the field is that projects and initiatives should connect to a primary key result. This also means that a project, which plays a major role in realizing a key result, should not necessarily carry the business case or business benefits.

Imagine wanting to reach 200% product revenue growth, which will involve several marketing campaigns, new hires and perhaps an upgrade to the CRM system. Each of these initiatives receives approval, as, together, they are expected to help the organization reach the “key results” goals and overall objectives.

Managing these projects and initiatives is often similar to managing any other project. There will most likely be a project manager, a timeline that explains the tasks and milestones, a budget and a way of tracking progress. This information will be of high value to the owner of the key results if running initiatives are being executed as planned.

How do KPIs and OKRs relate to each other? Although most organizations have become very strong in breaking down their vision and mission, there are more maintenance-oriented components to measure against. These are often referred to as key performance indicators (KPIs) and should be seen as “business-as-usual” drivers, which, of course, are also of high importance.

An example of a KPI is to sustain a minimum of 15% EBITDA per year. There will not be any stand-alone project or initiative that supports this. Instead, several processes will be involved, such as tracking hours with a timesheet tool each week.

Both KPIs (with supporting processes) and OKRs (with supporting initiatives) should be available to track the organization’s overall strategic performance. However, where the OKRs play an important role for the project portfolio management team, KPIs do not.

What else should you know about OKRs? With the introduction of Scaled Agile 5.0, OKRs were added to “strategic themes” to improve the connection between enterprise strategy and portfolio vision. Strategic themes are broken down into key results and further linked to value-stream KPIs.

I don’t believe in a one-size-fits-all approach when it comes to designing portfolio management in a strategic context. Generally, I would argue that organizations still need portfolio management to steer all IT projects in the right direction and with the same set of governance. Some of these initiatives might be of strategic OKR importance, but not all. For those initiatives that are directly linked to reaching a strategic goal, it would make sense to “tag” these with a key result, allowing the strategy to be linked to a portfolio-type view of the work that takes place.

It’s time for organizations to reconsider how they break down their strategies and connect them to the workforce as a whole. OKRs allow you to implement a standard that spans across traditional, hybrid and agile teams. With OKRs, teams will know when they’ve achieved their goals and when they can celebrate!

Leave a Reply