What To Do When Every Priority is Critical
I often come across companies where everything is a top priority. Let’s take a look at a fictional corporation, Acme Bank, where revenue was low last quarter. Like many, their natural response is to cut expenses. At the same time, customer satisfaction is at an all-time low and employee engagement is rapidly decreasing. Adding fuel to the flame, auditors are becoming increasingly critical (which, of course, they technically should be in such a highly-regulated market). Staff are complaining about a lack of clarity, direction and focus. So, which areas would you recommend Acme Bank to focus on to bring the ship back on course? How can they start using OKRs the next quarter?
No Piece of Cake
OKRs demand leaders to make tough choices. OKRs are about the (often extreme) focus that helps employees understand what is most important right now. In today’s 24/7, “always on” culture, your employees are bombarded which large amounts of information. Company goals, team goals, individual goals, innovation trends, social media, news, private lives, raising children. All that information needs to be processed and humans have limited cognitive capacity. Their mental hard drive is full. They aren’t the only ones.
As an executive or manager, you’re also faced with a constant barrage of choices ranging from Do we stop with product X? Do we hire that star engineer with the bad reputation? Do we green-light the new marketing campaign? Basically, how can we stop the hemorrhaging? There is a ceaseless procession of questions that must be answered: yes or no? Each question and answer has its own domino effect; if this, then that.
It is the responsibility of today’s leaders to make these tough choices and put only the most important goals into your OKRs. By putting a spotlight on your bottomline priorities, you’re winning on two fronts: identifying what matters most, and by default, providing yourself with the appropriate ammunition to say no to the many initiatives that, while tempting, are not in line with your goals.
Be Bold: A Single OKR to Rule Them All
In the case of our fictional corporation, Acme Bank, it certainly seems impossible to set priorities and create focus. Of course, OKRs won’t magically solve your prioritization problems, however the do provide a critical thinking framework; a special lens through which to see what is the most valuable thing you should be focusing on. As you might know, I’m an advocate of having one single OKR [Wodtke, Radical Focus, 2016] at the corporate level. This will force you to devote attention to one thing at a time, even when you and your employees are put under pressure. How can you select a single OKR in such a challenging scenario?
Get to the Root of It
First, you will need to do a root cause analysis. Let’s unravel the Acme Bank case mentioned earlier. The top priorities for Acme Bank are: reducing cost, customer satisfaction, and employee engagement. Are there relationships between these areas, dependencies, or both? My favorite tool is the five whys technique from lean manufacturing; it is my Swiss Army knife in most of my coaching engagements. Other techniques I often use are from the systems thinking domain. The Fifth Discipline by Peter Senge is a great introduction for managers into systems thinking. So, which area should the folks from Acme Bank concentrate on? Let’s zoom in on the three areas indicated above and examine them these lenses on.
Balancing the Books
When you look at cutting costs, one of the root causes could be that costs weren’t managed properly. According to Paul Leinwand and Vinay Couto, Principals at PwC USA, there are five big mindset shifts that can help you and your organization manage costs in the right way.
- connect costs and strategy
- rethink costs in terms of capabilities
- list all the expenses related to the activities of the enterprise, move them into a metaphorical “parking lot,” and then, one by one, decide whether to let them back in
- make your cost-management plan sustainable
- be proactive; fix the roof while the sun is shining
Developing a company’s value framework could help here. I like how Joshua Arnold divides the Opex vs Capex. In the context of a bank, he mentions four buckets; increase revenue, protect revenue, reduce costs and avoid cost buckets. Most banks focus on increasing revenue (changing the bank) and reducing costs (operating the bank). Instead, it might be better, for example, to avoid costs like avoiding data breaches, fines, and negative branding experiences. Understanding value can help tremendously in choosing priorities.
One Star out of Five
Looking at low customer satisfaction, a potential root cause could be poor customer experience which invariably leads to high customer turnover. If we analyze the Acme Bank, we are not surprised to notice a typical vicious cycle: low customer satisfaction -> high customer turnover -> lower profits). So how can we break the cycle? The short version: get the basics right, remove obstacles for your customers and quit trying to “delight” your customers.
Low employee engagement will inevitably cost Acme Bank big bucks. A few things that you can count on will be whispered complaints between colleagues at the water cooler, followed by a lag in meeting deadlines and finally, your star employee will either leave or give you an ultimatum.
An article published by the Harvard Business Review titled The High Cost of Lost Trust by Tony Simons puts it perfectly: “We hypothesized that when employees sense an inconsistency between what their bosses say and do, it triggers a cascade of effects, depressing employees’ trust, commitment, and willingness to go the extra mile. These effects, we reasoned, would reduce customer satisfaction and increase employee turnover, harming profitability.”
Decide what to do next
Let me be clear: your people are not the problem. The problem is woven into the fibres in the system. If you understand the system, study and understand the root cause, you can shift focus to that area specifically and stop the hemorrhaging. Ask yourself “if every other area of our operation remained at its current level of performance, what is the one area where change would have the greatest impact?”.
Revisiting Acme Bank, their focus will be internal. The leadership team at Acme Bank decided to first attend to improving customer satisfaction by providing excellent customer support, rather than the knee-jerk reaction of slashing expenses. They are going to protect revenue by keeping existing customers onboard. Also, they decided to implement weekly OKR check-ins to communicate, share the current status openly and honestly, create Objectives together, and track the new direction of the company.
OKR Check-ins: Consistent Clarity
Once you have decided on your number one priority, your single OKR, use the weekly OKR check-ins as a vehicle to communicate priorities consistency. This massively impacts employee engagement as well because people will get progress updates on a weekly basis. Consistency is key here. Make sure as a manager you don’t change your mind on your goals.
The effects of clear, consistent, open and honest communication will be felt rippling through your business and will most definitely reflect in revenue. Psychological safety is reinforced when managers follow through on their promises and demonstrate the behaviour and attitude that they expect from their staff and teams. It seems strange to say that such a hazy concept can lead to sustainably more profit, but it’s a trend that we see time after time and furthermore, is a concept at the top of the list of effectiveness.
Prioritizing OKR Initiatives
Many product development organizations have issues deciding on which OKR initiatives to work on. Even organizations that operate with some form of “Agile” aren’t spared. Scrum doesn’t address which projects to start nor about when to stop and move on to something else. In all honesty, the same applies for selecting tactical OKRs or OKR initiatives and that is why, as mentioned earlier, developing a value framework is key (watch Joshua Arnold in a recent interview speak about this topic).
Sometimes the prioritization problem lies deep in your organization. More often than many would like to admit, prioritisation is driven by the Highest Paid Person’s Opinion or HIPPO. Even if you are using other techniques like Eisenhower’s prioritization matrix, Value and Effort matrix, Value and Risk matrix and Value and Complexity matrix to name a few. Most famous is the MoSCoW prioritization model and the Diagram prioritization model. However, these models won’t solve your HIPPO problem.
In a product development domain, there are some other interesting prioritization techniques available for you can look into. One of them is Cost of Delay Divided by Duration, or CD3. CD3 is a way of expressing the impact time will have on the outcomes (or for us, Objectives). Think of it in terms of this commonly asked question at boardroom tables: “What would doing x,y,z cost us if we delayed by a month?” or perhaps, “Would it be worth it to us to have this accomplished one month earlier?” Personally, I use this as a mental model when helping clients with setting priorities on OKRs and initiatives. What about you? Let me know what your favorite technique is.
- Making tough choices: 1) pick what matters most and therefore 2) ammunition to say “no” to tempting options
- Consider one single overarching OKR that will guide other OKRs
- Analyse the root cause using the Five Whys technique
- Develop your company’s value framework: increase revenue, protect revenue, reduce costs and avoid cost buckets
- People are not the problem; the issue is often more subtle and will require creative thinking ie. improve customer satisfaction by providing excellent customer support to generate increased revenue rather than slashing expenses
- Clear, consistent, open and honest communication (specifically at weekly OKR Check-ins) is unequivocally the best method for increased profit
- Consider different prioritization models: Eisenhower’s prioritization matrix, MoSCoW prioritization model and Cost of Delay Divided by Duration to name a few
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