Recession-Proof Your Company with OKRs

Updated: Oct 4



What are the top three strategic priorities for your organization right now? Chances are very high that you don't know, and even if you tried to answer your chances of being correct are low. The reason your chances are low is because, only *50% of top-level executives can accurately name the top three priorities for their own organizations. That is not an impressive number, and sadly it isn't the worst number. When you get down to the level of front-line leads, less than 15% can accurately name the top three priorities in their organizations. That is called a decay rate of understanding. It might also be considered a decay rate of purpose - and the numbers do not look good.


"Never let a good crisis go to waste"

It may seem insensitive to draw on the wisdom of Winston Churchill, but the reality is - we are facing a recession and for many organizations, it is a crisis. If that is true for your organization - meaning you already see hiring freezes, pay freezes, and cutbacks on the near-term horizon, then read on. This short article is going to provide some insights on immediate changes your company can make to survive this recession. Keep in mind, most companies are going to respond to a recession in traditional ways (only way they know how), which ultimately leads to reducing staff. Stop being a traditional old company that does traditional old stuff. Leverage these tough economic times to once and for all learn how to become an organization that is strategically aligned, and entirely outcome-focused.


Speed and Predictability are NOT your biggest problems

Most companies recognize that there are systemic issues in their processes that contribute to bottlenecks in the flow of value. The problem is, most organizations believe that their primary bottleneck is at the delivery team level. If their teams could just work faster and produce higher quality output, then all their issues would go away. However, when you consider that:

  • Less than 30% of companies prepare a business case for new projects

  • Less than 60% of companies bother to measure the ROI of their projects

  • 40% of projects start with undefined project goals and 35% are impacted by changes to project goals (how ironic!)

  • 30% have inaccurate time and cost estimates

AND

  • *** 70% of leaders spend on average only one day per month reviewing strategy

  • And 85% of leadership teams spend less than an hour per month discussing strategy

The numbers are in!

When teams are working in an environment that lacks clarity and purpose and priorities are constantly shifting, getting them to work faster is not the fix. In fact, if they moved any faster it might actually make matters worse. The reality is, too much of the work they are doing is poorly defined and not aligned to the needs of the customer anyway - it's wasteful work! Why consider speed of execution the problem in an environment that lacks clarity? Applying more pressure on teams to work harder and faster in an environment that lacks clear purpose, only leads to employee burnout and disengagement.


Establish AND leverage your North Star

If your company is more project-focused then strategy-focused, then your executives are too "internally focused" and very likely in the weeds - where they should not be. When an organization is trying to do too much, everyone's energy becomes focused on the micro details, like meeting an internally derived due date or the red, yellow, green status of various projects. In the most extreme cases, your c-level executives actually participate in managing defects and bugs. You can't get more in the weeds than that.The macro level purpose gets lost in the urgency of trying to do too much.


Get your leadership team in a room and take as much time as needed to get your strategy clear. There are many strategy frameworks available - you can get creative or you can stick to the basics and perform a SWOT analysis. If your company has not been strategy-focused, then a simple SWOT analysis will serve you well. If you have a strategy, but it's being impacted by unexpected events, then consider at PEST Analysis or other strategy framework to compliment your current approach, and broaden your strategic perspectives. A simple strategy map can also be a good guide for developing a more comprehensive strategy.


Depending on your current operating conditions, your leadership team may or may not be the appropriate group to independently create or calibrate your company's strategy. What got you here, may not get your there. Consider hiring external support to come in and facilitate your strategic planning sessions. Hire experts that know how to ask the tough, relevant, probing questions to tug at the edges of your status quo. Bring in a disrupter that is willing and able to ask the questions that everyone wants to ask, but no one will.


Make your strategy measurable with OKRs

You cannot calibrate what you do not measure. A strategy that is not measurable is doomed for failure because it doesn't provide the context of exactly what the company is trying to achieve. Most strategies are captured in a qualitative manner, that describes the objective of the strategy. An example of that would be - increase profitability. Those two words are in fact an example of a full and complete strategy that many organizations would deploy. And with a strategy like that, you can see why organizations lack direction, even with a strategy. How much is the company trying to increase profits? What near-term conditions could they measure that would indicate their efforts our leading them toward increased profitability? Should they just wait until the end of the year when the books are finalized, and then at that time figure out if their efforts were in the right direction or not? Of course not, that's no way to work. So, why do so many companies sign-up to work under those conditions?


Objectives and key results (OKRs) are the perfect compliment to your company's strategy, because OKRs provided an added layer of clarity on what specific and measurable steps the company is taking on a quarterly basis. The Objective portion describes what the company is going to achieve, and the key results provide the measurable evidence of progress toward the objective. The magic of the OKR framework is that it is built upon the notion that doing less is better. If you pick 1 - 3 objectives you'll likely achieve all of them. If you set 4 to 6 objectives, you might achieve 1 or 2, and if you set 10 or more objectives, you'll achieve none. With OKRs, you'll want to compliment your 1 to 3 year strategy, with a set of 1 to 4 annual strategic Objectives, followed by 2 to 4 key results on each objective. The set of strategic OKRs must be complimented with a set of quarterly tactical OKRs, which follow the same construct. The tactical objective highlights what is going to be achieved, and the key results indicate progress toward achieving that objective.


Create shared OKRs to establish deeper alignment

One of the de facto mistakes that we see organizations make, is when they create siloed OKRs. This generally happens first at the senior leadership level, and then it has a trickle down effect from there. What it looks like is this - a team of leaders get into a room for one of their routine meetings. They discuss trying OKRs based on the level of understanding they have at that time. Because of our very hierarchical way of managing organizations, most leadership teams think it's appropriate that each member of the leadership team come up with their own OKRs based on their functional contribution. That is a major error that will torpedo any effort of doing OKRs. Here's the math - if you have a leadership team of 10 people, and each of them creates 2 - 3 OKRs, you stand the chance of offering back to your departments and teams, 20 - 30 (or more) functional, siloed OKRs from your leadership team. That does not offer focus - it actually offers more ambiguity.


The fix for that major OKR pitfall, is that the same leadership team needs to come up with 2-3 shared OKRs that the team owns. That shows a powerful level of alignment and clarity. And with 2 - 3 shared OKRs at the leadership level, they stand a much better chance of making OKRs a massively important part of their daily focus and daily discussion. Taking this critical step of sharing OKRs across a leadership team is game changing and it is the first giant step toward fostering an organization that is focused on outcomes!


If work doesn't align to your OKRs, don't do it!

Most organizations lack an operationalized way to say No to new work requests. Instead of saying No, organizations use the word Priorities. The word priorities allows for an ever increasing list. The word No, stops the list building and intense, political prioritization discussions, and keeps your company focused on the work that matters most. If you've taken the steps to create a 1-to-3 year strategy, and you complimented that with a set of annual and quarterly OKRs, then you have the foundation to say No to work. With the foundation in place, make it a permanent operating rhythm of always validating new work requests for strategic alignment. If it's not aligned - don't give it a second thought. It's as simple as that.

Having the ability to say no to the wrong work, will allow your company to focus on what matters most, and start shaping their work in a manner that fits within their capacity. When an organizations shifts from project focus, to OKR or Outcome focus, they will be forced to start shaping their work to fit into a quarterly delivery cadence. And this is a good thing! Projects that are under $1 million have a 76% success rate. Compare that with projects that are $10 million and have only a 10% success rate. Make sure your company is working on small, strategically-aligned projects, and you will see an immediate lift in both performance and morale. People love getting stuff done. If your company is saddled by many projects that take multiple months, you'll find yourself working in a company with very low morale and very high turnover.


Agile Portfolio Management (APM) is a perfect nucleus for being the entity in an organization that can help to establish and maintain strategic alignment. APM is built on the notion of doing small batches of work and ensuring the organization is always working on the highest priority, strategically-aligned work. 100% of the time.


Calibrate your strategy on a quarterly basis

Objectives and key results provide the foundation for strategic agility. Once the operating rhythm is established of defining OKRs and then determining what work to do, then you will be able to evaluate outcomes, relative to the defined key results. If the work that was done in support of an OKR, delivered the intended measurable outcomes, then do more of that work - it's proving valuable. On the other hand, if it's not delivering the intended measurable outcomes, then stop that work and determine what corrective steps need to be taken to adjust the work being done in support of the OKRs. And then check again in another quarter.


Communicate, communicate, and get out of the way

If you want to shift your organization's focus to the things that matter most - make sure they know what actually matters most. If you decide to do OKRs and you take all the right steps to shift your organization to an outcomes focus, communicate with intentionality. Let the organization know "why OKRs, and why now." It's very important that the organization receive the clarity on how OKRs fit into the bigger picture. And as leaders in an organization, if you've taken the steps necessary to create a purpose-driven environment, then keep your focus at a holistic level, always scanning like a radar, looking for and eliminating the internal and external factors that slow you down and catch your company by surprise. A system that is operating under conditions of clarity, where proper demand and capacity management is being done, will ultimately speed up and become more predictable.


Bringing it all together

Most organizations are on a treadmill of routine that they have been following for years and years. And despite evidence that it results in poor work environments, disengaged employees, and executives that are overly tactical and in the weeds, the tendency is to keep doing it. Familiarity does indeed breed content. If you want to be a modern organization that has the strategic agility to survive a recession - don't start by fixing symptoms of problems, like missed due dates, poor quality, low morale, etc. The cause of those symptoms starts with misaligned and misdirected leadership teams that don't know how to work together. And those same leaders frequently have misguided incentives that keep their focus too tactical and lead them to put pressure on teams to do wasteful work. Leverage the OKR framework to get your leadership team on the same page, and then use your OKRs to make sure your organization doesn't take on wasteful, rogue work efforts that lack strategic alignment. That's the foundation to both recession-proof your company, and also provide the strategic agility to keep pace with today's competitive landscape.


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