Agility is not an end in itself; agile methods are intended to make companies more productive and efficient. In order to establish agility and achieve measurable success, a control system is required. The OKR method, in which "objectives" and "key results" (central intermediate results that contribute to the objective) are defined, is particularly suitable here. In the fourth and final part of the series "Agility in SMEs", Bernd Ettelbrück presents the management of agile projects using the OKR method.

Note from the TCI editorial team: Also read the previous parts of the series "Agility in SMEs" by Bernd Ettelbrück:

• Part 1: Agile methods in SMEs - basics, challenges and recommendations for action
• Part 2: Best practice and learning from mistakes: putting agility into practice
• Part 3: Triggers for agile working methods: Why companies are becoming agile

Measuring success through KPIs

Agility is not an end in itself, but serves a goal. KPIs help to achieve this goal. This already shows an important difference to traditional management, where KPIs are created externally to measure team performance. An agile company, on the other hand, should choose overall KPIs from which individual agile teams can derive their own KPIs in order to work better and provide orientation for their own work.

Specifically, the company RoI is formed from a system of team RoIs. This system decides autonomously how the available developer resources are used to generate the best possible team output, e.g. a product.

The two example companies Moovel and Zalando (see Part 3) have adapted their management system to agility. The Takkt Group is retaining its management system and supplementing it with some agile key figures. In its report to the Annual General Meeting in 2018, it states: "The core of the business model of the TAKKT companies is comparable despite their different focus in terms of regions, product ranges, customer groups and sales approaches. There are therefore no separate performance indicators for the divisions. Instead, the management controls the Group, the divisions, the individual divisions and all subsidiaries according to the same key figures."

OKR as a control system: defining objectives and key results

This article provides information on what an agile management system can look like. One such management system is OKR - Objectives and Key Results. The objectives should be motivating and challenging. The key results describe a measurable variable that is causally linked to the achievement of the objective. The achievement of the objective is measured and evaluated with the key results. The key results can also be used as a parameter for evaluating the performance of employees.

To Objectives resp. Goals a desirable state in the future is described.

A Key Result or an important performance indicator is a success parameter for target achievement. This means two things:

• Key results make a causal contribution to the achievement of objectives.
• Key results are measurable.

Ideally, a company should four to a maximum of five targets formulate and a maximum of four key results for each target or control variables. This is because too many goals at once are often lost sight of. With five clearly formulated future states, the risk of formulating conflicting goals is also low. One example of this is the often chosen goal of increasing sales while simultaneously focusing on fewer customers or increasing returns.

Key results contribute to the achievement of objectives

The achievement of performance indicators should contribute to the fulfillment of objectives. The questions of validity and reliability of targets and their metrics are therefore crucial. The targets should be so challenging that 100 percent target achievement is excellent and a Gaussian distribution of target achievement settles at 75 to 90 percent. If the payment of bonuses is linked to the degree of target achievement, you need to check what salary reduction you can justify to employees. If, on the other hand, 120 percent is regularly achieved, then the target is not formulated ambitiously enough.

Dealing with missed targets

Missed targets are not pursued further, but new ones are formulated. How realistic and how important is a goal that a team has not achieved after three months of intensive work? Should I continue to invest in it, or should I concentrate on something new? This is also an important difference to the approach of traditional companies: the timeline is almost always extended automatically and there are often additional budget "as punishment" for not reaching the targetbecause a project team needs funds to deliver the missed target. The money is then often used to finance something else. In this respect, it is sometimes worth not achieving goals.

How should goals be formulated?

To show you how NOT to formulate goals, here are some examples of unsuitable goals:

• Improving customer satisfaction
• Promoting teamwork
• Increase response rate for a customer satisfaction survey by five percentage points
• Make 20 calls per day or enter 5 new addresses per week into the CRM.
• Doubling sales in five years and improving the return on investment to 11%
• Increase gross profit by 5 %

These goals do not describe a state to be achieved in the future, but represent general wishes. High turnover and hard-working sales representatives are always good in some way. However, they do not move the company forward because they do not focus employees on the future and lack clear statements about the expected results for the coming quarter.

Objectives always refer to specific conditions at the end of a quarter so that a KPI can be increased.

Formulate goals correctly: Criteria

There is much discussion in the literature about how objectives should be formulated, which quality dimensions should be applied and which dimensions of success should be covered. In this article, we focus on these two criteria:

• The objective is an objectified description of the status in the future.
• Key results are causally related to the objective.

It is therefore not a question of whether achieving a target makes the company more successful or not. You can have a good discussion about a changed team structure or the effect of cost reductions. It's just a question of whether I can actually identify reduced costs.

Key results as a driver of success

All key results should contribute to the outcome. These are the success drivers that a team should implement. Making many phone calls per day or entering new addresses into the CRM system does not lead to new orders. Such "drivers" are measurable, but they are not the cause of a targeted higher sales value. The phrase "measured by..." can be a good help. If a goal can be measured by a key result by mutual agreement, it is an appropriate key result. If there is agreement on this, the team is completely free to implement it. The what is clear, the how is at the discretion of the individual employee or team. The self-sufficiency of a team is possible because agreement has been reached in advance on the objective and the control parameters.

Tasks: Tasks assigned to a key result

The number of calls per day are tasks. At best, they contribute to a key result, but they are not drivers of success. Similarly, an action plan is a plan and not a measure of success. Eating menus does not fill you up!

The same applies to the objective of increasing sales: this objective does not fulfill the first requirement of focusing and cannot be clearly described in terms of content. Turnover can be achieved through financial participation or through higher sales figures. It is not possible to directly derive a substantive reference to the performance of the individual in the team.

This can be controlled by OKR ("Objectives and Key Results")

OKR is a management method for controlling agility in companies. Among other things, it helps

• quarters of a financial year
• Allocate resources appropriately
• Inform employees transparently
• Involving employees in achieving the company's goals
• Linking long-term goals with short-term work planning.

Employees benefit from OKR in that quarterly target-setting meetings are held in which decisions are made on the use of resources. The next step is implementation - without hesitation. Operational excellence leads to an improved connection between the goals of individual teams and employees, an increase in the commitment of a target system and significantly greater measurability of progress.

Conclusion: Higher efficiency and more transparent performance measurement through OKR

With the right management system, the company focuses on achieving results and no longer on action plans and tasks for employees. In short, you no longer talk about the input, but about the output and therefore the outcome. Successful agile management therefore works primarily by defining objectives - how these are to be achieved remains open. This freedom allows the teams themselves to choose the appropriate path - at the same time, the clear objectives increase efficiency and the measurement of success becomes more transparent.

Source cover image: © adam121 | Adobe Stock