There is growing evidence confirming that top-performing companies deploy OKRs and claim that most of their success depends on them. These same companies are transitioning to agile organizational structures.
Is this correlation between OKRs and agile organizations random?
For innovative companies, an agile organization is the answer to an intensely competitive environment and VUCA conditions (Volatility, Uncertainty, Complexity, Ambiguity, as coined by W. Buffet). Agile systems can cope with the current context by leveraging on their cross-functional and flat networks with strong interactions and more engaged employees. Opting for fewer bosses and more leaders translates into flatter, leaner and quicker organizations. The higher the engagement level, the lower the need for control. These elements are crucial to succeed in VUCA environments.
Yet, how to check if an organization is becoming more agile?
The average Span of Control (SoC) is the proxy to look at. The average Span of Control (SoC) measures the average number of reports per manager. In his book, Measure what matters, John Doerr reminds how most companies have a “rule” of no more than seven reports per manager. Instead, he suggests that leading companies such as Google establish a minimum of 7.
Why should it be desirable for a company to increase the number of reports per manager?
At first glance, a minimum SoC of 7 might sound counterintuitive. The common thinking is that there are pros and cons for both large and small SoC and the ideal number of reports depends on the company itself. Blindly aiming at a large SoC may lead to overburdened managers, poor discipline, and weak supervision. Moreover, the higher the number of reports per manager, the lower the number of appointed “bosses”, hence fewer opportunities for promotion. Altogether, these factors might endanger the overall performance.
The issue of leanness becomes more relevant the larger the organization. Given the company size, the average number of reports per manager indicates the distance between the vertex and the base, that is the steps needed to link two people (i.e., nodes). Intuitively, the greater the distance, the longer the time it takes to discuss, decide, act; in other words, the command chain is slower.
Still, there may be a good reason for an organization to strive to achieve a large SoC: embracing and gaining agility.
More reports per manager lead to a more horizontal organization, with a smaller need for supervision and greater autonomy. If employees are engaged, such a lean environment is the fruitful space to thrive professionally, bringing great benefit to the company.
At this point, it looks evident why OKRs and agile systems are so interrelated. Using OKRs helps to bring in the engagement factor. This supports more agile, leaner, and faster organizations. In other words, OKR-based companies foster employee engagement, more committed and motivated workers benefit from greater autonomy, and the conditions are laid for the company to raise the bar of the optimal number of people a manager can coordinate.
How to trigger this process reducing the risk of downsides or failure?
These are our recommendations:
- Analyze the organizational networks checking the SoC metric together with the Graicunas Index. This combo is more informative as it highlights both the distinct count of reports per manager with the SoC measure and the underlying complexity of the nodes measured by the Graicunas Index.
- Gain awareness of the interdependencies among acted organizational roles of managers. This is an essential information before starting an organizational change.
These may seem complicated concepts, but they can be easily put into practice by using a suitable analytical tool. This is when the power of Organizational Network Analysis (ONA) comes into play. HOW4 is the platform that will enable you to discover the potential of ONA. By asking the employees just 4 easy questions and analyzing the collected answers, HOW4 can map out the true organizational functioning of the company, shedding a light on informal networks and measuring cooperation at individual, team, and company level.
- Adopt an OKR system that helps employees get highly engaged in pursuing the company’s mission and become self-managers of their objectives. Through OKRs, the company can boast commitment towards a common purpose and alignment to the organization’s strategic goals.