Get started with OKRs
In our previous post we were talking about common pitfalls and errors when adopting OKRs. Now that you know what you shouldn’t do, let’s take a look at how to get started with OKRs in order to be successful and don’t die trying.
OKRs are living a hype cycle right now and many people are frustrated with the outcomes of their OKR adoption. Just like Lean, Agile or Corporate Innovation with enormous failure rate, simply because some organizations implement the method badly doesn’t mean you cannot do it properly and achieve the breakthrough other firms achieved in the past like Intel, Google or Zynga.
Get Started with OKRs
First of all, if this is your first experience with OKRs I wouldn’t start by rolling them out to the whole company.
We also do not recommend that you start with a team and then try to roll it up. This bottom up approach rarely works with changes that imply mindset and deep structural change.
We definitely recommend that you select a vertical slice of your organization and you fully implement it there. This can be a business unit, a division or a product line.
Once you are clear about where to start, let’s get started with OKR implementation.
Components of an OKR plan
First of all, let’s look at the key components of an OKR plan:
Statement of Purpose
Regardless of your organizational model, there will be some people responsible for defining vision, mission and strategic objectives. Typically that’s the executive team.
We start with the executive team by facilitating a workshop with the goal of understanding the current context of the company and defining where they want to go.
In this workshop we cover the first two points of the plan: statement of purpose and strategic OKRs. We want to clearly understand what is the long-term vision, the current condition and the next target condition for the business.
We plan this workshop together with the team and we use tools and techniques, such as the following to make sure we understand the whole picture and consider all important information to set direction:
- Business Model Canvas
- Business Environment Canvas
- Scenario Planning
- Innovation Thesis
The outcome of this workshop is:
- VISION: long-range (5-10 years). Long-term, futuristic and motivational. What would the ideal state look like. This is aspirational and acts like a north star.
- MISSION: articulate what needs to be done (3-5 years). Addresses what is to be accomplished (OBJECTIVE) with the measure of accomplishment within a given time frame (KR) to be tracked. In general, the mission statement describes what the OKR plan needs to accomplish. This would be the next target condition towards the vision. This is the one and single most important OKR.
- STRATEGIC OKRs: define the key business objectives and key results for the next planning period.
This workshop takes more than one day and we usually leave some time in between for the team to gather data, in order to validate assumptions, verify risks, assess gaps or set KRs.
Defining objectives doesn’t come natural to many people, and it is pretentious and a typical error to assume that they will know how to do that.
So, we provide some basic guidelines for beginners until you find your own way.
Below you can find five different ideas that will make your life easier. But, remember, these are tools for defining goals, and OKRs is an organization-wide process for alignment, focus and continuous improvement.
1 – Breakthrough Objectives & Business Fundamental Objectives
OKRs may include both breakthrough objectives and continuous improvement of business fundamentals.
Breakthrough objectives are directed at achieving significant performance improvements or making significant changes in the way the system operates. These activities are typically directed at overcoming the critical business issues the organization will face in the next two to five years.These issues may relate to profitability, growth, market share, or new product or service introduction.
However, there must be a balance of the business-as-usual activities and the activities required to implement the breakthrough activities. Part of the business-as-usual activities should be designed to monitor, maintain, and continuously improve your processes.
We can’t work on implementing breakthrough improvements when our processes are out of control.
If your company is struggling to bring key business processes under control, the key business issue for which a breakthrough is needed may be just to bring the fundamental business processes into control.
2 – Balanced Scorecard
A technique we use in our company in the process of defining goals, is grouping the goals among the four main dimensions of Balanced Scorecard (or an adaptation in our case):
- Customers: goals related to customer development, marketing, branding, markets, …
- Products: goals related to your products or services
- People: goals related to your people and partners
- Results: goals related to typical financial results like
3 – Strategy Map
This is an evolution of Balanced Scorecard where you basically create a map of how different goals relate to each other at an organizational level.
4 – Fitness-for-Purpose Framework
David Anderson in his book “Fit for Purpose” defines a framework for categorizing metrics that you can also use to categorize your OKRs.
- Fitness Criteria – criteria by which customers select our products or services (Quality, Lead Time, Design, Price, …)
- General Health Indicators – system and process health indicators (Throughput, Defect Rate, …)
- Improvement Drivers – indicators and signs that something has to improve (Churn, Viral Coefficient, Cost of Sales, Cash Flow Conversion Ratio, …)
5 – Impact Mapping
Using Impact Mapping you can easily define your OKRs.
- Mission: Why are we here? What is the unique goal we are trying to achieve?
- Example: Win the world cup
- Personas: Whose behaviors do we want to impact?
- Example: players, coach, supporters
- Objectives: How should our personas’ behavior change?
- Example: run faster, commit less faults, have fun, …
- Initiatives / Experiments / Projects: What can we do as a team to support required impacts?
- Example: train harder, improve diet, …
HOW MUCH? (Not part of original Impact Mapping but required for OKRs)
- Key Results: How are we measuring impact or behavioral change?
- Example: Run 100m in 10 seconds, less than 10 faults per game, …
Basic Guidelines to get started with OKRs
Characteristics of a Good Objective
- Makes you feel uncomfortable
- Not necessarily measurable
- Business oriented
- Describing the gain for the company
- Agreed between management and team
- Allows different ways of reaching it (leaves space to team’s creativity on how to get there)
Questions to answer
- How will we help the company achieve its strategic goals?
- What will we see when our mission is accomplished?
- What are our three main priorities?
Characteristics of a Good Key Result (KR)
- With a target value based on the desired state
- Stretchy, achieving 100% should be nearly impossible
- Reviewed frequently to incorporate new learnings
Questions to Answer
- How can we track our progress towards an objective?
- How will we know we have achieved our goals?
Sample OKR for Darth Vader (Episode IV)
OKRs work on the basis of a two-way communication between the different levels of the organization in which both the vision and the objectives are discussed, as well as the hypotheses about concrete actions and experiments to achieve them.
Typically the information that flows from management to teams is company’s strategy, objectives and expectations of shareholders. And the information that flows from teams to management are hypotheses, improvement actions and learnings from working on previous goals.
These ideas are discussed and agreed, because we believe that people closer to action has the most information and knowledge and we want to decentralize decision-taking and enable higher levels of agility and speed.
But the communication can be initiated by any person. It may be initiated by the management with a communication of strategy, objectives and expectations or it may be initiated by a member of a team with a hypothesis or a proposed action. Hence, the metaphor of catchball, the person who initiates the communication “throws the ball” towards the other person so that the latter returns the ball in the form of constructive comments and contributes to enrich the idea.
Once OKRs are set, you have to review progress and adapt to learning, but you don’t want to do this randomly creating disruption and confusion, that’s the reason you will need to agree on some cadences.
Embedding strategy into your daily operation
Cadence and synchronization are key to improve flow and reduce waste at an organizational level.
Knowing when things will happen should prevent people from pushing stuff or setting up random meetings. And you also want to make sure you are doing what you agreed, and you are adapting, learning and improving in the process.
So, you need to define some cadences for goal reviewing. In doing so you will get rid of several wasteful meetings you are currently having and you will improve predictability, visibility and focus.
But, you cannot add all these new meetings on top of the meetings you currently have.
Now you know how to get started with OKRs, in the next article you can learn how to practically embed your strategy into your daily operation.
Contact us if you need help.