We’re obsessed with outcomes. Yet after more than three years of running our business with OKRs and implementing OKRs for numerous clients, we still struggle to focus our Key Results on outcomes and not outputs. So we’ve asked ourselves the question: How do we really test for outcomes? Is there a litmus test of sorts that we can apply? It turns out that there is – and the answer lies in thinking about how we expend effort.
But first, here’s a quick recap on why the fuss about outcomes.
Outcomes are not inputs
An input is something you do; it’s an action or a task you complete. It’s the steps you take and what you provide.
Outcomes are not outputs
An output is what you produce from your action or inputs. It’s what you have to offer to stakeholders.
Outcomes are results
An outcome, then, is the result of your output. Your output is the product of your input. And outcomes include a healthy dose of contextual influence (i.e. it’s not all within your control).
Before we get into business, let’s look at an example. A sports team puts in many hours of rigorous training (input) so that they can play the game with confidence (output) so that they can win (outcome). Both the input and the output is relatively unaffected by the context or the environment. Their training is up to them to do and unaffected by what competitors do. Whether they play with confidence or not is up to them.
Outcomes are important
In another article, we’ve expanded on the motivation behind the focus on outcomes. Please have a look at this article, or better yet, download our white paper here. As a quick summary, an outcomes-based approach enables the following:
- Creating focus on the elements that add value
- Increasing employee engagement
- Encouraging innovation from more stakeholders
- Enabling scalability through empowerment
- Driving agility in responses
An outcomes-based approach is, in our view, the way that organisations will need to be managed in the future to remain relevant and competitive.
We use Objectives and Key Results (OKRs) to focus on outcomes – Key Results should be outcomes, not output.
The litmus test to differentiate outcomes from output
The answer is to think about the timing of effort expended to deliver on your OKRs.
Consider this first graph.
In this scenario, the OKR owners did very little during the quarter to progress their OKR; then, right before the end of the quarter, they pulled a few all-nighters and delivered. Unfortunately, two things are wrong with this scenario:
- The organisation is at risk of a fear-based culture. We see this because teams are sprinting to get to the line and not delivering throughout the quarter. The reason teams are sprinting towards the deadline is probably due to consequences if they don’t perform.
- The fact that they can pull all-nighters means the Key Results are probably input or outputs, not outcomes. If they can work through the night to get something delivered, the chances are high that the result will be no more than what they produce. In effect, there’s no impact on the business; all we have is an output.
And hence, we would argue that these OKRs are not OKRs at all.
Here’s another scenario to consider.
Scenario 1 and 2 are, in essence, the same. The only change is that the effort was brought forward, and the output was delivered sooner. The team set themselves a hypothetical deadline three weeks into the quarter and delivered against that deadline. Unfortunately, the culture remains as in scenario 1, and the output problem persists.
Here’s scenario 3.
Now we’re starting to get into the realm of outcomes. It’s very seldom that outcomes can result without distributing effort throughout an OKR cycle. Remember, outcomes are affected by the context and environment, which we need to test. It’s not clear what the result of the output will be, and we, therefore, need to launch, test, iterate, launch again, and so forth until we get the desired outcome.
Outcomes-based management is about distributed leadership. We are now truly distributing leadership because it’s up to the decentralised teams producing the output to test whether that output is delivering the outcomes. If not, they need to make alternative plans.
Here’s a real-world business example for a professional services company.
There’s no way this team can get to outcome 1 if they don’t test and learn on the way. They need to understand the best return on effort before the quarter ends and leverage that. A consistent expending of effort is required.
But then, they also need to improve those efforts over time, which would prove that they are systematising their efforts. For this, a baseline is required. And hence the reason for outcome 2. This might look like an output that can be delivered through all-nighters, but they need to understand performance throughout the quarter to set the baseline. Otherwise, it’s just a snapshot that is not useful. So again, a consistent expending of effort is required.
Some reservation of the “outcomes not output” litmus test
The “can you pull an all-nighter to deliver?” litmus test is not a perfect test, but it’s instrumental, as we’ve seen above. Two questions that might arise initially:
What about distributing effort throughout the quarter with a Key Result like “have 12 weekly meetings” or “train 20 hours per week”?
All you’ve done now is shorten your timeframe. It’s still an output or even an input. Short timeframes and small batch sizes are great, but it’s not our goal here. Our goal is outcomes.
What if we’re able to reach the outcome without the input and output?
The question here is, “what if the sports team can win without training?”. Then they haven’t set an ambitious goal. It will come down to culture again – why are they setting this goal at all if it’s so easy to reach? OKRs need to be inspirational and aspirational, and they need to stretch a team.
During the three or more years that we’ve been operating with OKRs, we’ve made many changes to our methodology (as it should be). The most significant change that has moved our mindsets from outputs to outcomes is the litmus test and creating a space to park inputs, tasks and initiatives. (Usually, they don’t have a place to live, which makes us want to park them in the space where Key Results are supposed to be.) Hopefully, our litmus test question can help with moving more mindsets from outputs to outcomes.