Why Should Software Development and Delivery Teams Care About OKRs and VSM?

Should software development teams bother about Objectives and Key Results (OKR), or is it just a fancy term for another performance evaluation metric? 

Let’s clear this right away: the OKR approach is not task or to-do checklists, or performance evaluations; it is not the same as software development KPIs or MBOs, and it definitely is not a project management target. 

Despite the perception that executives are the only ones who should worry about OKRs, a well-planned and strategically written OKR — when tied to business outcomes — will have an impact on software development teams. Why? Because an OKR approach will help track progress, drive team engagement, create a strong alignment with the company goals and ensure a place where the dev teams work with purpose — thus keeping them focused and driven. 

So the answer is yes, software development teams should absolutely be part of developing, implementing, and using an OKR process, just as they should be equally investing in Value Stream Management (VSM).

OKR and VSM have many of the same agendas and features so we will talk a little more in-depth about how these two complement each other to drive continuous improvement later in this post.

What does OKR stand for and why should you be using it?

OKR is a management approach that simply aims to track audacious and ambitious business objectives and their corresponding outcomes. Objectives are what need to be achieved — they are actionable, qualitative, and time-bound. Key results are verifiable information that helps establish and monitor progress against each objective — they are quantitative, time-bound, and help objectives be more actionable. While objectives can be long-lived (for example, you set an objective that needs to be achieved in one year), key results are progressing along the way. They make sure success is measurable and concrete.

OKRs help to answer these two questions:

• Where do we want to focus our improvement efforts?
• How will we measure whether or not our efforts are generating plausible outcomes?

According to London Business School, only a third of senior managers can name the top priorities of their respective companies. Meanwhile, only 16% of frontline teams know how their contributions connect to the enterprise’s priorities.

The disconnection between management, employees, and corporate priorities could be attributed to poorly crafted or non-existent OKRs. Goal setting is a foolproof way to bridge this gap, ensuring the strategic alignment of every team member with organizational goals.

According to John Doerr, the author of “Measure What Matters”, there are 5 key benefits to using an OKR process that impact software teams: focus, alignment, commitment, tracking, and stretching. 

Software teams find OKR process meaningful because they ensure:

• A common language: long-term strategies are divided into actionable quarterly goals
• Transparency: communication becomes informal and optimal across the company
• Accountability: employees take ownership of their responsibilities
• Alignment: A focus on execution is followed across the whole organization

For development teams, it’s not about the number of story points; for IT operations teams, it’s not about service level objectives (SLOs). Rather, for these teams and the business, it’s about metrics like sales per hour. Through an OKR process, people across the organization will better understand how they contribute to top-level objectives. 

[Find out How to monitor business goals with value stream management]

How does Value Stream Management help harness metrics and align with OKR metrics?

If there’s one overarching goal for all software development and delivery managers, it’s likely to be the continuous improvement of your team to support your organization’s vision and mission. And this is where the lean practice of VSM comes into play. One of the major goals of VSM is continuous improvement — it is a human endeavor. VSM is about managing the way you deliver value, not assessing if what you are delivering is valuable.

VSM gives you the power to connect everything in your value streams across the software delivery and development lifecycle — from planning to monitoring. It gives you:

• Visibility
• Unmet traceability
• Power to connect, automate, trigger activities, track data and synchronize

…which in turn enables you to harness metrics and gain alignment on OKRs — which ties it all back to business outcomes.

“The eight steps to an effective VSM implementation are the things that you need to do to improve your value stream — understand the value stream, identify it, understand lean, match your current state, measure it and — then there’s an implied in here — decide a direction for improvement and map out the future state based on — what is implied — the direction that you need to take to improve upon — make your improvement plans and implement them and then repeat. And so it’s very much a human endeavor. Again, all of these things are human steps that you have to do. You have to keep your brain engaged, evaluate these things, make decisions, and then implement them. You can’t automate all of this stuff away.” — Andrew Fuqua, SVP of Products, ConnectALL

OKR is all about setting Objectives that can be tracked with Key Results. VSM is all about minimizing waste in the value stream and optimizing the software delivery value stream. OKRs and VSM, therefore, go hand-in-hand in their overarching goal: figuring out what really matters and getting that done in a time-bound, efficient manner so that it all leads to improvement.

This one goal of improvement encompasses a great many other objectives, each very important in its own right. VSM metrics, lean metrics, or even value stream KPIs, from a business standpoint, give leaders access to aggregate business intelligence with details like changes to headcount, process, and tooling; development cadence including planning, funding, releases, or sprints; and metrics like process time, cycle time, lead time, flow time, wait time, value-added time, MTTR, escaped defect ratio, WIP, blocker data, queues, throughput and production impact, etc. 

The data-driven analytics that VSM triggers helps track an organization’s software and digital transformation journey to establish where it is today and how it can achieve the next level of development and delivery. This further enables lean budgeting that primarily focuses on early indicators of customer satisfaction. Lean budgeting, unlike traditional approaches, tends to view a business as a reasonably stable set of products or services that brings value to customers and a system of value streams through which it produces those products. Each of those customer-facing products or internal value streams is enabled by a cross-functional group of people who use processes and systems to get their job done. Because these value streams are continuous, we tend to measure them by analyzing trends. 

The OKR process is one way that mature Lean-Agile organizations approach setting, communicating, and monitoring goals on a regular basis. Defining and aligning around OKRs helps to link organizational and team goals in a hierarchical way to measurable outcomes. 

“The objective should be bigger (objectives are usually subjective). Key results should be measurable and focused on meeting the objectives. In value stream management, if OKR is a management tool to get everyone onto the same page in terms of vision and objective, the value stream should be tied to a key result and aligned to an OKR. For example, tie epics, features, and user stories to the OKR, which leads to traceability across the value stream. Manage the value stream to achieve your OKRs, but OKRs are not about the value stream and the effectiveness of the value stream unless you are a value stream leader in charge of improving the flow.” — Andrew Fuqua, SVP of Products, ConnectALL

This allows an organization to pivot faster and spend money where the business has the most impact – based on value stream, agile release train (ART), and/or team OKRs. Without the guidance of OKR, a particular value stream may end up using funds for something that doesn’t deliver the intended value the business needs, and subsequently, the organization cannot quickly release funds to something more innovative and in-line with what the market needs now.

Crafting an effective OKR strategy for software development teams aligned with business goals

The first step is to make sure that OKRs are not a replacement for performance KPIs. It’s an effective framework to prioritize work in line with the business goals and make sure that everyone moves in the same and right direction.

Before writing OKRs for dev teams, here are a few questions that you and your team together could answer: 

• What is its purpose?
• Why is it important?
• How do you know it’s successful?
• Does it support company goals?
• How are you going to accomplish it?
• Do you know the expectations of each one working towards it?

The second step is to use the FAST principle to scope out the OKRs.

1. Frequent discussions: setting goals is an essential part of ongoing talks about progress, resource allocation, prioritization of initiatives, and feedback sharing
2. Ambitious: setting ambitious goals lowers the risk of sandbagging
3. Specific metrics: track metrics and milestones that measure progress 
4. Transparency: aligns teams and team members with organizational goals. This eliminates the risk of feeling excluded or working on things that are non-value-added

[Also read Three Simple Strategies to Create Effective OKRs for Software Delivery Value Streams]

Three ways to set the stage for scoping out OKRs for software development:

Get the dev team on board with the plan: Involving each one in goal-setting allows them to express themselves. They can share how they want to work and spend their time at work. This can make them feel more involved, part of something big and meaningful, and also more willing to take ownership.  

Write, literally write the OKRs: OKRs have a very simple format and are easy to write. Coming up with effective and meaningful OKRs that align them across individual, team, project, and company tiers is more complex. Describe OKRs this way: “We will (Objective) as measured by (Key Results),” and this can be a collective activity. 

When you start crafting, remember the three core elements of an OKR: Objective, Key Results, and Deadlines 

How to set Objectives:

• Pick only 3-5 objectives
• Avoid words that don’t talk about new achievements (for example: “keep”, “continue”)
• Use words that talk about results (for example: “ship feature Z”, “improve speed by Y”)
• Use clear, objective, tangible words

How to set Key Results:

• Pick around 3-4 KRs per objective
• Use words that express measurable milestones
• Make sure they’re easy to document
• Describe outcomes, not activities 

[Read more about the common OKR mistakes and pitfalls and how to avoid them: How VSM Can Help You Steer Clear of These Six OKR Mistakes]

Set a flow and frequency cadence: Narrow down on grading and frequency using percentages or a scale. Then set a quarterly review cadence. You can draft the first OKR sets together, by having an annual plan in mind, and then make the final ones transparent across the entire organization.

Get inspired by these software development and delivery OKR examples

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

Examples of Team-oriented OKRs

1. Objective: Create a high-performing engineering team

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

2. Objective: Boost engineers’ career growth

• KR 1: Increase the promotion rate by 15% in 2022
• KR 2: Document career roadmaps for 3 most popular roles
• KR 3: Increase 1-on-1s satisfaction for the “career growth” section by 2 points

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

• KR 1: Deploy VPN
• KR 2: Set up the VOIP app for remote call management
• KR 3: 80% of all users log in at least 1 time in 30 days

Examples of Development OKRs

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

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

2. Objective: Improve the quality of the development process 

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

3. Objective: Improve the quality of product releases

• KR 1: Reduce bugs found during the development process by 20%
• KR 2: Improve unit testing coverage from 50% to 70%
• KR 3: Increase sprint capacity from 85 to 100 SP (story point)
• KR 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 bring 30% more leads 

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

2. Objective: Improve our testing procedures

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

3. Objective: Release high-quality products

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

Conclusion

The success stories of Google, LinkedIn, Intel, and many more have inspired businesses to adopt the OKR framework. However, some businesses fail to implement OKRs because of the lack of understanding among teams regarding the role OKRs play. Team OKRs should reflect and complement your corporate vision for the OKR to be effective. And VSM is the best way to make sure this alignment happens as its core nature is to connect and allow both bottom-up and top-down approaches to governance, and compliance, and stay on point with business strategies. Like with any management method, implementing OKRs must be done in the right way to be effective. When done properly, OKRs have the power to clarify focus, align the organization, and tap into the creative power of every member of your team. VSM can help accelerate OKR implementation. The major tenets of VSM can be used to increase things like waste elimination and end-to-end improvement. By using the strengths of VSM, organizations can achieve the larger goal of business outcomes, improve agility and velocity, become more predictable by delivering value, and focus on what matters.

Want to know how a VSM solution can help you and your teams align on OKRs? Contact us and schedule a one-to-one consultation with our experts.