Execution is Everything

I have wanted to write a review of John Doerr’s book Execution is Everything since it was first published five months ago. Some of you are probably saying right now: “That’s not the name of his book!” This is true, but I decided to write this post as if the book had another title to attract a different audience that might not otherwise read the book. Many people who would benefit most from reading this book are the least likely to read it because the title may lead them to believe it is a book for engineers. Doerr has said a few times that my alternative title is the theme of the book, so I have not strayed too far from what he wrote and am instead trying the present the ideas from a different perspective. I do give readers the actual name of the book and a link at the end of the post.

In case you have forgotten since I took a week off, Doerr’s statements and writing are in bold text as is usual on this blog. My thoughts and commentary follow his quotations.

1. “Andy Grove, one of the the greatest managers of his, or any other, era told me something that I’ve never forgotten, ‘John, it almost doesn’t matter what you know. It’s execution that’s everything.'”

The idea that execution is what matters most has long been rallying cry for people who love to create important outcomes. Notice that in this sentence I used the words “matters most” which Doerr says sometimes in addition to execution is everything, which clarifies that execution is not the only thing. Doerr’s approach when saying execution is everything may be a bit like Howard Marks writing a book entitled The Most Important Thing which actually discusses a number of important things.

Placing the right focus on execution and actually executing well are easy to say, but hard to do in a world that is changing faster than it ever has before. In the book, Doerr quotes a business philosopher named Dov Seidman:

“‘In the past employees just needed to do the next thing right.’ In other words, to follow their orders. ’And culture didn’t matter so much. But in today’s world, we want people to do the next right thing. And a rule book is not going to solve that problem. You need your culture to make thousands of decisions the right way.”

These “do the next right thing” tasks are very different than traditional tasks since they require that a person or organization successfully adapt to change rather than just repeat a known process. The world is not only changing more quickly than it ever has right now but the pace of change is increasing. For this reason alone, creating a more scalable system for execution has never been more important.

2. “Andy invented a scalable system for execution.”

Doerr’s book focuses on a number of important questions, including:

What is the best way to create a modern scalable goal setting system?

What is the best way to avoid creating a system with so much structure and process that it gets in the way of desired objectives?

How does an organization or individual find the right balance between process and individual employee autonomy?

The nature of the challenges and opportunities that systems can create was beautifully and humorously described by Rear Admiral Grace Hopper, who famously once said: “Life was simple before World War II. After that, we had systems.” One of the most effective ways to learn about systems is to look at many examples of systems in operation. Among the most interesting and relevant systems to study are businesses. Of course, there are an endless number of permutations of this type of system and that diversity is what makes business an endless source of fun for people like me.

In creating a system Doerr quotes Jeff Bezos on the need to avoid what he calls the “institutional no.” Bezos puts it this way:

“I work hard at helping to maintain the culture. A culture of high standards of operational excellence, of inventiveness, of willingness to fail, willingness to make bold experiments. I’m the counterbalance to the institutional “no” who can say “yes.” I’m not going to be here forever. Many of the traits that make Amazon unusual are now deeply ingrained in the culture. In fact, if I wanted to change them, I couldn’t. The cultures are self-reinforcing, and that’s a good thing.”

The most effective businesses fight the tendency of organizations to become more conservative with time. Does a company tolerate the failure of intelligent experiments? Does the business have an intelligent risk taking culture? Bezos likes to say that “every day should be day one” at Amazon. One of the most powerful ways for an organization to stay vital and adapt is to take advantage of and respond to different kinds of feedback. The impact of feedback has increased as the world has become more digital. Both the greatest opportunity and challenge faced by businesses and investors today is dealing with these increasingly powerful positive and negative feedback loops. An ad hoc approach is unlikely to be successful.

3. “Andy Grove created a system for goal setting that was deceptively simple.” “Objectives are the what. Key results are the how. If I achieve those hows, those key results, I will provably get to the objective.” Objectives are significant, concrete, action oriented, and (ideally) inspirational.” “They are typically longer lived. They’re bold.” “When properly designed and deployed, they’re a vaccine against fuzzy thinking—and fuzzy execution.” “The key results are aggressive, but always measurable, time-bound, and limited in number.” “They’re aggressive but realistic, but most of all, they’re measurable and verifiable.” “It’s not a key result unless it has a number.” “How do we set meaningful audacious goals?”

Doerr describes the OKR system as: “a collaborative goal-setting protocol for companies, teams, and individuals.” In order to explain OKR concepts in a way that is more understandable, Doerr selected a different name than Grove used to describe his system. I am not going to tell you that name since it is confusing. In creating his own terminology Doerr wanted readers to break free of old mental models so they can look at the system in a fresh way. Doerr borrowed the ideas of “the master” Andy Grove and renamed them “Objectives and key results” or “OKR”. The Objective establishes a goal to be achieved during a pre-specified period of time (usually a quarter). The key results will determine whether the Objective has been met. The key results should be achievable by the individual or team with as few dependencies on outsiders as possible and it should be more like a sprint than a marathon. An Objective should be hard but not impossible. Key results will let a person know if their key result has been achieved. Metrics that can be part of a key result might include revenue or cash flow growth, greater customer engagement or higher customer retention.

4. “My football analogy is the objective is the goal post and the key results are the 10 yard markers as we march our way to our objective. If you got the right key results and you achieve them you’ll achieve the objective for sure. But there’s a lot more going on to have a team be operationally excellent or win a game, there’s the huddles, there’s the substitutions, there’s the plays that you’re calling in the meantime. These are the conversations, feedback, and recognition (CFR) for OKRs that are what you do to bring to life all these goals. Then if you can take those two systems and infuse them with values that people remember that they’ve lived, that they believe in, you can go to the moon.” OKRs are transparent vessels that describe the ‘what and the “how.’ The values we pour into those vessels are the answers for the question: “why it is we do the work we do.” And our mission and values statements are the declaration, in no uncertain terms, of what those are.”

The OKR system helps guide users to identify and achieve: (1) what they want to accomplish (objectives) ; and (2) how they are going to get it done (key results). If a key result is not reflected in at least one number it is not a key result since quantification is an essential element. Doerr believes that people crave the regular conversations, feedback and recognition especially when combined with an environment in which they have the autonomy that exists when micromanagement is absent. Doerr says the human resources part of his OKR system is often called: “continuous performance management.” CPM is related to but separate from OKR.

5. “One of the powerful things about this system is that at any level of an organization you’re only going to have two or three, or maybe four or five, objectives. And three or so key results. So it requires a kind of rigor and discipline about saying, these are the most important things that are going on in an organization.” “OKRs don’t govern your day-to-day behavior. I’d say this is more of a weekly check-in. But it’s not set the goals and then stuff them away in a drawer and ignore them.” “By going through the process of brainstorming and writing goals, we are assured that the major goals will surface. That’s good discipline.”

The goal setting process has a series of flows that are illustrated in this chart.

okr cycle

That a business has aspirational goals does not mean that it does not also have committed goals. With committed goals only 100% realization is acceptable. With other aspirational goals, a trying to reach mars can be successful if the business only gets to the moon. Aspirational goals should be a significant stretch but should still be achievable.

6. “OKRs are not a silver bullet. They cannot substitute for sound judgment, strong leadership, or a creative workplace culture. But if those fundamentals are in place, OKRs can guide you to the mountaintop.”

Doerr says that every organization must adapt the OKR system to fit their unique culture and mission. He also says that good business judgment should trump the OKR system if there is a conflict. The rules of the OKR system are not meant to be carved in stone. However, a commitment from the very top of an organization is required for the OKR system to be successful. Both OKRs and culture can help avid the need for micromanagement and yet provide the continuous feedback that most people desire. Motivational systems become intrinsic rather that extrinsically riven since the individual contributors drive the creation of their key requirements. Doerr says that a well-crafted system can avoid the types of problems that arose when the wrong goals create harm to the business and customers (e.g., indiscriminate cross-selling at Wells Fargo).

7. “[The OKR system] is the polar opposite of the conventional management by objectives (MBO) systems, which tend to be top down, hierarchical, annual, and linked to compensation.” “Contributors are most engaged when they can actually see how their work contributes to the company’s success. Quarter to quarter, day to day, they look for tangible measures of their achievement. Extrinsic rewards—the year-end bonus check—merely validate what they already know. OKRs speak to something more powerful, the intrinsic value of the work itself.” “The first thing wrong with the annual review is that it’s annual. The second thing wrong with it is it’s almost always backward looking. The third thing is that it takes a lot of time to dredge up the facts of that review. Usually you’re combing through emails or other reports. The fourth problem with them is all the data shows they’re tremendous de-motivators. The number of people who quit or move on after an annual report — good or bad — is unreasonably high. Another problem with them is they take so much time. On almost every count, they fail. But some companies aren’t willing to ditch them. So they combine an annual review with a lighter touch and more frequent one-on-one style feedback.” “If you pay bonuses on the sum total of all your objectives and key results, it will inevitably lead to sandbagging while setting the goals. You won’t get the risk-taking you want in the culture.”

That a OKR system itself should not be used for compensation or promotion purposes will be a radical idea in some organizations. Doerr says that many business will also find the fact that the system calling for people to set their own key results and “grade themselves” may meet resistance. Not linking the OKR systems to compensation is even more heretical says Doerr. He believes that only by creating OKRs that enable people to create their own key results and to sometimes fail can organizations create the freedom required most effectively benefit from innovation and others forms of growth. This does not mean that a company can avoid having sales quotas. Again, OKR is not a system that should be used for compensation or promotions. This decoupling of OKRs from compensation enables the system of the organization to be agile, enable innovation and promote transparency and working across teams. Doerr points out that many business have decided to abandon the annual performance review in favor of a more frequent feedback system. When should compensation and promotions be a part of the process? Many people believe the right cadence for a compensation review is once or twice a year. Obviously, this must be done in connection with a budgeting and planning process which is a potential topic for another blog post.

8. “OKRs are not the sum of all tasks. It’s not everything you’re trying to do. It’s the few things that really matter.” “One of the powerful things about this system is that at any level of an organization you’re only going to have two or three, or maybe four or five, objectives. And three or so key results. So it requires a kind of rigor and discipline about saying, these are the most important things that are going on in an organization. It’s not the sum total of tasks. It’s not the work order for the enterprise. It’s whatever we as a team agree deserves special attention, and it really matters. At Intel, Andy Grove had us post our personal OKRs outside our carrels, so everyone could see them.” “We use OKRs to plan what people are going to produce, track their progress vs. plan, and coordinate priorities and milestones between people and teams. We also use OKRs to help people stay focused on the most important goals, and help them avoid being distracted by urgent but less important goals.”

Michael Porter once said: “Strategy is about making choices, trade-offs; it’s about deliberately choosing to be different. The essence of strategy is choosing what not to do.” Doerr is saying that execution is also about making choices, trade-offs and choosing what not to do. There are only so many objectives and results that a person can focus on at any given time. Focus by definition means deciding not to spend as much time on some things as others. So much of life involves making trade offs that people who acquire skills in making them live better lives a a result. Charlie Munger is a strong believer in making decisions based on opportunity cost. He says about his long time business partner: “Warren is scanning the world trying to get his opportunity cost as high as he can so that his individual decisions are better.” “Opportunity cost is a huge filter in life. If you’ve got two suitors who are really eager to have you and one is way the hell better than the other, you do not have to spend much time with the other. And that’s the way we filter out opportunities.”

9. “Focus, alignment, commitment, tracking and stretching, I love that [acronym] because it spells FACTS. And I can remember it.”

Each of these ideas below is what Doerr calls a Superpower:

Superpower #1—Focus: “We must realize—and act on the realization—that if we try to focus on everything, we focus on nothing.”

Superpower #2—Alignment: “Transparency creates alignment.” “With OKR transparency, everyone’s goals—from the CEO down—are openly shared. Individuals link their objectives to the company’s game plan, identify cross-dependencies, and coordinate with other teams. By connecting each contributor to the organization’s success, top-down alignment brings meaning to work. By deepening people’s sense of ownership, bottom-up OKRs foster engagement and innovation.”

Superpower #3—Tracking: “OKRs are driven by data. They are animated by periodic check-ins, objective grading, and continuous reassessment—all in a spirit of no-judgment accountability. An endangered key result triggers action to get it back on track, or to revise or replace it if warranted.”

Superpower #4 — Commitment: the creation of transparent goals crates a social contract that takes the form of commitment. “In implementing OKRs, leaders must publicly commit to their objectives and stay steadfast”

Superpower #5— The goal with this superpower is to create a culture that takes intelligent risks. “Stretch for Amazing.” “OKRs motivate us to excel by doing more than we’d thought possible. By testing our limits and affording the freedom to fail, they release our most creative, ambitious selves.” “The hairier the mission, the more important your OKRs.”

Doerr’s book has loads of great bullet point style resources and checklists that are in the back of the book. My repeating these bullet points in summary form in this review isn’t useful. But I can say that you will benefit from reading them. The objective of creating an OKR system is to:

a) surface an organization’s most important work;
b) focus effort and foster coordination;
c) link objectives across departments to unify and strengthen the entire company;
d) enhance workplace satisfaction; and
e) boost performance and retention.

10. “At smaller start-ups, where people absolutely need to be pulling in the same direction, OKRs are a survival tool. In the tech sector, in particular, young companies must grow quickly to get funding before their capital runs dry. Structured goals give backers a yardstick for success: We’re going to build this product, and we’ve proven the market by talking to twenty-five customers, and here’s how much they’re willing to pay. At medium-size, rapidly scaling organizations, OKRs are a shared language for execution. They clarify expectations: What do we need to get done (and fast), and who’s working on it? They keep employees aligned, vertically and horizontally. In larger enterprises, OKRs are neon-lit road signs. They demolish silos and cultivate connections among far-flung contributors. By enabling front line autonomy, they give rise to fresh solutions. And they keep even the most successful organizations stretching for more.”

A startup is not just a smaller version of a large company. It has unique challenges like establishing product market fit for the first time. Medium-size companies have their own challenges. It can be hard to break free from challenges related to scale and sometimes a business hits an invisible asymptote which limits growth. Large organizations have a tendency over time to focus too much time on process and not enough time and energy on renewal of the franchise of the business. I have written many blog posts on this topic and won’t repeat that here. Research done by Geoffrey West and his colleagues revealed: “The typical half-life of a publicly traded company is about a decade, regardless of business sector. Mortality rates are independent of a company’s age.” “Firms may ‘die’ through a variety of processes: they may split, merge or liquidate as economic and technological conditions change.” Natural questions to ask when you see a public company lifespan like this include: How does the mortality of a business compare to other systems? Which systems should a business emulate if it wants to increase the probability that it will survive longer? For example, cities certainly survive far longer than businesses. Why is that true? We know that some animals live longer and some die faster. Why is that true and what can we learn from that? West explains: “[Cities] scale in what we called a super linear fashion. Instead of being an exponent less than one, indicating economies of scale, the exponent was bigger than one, indicating what economists call increasing returns to scale.” In terms of physical infrastructure, cities benefit from classic economies of scale. If the population of a city doubles, its physical infrastructure must increases only by a factor of 1.85. But on the social interaction side, attributes scale by a superlinear factor of 1.15. West further explains:

“If you double the size of a city from 50,000 to a hundred thousand, a million to two million, five million to ten million, it doesn’t matter what, systematically, you get a roughly 15 percent increase in productivity, patents, the number of research institutions, wages and so on, and you get systematically a 15 percent saving in length of roads and general infrastructure.” “In the language that we used for a city, [with a business] you go from a kind of superlinear behavior, with lots of positive feedback loops, to those being more and more suppressed, and dominated by this economy of scale. That is not a bad thing, but it suppresses the innovative, idea-creation side of the company…The life cycle of a company then tends to follow, ironically, much more that of an organism, growing quickly at the beginning, and then turning over and becoming static.”

As just one example, if the managers of the business focus too much on economies of scale in order to become more efficient at using the same processes and as a side effect lose sight of innovative new processes, unfortunate nonlinear consequences for the business may occur, which can lead to an extinction event for that business. West describes the challenge: “It’s not surprising to learn that when [businesses] …allow themselves to be dominated by bureaucracy and administration over creativity and innovation” bad things happen. Systems like OKR are designed to reduce the probability that this will happen.

11. “Now that we have the cloud and shared collaborative social systems — can really improve the people science. Not just better analytics, but actually getting greater performance, higher performance, higher commitment, out of teams. Every business I’ve seen benefits from a stronger team and stronger leaders. They are just now getting modern tools to help them do this.”

Modern data science tools create the potential for managers to apply the scientific method to what they do rather than use trial and error and guessing. Some people take data and algorithms too far and some people don’t take it far enough. Creating the right balance between these two approaches is not only hard, but changes as technology changes. The best way to stay current about best practices is to read extensively and then read some more.

12. “Andy Grove loved teaching. He believed the role of a leader and CEO is to be a teacher.”

Doerr included a Dedication his book to Coach Bill Campbell, who some people believe is the best business executive coach of all time. He was a teacher. One of Doerr’s descriptions about how Coach Campbell worked with others is particularly insightful to read:

“Campbell did it in his characteristic style, one part Zen and one part Bud Light. Bill gave little direction. He’d ask a very few questions, invariably the right ones. But mostly he listened. He knew that most times in business there were several right answers, and the leader’s job was to pick one. ‘Just make a decision,’ he’d say. Or: ‘Are you moving forward? Are you breaking ties? Let’s keep rolling.’ When it came to Google’s OKRs, Bill paid closest attention to the less glamorous, ‘committed’ objectives. (A favorite piece of coaching, served with his typical dash of salt: ‘You’ve got to make the f—ing trains run on time.”) As Google CEO Sundar Pichai recalls, ‘He cared about operating excellence day in, day out.’ It went back to Bill’s deceptively modest sounding motto: ‘Be better every day.’ There is nothing more challenging—or more fulfilling— than that.”

I wrote essays on both Doerr and Campbell as part of my book A Dozen Lessons for Entrepreneurs that is a fund raiser for the charity No Kid Hungry. As an aside, I know now that I should have named my book Get Wealthy Fast, the Kanye Blockchain Way, but it is too late for that now. The actual title of Doerr’s book is Measure what Matters.

End Notes:

https://www.whatmatters.com/stories/the-origin-story

https://sloanreview.mit.edu/video/john-doerr-on-okrs-and-measuring-what-matters/

http://fortune.com/video/2018/05/21/john-doerr-measure-what-matters/
https://www.recode.net/2018/5/19/17369636/transcript-kleiner-perkins-john-doerr-book-recode-decode
https://www.commonwealthclub.org/events/archive/podcast/venture-capitalist-john-doerr-measure-what-matters
https://hbr.org/2018/05/how-vc-john-doerr-sets-and-achieves-goals
https://www.bizjournals.com/sanjose/news/2018/04/24/john-doerr-kpcb-okr-measure-what-matters-book.html
https://hbr.org/2018/05/how-vc-john-doerr-sets-and-achieves-goals
http://fortune.com/video/2018/05/21/john-doerr-measure-what-matters/
http://rsif.royalsocietypublishing.org/content/12/106/20150120

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1852329/

https://www.edge.org/conversation/geoffrey_west-why-cities-keep-growing-corporations-and-people-always-die-and-life-gets

https://www.wired.com/2011/07/superlinear-cities/

https://www.linkedin.com/pulse/super-linear-strategy-gateway-survival-growth-john-raddall/

http://blog.irvingwb.com/blog/2016/01/the-mortality-of-companies-1.html