The Importance of OKRs and VSM for Software Development and Delivery Teams

Is it essential for software development teams to pay attention to objectives and key results (OKRs), or is this term merely a sophisticated label for yet another performance assessment measure? Let's swiftly dispel any confusion: The OKR methodology doesn't equate to task checklists, to-do lists, performance evaluations, software development key performance indicators (KPIs), management by objectives (MBOs), or even project management targets.

Some have the notion that only executives should be concerned with OKRs. On the contrary, a meticulously planned and strategically formulated OKR that is interconnected with business outcomes exerts a significant influence on software development teams. Why, you ask? The OKR approach acts as a guide to ignite team involvement, monitor advancement, and establish strong alignment with company objectives. Ultimately, OKRs cultivate an environment in which development teams operate with a sense of purpose and effectively maintain their focus and motivation.

Therefore, the answer is a resounding yes—software development teams should actively participate in adopting, shaping, and executing the OKR process, just as they should invest in Value Stream Management (VSM). Both OKRs and VSM share numerous common goals and attributes. Later in this discourse, we'll delve deeper into how these two strategies complement one another to propel continuous improvement.

OKRs: What they are and why they should be adopted

OKRs represent an operational methodology that encourages the establishment of ambitious business aspirations and the focus on efforts that achieve those outcomes. Objectives constitute the specific achievements being targeted. Objectives should be actionable, qualitative, and bound by time. Key results provide measurable data that aids in gauging and supervising progress in relation to each objective. These results must be quantitative, time-bound, and enhance the actionability of objectives. Objectives can extend over a prolonged duration, such as a year. To ensure that success is tangible and quantifiable, results must evolve along the way.

OKRs serve to address these pivotal queries:

• Where should our improvement efforts be directed?
• How do we assess whether our endeavors are yielding actual results?

According to research from the London Business School, just one-third of senior managers can identify their companies' foremost priorities, and only 16% of frontline teams comprehend how their contributions link to the enterprise’s overarching priorities.

This disconnect between management, staff, and corporate objectives can be attributed to poorly formulated or nonexistent OKRs. The establishment of goals serves as an essential means to bridge this gap, guaranteeing that each team member is strategically aligned with organizational objectives.

In his book, "Measure What Matters," John Doerr outlines five pivotal advantages of adopting an OKR process that deeply influences software teams: concentration, alignment, dedication, monitoring, and expansion. For software teams, the OKR process holds significance because it ensures:

• A common language. Long-term strategies are translated into actionable quarterly objectives.
• Transparency. Communication becomes informal and optimal throughout the organization.
• Accountability. Employees take ownership of their responsibilities.
• Alignment. An emphasis on execution reverberates throughout the entire organization.

For development teams, the focus is not on story points. For IT operations teams, it's not limited to service level objectives (SLOs). Instead, for these teams and the business as a whole, OKRs revolve around such strategic metrics as sales per hour. Through the implementation of the OKR process, individuals across the organization gain a clearer understanding of their contributions to top-level objectives.

How VSM aligns with OKR metrics

If there's a single overarching objective that encompasses the aspirations of all software development and delivery managers, it is the focus on continual enhancement to strengthen their team’s contributions to their organization's vision and mission. This is precisely where the lean practice of VSM becomes instrumental. A key focus of VSM is driving teams to make persistent improvements. VSM centers on refining the way value is delivered, rather than assessing the value of the delivered outcomes.
VSM empowers you to unify all components within your value streams, including across the software development and delivery lifecycle, from planning to monitoring. This empowerment includes:

• Enhancing visibility
• Addressing traceability gaps
• Leveraging capabilities to connect, automate, trigger actions, monitor data, and synchronize activities

Consequently, VSM facilitates the use of metrics and aligns with OKRs, tying everything back to business achievements.

OKR methodology revolves around the establishment of objectives that are quantifiably traceable through key results. On the other hand, VSM centers on optimizing the value delivery process and minimizing waste within the value stream. In essence, OKRs and VSM share a common overarching objective: They both seek to help you decipher what truly holds significance and accomplish it with maximum efficiency and within a defined timeframe, all in the pursuit of continuous improvement.

This pursuit of improvement encompasses a multitude of secondary objectives, each having substantial importance in its own right. From a business standpoint, VSM metrics, lean metrics, and value stream KPIs offer leaders a comprehensive view of business intelligence. These metrics can provide insights into changing headcount, processes, and tools. They can offer a gauge of development frequency, encompassing planning, funding, releases, and sprints. They can also feature metrics like process time, cycle time, lead time, flow time, wait time, value-added time, mean time to repair (MTTR), escaped defect ratio, work-in-progress (WIP), blocker data, queues, throughput, and production impact.

The data-driven insights facilitated by VSM analytics enable leaders to track their organization's progression in software development and digital transformation. Through this analysis, leaders can determine the organization's current status and set a course for the next phase of development and delivery. Further, this framework enables the adoption of lean budgeting, which focuses on early indicators of customer satisfaction. Unlike conventional approaches, lean budgeting perceives a business as a relatively stable amalgamation of products or services that deliver value to customers through a network of value streams. Each value stream is sustained by a cross-functional group of individuals, who use processes and systems to fulfill their roles. Because these value streams are ongoing, assessment is often based on trend analysis.

The OKR process is a framework that mature Lean-Agile organizations can employ to establish, communicate, and monitor objectives on a regular basis. The definition and alignment of OKRs facilitate the hierarchical linkage of organizational and team goals to quantifiable outcomes. This synchronization empowers an organization to swiftly pivot and allocate resources where they would have the greatest impact—whether according to the value stream, Agile Release Train (ART), or team OKRs. Absent the guidance of OKRs, a specific value stream could inadvertently allocate resources to endeavors that fail to deliver the intended value. This misallocation hinders the organization's ability to promptly apply resources to the most innovative and market-relevant ventures.

Developing a strategic OKR approach for software development teams

To start, it is vital to ensure that OKRs serve as a complementary tool, not a replacement, for performance KPIs. This framework is effective in guiding work prioritization in harmony with business objectives, fostering alignment and collective progress.

Before drafting OKRs for development teams, it is crucial to collaborate with stakeholders and consider these questions:

• What is the team’s fundamental purpose?
• Why does the team hold significance?
• How will the group’s success be determined?
• How does the team contribute to overarching company goals?
• What strategies will be employed for goal achievement?
• Are the expectations of all contributors well defined?

Subsequently, the utilization of the FAST principle becomes pivotal in shaping OKRs:

• Frequent discussions. The act of goal setting becomes an integral aspect of ongoing conversations regarding progress updates, efficient resource allocation, initiative prioritization, and the exchange of feedback.
• Ambitious. Crafting ambitious goals encourages a bolder outlook and curtails the natural propensity for teams to set conservative targets.
• Specific metrics. Teams must consistently track metrics and pivotal milestones that gauge advancement.
• Transparency. Aiming for transparency ensures teams and team members are aligned with overarching organizational aspirations. This approach effectively eradicates feelings of exclusion and precludes the pursuit non-value-added endeavors.

Three ways to set the stage for scoping software development OKRs

1. Get the development team on board with the plan

Involve each development team member in goal-setting efforts. This allows them to express themselves. Individuals can share how they want to work and spend their time. This can make them feel more involved, more like they are a part of something big and meaningful, and more willing to take ownership.

2. Write down your OKRs

OKRs have a very simple format and are easy to write. Coming up with effective and meaningful OKRs that align across individual, team, project, and company tiers is more complex. Work collectively and describe OKRs this way: “We will (objective) as measured by (key results).”

When you start crafting, remember the three core elements of an OKR: objective, key results, and deadlines.

How to set objectives:

• Pick only three to five objectives
• Avoid words that don’t talk about new achievements (for example, “keep” or “continue”)
• Use words that talk about results (for example, “ship feature Z” or “improve speed by Y”)
• Use clear, objective, and tangible words

How to set key results:

• Pick three to four key results per objective
• Use words that express measurable milestones
• Make sure key results are easy to document
• Describe outcomes, not activities

3. Set a flow and frequency cadence

Narrow down on grading and frequency using percentages or scales. Then set a quarterly review cadence. You can plan and draft the first year’s OKRs together at one time, and, when final, share them across the entire organization.

Examples of inspiring OKRs for software development and delivery

What are some good OKRs for software development teams? Here’s a list of relevant examples that product, project, Agile, and DevOps managers may find inspiring.

Examples of team-oriented OKRs

1. Objective: Create a high-performing engineering team

• Key result 1: Hire 10 new engineers by end of the quarter
• Key result 2: Document, set, and track specific performance KPIs and metrics
• Key result 3: Attend two engineering events or conferences in the next quarter

2. Objective: Boost engineers’ career growth

• Key result 1: Increase the promotion rate by 15% in 2022
• Key result 2: Document career roadmaps for the three most popular roles
• Key result 3: In the “career growth” section of one-on-one reviews, increase satisfaction ratings by two points.

3. Objective: Switch to a remote-friendly work environment

• Key result 1: Deploy VPN
• Key result 2: Set up a VoIP app for remote call management
• Key result 3: 80% of all users log in at least one time in 30 days

Examples of development OKRs

1. Objective: Improve code quality by the end of Q1

• Key result 1: Decrease load time by 50%
• Key result 2: Reduce code duplication by 100%
• Key result 3: Document 100% of my code
• Key result 4: Reduce runtime warnings by 100%

2. Objective: Improve the quality of the development process

• Key result 1: Implement a process to assess the development tools being used
• Key result 2: Reduce the number of customers who reported bugs by 25%
• Key result 3: Increase mandatory educational development time to one week each quarter

3. Objective: Improve the quality of product releases

• Key result 1: Reduce bugs found during the development process by 20%
• Key result 2: Improve unit testing coverage from 50% to 70%
• Key result 3: Increase sprint capacity from 85 to 100 story points
• Key result 4: Individual developers contribute 20% more code reviews by the end of every sprint

Examples of product quality OKRs

1. Objective: Build products that can generate 30% more leads

• Key result 1: Develop three products before the end of the year
• Key result 2: Speed up the loading time of current products by 50%
• Key result 3: Overcome the limitations of existing products before the end of the year
• Key result 4: Improve performance maintenance coverage by 100%

2. Objective: Improve our testing procedures

• Key result 1: Implement test-driven development in three new development teams
• Key result 2: Increase unit test coverage to 75% of the code
• Key result 3: Conduct a security assessment of our codebase using automated tools

3. Objective: Release high-quality products

• Key result 1: Decrease the number of bugs by 35%
• Key result 2: Speed up the content approval process by 20%
• Key result 3: Decrease the QA process time by 50%

Conclusion

The success narratives of companies such as Google, LinkedIn, Intel, and others have sparked a trend in businesses adopting the OKR framework. Despite this, certain businesses encounter challenges when trying to put OKRs into practice. Often, this is due to teams' limited comprehension of OKR’s role. To be effective, team OKRs need to harmonize with and complement the overarching corporate vision. This is where VSM emerges as the optimal approach, as it inherently fosters connections, enabling both bottom-up and top-down governance and compliance. Ultimately, VSM helps ensure alignment with business strategies.

As with any management approach, the implementation of OKRs must adhere to the methodology’s principles to yield maximum results. Skillfully executed, OKRs possess the potential to enhance clarity of focus, strengthen organizational alignment, and more fully harness the creative capabilities of all team members. The incorporation of VSM can expedite the deployment of OKRs. The core principles of VSM can be leveraged to reduce waste and achieve comprehensive enhancements. Through the strategic utilization of VSM's strengths, teams across an organization can concentrate on what truly counts, attain broader business objectives, bolster agility and speed, and enhance predictability in value delivery.

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.