OKRs – Yet Another Silver Bullet
It seems OKRs are the new “silver bullet” – VC/PE/GE Investors give John Dorr’s “Measure What Matters” book to their CEOs and strongly suggest that their portfolio companies use OKRs.
While the idea of using OKRs to improve strategic focus and alignment with execution is great, things often go wrong in implementation.
When I come to such an organization, I often see an environment where every project becomes an OKR, OKRs that describe outputs and activities, and OKRs that are siloed and departmental, sometimes even individually assigned. It’s as if the organization took whatever way it used to manage work and slapped an OKR label.
When that happens, leaders and investors reap none of the potential benefits of OKRs. Alignment isn’t improved, and people don’t have the context to make better decisions. They also don’t have the space to make decisions. The organization still exhibits the same micro-management siloed behavior that existed before introducing OKRs.
OKR Best Practices
Here are some tips for getting more alignment, empowerment, and focus using OKRs.
First, understand that OKRs are there to help you align developmental work, not manage ongoing operations. For example, in the Marketing/Revenue world, you don’t need to use OKRs to manage ongoing marketing and revenue work. But you might use OKRs to align around moving to a PLG motion, focusing on plugging a retention leak.
Secondly, the power of OKRs comes from creating alignment around outcomes and empowering people and teams to figure out how to achieve those outcomes. Set OKRs that focus on what you’re trying to achieve, not how to achieve it. Ask Why a couple of times to move from activity to output to the desired outcome.
Another common problem is where leaders set OKRs in a vacuum – not considering the capacity of the organization to achieve the objective. Consider the big picture of operational and developmental work flowing across your organization. Consider a set of candidate OKRs and set a clear priority between them. Then, let people and teams PULL from the top of this list the OKRs they CAN achieve. (PS This is very similar to the concept of Backlog in Agile ways of working such as Scrum.)
To avoid “Fire and Forget,” create a disciplined routine of creating transparency on what outcomes have been achieved, inspecting and adapting on a cadence that makes sense so that you can steer towards maximizing those outcomes. Allow, welcome, and even encourage adjusting actions and activities as needed to achieve the objective. And be open to the possibility that even the objective might change.
Not everything needs to be an OKR
Many organizations confuse OKRs and KPIs and struggle to determine which work to manage using OKRs. As mentioned, OKRs should be used for developmental/growth/change work. Let’s explore this in more depth by explaining the difference between KPIs and OKRs.
Every organization balances running the business and improving/growing/scaling the business. Key Performance Indicators (KPIs) are the quantifiable measures used to evaluate our performance against our promises. You can also call them Key Promise Indicators. KPIs are used for ongoing operations – to run our business. Churn / Revenue / Conversion Rate / Throughput are all examples of KPIs. We monitor the KPI Dashboard to keep our business on track.
Objectives and Key Results ( OKRs) are meant to be about managing/guiding change rather than maintaining the status quo.
OKRs typically describe a desired change in a KPI as the quantitative outcome associated with the qualitative objective.
Interaction between KPIs and OKRs
A typical journey towards becoming an evidence/data-based organization would include identifying key business processes or value streams, agreeing on a set of KPIs aligned with the outcomes we expect those streams to create, creating a baseline of these KPIs, and a routine for ongoing management. As part of that, gaps between desired and actual performance are identified, and objectives can be created to close these gaps. This is where OKRs are defined.
A Business Example
For example – one of these business processes/value streams is Revenue generation. One obvious KPI here will be Revenue. But Revenue is not an OKR! Improving Revenue could be an OKR, but it would be a mediocre OKR that doesn’t provide any help/context as to what exactly we want to achieve. Improving Expansion Revenue is somewhat better because it provides some guidance on where to focus. This OKR will require some new KPIs to measure it – e.g., Expansion Revenue – and the first Key Result might be to discern expansion revenue vs. straight renewals vs. new logos and establish a baseline. The team focused on this OKR would then figure out what projects/initiatives could move the needle on expansion and set a KR to capture their intent there and what results they are expecting in terms of the KPI.
In this way – what you might call “development” work is tightly connected to “operational” work and aligned with the needs of the business- but managed in a different way that taps into creativity and optionality.
How to manage work towards OKRs
Another anti-pattern I see often is using traditional project/program management to manage OKR work. Most OKR work involving complex changes to our products, our business model, or key business processes is rife with volatility, uncertainty, complexity, and ambiguity to the point that plans don’t survive contact with reality.
What works better is approaches to project/program management inspired by Agile software development. These approaches are incremental and iterative and emphasize cross-functional collaboration in tight feedback loops leveraging empiricism. In this context, it means to create a sequence of Increments that provide progress toward the desired output in alignment with the OKR. Each Increment is created in a cycle of planning, doing, inspecting, and potentially adapting. Companies use this approach to incrementally and iteratively design marketing campaigns, business model innovation, product-led growth plays, and other business capabilities.
OKRs can be a powerful tool. They can also be misused and generate more damage than benefit. In this article, I provided several best practices for helping you tap into the power and potential of OKRs to help organizations align, focus, and execute.
If you want to discuss these best practices and your context in more depth, Reach out to me and schedule a free OKR consultation session.