It’s a dynamic and challenging time for all organisations around the world. The conditions in which we operate are being reshaped in front of our eyes. Supply chains are being disrupted, customer behaviour is changing, the reliance on remote working and digital technology has increased exponentially, people have been forced into social distancing and the drive for efficiency is greater than ever.
Not all organisations are impacted to the same degree. At one end of the spectrum, some are having to fundamentally change their business models to survive. While for others, the crisis has resulted in a massive increase in demand for their products and services. Either way, the impact has been significant. Many organisations are asking if this is the ‘new normal’? This is a hard question to answer. One thing we do know with greater certainty is that we are all facing an accelerated and unprecedented level of change.
One framework being used to navigate the changing environment is OKRs (Objective and Key Results). A number of organisations are using OKRs to ensure they are better equipped to react decisively, and effectively execute their strategy at pace. However, there are a number of dimensions to OKRs, and it’s important to understand the wider benefits before jumping to implementation.
Organisational drivers for implementing OKRs
OKRs are a powerful goal-setting framework that can deliver a range of benefits to organisations, teams and individuals. They’re flexible enough to be used by leadership to provide strategic clarity, and by teams to drive progress towards the key customer and business outcomes. With each associated benefit to OKRs, there are a number of ‘accelerators’ or conditions that help ensure organisations get maximum impact from the framework.
Key benefits of implementing OKRs
There are a number of potential benefits from implementing OKRs, and they compound over time as organisations successfully embed the framework. That’s why there is such interest in OKRs and why they’re so powerful in helping organisations deliver sustainable competitive advantage.
Clarity of purpose is one of the fundamental benefits of OKRs, and it’s the starting point for a number of organisations as it’s the bedrock that supports the realisation of other benefits. Organisations may implement OKRs to target other benefits shown on the diagram, but if this is the case, they need to be comfortable they have clarity of purpose across all levels. This doesn’t just mean having a vision or mission statement. It’s a clear and dynamic link between the teams at the “coalface”, and the overall strategic intent. The dynamic and cascading nature of the OKR framework makes it perfectly suited to achieving this.
It’s much easier for organisations to achieve clarity, if they have a clear strategy to facilitate the creation of quality OKRs. Establishing OKRs without a strategy is challenging, as you’re essentially defining your strategy “on the run”. In more normal times this isn’t recommended, however, during the current environment, it is a way to accelerate the crystallisation of a new strategy and may be appropriate. Clarity of purpose across the organisation helps unlock the second key benefit of OKRs, alignment.
Alignment drives cross-team collaboration (at all levels) which is a key challenge faced by many organisations. It’s also necessary to realise the synergies that drive high-performance. OKRs make organisational alignment easier due to their visibility and tangibility. For leadership, OKRs quickly visualise the key priorities of all teams in a consistent and regular way. For teams, OKRs generate conversations between teams, encouraging collaboration around common objectives and challenges.
There are a couple of key accelerators to support organisations achieving alignment. The first is leadership alignment, as their behaviours permeate the whole organisation. The second is a willingness by teams to collaborate across different business units and departments. Organisations often have silos, and while it is common to have strong collaboration within business units, there may be little effective collaboration across business units. However, if the teams are willing to collaborate, OKRs are a powerful framework to encourage and embed effective cross-team collaboration across an organisation. The next OKR benefit, transparency, is closely linked to alignment.
OKRs can provide complete transparency across an organisation, not just at the start or end of an OKR cycle, but throughout the year. This transparency is wider than just understanding priorities, it’s also understanding progress against the priorities. Understanding their progress regularly allows teams to course-correct and take the remedial actions necessary to get back on track. The timely nature of OKRs and the ability to course-correct means they can effectively complement existing enterprise-level KPIs.
For transparency to be embraced by teams, organisations need to have a culture of “learning” rather than “blame”. Teams need to be safe to call out challenges and seek support, rather than attempt to hide issues to avoid recriminations. It’s also important to have effective tracking and analysis of metrics in place otherwise, it will be difficult for teams to set and monitor effective OKRs. Establishing transparency is a key enabler for the next benefit, empowerment.
The empowerment provided by OKRs can have a number of positive impacts on teams. Firstly, they’re instantly more engaged as they are setting and tracking priorities they established. OKRs can’t be drafted for teams, they need to create them to establish a sense of ownership and accountability.
The benefits of engaged and empowered teams are widely documented. Ultimately they’re typically much more effective. Leadership has a key role to play here. They need the confidence to truly empower teams and adopt a Servant Leadership approach. However, the door swings both ways, and teams need to recognise the increased accountability that comes with empowerment.
Repeatable innovation that delivers tangible customer and business value is the panacea for many organisations. The OKR framework is a powerful enabler of innovation. The framework is designed to promote continuous improvement by measuring progress towards Key Results, not activity or outputs. Essentially organisations and teams measure their activity is effective, rather than just track activity on a project plan. The mindset shift from outputs to outcomes is fundamental. It helps teams move from assuming they always know the perfect solution at the start of a program, to establish a clear hypothesis to test with rapid feedback loops. Organisations most effective in working this way have empowered cross-functional product teams. The model simply won’t be as effective with teams working in more traditional ways, with predetermined solutions and long lead times.
All of the potential benefits of OKRs are interrelated, but that doesn’t mean organisations have to focus on them all simultaneously. In fact, it’s best not to. When considering how OKRs can help, it’s important to be pragmatic about the current state of your organisation and clear on the problem you are trying to solve.
Using OKRs to navigate the current environment
During times of significant change, it’s critical to have a clear focus and ensure that teams across the organisation are aligned. This is where OKRs are particularly powerful. They enable leaders and teams to clearly communicate and track progress towards the most important priorities. This allows the organisation to rapidly pivot and course-correct in line with its overall purpose and strategy.
In more normal times, organisations typically have a well-defined strategy before undertaking an OKR implementation, as this makes things run much smoother. However, many organisations have had their strategy “turned on its head” in recent times. To quickly navigate a path forward, you can use the OKR framework to accelerate the implementation of your new strategy. After all, in this market environment, the pace of an organisation’s response is paramount.
In his book Good Strategy/Bad Strategy, professor Richard Rumelt outlines three essential elements of a good strategy:
- Diagnosis – understanding the nature of a challenge and simplifying complexity to identify critical aspects of the situation
- Guiding policy – outlining an approach to dealing with challenges identified in the diagnosis
- Coherent action – Key steps or coordinated actions to be undertaken to carry out the guiding policy
A number of organisations are currently reassessing the first two elements described above. Where OKRs are particularly powerful is the third element, defining and coordinating the approach an organisation will take to implement its strategy. OKRs are the bridge between the activity undertaken by organisations and the customer and business outcomes that drive long-term goals.
OKRs help organisations become more outcome-driven
OKRs are a great way to communicate and execute strategy by creating a link between planned activity and the intended results (Outcomes and Impact). The model below is adapted from the Logic Model created by the Kellogg Foundation. Organisations have much greater influence over the factors on the left (Inputs and Activity) than they do on the intended results (Outcomes and Impact). Rather than just tracking activity, the Key Results in OKRs should measure progress towards the key customer and business outcomes. These are the measurable behaviour changes that will drive the long-term goals.
Where to start with OKRs
All organisations are different, there’s no “one size fits all” approach to implementing OKRs. However, you can apply a consistent methodology that I have found works successfully over a number of years with organisations of all sizes across a range of industries.
- Define the problem – Ensure key stakeholders have a clear understanding of the problem you’re trying to solve by establishing OKRs. Your problem statement will typically link to one of the benefits highlighted in the diagram earlier. For many organisations rapidly responding to the Coronavirus, it may be ‘alignment’.
- Create a hypothesis – Look at an OKR implementation the same way as you would the launch of a new initiative. Articulate the impact you think OKRs will have (by when) and outline how the impact will be measured.
- Design your OKR system – While there is a plethora of information available on OKRs, no two implementations will be the same. It’s important to design a specific OKR system based on the unique attributes of your organisation and environment in which you operate.
- Establish internal champions – Along with sponsorship from the leadership team, internal champions in the teams will be vital. Many organisations engage experts to support implementing OKRs, but without internal champions, your implementation can lose momentum and fall flat.
- Run a pilot – Pilot your approach across a few teams or single business areas initially before a wider roll-out. If you’re implementing OKRs to help accelerate progress in a new strategic direction, the leadership team should participate in the pilot. It’s also best to have a mix of teams in the pilot (eg. Product, Sales, Operational teams)
- Have a short OKR cycle – In times of significant change, you want fast feedback loops, to allow teams to learn faster and react quicker. Your OKR cycle needs to be determined based on your specific circumstances, although it shouldn’t be longer than quarterly in the current environment.
- Adhere to the OKR basics – There’s a lot of material available that outlines the basics of an OKR implementation, here are a few fundamentals:
- Create focus – don’t set too many OKRs
- Make them aspirational – OKRs are great for driving step-change, not tracking BAU and adhering to the status quo
- Measurable – Your Key Results need to be measurable and teams need to be able to track their progress during your OKR cycle
- Outcome driven – When setting Key Results don’t measure the activity a team does, measure that it works (ie. the desired outcomes)
- Review and evolve – OKRs are all about driving continuous improvement, and the same applies to implementing OKRs. It’s vital to review and evolve your approach as OKRs are established.
It’s a challenging time for all organisations. OKRs can be a powerful tool in your arsenal. They create focus and alignment and can help organisations rapidly accelerate the effective implementation of a new strategy. Importantly, the benefits of OKRs can stretch much further to empowering teams and creating a powerful innovation ecosystem. One of the main reasons OKRs have gained traction internationally is the simplicity of the framework. While successfully implementing OKRs can be challenging, there are proven methodologies available to help. If you think OKRs may be right for your organisation, don’t wait for things to settle down, use OKRs to navigate these choppy waters. Be clear on what you’re trying to achieve and start your journey today.