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Objectives and Key Results (OKRs) for business outcomes

Objectives and Key Results (OKRs) for business outcomes
January 25, 2022

What are OKRs?

Objectives and key results (OKR) is a management process or system intended to drive focus on what matters, set clear priorities for all teams that need to deliver the outcomes, and orchestrate their actions. OKR is a management methodology that helps to ensure that the company focuses effort on the same important issues throughout the organization. OKRs enable the distribution of strategic decision-making to teams to allow the teams to adopt a strategy in their context.

Agile and OKRs work best in tandem. There’s a desired end state of outcomes (OKRs), and those help keep you focused. Agile is a process to get you there, and it overlaps well with OKRs to retain strategic focus and align end priorities with daily execution.

OKRs vs. SMART goals vs. KPIs

Let’s look at the difference between OKRs, SMART goals, and KPIs.

  1. In SMART goals, SMART is an acronym and stands for “Specific”, “Measurable”, “Assignable”, “Realistic”, and “Time-bound”. OKR is the acronym for “Objectives” and “Key Results.”
  2. SMART goals describe goals in isolation, and there is no objective linked to the company strategy. SMART goals do not focus on the key results. Rather, they just focus on “what is the goal.” OKRs are tied to a mission and set the direction to get to the mission. OKRs involve the entire company in the goal-setting activity. OKRs focus on “what is the goal” and “how do we achieve the goals.”
  3. KPIs, on the other hand, measure the health of the initiatives. Key Results (KRs) can be linked with KPIs; KRs can be of the following types:
    • Percentage-tracked KRs
    • Task-based KRs
    • Milestone-tracked KRs
    • KPI-based KRs

     Key results can be tracked using KPIs; hence KPIs and key results complement each other

Making distinctions between objectives, key results, and tasks

Objective, is simply WHAT is to be achieved, no more and no less. Objectives are significant, concrete, action-oriented, and aspirational. When properly designed and deployed, they’re a vaccine against fuzzy thinking and fuzzy execution.

Key results benchmark and monitor HOW we get to the objective. Key results are specific, time-bound, aggressive yet realistic, and measurable. An objective can map to multiple key results.

Tasks - Refers to the tasks to do in order to drive progress on the key results. Initiatives are frequently confused with key results, but they are two distinct things. Key results are not tasks but rather a measurement of progress towards the objectives. Initiatives are action plans (tasks, projects, etc.) to be completed to reach the objectives.

When to use OKRs (and when not to)

OKRs show teams how their work impacts overall enterprise outcomes; in addition, OKRs help manage interdependencies and provide visibility into each other’s work.

OKRs show teams how their work impacts overall enterprise outcomes.

OKRs are Swiss Army knives suited to any environment. The OKR goal-setting methodology requires its logical adjunct, CFRs (Conversations, Feedback, and Recognition), to provide the continuous performance management element needed to drive results.

For leadership, OKR gives proper alignment and visibility into the organization. For teams, OKR provides the focus area which generates value to the organization.

OKR cannot substitute for sound judgment, strong leadership, or creative workplace culture. If those fundamentals are in place, OKRs can guide you to the mountaintop.

OKR cannot substitute for sound judgment, strong leadership, or creative workplace culture.

Use cases for OKR implementation

OKR can be the best companion in any empirical journey where we need to explore/experience/learn yet need to focus on the larger business outcome that may take years to achieve. What is essential in this scenario is to move in the right direction and take smaller steps to achieve that target business outcome.

OKR helps the leadership and the teams together define the smaller target objective(s) for a smaller timeframe with higher certainty, let’s say a quarter or couple of quarters or at the max a year. The only point to remember is that the progress made towards the defined target state must be clearly measurable.

Use cases for OKRs are:

  1. To create focus and alignment: OKRs are a great way to plan outcomes in QBR (Quarterly Business Planning) sessions; they enable consensus across Tribes / Release trains/ Programs about writing the quarterly objectives in OKR format. This helps business owners and teams align against a common goal.
  2. For collective accountability: Using OKRs help drive a mindset of collective accountability in a product-centric operating model. In a product-aligned operating model, horizontal foundation platform teams support the various business-aligned teams; in this scenario, OKRs bring common alignment and focus between the foundation and business-aligned teams.
  3. Change initiatives: Every change initiative in an enterprise must communicate the urgency to change. OKRs are a way to bring a sense of urgency by aligning the teams to a common purpose.
  4. Promoting team effectiveness: OKRs help gives structure and clarity and provide meaning and purpose for the teams on the ground by seeing the impact of their work on the bigger picture. 

OKR adoption roadmap

Step 1 - OKR setup

  • OKR planning workshop – Sets the purpose for the team by connecting the organization or department mission; everyone involved in the planning exercise is aligned to the mission statement.
  • OKR setting workshop – To create a draft OKR aligned with one of the company's KRs for the next OKR cycle.
  • Alignment workshop – Alignment across interdependencies across teams. During the workshop, the OKR owners learn if there are dependencies and how to handle them. 

Step 2 - OKR execution

  • Establish OKR calendar – Setting weekly cadences for team check-ins and monthly cadences for company OKR check-ins is a good way to set the rhythm for check-ins.
  • OKR Check-in – A regular check-in meeting is the most effective success driver of any OKR process. The check-in is a brief meeting to talk about progress and learnings as well as reveal where mutual support is needed. It ensures continuous feedback and learning, the correctness of data, accountability, and a high level of engagement within teams.
  • OKR dashboards – Enable on tools or physical walls.

Step 3 - Reflect-Reset plan – The reflection workshop is a built-in feedback moment to reflect on, adjust and pivot the OKRs to your organization’s needs and processes. Such an opportunity to learn about the goals makes your organization more agile.

OKRs in action

Let’s look at a few examples of how OKRs can be implemented

1) Team-level objectives and key results (KRs)

The example below is from a team mapping their objectives and key results. The objective maps to the ‘what’ and the key results maps to the ‘how’. In this example, KRs are linked to KPIs. By adopting OKRs, the teams focused on ‘outcomes’ and not just ‘outputs.’ Focusing on outcomes is a mindset shift that is necessary to move from a project-based to product-based approach.

Objectives (what do we want to achieve)

Portfolio/Enabler

Key results (how do we know we are successful)

Develop a business-focused, high-performing team.

Supply

1. Customer satisfaction result >= 8/10 (Baseline first)

 2. Reduction in lead time to deliver value for large demands from 90 days to 45-70 days

 3 .100% of team members are able to use agile ceremonies for continuous improvements.

4. Automated dashboard using HCLTech Accelerate to reflect on key metrics around business value and operational efficiency aligned with contractual metrics by Q1 2022

5. All team members advance to their next stage in their skill acquisition matrix

6. Team happiness score>= 4.5/5

7. Tool satisfaction survey result > 7/10

8. 100% contractual compliance.

2) Objectives and key results aligned and cascaded across dependent teams

The below example shows top-down assignment, thus eliminating silos and addressing interdependencies

  • KR of one team can be assigned as KR for another team
  • KR of one team can be an objective for another team

OKR

Getting started with OKRs

Company level only

Leading by example is a management technique where OKRs are initiated just in the executive team. Organizations usually start by setting a strategic OKR and/or use them on a quarterly basis. It is only used within the C-suite for a few OKR cycles without any announcement or distribution. Thereafter, learnings and insights are presented to the rest of the organization.

OKR pilot at an initiative level

Start an OKR pilot project. Use a cross-functional team or department as a test group.

Applying lean change for OKR implementation

Applying Lean change involves working with the people and co-creating and applying the physiological aspects to the implementations. Using the principles of lean change management (LCM) complements the implementation of OKRs. Lean change is not a rigid approach and hence enables a step-by-step approach to the implementation approach with a feedback loop, which gives way for experimentation.

The steps for change will include

  • Gather insights on existing frameworks – through surveys and discussions
  • Hypothesis to arrive at options – identifying pilot areas for experimentation
  • Experiments and success stories shared for wider adoption

Benefits of OKRs

OKRs can bring many benefits to an organization.

  • If implemented correctly, they’ll increase alignment between teams, inspire people, and improve employee performance and engagement. They’re easy to understand, which means more buy-in. They also increase focus, transparency, accountability, and data-driven discussion of business results.
  • Enables teams to think in terms of an ‘outcome’ mindset.
  • OKRs are key drivers to move from a project mindset to a product mindset.

Conclusion

OKRs can be our best friend and the worst enemy at the same time if not implemented properly. Below are some of the pitfalls that can make a detrimental impact on the overall value flow.

  • Too many objectives - Mature programs limit OKRs to three objectives at any time and just three KRs per objective.
  • KPIs cannot replace OKRs; OKRs convey intention and rely on KPIs to measure the progress of key results. OKRs, unlike KPIs, are not to be used to measure performance rather to track progress.
  • Key results that are not measurable and created as tasks are not recommended.
  • Cascading vs. aligning OKRs - Emphasis on top-down OKRs is useful when an organization is in a crisis or is prioritizing very specific objectives. On the other hand, use bottom-up OKRs when an organization wants to encourage innovation.
  • OKR management is critical, and leaders should track the OKR process with frequency and discipline.
  • An OKR program is a significant change in process and should have strong coaching by OKR experts.

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