Most companies fail within the first 5 years of business. It seems that even with a highly skilled team, a promising offer and vast financial resources, it’s difficult to create a long-lasting company. Why?
Because defining clear goals is difficult.
Both employees and managers are constantly going through change as the company develops and are hence facing the complicated task of aligning towards common goals. But those goals are ever changing in today’s competitive, fast-moving landscape. So how do you grow a company, successfully navigating it through change?
The trick might be something seemingly inconspicuous, a little method called OKRs. OKRs (which stands for Objective and Key Results) have continued to gain popularity ever since it became common knowledge that Google uses the tactic to transform into the global behemoth it is becoming now.
What are OKRs?
OKRs, Objectives and Key Results, are a simple tool that helps an organisation achieve goals by building specific and measurable actions as well as communicating and monitoring progress towards them. OKRs are typically set for each quarter.
Objectives define where you want to go. They are usually short, inspirational and ambitious. Here’s an example: improve employee engagement and satisfaction rate.
Key Results are the deliverables defined to measure progress towards each objective. Each objective has two to five Key Results, which all need to be measurable.
Here’s an example relating to the above objective: Collect feedback from 50 employees about their needs for improving working conditions; launch regular feedback and retrospective sessions in all teams, increase employee satisfaction score (eNPS) to 40.
The concept of OKRs was first developed by Andy Grove in the 1970s. But the concept only became popular when John Doerr, who had worked with Andy Grove, introduced it to Google in the 1990s.
John Doerr’s basic formula for OKRs is: I will (Objective) as measured by (set of Key Results)
Sounds simple, right? Well, there’s more to setting them than initially meets the eye.
Difficult, but not impossible
Companies like Google use OKRs on three different levels: company level, team level, and individual level. OKRs are not just goals for individuals but they serve as connections between strategy and execution. This means they need to be developed in a way that they can be broken down into clear deliverables and to-dos are easily understood across departments.
Here are some things to think about when creating Objectives:
Is the objective broad in outlook?
Is the objective inspiring?
Does the objective align with overall corporate strategy?
Is the objective clearly timeboxed?
Is the objective challenging?
Here are some things to think about when creating Key Results:
Does the Key Result adhere to SMART? (Specific, Measurable, Attainable, Relevant, Timebound)
Is the KR an actual result, not just another task?
Is there a timeline identified for the KR?
Is the KR important enough to appear in the top 3 KRs for the objective?
Setting your first OKRs
Ok, you’ve probably got it: setting OKRs isn’t super easy. It involves taking a close look at your organisation and having a bunch of potentially time-consuming, in-depth conversations as well as digging into strategy, goals, and structure. Here’s a suggestion on how to run your first OKR meeting - no matter if it’s with the board of directors, your team, or you’re trying to define your individual Objectives and Key Results.
When you’re setting your first KPIs, you shouldn’t come unprepared. Sending out material that explains how OKRs work and asking participants to reflect on what Objectives they may have in mind beforehand, can make discussions more effective. It can also support participants to get into a solution-focused mindset before the meeting has even started.
The meeting itself needs structure and a clear purpose that ensures everyone knows what they’re doing and why. If you’re setting OKRs with your team, it makes sense to wait until the board has set their overarching OKRs, then relate those to your department’s or team’s goals, and finally, break it down for each individual.
Running your first OKR meeting It doesn’t matter if you’re running the meeting with the board of directors, a small team, or as an individual. The structure for OKR meetings is essentially the same, no matter what level of OKRs you’re working on. However, it is recommended that the board agrees on overarching OKRs first, asking each department for input. After the organisational OKRs have been set, team leads can begin developing their own OKRs.
Getting started In the beginning, ask every participant to submit one or several key objectives they believe the organisation should focus on as a whole.
During the meeting, spend some time on bringing forward all suggestions but beware to not get stuck in discussions. Don’t spend the majority of meeting time on this part. Overall, the meeting shouldn’t take longer than 3 hours. If you can cut that time in half, that’s even better.
Then, pick the most relevant suggestions and write them down on individual notes. The board should ensure that there’s at least one objective for each team or department to focus on. The team lead should make sure, there’s at least one for each team member.
Arrange the papers next to each other and spend a few minutes on eliminating duplicates and identifying correlations. Next comes one of the most difficult steps: ranking the objectives. This is where discussions will get heated. Be prepared to speak up.
Bonus Tip: A great tool to help you when you’re looking to democratically rank different ideas and suggestions is Dotmocracy.
Adding values and metrics After ranking the remaining objectives, have participants list as many metrics as they can think of to measure each Objective. Encourage people to share as many ideas for measuring Objectives as possible. Again, align ideas alongside each other and identify duplicates. This time, instead of removing duplicates, count them as votes towards a specific measurement method.
Remember, your goal here is to discover different ways to measure success to ensure balance between i.e. performance and innovation. Focusing only on revenue can lead to employees gaming the system and developing short-term approaches that can damage retention or sustainability. That’s the type of scenario you want to avoid.
Bonus Tip: Check out this case study on how to work with OKRs.
Finally, give your KRs values. Make sure they are ambitious. You shouldn’t be too confident in reaching them in time. Make sure nobody is playing it safe here. Remember, challenging but not impossible.
It’s recommended to have at least one usage metric, a revenue metric as well as a satisfaction metric for each objective. This may not always work, but if it does, that’s great.
Here are examples for each metric:
: we want to eliminate 3 of the 9 digital tools we’re currently using to generate leads (it’s more objective here, key result would be ‘users spend 20% less time to find relevant information’)
: Profits should increase by 3%
: Customer NPS should increase by 15%
Now you’re good to go. Are you ready to live your newborn OKRs for the next 3 months? In the next article, we will provide you with some insights on how to align organisation, teams, and individuals around OKRs.