To achieve your vision, you must set goals to help you get there. But often, people set goals that don't support them in reaching their vision. So how can you ensure your objectives help you achieve your vision? Once you've set those goals, how can you trust your operational systems to execute those goals?
One way is to use OKRs. OKRs are a system of goal setting that helps ensure all your goals are aligned with your vision and help you reach it. They are different from other types of goal-setting methods, such as KPIs or MBOs, in a few ways:
They focus on the outcome, or what you want to achieve, rather than how you will achieve it.
They are measurable, so you can track whether or not you're reaching your objectives.
They are time-bound, so you know when you should achieve them.
If you're looking for a system of goal setting that will help you achieve your vision, then OKRs may be the right choice.
Before I get into the details, let's understand how we got here.
Our Shared Legacy on Operational Efficiency
My bachelor's degree is in Finance. My mother was a systems analyst for Sun Systems before they had information management degree programs. I remember her coming home late one night and saying, "If you want to be successful, take all your electives in computer science. I swear, these programmers can't understand what the business wants. You'll be worth more than gold if you can bridge the gap between business and technology."
Fast forward thirty years and things have mostly stayed the same. Why is that? We're intelligent people. We know it's been a problem. Why haven't we fixed it? What causes this divide?
I left college and had a brief career as an Investment Analyst at a major bank in downtown Philadelphia. My father took me to a downtown warehouse to buy three suits: six white shirts, different color ties, and two pairs of shoes. I could mix and match my way to a professional look. I felt great that first day. I read the Wall Street Journal while I rode the train to work; I felt so cool. After three weeks in the office, one of the most successful traders stopped me in the hallway. He had heard that I minored in computer science.
He wanted to know if I thought creating a consumer-oriented online trading app was possible. This was 1980, and none existed. My response was; sure, but you have to have access to a mainframe, find a way for people to access it, and get real-time data from a trading platform: problem, problem, problem. I wonder if he ever followed through with the idea. The first commercial customer-oriented trading application came out around 1985. It would be a huge missed opportunity if he didn't follow through. I still think about the missed opportunity of the M-Trade Platform to this day ("M" for Marty instead of "E" whatever that stands for; dumb E-trade. Um, I mean, good for them! 😉). It seems like business leaders have great ideas, and IT points out all the things that might get in the way. This way of viewing opportunities is the classic divide. In this age of everything digital and immediate response, software development must become a core business competency.
Before we beat ourselves up, remember what Deming said,
Every system is perfectly designed to get the results it gets.
Many early business applications are batch-oriented. Most of the organizations I go into today have some form of this batch-oriented system as a core part of their platform of services. The popular term today is "monolith," suggestive of a large block of stone, hard to move and unchanging.
The first batch-oriented business applications were developed in the 1960s and 1970s. These programs were designed as a computing response to the need for data to be processed during off-hours. They wouldn't start until you had enough work; they would run through the night and then spit out their results for humans to review and further process.
It's not surprising that IT departments started getting bigger at this time. To automate routine tasks, you needed more people trained in programming languages like COBOL or Fortran.
(OMG, remember Pascal? How old am I? Wow, I just used OMG and Pascal in one sentence. That sentence alone spanned 30 years 🙂 )
As the IT departments grew, organizations needed buildings to store the mainframe computers, adding more cost and infrastructure to IT. The expenses kept adding up with the addition of staff to maintain the data centers, the mainframes, 24/7 support, water cooling systems, and more. IT departments had no actual revenue unless you considered charge-back systems. The IT department became a cost center. The organization centralized all its application systems to use the expensive mainframe servers to full capacity. It made sense to look at efficiencies of scale.
IT budgets were based on costs to maintain the current systems with some estimate as to how much capacity would be needed by the business the following year. We created a budget and then pushed down the dollars to create capacity. We attempted to keep the budget aligned with the incoming demand, but organizations never achieved that goal. The IT department became a bottleneck of projects never being delivered on time. Requirements needed to be clearer for a team of programmers to build what the business wanted. There were no incremental feedback loops. The business usually got a first view of the product during a Beta Testing Period once all the software was written. It was difficult to change anything except the most egregious problems at that late stage. If a project date was pushed, more features were requested as a way to negotiate the change in date with the customers. Late projects caused more cost overruns and introduced late-stage defects in the production system for the customers to find. These defects are the most costly to fix, and use the capacity set aside to create new features.
We use terms like Business and IT as formal nouns, maintaining that divide. Organizations put hierarchal systems in place to protect themselves or to prove they are getting value from the money allocated. IT departments required highly detailed requirements before they started a project because they didn't want to be held responsible if something went wrong. Business teams flooded IT with requests demanding they find a way to get it done, or they would outsource the development of the system to a third party. IT organized priorities based on what they could get done, not what the business valued.
We built systems with compliance and controls to deliver value to our customers. We've spent our lifetime building and rebuilding our systems to be the most efficient, given the structure and compliance systems we have in place. As the need changed to address a highly transactional model, we made incremental changes using our current systems and structures. Our markets began changing rapidly; innovations, high-speed access to information and applications directly into homes, and ubiquitous cloud computing. Demand changed beneath our feet.
Many of our responses were still very IT-centric. We brought in consultants and trainers to change our organizations and make us more agile. We needed to be nimble. Our agile transformations started in the Program Management Office (PMO) because we needed to address how we delivered to the market. Our IT department and how we managed delivery to the market had to be more agile. It was an IT problem, right?
We did get better in some aspects. We, in many cases, built things very quickly and got them uploaded to the cloud for customer access. Were we making the right things? Not really. Realistically, we can only be sure at the very end. Sound familiar?
Skilled IT can do a lot to help an organization be more responsive to the market, from the build-the-thing-right part of getting solutions to the market. The Business defines the build-the-right-thing part of bringing solutions to the market. An organization that needs multiple levels of approvals to ensure all decisions align with the organization's strategy is incapable of keeping up with market demand. Everybody can't be involved in every decision.
We need to bridge the responsibility gap and ensure the business-savvy and technology-savvy members are jointly accountable for build-the-right-thing-right and ensuring that what goes to the customer aligns with our strategic intent.
What are OKRs, and how are they different from other goal-setting methods
OKRs are a critical thinking framework and ongoing discipline that seeks to ensure employees work together, focusing effort to achieve measurable progress. OKRs—Objectives and Key Results—are simple, measurable goals everyone in an organization is responsible for achieving.
Objectives (O) define where we want to go. This is "your" Intent and your Why. You want to declare the big idea. Inspire and motivate with a sense of purpose. Keep your OKRs small, as the work to execute against the objectives will exponentially grow as they trickle through your organization. Set a max of 3 to 5 of them to focus; less is more. Objectives should be bold, easy to understand , and may span a 12 to 24-month horizon.
Key results (KRs) are the outcomes by which we measure success. 4-6 results that are clearly measurable at the end of the OKR cycle. You want to ensure that your operational systems will focus their efforts because it creates the most value. Measurable means quantifiable numbers – not action items or tasks. Make sure you define the BEST POSSIBLE results – not the most probable.
OKRs differ from other popular goal-setting methods like Key Performance Indicators (KPIs), Management by Objectives (MBOs), and SMART Goals in several ways. Unlike other forms, OKRs focus less on the specific tasks involved in achieving a goal and more on the overall objectives of an organization or team. Additionally, OKRs are designed to be flexible; teams may determine different OKRs depending on their objectives throughout the year. Furthermore, OKRs share progress on company-wide objectives with everyone at all levels within the organization and outside stakeholders, giving employees an improved sense of alignment with your mission. OKRs offer teams a truly dynamic approach to goal setting and can help organizations become more successful than ever. OKRs make your workforce collaborative, transparent, and agile!
The benefits of using an Objectives and Key Results Framework
Setting objectives and key results (OKRs) is an easy and effective way to prioritize goals, identify clear steps toward achievement, and measure progress. OKRs also give teams a strong sense of purpose and foster accountability by making it crystal clear who is responsible for completing each task. The OKRs framework is aware of what success looks like, how much progress has been made, and how many steps are left to take. On top of that, OKR-driven organizations enjoy greater flexibility than ever before because the OKR core principles can easily be adapted to fit their specific objectives. Indeed, even wily industry veterans often find themselves taken aback by their newfound responsiveness. Soon OKRs will become de rigueur in business strategy. Overall, there's no denying that the benefits of setting OKRs far outweigh the difficulties.
How to set up effective OKRs for your company
Setting up effective OKRs (Objectives and Key Results) for your company can seem daunting, especially if you have scaled over time. Knowing where to start is vital, so before dipping into the nitty gritty of setting up scaled OKRs, it is essential to comprehend the OKR basics. Start by conducting a thorough assessment of your company's needs and priorities, followed by defining achievable objectives that are specific, measurable, and challenging but realistic and time-bound. Then proceed with mapping out the results to meet those objectives - these should be quantifiable measures or indicators with specific goals for improvement.
You can begin to scale both the objectives and results to provide sufficient clarity on what success looks like at each point in the timeline. Your OKRs should be shared as they trickle down through the organization.
TIP: Don't make the mistake of dividing OKRs by function.
Finally, ensure that progress towards hitting those scaled OKRs gets tracked and communicated to all relevant stakeholders to stay on top of progress throughout your growth and help motivate employees with timely rewards when meeting targets. With some thoughtfulness and preparation, setting up scaled OKRs for your company can ultimately become an enjoyable task!
Example of Successful Objective and Key Results
Here's a bad example of an Organizational Objective and Key Result:
Objective: Increase website traffic.
Key Result: Reach 1 million website visitors per week.
This example is not a good OKR because it doesn't provide any quantifiable measures or indicators to measure success, nor does it set realistic and achievable goals for improvement. Furthermore, the key result doesn't have a timeline attached, making it difficult to measure progress or hold people accountable.
A better OKR would set specific, measurable, challenging, but realistic, and time-bound objectives and key results. For example:
Objective: Increase website traffic by 25% in 3 months.
Key Result: Reach 750,000 website visitors per week.
This example provides a quantifiable measure of success with a timeline attached to it, making progress measurable and achievable. It also holds the team accountable for meeting its goal within the set timeframe. This is an effective OKR!
Tips for making sure your OKRs lead to success
Objectives and Key Results (OKRs) are an effective tool for businesses to set goals and track performance, but it can take time to implement. Here are a few tips to ensure your OKRs lead to success. First, keep objectives small and clear-cut. Setting intricate OKRs can be overwhelming and discouraging; instead, focus on bite-sized milestones that achieve small wins. Additionally, when setting Key Results, make sure they are specific and measurable so you can gauge progress accurately. Another critical factor is frequently reviewing your results; I suggest at least quarterly to check on progress or make any mid-course corrections as needed. Finally, remember to celebrate successes! Treat yourself or your team members to a reward (like french fries, mmmm, french fries🍟) after reaching a goal! With these simple steps in mind, everyone can ketchup (HA! - sorry, it's been a long week🤣 ) when creating successful OKRs.
To delegate the execution of strategy and ensure operational efficiency, you need to have a system you can trust. Many leaders are unaware of the risks of misalignment of execution and strategy. Nobody owns alignment, and we have tasks masquerading as progress. This system of OKR management needs to track and provide feedback at a minimum speed that matches market or product demand. This feedback loop must connect you to your customers and markets in a measurable way. You have to be able to use that information to rationally move the budget to create the appropriate capacity and increase revenue for that specific market. When you improve operational efficiency and have a system you can trust when the market demands more from one part of the system, you can confidently create capacity by spending money to add more teams in that area. You need an operational system that blurs the lines between Business and IT to the point there is no discernible difference. You have products and value streams that deliver on value propositions and create revenue. Cross-functional teams throughout this system are a mix of business-savvy and technology-savvy people. They must have the autonomy to make decisions within the guardrails of the strategy and budget.
You define operational system guardrails with your Scaled OKRs System.
These teams can therefore be held accountable for delivering value and will be excited at the opportunity to help the organization grow beyond all expectations.
As you can see, OKRs are a great way to set goals and measure success. They're simple enough that everyone in your company can understand them, but they also provide the flexibility needed to make sure each department is hitting its and the company's targets.
Let me know how you use OKRs in your organization in the comment section below. If you want to start using OKRs in your business or are already using them and have questions about scaling them up, let me know in the comments below. I'd be happy to help!