OKRs: From Strategy to Results

OKRs are a management tool designed to align work with strategy.

Between strategic planning and the execution of day-to-day activities are several hierarchical levels and a multitude of people transmitting ideas among each other. OKRs ensure that the finished result is reflective of the initial plan.

OKRs integrate into an intermediate level of the management model. In the context of an organization, they fill the tiers between strategic objectives and the activities that ultimately implement them.

OKRs are the drive belt between strategy and daily activity

OKRs are based on an objective and several key associated results. Expressed in a standardized model:

[Verb] [Subject]
                [Key Result]
                                [Target][Date]

Let’s look at a concrete example:

Increase Productivity
                Packages packaged
                                Average of 12/hour in the first semester
                                Average of 14/hour in the second semester
                Calls answered
                                8 operator/day in the first semester
                                9 operator/day in the second semester

The activities are responsible for the key results and, ultimately, the realization of the strategic objectives.

Why OKRS?

OKRs solve any disconnect between strategies and their execution. They are also an effective motivational tool because they offer a purpose to daily activity.

We often do as we are commanded. But how often have we felt that we do not know why? OKRs ensure that daily tasks are both defined and explained.

According to Gallup, teams with committed staff have 21% higher productivity that those without.

• Only 30% of workers understand their global strategy
• Less than 50% understand how their work adds value
• Only 13% of workers are committed to their work

OKRs help teams understand the purpose of their work.

Technology accelerates the distribution and tracking of work, but it does not explain why it is required.

How OKRs are built

Let’s remind ourselves of the structure of an OKR:

[Verb] [Subject]
                [Key Result]
                                [Target][Date]

Those organizations that are accustomed to traditional management models may find it helpful to use a Canvas to arrive at the definition of their OKRs.

The following example built by the ITM Platform team serves as a helpful basis:

You can download this OKR Canvas in PDF or Excel formats

The following are some proven steps for generating OKRs with or without a canvas:

1. Start the process from the top, working downwards.
2. Define your objectives.
3. Anticipate each key result’s overall impact
4. Establish action plans for each outcome.

OKRs should be circular. Information should not only propagate down from objectives to activities. Information should feed back to the company’s management.

The third point suggests that action plans should be ready when results are not achieved or exceeded. Action should remain closely tied to the initially conceived plan. Improvising offers worse results.

For example, what if we only generated three customer leads from a Google Adwords campaign for which five were hoped for?

Without a plan for this eventuality, it might be tempting to increase the Adwords budget and adjust the OKRs that depend on it. This might involve reducing the ambition of their objectives or postponing their results.

Anticipate scenarios in which activities do not deliver their expected results.

If we plan for these scenarios, we can strategize more effectively. We might consider that Adwords might not be the best option. We might consider that the market is not responding well to the product and that structural changes are required.

Best Practices when using OKRs

Like all business management practices, there is no one-size-fits-all solution. Using the same measures may have the opposite effect in different organizations. Don’t try and stuff yourself into a shirt that doesn’t fit!

The following best practices cover aspects that need to be adapted for each case:

• Period. In general, OKR’s are quarterly. This is a short enough term to execute actions and still see measurable results. Some organizations may prefer biannual deadlines if results can not be yielded sooner. Start-ups may iterate over shorter, perhaps monthly, periods.
• Number of targets. The standard number is between three and five simultaneous targets. The general rule is not to have too many.
• Key results per objective. As before, do not be excessive. If four key results are to be achieved, the objective can probably be divided into two.
• Revisions. Just because an objective has been set with a certain periodicity does not mean that results cannot be measured over shorter periods. Course corrections can be made. Be careful not to overreact. Some metrics will require time to materialize accurately.
• Visibility. By their nature, OKRs are public and shared. The motivational sense would be lost if not.
• High impact. Choose the OKRs that will have the most significant impact on your organization. Aim for those that have the highest ratio of benefit to cost.
• Feedback mechanisms. The results of one set of OKRs must be considered when planning the following set. Establish a mechanism by which planning and outcomes can communicate.

Goals vs. OKR vs. KPIs

They look alike, but they are not the same. Objectives, OKRs, and KPIs (Key Process Indicators) are related but serve different purposes.

As shown in the table above, all three are hierarchically related. In turn, objectives define the OKRs, and KPIs measure the key indicators in the overall running of the business.

Common mistakes when implementing OKRs

Using OKRs does not guarantee success. While it is an intuitive mechanism, bad practices can cause them to fail.

The most common risks are:

• Do not overpromise and raise expectations above what can reasonably be attained. Do not sell OKRs are a solution to all your problems but as an effective management tool.
• Speed up the process more than your organization can assimilate. Do not hurry.
• Abuse their use. OKRs are a tool with a purpose. A hammer is a tool for driving nails, but not every problem is a nail. Not every management problem can be solved using OKRs.
• Absent leadership. OKRs are a way of implementing a strategy. Without a leader, the rest of the organization will let them dilute.
• Lack of adaptation. Following a guide to the letter is a risk. Prepare to adapt to your reality.

OKRs and project management

There is a threefold link between OKRs and projects:

• Use projects as a mechanism for the materialization of OKRs
• Use OKRs as a control mechanism for long-term projects
• Use OKRs as a portfolio management control mechanism

Projects as a mechanism for the materialization of OKRs

Remember the hierarchy between OKRs and the activities that will materialize them.

Activities will often be complex and will require a team. What is the best tool to manage complex and multidisciplinary work? Projects, of course!

OKRs as a control mechanism for long-term projects

In year-on-year projects, OKRs can be an exciting tool to control their results.

We already know about agile methodologies and their benefits for iterative management. The reality is that it is not always advisable or even possible, especially when the expected result is known.

One of the biggest problems long-term projects present is the effect of distance. Some results are only seen at the point of delivery. This is where OKRs can be invaluable.

You can use OKRs as a control measure with deadlines that suit your project’s duration and the key results that you expect at intermediate stages.

OKR as a portfolio management control mechanism

Any project office (PMO) wants to improve its management indicators. This may not be on a project-by-project basis but across the organization itself. As with any company with revenue and customers, a PMO should have indicators of success that quantify productivity, image, or efficiency.

Related reading: Strategic alignment: selecting higher value projects.

Let us look at an example:

Increase on-time deliveries
                Reduction of non-productive hours
                                10% in the first semester
                                12% in the second semester
                Reduction of unavailability of resources
                                Less than 10 days per month in the first semester
                                Less than 7 days per month in the second semester

Thus, the PMO – and more generally, project portfolio management – of your organization can find great benefits with the use of OKRs.

Conclusions

• OKRs are an excellent tool for strategy implementation.
• There are methodologies to build them; you do not need to start from scratch.
• There are excellent best practices for implementing them.
• There is no universal recipe. You need to adapt the methodology to your company.
• OKRs are an ideal complement to project portfolio management.

Sign up for a 14-day IMT Platform free trial