Six OKR Pitfalls That VSM Can Help Avoid

In 2020, a majority of the workforce shifted to remote work. At the same time, another fundamental shift took place: Organizations worldwide, regardless of size, turned to objectives and key results (OKRs) to maintain alignment, while adapting to rapid changes in the business landscape.

OKRs offer an effective approach for achieving ambitious objectives. This is because they compel individuals, teams, and companies to clearly define their goals within specific timeframes and in measurable terms. By establishing an objective (a broad mission statement) and multiple key results (tangible, measurable outcomes), significant progress can be accomplished in a systematic and efficient manner.

The OKR framework is a potent tool for maintaining focus on desired outcomes, without resorting to micromanagement. While creating OKRs is a step in the right direction, their effectiveness hinges on how well they are formulated. To be successful, it's crucial to avoid common pitfalls, which is where Value Stream Management (VSM) comes into play.

The Role of VSM in enhancing OKRs

As with any management method, the success of an OKR implementation depends on the quality of its execution. When executed correctly, OKRs can provide clarity, align teams across an organization, and tap into the creativity of every team member.
Lean practices like VSM can accelerate the adoption of OKRs. These two approaches complement each other in enhancing performance, particularly in those organizations operating in a scaled-agile fashion. The principles of VSM can help teams reduce waste and improve processes.

By leveraging the strengths of VSM, people across organizations can attain broader business objectives, enhance agility and speed, deliver value more predictably, and stay focused on what truly matters.

OKRs and VSM share a common goal: Identifying priorities and achieving them efficiently and within specified timeframes, thereby enhancing overall performance. VSM enables the connection of all components in the value stream, employing metrics and aligning with OKRs that ultimately link back to business outcomes. It's not merely about story points for development teams or service level objectives (SLOs) for IT operations. Instead, it's about top-level metrics like sales per hour. Through OKRs, employees across the organization gain a clearer understanding of their contributions to high-level objectives.

Common OKR mistakes and how to avoid them

A mid-sized financial services company with over 600 employees, ACTFS was one of many organizations that embarked on an OKR journey in 2020. Seeking to foster growth through transparency and alignment among departments, ACTFS started to implement an OKR framework. Early in this process, teams within the company made the following common mistakes:

• Setting objectives and results incorrectly. Across ACTFS, teams erred in determining objectives and results. In some cases, teams set too many, while others set too few. In addition, others used low-value or imbalanced factors. OKRs should prioritize key goals, not serve as exhaustive lists of tasks. Striking a balance is crucial.
• Taking a top-down approach. ACTFS took a top-down approach to OKRs, limiting creativity and autonomy. Top-down approaches to OKRs can hamper motivation and overall performance. Collaboration and trust are integral to effective OKR implementation.
• Confusing tasks with results. Teams in ACTFS misconstrued key results as tasks rather than the measurable outcomes of actions. It's vital to distinguish between daily tasks and the overarching goals and outcomes they aim to achieve.
• Neglecting progress tracking. The organization lacked a process for tracking OKR progress. Instead, teams treated OKRs like New Year's resolutions that could be set in January and forgotten by February. To be successful with OKRs, it is essential to establish consistent, ongoing tracking of progress and to integrate them into the organizational culture.
• Misusing OKRs. ACTFS misused OKRs, applying them to employee performance evaluations, which worked against the framework's intended purpose. OKRs are a management tool, not an evaluation metric, and they should not influence compensation discussions.
• Setting non-measurable key results. Within ACTFS, teams faced challenges in setting measurable key results, which undermined the effectiveness of their objectives. Measurable outcomes are essential for gauging objective achievement.

More common mistakes and VSM's role in addressing them

In establishing OKRs, teams encounter other common mistakes, including siloed development, short-term focus, blind replication of practices, communication gaps, unrealistic objective setting, and ineffective resource provisioning. Here’s how a VSM solution can help mitigate these issues:

• Siloed development. VSM eliminates silos by centralizing data, promoting communication, and fostering data-informed OKR development.
• Short-term focus. VSM provides a baseline for setting ambitious OKRs based on measurable data, which helps inform the team’s long-term vision.
• Blind replication. VSM offers context that can be used to tailor industry practices effectively to specific requirements, ensuring results are relevant and accurate.
• Communication gaps. VSM facilitates a strong focus on communication, exposing metrics to inform and guide OKR development.
• Unrealistic objectives. VSM supplies performance insights to ground OKRs in attainable goals, preventing the creation of unrealistic targets that stifle motivation.
• Ineffective resource provisioning. VSM exposes gaps and areas of weakness, enabling informed decisions on resource allocation.

Keys to maximizing OKR success

Here are tips to enhance OKR effectiveness:

• Limit objectives and results. Set three to five objectives and two to four key results per department per quarter.
• Align rather than cascade. Balance top-down and bottom-up approaches to set OKRs in a collaborative fashion.
• Differentiate objectives and tasks. Clearly distinguish high-priority objectives from tasks and milestones.
• Establish tracking cadence. Regularly track progress through weekly, monthly, and quarterly assessments.
• Foster aspiration. Use OKRs to challenge employees' limits, encouraging innovation and growth.
• Employ SMART goals. To optimize precision, follow the SMART framework, establishing goals that are specific, measurable, achievable, realistic, and timely.
• Do regular refinement. On a quarterly or annual basis, redefine OKRs to enhance accountability and improvement.

Conclusion

In summary, the combined adoption of OKRs and VSM can fuel improved alignment of efforts, ensure the establishment of realistic goals, and foster continuous improvement—so organizations achieve higher levels of success.

If you want to learn more about our VSM platform, and how it can provide the critical metrics integration your teams need, be sure to contact the Broadcom ValueOps team today.