Traditional businesses use KPIs that compare year-on-year performance, and “SMART” objectives that commit people to an inflexible 12 month journey. Reaction times are slow, and feedback loops bring insight far too late. It may seem counter-intuitive, but success with long term goals can only be achieved using short term objectives.
An alternative to KPIs
“Tradition becomes our security, and when the mind is secure it is in decay.” – Jiddu Krishnamurti
Organisations emerging from the industrial revolution were traditionally organised into hierarchies, made efficient through the separation of concerns, and measured using well recognised KPIs (key performance indicators – such as cost and time). This approach proved very effective for stable business sectors that had reached a high level of maturity and was recognised as the standard way of running a business.
The internet, however, has created significant market disruption, and the rate of change across many businesses is still rapid and promises to remain so for the foreseeable future. To respond to this ever-changing environment, a new way of setting targets and prioritising work has emerged that removes the need to micromanage every task and function. Made popular by Google, this technique is generally referred to as OKRs (Objectives and Key Results) and, unlike the more static KPI approach, it adopts a rapid review cycle and a focus on group responsibility.
This is why we chose OKRs as our method of choice for linking strategic goals to delivery activities. At Equal Experts, we are experienced at bringing about change and OKRs are about delivering that change, not about maintaining the status quo.
Essentially, the OKR approach aims to achieve three outcomes:
- Align task execution directly to company strategy
When the tasks being performed by a team or individual are far removed from the strategy that gave rise to those tasks, the reason is lost. All too often, teams successfully complete these tasks but somehow manage to completely miss the strategic point. By linking tasks directly to core company goals, OKRs help to ensure that the “doers” understand the purpose and value of their efforts.
- Create transparency
Where teams and departments operate in isolation from one another, and when their work is hidden from the rest of the organisation, duplication of effort proliferates and waste is high. The OKR approach endeavours to create transparency so that unintended duplication can be avoided.
- Encourage collaboration
There is little incentive to collaborate when overall goals are divided and cascaded down to teams, and then divided further to individuals. By creating objectives at the team level, rather than measuring the success of each individual, collaboration can be encouraged rather than discouraged.
Goals: Setting the strategic direction
“The best way to predict your future is to create it.” – Abraham Lincoln
The starting point for our stripped down version of the OKR approach is to establish the core goals for the organisation. These goals typically manifest as a handful of statements that embody the overall purpose and intent of the organisation; they are high level, direction setting, and likely to create an element of conflict when taken as a set.
For example, a company might have as two of its goals, ‘be profitable’ and ‘be ethical’. There are many ways to be unprofitably ethical and many ways to be unethically profitable. Taken together, however, the number of options available to the company is reduced. Thus, through a small number of well-defined goals, a company can create a clear strategic direction.
Constraints may, at first glance, seem to limit innovation and progress; in practice, they help to focus attention on the changes that best align with the strategic direction of the company, thus facilitating faster and more effective decision making.
Goals are long-lasting (at least a year, and generally longer), and they form the first layer in the OKR hierarchy; there is only one more layer.
Objectives: A call to action
“Nothing will work unless you do.” -Maya Angelou
The real driving force behind the OKR approach are the objectives themselves. Objectives are the things you are going to achieve; they are time-based (typically to be concluded within one or two quarters), qualitative in nature and aspirational.
An objective should clearly state an outcome, rather than an action or deliverable. “Build an application” is not an objective, but “Ensure our customers are engaging more regularly with our service” might be. This may seem like a small distinction, but it has a big effect; by focusing on outcomes you empower teams to use their skill and judgement to deliver success, rather than just complete tasks.
Each objective must link back to one of your goals, whilst conflicting with none of the others. If an objective seems to link to more than one goal, it is likely that you have combined more than one outcome into a single objective. This is not advisable as there will be a conflict of focus when attempting to deliver the objective.
Objectives form the second and final layer in the OKR hierarchy. Objectives should not have sub-objectives, nor should they be cascaded to sub-teams to create further related objectives. It should, therefore, be clear that objectives need to be assigned to multidisciplinary, empowered teams and not distributed to individuals. Anyone who is needed to make the objective successful should consider themselves part of that team.
Key Results: Measuring success
“In many spheres of human endeavor, from science to business to education to economic policy, good decisions depend on good measurement.” – Ben Bernanke
If the intent is to deliver successful outcomes, then there needs to be a way of measuring that success. All too often, progress is measured in terms of tasks completed or widgets delivered; this is not the purpose of key results. Each objective should have at least one key result by which its success is measured.
A well defined key result is numerical in nature, defines a specific target (either relative to a current baseline or absolute), and measures an outcome rather than the tasks undertaken to achieve that outcome. Additionally, care should be taken to select key results for which you can “move the needle” within the timescale of the objective. If you’re not going to see any movement in the measurement over the next quarter or two, then it is not going to be an effective way of guiding your actions and refining your approach.
Examples of key results might include “50% of new users return within 2 weeks” or “Churn rate < 2% this quarter”. An example of a poorly defined key result might be “20% more prospects contacted” as it measures the level of activity and not its success.
Establishing a cadence
“Nothing is ever so good that it can’t stand a little revision, and nothing is ever so impossible and broken down that a try at fixing it is out of the question.” – Rebecca Solnit
Establishing, monitoring and renewing OKRs is an iterative process, and once you have defined and assigned your objectives you need to establish a cadence for reviewing them. A typical cadence is as follows:
- Plan quarterly
Review all your current objectives, remove those that are no longer relevant or that have been completed, and create new ones for the next quarter. Some of these new objectives are likely to evolve out of previous objectives allowing you to take your success to the next level, or change tack in response to unexpected results.
- Amend monthly
The whole point of OKRs is to continuously improve based on your findings. It is therefore worth revisiting your objectives on a monthly basis to see if any are flawed and need to be adjusted to improve your chances of success.
- Report weekly
Measuring your key results on a weekly basis and reporting on progress improves transparency across teams, and also allows you to test-and-learn as you progress. It is easier to know which actions produced which results if you measure at a granular level, rather than only on completion of the objective.
It is then up to the assigned teams how they deliver, and the tasks they perform to achieve that delivery, but as objectives are short lived, explorative and iterative in nature, agile techniques are usually well suited to their delivery. This is because OKRs are about change and improvement – for existing processes where change is not needed or prioritised, existing techniques should still be used to measure their success and efficiency.
The art of introspection
“You will only fail to learn if you do not learn from failing.” – Stella Adler
OKRs are simple in nature, but any change, no matter how small, is always hard to embed in a lasting way. This is because old habits are hard to break, and so it is essential that during the early stages of introduction, you revisit the rules for objectives and key results in this document and make sure you are applying them consistently. Otherwise, it is highly likely that you will drift back towards an existing KPI based approach. Three of the common mistakes made are:
- Cascading objectives so that teams can create “subordinate” objectives of their own.
- Measuring tasks completed rather than outcomes achieved.
- Giving every objective to everyone, rather than assigning them to responsible and empowered teams.
Don’t expect to get this right the first time; no-one does. But don’t forget to learn and improve either; that’s the point of iteration. We have a tried and tested approach to putting OKRs into practice, so if you’re interested in doing this either experimentally, or at scale, drop us a line at firstname.lastname@example.org and we’ll see what we can do to help
In Part 3, we will introduce our Roadmap Radar tool, which allows you to visualise your entire portfolio of work in a way that creates clarity, agility and collaboration.
Part 1 – An agile strategy for an unpredictable world
Part 2 – Shaping the vision – (you’re here!)
Part 3 – The Roadmap Radar – When is a plan not a plan?
Part 4 – The Bet Canvas – Nothing ventured, nothing gained