How to incorporate OKRs into your portfolios
John McIntyre is the founder and CEO of project management office (PMO) consultancy HotPMO. He is also a big fan of objectives and key results (OKRs). Andy Grove, former chairman and CEO of Intel, coined the term. The principle is that the output is greater when people strive for achievements that are beyond their grasp – even though it might result in failure.
“Project managers are not taught this,” says McIntyre. “They are taught to come up with realistic goals, with safety and contingency built in. Risk management features heavily, yet opportunity management seldom gets a mention.”
Google used the OKR framework when it first started up – the aim was to align teams towards a shared goal and set ambitious targets. They still use it today. McIntyre believes it’s a philosophy that should be adopted in portfolio management.
“As someone with a projects background, my approach to portfolio management mirrored my approach to projects. Lock down the scope and plan, then manage risk. The portfolio plan was usually constructed as a sum of the projects that were running within it. The portfolio outcomes were derived from the benefits we expected to see from the projects. If the outcomes broadly aligned with the business plan, then all was good.”
Progress would be tracked against key milestones, which McIntyre believes is full of challenges: “When focus on milestones intensifies, we take our eye off the dials we are aiming to turn, and when the list of projects is locked down, we reduce our ability to seize opportunities when they arise. Above all, we stop people thinking about how to achieve our audacious objectives, and we focus them on delivering on competing project plans.”
By applying the OKR frameworks to portfolios, everyone has the same accountability, alignment and focus, he explains. Portfolio teams should start with the OKRs, not the projects. Define three to five OKRs for the portfolio. “More than that and you simply aren’t focused enough. The key results need to be stretching and inspiring. It is important to balance these out so you avoid perverse incentives: increasing sales volumes is easy if there is no corresponding target that ensures those sales are profitable.”
Here are three pieces of advice from McIntyre for incorporating OKRs into your portfolio management strategy.
- Data must flow two ways.
Your PMO may operate in a way where they take information from project teams and share them with the rest of the business. With an OKR-driven portfolio, progress should be tracked against key results, so information needs to come to the portfolio team too. “For your portfolio team to turn dials, they need to have fast feedback loops so they can see business metrics changing as project teams deliver. Challenge your project management office to think about how they can deliver information into teams to drive effective decision-making within projects.”
- Encourage thin-slice delivery approaches.
You want to see key results steadily rising throughout the cycle if you’ve adopted OKRs. If your projects only deliver at the end of a period (or beyond), you risk your numbers staying flat. As a result, people will lose faith in the system. “Challenge your teams to adopt more incremental delivery approaches that see small packets of value being delivered frequently. This will allow everyone to see how their efforts are affecting the portfolio OKRs in real time.”
- You won’t always hit your goals – and that’s OK.
The people factor is the biggest challenge in implementing OKRs. Getting it to work requires a mindset change. Failure can be a difficult thing for people to accept, and it will be part of the mix when OKRs are in play.
“As portfolio manager, you will need to work closely with the leadership team to promote a culture where it is safe to take such risks and it is OK not to hit moonshots all the time. With OKRs we know that hitting our 1.0 targets on every key result may be almost impossible, but we know that striving for our audacious objectives will drive us further forwards than conservative and safe goals ever will.”
John McIntyre's article on OKRs appeared in the Winter 2019 issues of Project journal. Read the full article on audacious portfolios here (🔒).