Business goals are a dangerous animal.
On the one hand necessary for top performance, on the other can lead to increased risk taking, narrow focus, unethical behaviour.
I already blogged about the OKR system employed initially by fast-growth tech companies which implemented it to have a meaningful goal setting process and increase transparency. In that sense reading “Measure what matters” by John Doerr added a whole new dimension to my understanding and linked theory with some real-life examples and learnings.
I have put toghether my take aways in the hope that they can help others in implementing OKRs. I strongly recommend that you read the book as it is by far the best I could find on the topic.
OKR requires commitment and time
- OKRs are a tool, not a weapon – do not use them to force on people.
- Dare to fail – won’t work out in the beginning and probably never gonna be perfect.
- Be patient: it takes at least some quarters to get it going.
Implementing OKR the right way
- Ask the question: what is most important for the next 3 months, where should we concentrate our efforts?
- Set hard goals as they drive performance more effectively than easy ones. Specific hard goals yield better output than easy ones.
- Less is more – better have a few but well chosen objectives.
- Set goals from the bottom up – about half of the goals should come from employees.
- Collective agreement is essential for getting buy-in from colleagues and subordinates as no dictating is allowed.
- An OKR can be modified or scrapped at any point in time, sometimes it takes months in the process until the right key results are identified.
- Pairing OKRs – pairing quantity and quality results in getting key results better aligned with value creation e.g. Sales of 50M + Maintenance contracts of 10M.
- OKR for new features could be tied to a deadline till data is available and results can be quantified.
- Having cascading in OKRs allow employees to see the objectives up to the top management and clarifies how the objectives of employees down the hierarchy contribute to the mission of the business.
- Implementing OKRS requires the whole organization to participate – no opt-outs are allowed. In order to ensure that one or two shepherds can be designated (e.g. for some years this task at Google was done by its SVP Jonathan Rosenberg).
- Commited vs. aspirational goals – committed are generally goals such as revenue, users, bookings that are to be achieved in full. Aspirational are on the other side dare and future looking but with a high risk of failure.
OKR alone is not enough, you also need CFR
The introduction of OKR requires a change in HR practices where annual reviews are the standard. The alternative to annual reviews is called continuous performance management. Its tool is CFR – Conversations, Feedback, Recognition.
- Conversations stands for regular and open exchanges between a manager and contributor.
- Feedback: provided among peers in order to track progress and future improvements
- Recognition: is given in 1:1 to deserving individuals for their contribution
Interesting point around CFR is that it is decoupled from compensation unlike with annual reviews (for most companies).
CFR foresees a semiannual professional development conversation where discussion is around career trajectory.
In sum, the old practice which still rules in many companies sees goals, compensation and performance management to be tightly intertwined. The new model engages a different view, namely that 1) OKR, 2) CFR and 3) Compensation & Evaluation are separate areas with a bit of overlap.
“Culture eats strategy for breakfast”
Once said … Peter Drucker.
You get leaps in productivity when stretch for amazing. A typical example is the Google’s 10x rule whereas incremental OKRs are being replaced with exponential ones.
OKRs are usually marked with red (behind plan), green (going well) and yellow (somewhere in between). Companies often have particular strategies how to deal with tracking OKRs. They remove the yellow/orange and mark the ones in danger as red. At OKR reviews they concentrate only on the reds and discuss which objective is most important therefore should get extra attention and eventually resources. This is known as „selling the reds“.
This is what a typical OKR cycle looks like
- Define annual OKRs and Q1 e.g start in November practically several weeks ahead of Q1.
- Announce company-wide OKRs for the year and Q1 and e.g. mid-December.
- Announce team Q1 OKRs – the team develops their own OKRs and shares them in meetings e.g. at the beginning of January.
- Provide employee Q1 OKRs e.g. end of first week of January.
- As the quarter goes, OKRs are being tracked and toward end of Q1 also being scored. In the mean time about 6 weeks before next quarter starts the brainstorming of company-wide OKRs for Q2 and the cycle repeats.
If you want to get systematized and proven guide into the world of OKRs I cannot emphasize enough the importance of laying your hands on “Measure what matters” by John Doerr. I consider it a must have in every library and will be happy to hear some funny stories from your experience.