Operational Management

Operational management (or execution) is the discipline that takes a company's strategy and makes it happen. Operational and strategic management are not related in a one-way street. Strategy lives and blossoms in every small operational decision that you make every day, and often strategy evolves from strong decisions that were taken from an operational point of view.

Management Rhythm

The most important concept in operational management is that of a management rhythm or cycle. Management is an iterative discipline that benefits from a constant feedback loop.

In any company, there are overlapping rhythms that drive execution. These are:

  1. Vision and Mission process and longer-term strategy: This sets the company's direction with a 5-10 year outlook.
  2. Annual goal-setting process: Defines what the company wants to achieve in the next 12 months.
  3. Quarterly planning: Sets the goals for the next 90 days
  4. Monthly goals (often used in sales, marketing and finance) or sprint-based iterations (used in product and engineering): tactical goals for immediate execution.
  5. Daily stand-ups and check-ins: What are we going to achieve today? On a team level, people should sync briefly every day to

Operational management deals mostly with the last three layers.

Objectives and Key Results (OKRs)

Objectives and Key Results is a framework that is widely used in Silicon Valley startups and beyond. It is based on Peter Drucker's concept of Management by Objective and was famously introduced to Google by legendary VC John Doerr. Before that, Intel CEO Andy Grove implemented a very similar concept at the chip manufacturer, and it is credited as a major factor in driving Intel to market dominance.

OKRs consist of two levels:

  • Objectives are stretch goals that define what a company (or department, or individual) wants to contribute. Typically, objectives should be framed in a way that with normal effort about 60-70% of the objective can be achieved, but an extraordinary effort might take you beyond. Objectives can be quantifiable, but also more general.
  • Key Results: Each objective gets broken down into 3-5 key results, which are tangible, measurable outcomes that contribute toward the Objective.

OKRs are defined in a hierarchical way: There should be 3-5 company-wide objective with key results that translate into actions for an entire department or multiple departments.

Below that, every department should define its own OKRs that are designed to help it achieve the key results it is expected to deliver on.

Below that, teams or individuals will define OKRs as well, going down another level in granularity.

An example (based on John Doerr's book):

A company-wide Objective might be "Grow our team".

Key results might be:

  • Hire 10 additional engineers
  • Hire a new sales leader
  • Hire a new content marketing expert
  • All candidates feel they had a great interview experience, even if we don't hire them (as measured by post-interview questionnaires).

These key results break down into new objectives by department. The goal to hire 10 engineers will be split up between engineering and HR, for example, and they will need to define which key results they need to provide to make this objective happen.

Agile, Scrum and Kanban

Agile software development is by now the standard in engineering, and many other disciplines have adopted this approach.

The key in agile philosophy is iteration: It is assumed that not all goals and requirements for the development of a product will be clearly defined from the beginning. The world keeps changing, and so do requirements.

The Scrum methodology is an implementation of this agile mindset. It adapts to the reality of changing environment by breaking down value delivery into smaller units of time, called sprints. Sprints are typically 2-3 weeks long and aim to deliver tangible value for the customer.

A key for Scrum is that the team that is expected to implement functionality chooses what it is going to be able to implement in a sprint. This increases the level of commitment compared to a top-down management philosophy. This planning is done ahead of the sprint in a spring planning session. After the sprint the team conducts a sprint retrospective to analyze how things went and what unexpected obstacles (or lucky breaks) influenced the delivered value.

The key roles in Scrum are:

  • The scrum master, the person in charge of organizing the planning and review process. Scrum masters also support the development team and product owner in their own tasks.
  • The development team, which means the people who are going to create the solution. These can be engineers, designers, writers, etc.
  • The product owner represents the business and therefore defines requirements and priorities from a business value point of view. This person also manages the backlog of pending items and manages relationships with stakeholders outside of the scrum team.

Kanban is an additional approach that is used more frequently for tactical implementation teams, such as DevOps and customer support. While Scrum is medium-term oriented, Kanban is optimized for tasks that tend to be more urgent and short-term. A Kanban board is a list of pending tasks that are moved along different states, such as "To Do", "In progress" and "Complete".

Many engineering teams use Scrum and Kanban in combination to accommodate the different tasks they face.

Useful Resources

Doerr: Measure What Matters

The OKR system (Objectives and Key Results) has turned into the default operating system of Silicon Valley. Legendary VC John Doerr explains.

German Version, translated by btov's own Stefano Saeger:

Atlassian: What is Agile?

A great intro to Agile, Scrum and Kanban.

Harnish: Mastering the Rockefeller Habits

Ignore the title and focus on the very useful advice on how to run a growing company from the founder of the Young Entrepreneurs' Organization.

Harnish: Scaling Up

Similarly useful hints on how to best scale a business.

Sacks: The Cadence

Bossidy and Charan: Execution

Mostly focused on bigger companies, but many useful tips for how to establish a culture of relentless and robust execution.

Thean: Rhythm

A similarly execution-oriented book, but more geared towards startups.

Horowitz: The Hard Things About Hard Things

a16z co-founder Ben Horowitz has been through pretty much all tough situations you can experience in startup management. Here's how to deal with them.

Ries: The Lean Startup

The classic of contemporary startup design.