Audacious portfolios

Borrowing Silicon Valley’s Objectives and Key Results approach to strategy to manage your own portfolio will allow your projects to flex and adapt, says John McIntyre. Speaking at the APM Portfolio Management Conference, he explained how to set ambitious objectives, compete against your own targets and dare to achieve greatness

Japan seems an odd choice of location in which to start my story. I’ve never visited, but an article in The Times back in 2017 about the impact of increased tourism in the country caught my interest and started me on a journey through Abenomics, building cathedrals and Silicon Valley start-ups. It is a journey that Larry Page and Sergey Brin went on when they built Google from nothing to a company with an $843bn market capitalisation. And it’s a journey that will help you align your portfolio with your organisation’s vision and inspire your project teams to achieve far more than they would dare to think is possible.

The article was by Tokyo-based correspondent Richard Lloyd Parry. He was reflecting on the impact tourism was having on the city, but the bit that caught my attention was that the Japanese government had set a target of 20 million foreign visitors a year by the time the country hosts the Olympics in 2020. It achieved its goal five years early, but rather than sitting back and celebrating its success, it doubled the 2020 goal to 40 million, with a target of 60 million for 2030.

As someone who has delivered projects and managed portfolios, these achievements sounded incredible. When the 20 million goal was first conceived, Japan had never seen visitor numbers above nine million. Setting a goal of more than double that must have felt almost impossible to those in the Japan National Tourism Organisation. Yet these almost impossible goals are often the ones that inspire true greatness.

Shooting for the moon

Andy Grove, former chairman and CEO of Intel, certainly thought so when he first coined the term Objectives and Key Results (OKRs). He observed that output is greater when everyone strives for achievements beyond their immediate grasp – even though trying means failure half of the time.

Project managers are not taught this. 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.

Moonshots

The OKR framework sets out to do something about that. It consists of an objective statement (where we want to go), supported by key results (quantitative statements that determine whether our objective has been achieved). The objectives are designed to be inspirational and challenging. They are the rallying cry that your portfolio teams will swarm around. The key results are designed in such a way that they can be measured on a scale from 0–1. If you don’t move the dial, you remain on zero. But as you move through the period, your team focuses on turning the dial ever closer to that ‘moonshot’ of 1.0.

Moving from nine million to 20 million visitors a year meant Japan hit its moonshot. But teams that consistently hit their moonshots are probably not stretching themselves enough. When Japan set its next goal, it was even more audacious than the first – driving itself ever forwards and competing with its own targets to achieve greatness.

Ambitious goals are one thing, but there is no point in shooting for the moon if your organisation’s mission is to shoot for the planet Venus. Management thinker Peter Drucker summed this up perfectly in his parable of the three stonecutters, who were explaining what they were working on. The first said, “I am making a living.” The second said, “I am doing the best job of stonecutting in the entire country.” The third said, “I am building a cathedral.”

In this parable, it is entirely possible that the second stonecutter may achieve their objective, but it may not be the right goal for the construction company. They could spend decades doing the best stonecutting in the country, but the job may well require stones to be cut within the week. The third stonecutter, however, is aligned with the vision of the organisation. While their focus may be on stonecutting, they are doing so with an eye to the wider goal of building a cathedral.

From start-up Google to portfolio management

When Google was a start-up, it used the OKR framework to define where it was going, to align its teams and to set itself ambitious targets. The framework has scaled with it and is still in use today. OKRs are defined at the highest level and are cascaded down. Everyone understands the vision, which is encapsulated by the objectives and measured by the associated key results. Individuals are granted the flexibility to set their own OKRs too, so that the top-down objectives are balanced with bottom-up objectives, which serve to prevent a silo mentality building up.

How does this link to 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. We had a portfolio plan! If not, we would make changes, swapping projects out and adding initiatives in – balancing capacity with requirement until we felt that we had it right.

Moving beyond milestones

Once the plan was agreed, we could track progress against key milestones. Indeed, these milestones were communicated widely. We celebrated when we hit them and doubled down with renewed fervour when we missed them. This approach is replicated across many organisations – and it is one that is fraught with difficulty.

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.

Applying the OKR framework to portfolios increases joint accountability, alignment and focus. Rather than starting with projects, we start with the OKRs. Defining the right three to five OKRs for the portfolio is vital. 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.

The process of agreeing the OKRs could warrant an article in its own right. There are passionate debates and pitches as people discuss what really matters – not how we layer projects, but what direction we should be heading in.

With the portfolio OKRs defined, communication is critical. Teams are encouraged to set their own OKRs that align with the portfolio objectives. The mappings don’t have to be precise, but teams should be able to explain how their key result of increasing the number of corporate applications running in the cloud by 34 per cent is going to support the overall objectives of the portfolio.

Putting the portfolio first

With OKRs drafted, teams go through an exercise of horizontal and vertical alignment. In large organisations it is almost impossible for a single team to deliver an OKR without aligning with other teams and other departments. The portfolio-level OKRs help break away from silo thinking. Rather than focusing on projects that compete with each other, people work together to align around the portfolio OKRs. Priority calls – when they arise – are made based on which action is most likely to turn the dials the fastest, and furthest.

The OKR approach puts business metrics at the heart of our portfolio. Projects become the ‘temporary endeavours’ that they were always supposed to be, instead of the cornerstones of our portfolios that they so often end up becoming. With an OKR approach, I have found it becomes easier to swap projects out and kill those that have passed their useful shelf life. Portfolios become more fluid and pivoting becomes easier – while never losing sight of the overarching OKRs.

John McIntyre is founder and CEO of PMO consultancy HotPMO. He has been responsible for the strategic planning process, portfolio planning and projects delivery in mixed-framework environments across a number of sectors

How to incorporate OKRs into your portfolios

Switching to an OKR-driven portfolio approach takes time. It is a system, like agile, that can be described as deceptively easy. The concept is simple, but it can take four or five quarters to implement and bed in. So, to help you on your OKR journey, I’d like to leave you with three pieces of advice that will serve you well when planning to incorporate OKRs into your portfolio management strategy:

Data must flow two ways. You may have a project management office in your organisation that is used to gathering information from project teams and sharing this with the business. With an OKR-driven portfolio, we expect teams to track progress against key results, which means information needs to flow in the opposite direction 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. When you adopt OKRs, you should be able to see the numbers against your key results steadily rising throughout the cycle. If your projects only deliver at the end of a period (or beyond), then you risk numbers staying flat. This can sap energy and belief 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. One of your big challenges will be mindset. People are reluctant to commit to objectives when there is a risk that they will not achieve them fully. Maybe they have been penalised for this in the past. 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.

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