How to use Objectives and Key Results (OKRs) to drive your business growth
It’s the start of 2022. You’ve decided this is the year your business changes course. No more status quo. It’s time you steered in a new direction of growth, opportunity and fulfilment. Your Executive team have worked long and hard on a new strategy. You know your ‘Profit per X’ – that all-important single metric to drive the next three to five years. And you’ve identified the capability pillars of your business and the activities that underpin your strategy. So there’s stuff to do. Quite a lot of stuff as it turns out.
Don’t let this overwhelm you. Your best chance of success is using Objectives and Key Results (OKRs). Why? Because they’re a great tool for keeping you on track, ensuring accountability and providing focus. We recommend them to our clients to make the execution of their strategies slick and efficient.
What are OKRs?
OKRs describes team and corporate goals within an organisation. As such, they nail down ‘Who, What and When’, ensuring clarity on accountability and delivery goals. Maybe they’re time or activity-based – either way, they’ll show progression towards an objective. To illustrate their effectiveness, we often relate them to personal goals.
Say you’ve decided to get fit. Unless you’ve got a proper plan, this isn’t going to happen. Every person has their definition of what being fit looks like – their expectation. So, you need to get specific on the goal and the things you need to achieve to get there. Maybe it’s to run a marathon. OK – when by? Two years from now? Also OK, but how fast do you want to run the marathon?
You set yourself a target of completing the course within five hours and you start planning out the milestones along the way. What progress do you believe you can make in 90 days? With a 70% level of confidence? Take your time on your feet in one session to 90 minutes maybe? Where will you need to be by the end of week 1? How about time on your feet at 30 minutes? You can share your progress with your personal trainer at each juncture and take corrective action if you’re falling short.
Approached in this way, OKRs can clarify organisational expectations. Everyone knows where they’re heading, how quickly they’re going to get there and their score in real-time.
Commit to a small number of OKRs
It’s as important to be clear on what you’re NOT going to do as what you are. This is a constant challenge with clients. We’ll get 5 objectives on the board and someone will always try and sneak in a couple more. People will cry, ‘When do I do my other work?’ It’s hard to get them to stop doing ‘busy work’ that achieves nothing.
When we do retrospectives at the end of each quarter, we look at what the client committed to, how they did against this and what they learned. Two things are often true. a) They wrote the OKR in a way that didn’t allow them to say whether they’d achieved it or b) they said they’d do too many things and it turned out they couldn’t deliver that many. This is a salutary lesson. Don’t over commit. Do less, but better.
Is it hard to get your team to be accountable or work across functions? You’re not alone. Most of our CEO clients have this problem. OKRs are your secret weapon. Every OKR needs to have one person accountable for it. Without fail. Start at the Executive team level. Work out the person who’s accountable and who on the team will support them as contributors and collaborators. This will mean that you, as CEO, are not the only person on the Executive team making sure that people do the work.
Every year, work out the cross-functional OKRS. Get away from always thinking from an org chart perspective. Instead, do functional accountability charts, value chain analyses and activity fit maps. Find the capability pillars of your business. Let’s say, as an example, that one of these is ‘People’. So there may be some HR activities that need to be developed alongside others that don’t naturally fit within HR. Work out the OKRs here and who owns them. The work might be outside the owner’s normal function – that’s ok. You want your team to realise their success is collective. It depends on the team winning – not just their individual function. Once they realise this, they’ll naturally start to hold each other accountable.
Make OKRs ‘FAST’
OKRs communicate change initiatives that you’re planning to do throughout the year. They’re not the same as KPIs, which relate to business as usual. More than anything, they need to be FAST (Frequently Discussed, Ambitious, Specific and Transparent).
FAST goals speak to daily huddles and weekly team meetings. Because they’re ‘Frequently Discussed’, goals are embedded in ongoing review, helping people to allocate resources and make key decisions, keeping staff focused on what matters and linking to concrete goals. They’re ‘Ambitious’ meaning difficult but not impossible. A benchmark is to make them 70% achievable. If you’re setting key results for your team, don’t set them at the level of the best person but for your number 2 or 3. This will boost everyone’s performance.
‘Specific’ is all about clarity in what you’re expecting your team to do. Use KPIs and make clear the minimum standard you’re going to measure.
‘Transparency’ means goals for individual team members need to be shared. There are some great tools out there for this – technology that will give your teams the score in real-time.
Agree on start and end dates
With every OKR, you need to work out when you start, when you finish and how you’re going to measure success. Human beings hate failure and they really dislike uncertainty – it’s the way we’re wired. So be aware that people are most likely to start on the bit that’s easiest and most certain. To counter this, work hard early on to try and identify the unknowns. What’s the trickiest part of your OKR? And what’s your hypothesis? Test this as early as possible. Otherwise, you’ll get to November and run out of time.
Does it make sense to have quarterly or monthly milestones for this OKR? Maybe you need to do some research, implementation and testing in the first quarter and work out what your mental model is for progress. It’s likely to be different depending on the objective. Some OKRs might be linear, in which case having weekly and monthly milestones makes sense. But you’ll need to go back and reassess each quarter. You’re not trying to pick a number that’s in the bag. There needs to be some stretch built-in.
Organise regular check-ins
OK – so you’ve agreed on the shape of the Objective and set some key results. Now you need to set processes for regular reporting. So often, this is the piece that falls by the wayside as people get busier but it’s crucial. Don’t skip it.
In weekly and monthly management meetings, get people to stop saying how busy they’ve been and what they’ve done. It’s mindlessly boring for everyone! Instead, focus them on the five things that you agreed as a team were your most important OKRs that needed to change in the company. And get everyone to report on how they’re progressing against these things. Work out anything that’s blocking progress or slowing things down.
Work on resourcing
Small, Medium, Large and Extra Large. No – I’m not talking about T-shirt sizes. But you can use the same terminology to gauge the size of an OKR and how much effort it’s going to take. Try and make sure that people aren’t overloaded and give a similar level of effort to OKRs. Everyone has their KPIs and business as usual – that’s a given. So any work on OKRs is going to be additional. It’s important for everyone to realise that these change initiatives are crucial to your strategy. They need to happen as a priority.
Maybe three of your OKRs are Small or Medium. Then it’s reasonable to expect someone to do these alongside their day jobs. But if they’re Extra Large, they’ll be too much. Sometimes, an OKR will be XXXL. And you know it’s of high importance. There’s a level of uncertainty around it so you need to get on top of it in the first quarter. This is where you should consider single-threaded leadership . Get other members of the team to take on the accountable person’s day job so they can spend 100% of their time on this critical OKR. Otherwise, it just won’t happen.
As you look at OKRs and begin to cascade them down from year to quarter to people, ensure the workload is even and that you’re working on the priorities. The number 1 thing should be the number 1 thing. There’s no excuse for giving insufficient resources, people and attention to it. People will always get busy. So prioritise the single thing that will have the most impact and do it well. Then, when you’ve had success, you can build on it. This is how you make real progress.
- NAVIGATING AND COMMUNICATING CHANGE
- BUILDING COMPANY CULTURE
- CHOOSING THE RIGHT OPPORTUNITIES
- ORGANISING YOUR A-TEAM
Written by business growth coach Dominic Monkhouse. Find out more about his work here. Read his book, ‘F**k Plan B’ here