Which Problems can OKRs solve?
Common Problems with objectives within organizations
Consider your current work context: Do you know your individual objectives? Your team objectives? Your company mission? If you are not sure about those three things, it might be worth to read on.
Enabling an organization to push forward to a shared objective can be quite challenging. In “traditional”, hierarchical organized companies this challenge is solved by a pyramid of objectives that are defined once a year: From company mission to department objectives to team objectives down to the individual employee. The achievement of one or more objectives is often bound to a financial bonus. Once a year, management defines the strategic objective for the company, brakes these down into chunks for middle-management, which itself create the team and individual objectives. Often, progress and feedback on that objectives are only reviewed once a year — in the annual performance appraisals.
This leads to some problems.
Less focus
Thus you break the company objective down to individual, manageable objectives, those objectives can become very incremental and fuzzy. Employees do not relate any more to the overall company mission and only the top level hierarchies “feel” the mission. The organization consists of individuals with different, not related objectives. Consequently, the company’s focus is everywhere and yet nowhere.
Given the 12-month rhythm of performance appraisals, I’ve seen employees working 9 month on their “own” objectives and 3 month on the company objectives. Typically, some month before the cycle ends, employees remember the agreements made with their boss and try to get the score to 100 %. What do they do in the other months?
Less collaboration
Typically, you found a company, when the combination of different skills is necessary and more workforce enables you to reach your objective faster than an individual could. In short: It’s about collaboration of humans.
Different objectives on an individual or department level topped with financial bonus can foster something completely different that collaboration: Employees do not work together and support the company’s objective — instead they try everything to protect their “resources” to reach their own individual objectives. Selfishness or teamishness rules.
Lack of responsiveness
As a consequence of rigid objectives and a long lasting process of objective definition and communication, the organization cannot adapt quickly to new opportunities. Because a new opportunity needs to be communicated to top management and flow down again. A 12-month objective definition process simply seems a bit too rigid for some industries.
Less autonomy
I very much like Daniel Pinks teaching on motivation: According to his research, three factors increase or decrease the motivation of an employee: autonomy, mastery and purpose. If you believe that every employee needs to contribute in order to create a successful product, motivation should be on the top of the list.
With the right implementation of company objectives, you tackle primarily autonomy and purpose. In my experience, mastery develops out of practices and exchange between employees.
It takes courage for senior managers to step back and let the teams do their work. And middle managers, product owners or team leads needs to show backbone to protect teams against micro-management arising from senior management.
Principles of Objectives & Key Results
So, which system can help companies to focus and foster autonomy? I had some good experiences with Objectives and Key Results (OKRs). OKRs were invented at Intel and radiated by John Doerr. Amongst the adopters are Google, LinkedIn and Twitter.
What are the key elements?
- Focus on a few relevant and ambitious objectives
- Check & adjust the company mission annually and set objectives quarterly
- Invest in 4–5 sharp, relevant and measurable key results
- Check the teams’ trust in success (Confidence Level)
- Measure progress at regular intervals (Grading) and adopt from there
Prerequisite: Company mission
This may sound so trivial, but… I’ve seen companies that could not proper state their mission. Thus, all objectives derive from the company’s mission, it’s mandatory in my eyes.
(You could throw in a half-baked company objective in there and still be able to define objective. But “As company XYZ we want to increase market share by 25 %” is very little inspiring and purposeful for stakeholders.)
The company mission could look like Google’s, Quora’s or Patagonia’s.
Ambitious team objectives
With this objective at hand, every team can define together with management its self-owned objective. Obviously, the aim is to support the organization to reach its main objective. This objective should be ambitious and motivating for all team members. It’s a pull of accountability. It can be a bit crazy, which helps to memorize that objective for the next 3 months. ;)
Example objective for a customer service team in eCommerce: As a team, we want to provide the best customer service in our industry.
Key Results
Next, you define key results that makes your progress regarding the objective manageable. Usually, a team defines 4–5 key results. The well-loved S.M.A.R.T. criteria comes here handy.
Example key results for the customer service team:
- Reduce wait loop for telephone calls from 240 to 50 seconds*
- Validate 3 ways to reduce delivery time*
- Increase Net Promoter Score from -10 to 40**
*Assuming that it’s proved that both actions lead to increased customer service quality
**marks excellence in the industry
Just to give you one examples of not so S.M.A.R.T. key results:
- Be at first place in the quarterly industry customer satisfaction report*
*you cannot measure progress. It’s binary (0 or 100).
Confidence Level
When you have defined your key results, you can almost go to work. A quick check-in with all team members helps to show the teams confidence to reach that objective. This is achieved with a short show hands on a scale of 1–10. This score is marked on the OKR Poster and visible to everyone.
During the next weeks, you repeat this step and keep track of the overall confidence. This is especially interesting, for teams that a bit more quiet and do not dare to speak out that they lost confidence in achieving the objective. This is crucially important because it helps the team to come up with new ideas and overcome the “valley of doubt”.
It helps a lot to have Objective and Key Results visible at your team space (e.g. poster, flipchart) and not only buried in some electronic tools.
Grading
At the end of a cycle, the team comes up with scores for each key result. A score tells the progress towards that objective on a scale from 0 to 1.
Our example key results:
- Reduce wait loop for telephone calls from 240 to 50 seconds | score: 0,9
- Validate 3 ways to reduce delivery time | score: 1,0
- Increase Net Promoter Score from -10 to 40 | score: 0,5
Overall score: 0,8
Thus, the key results are measurable this step should not take much time. Based on the score for each key result, you calculate the average. This is your team score for this OKR iteration.
Thus, the objective should be crazy and ambitious, it’s very hard to reach a 1. Good teams have scores between 0,6 and 0,8.
If you want to read a little bit more about the system, look here.
Learnings from real life
I worked for a little more over a year with OKRs wich were introduced after a pilot with a single team to the whole organization. By that time, almost 10 teams switched to OKRs.
I want to focus on critical features within an organization that make or break the success of OKRs.
Communicate the company mission
Because every team objective depends on the overall company mission, the management’s focus should lay on communicating this objective and making sure that everybody is on the same page. If one employee has vital doubts on the objective, this needs focus. The aim is not to force her to align to the company’s objective, but to go into a conversation. However, it’s every employee’s task to speak up and make him heard. Plan time for this and make sure everybody is heard.
Have an eye on team interfaces
You can also use OKRs as a weapon of selfishness and teamishness. If your team lays back in its key results, it possibly doesn’t support you any more with your daily business requests. I saw that happen.
One solution could be to involve teams into objective and team setting and let the organization adapt from that.
Ditch financial incentives on personal objectives
There are so many studies on that topic that this incentives are counterproductive. Here’s one example.
Plan time for inspection
If the OKR team score is low and the team didn’t come closer towards the objective, it’s important to plan time for inspection. What have we learned? What did us prevent from doing better? How can we improve next time?
My experience is: If you don’t take the time to step back and come up with new solutions you will do more of the wrong things in the next OKR iteration.
Responsibility for teams
Most teams (I know) want to be responsible for their work. There might be several reasons why a team couldn’t achieve its objective: Maybe the team setup wasn’t right, the market changed, the objective was too ambitious (so you should have reached some success nonetheless) or the team decided wrong. Nevertheless, the team needs time to reflect and iterate.
The feeling that nothing happens after “failing” to achieve the objective is corrosive. After a short while, the team won’t strive for success because there’s no sense of accountability or responsibility. You disengage from reality.
Plan support for teams
It’s crucial to support the teams when defining their (first) set of OKR. Creating key results which can be measured and are actionable is tough — at least the first time. Support from (agile) coaches can be very helpful.
My Conclusion
As well as with all organizational changes, the success depends on the kind of implementation. Start small, let one team perform at least one OKR iteration and protect that team. If the team performs, it will radiate the idea towards other teams. If you sense the pull of other teams, offer them OKRs, too.
Personally, I really like the autonomy, focus and energy that OKRs bring along. Working with motivated individuals striving towards one ambitious objective is simply great.
What’s your take on OKRs? Please share your thoughts in the comments or on twitter.
