The current process of yearly goal-setting practice in most of the companies is dead. The 3 major reasons for this dead-end process are:
It doesn’t make sense to employees, managers, and management.
It doesn’t help in getting work done on business objectives which the company wants to achieve the next 12 months.
It only states WHAT needs to be achieved, the HOW part is missing.
Let’s look at how this traditional process works in a typical company
Why it’s done in a way it’s done: The current goal-setting is done to get the annualized rating of an employee & take that rating to decide who will get how much money this year. Against every goal, the employee declares how much she has achieved, and the manager reviews and correct the rating based on his perception. And them someone sitting at the top does normalization(adjustment of the rating) to put people and their rating in bell-curve shaped.
I am not saying that these activities are not important. Differentiating people based on their performance is important; otherwise how someone who is performing average will aspire to perform better. And how the company will come to know who is not performing and need coaching to perform better.
Being an employee & manager while working in corporate, I never liked the process; it was too theoretical.
Someone who is good at acting & driving perception in the last 3 months of the year will get the maximum benefit of the current goal-setting & rating process of the company
The future of the goal-setting process should be business-centric & data-driven; it should support in getting work done on the business objectives which the company wants to achieve in the next 12 months
The high-level process of this future goal-setting process should be something like this
The progress on these goals is driven by the milestones that define the method of achieving that goal. And these milestones are defined, achieved and refined every month or quarter. I call them as Agile goals, and few companies call them OKR’s. And those of you who have not heard about OKR, they are invented in 1978 at Intel and used by leading companies like Google, Walmart, Uber, and many others leading new-age companies.
How the future ready goal-setting can be implemented successfully:
Create a core team: This can be implemented successfully then the company creates a core team of a senior business person who understands company business horizontally + a human resource professional.
Spend time in coaching people on how to set agile goals/OKR: For the first 2 years, invest in coaching employees and manager on how to set the agile goals/OKR. Don’t consider to generated score in the final employee rating for 2 years.
Why the company should take this pain(what’s the business case): Why someone in human resource or CEO should think of changing this current approach of goal setting; here are a couple of reasons
Implement the new approach of goal-setting to achieve your yearly sales & operational targets. If done right, it can increase your top-line by 3% to 8%.
It can help the CEO and company to achieve a higher level of alignment across teams.
It will help HR to get this activity closer to company 12-month strategy and contribute towards company growth.
The future of goal-setting has already arrived. The new-age goal-setting process should create the habit of thinking, planning and executing goals that will drive company agenda & growth ahead.
The traditional goal-setting process leads to a bureaucratic culture in your company
The traditional goal-setting process is not data-driven
To implement the new-age goal-setting process, create the core implementation team which is a mix of business and HR.
We often hear the term ‘Business that isn’t growing is dying’. But is it really true, or is it just a way to create an unnecessary hype around the culture of expansion and commercialization?
The truth is that no business can survive in stagnancy. It must constantly change, evolve and keep up with market expectations and industry trends. As Jeff Bezos (founder of Amazon) mentioned,
“In today’s era of volatility, there is no other way but to re-invent. The only sustainable advantage you can have over others is agility, that’s it.
Because nothing else is sustainable, everything else you create, somebody else will replicate.” So it is clear that no company can just create a product and service, and expect lack of competition. The only way to survive in a competitive environment is to constantly grow and adapt to changes, but what does growth really mean? Is it only revenue growth and expansion, or can is it a more holistic form of growth?
Let’s look at different dimensions of growth that a company needs:
The most common concept when anyone thinks of growth regarding business is revenue growth. Revenue growth for business is extremely important. It’s a competitive age. Businesses not only have to compete with each other to stay ahead of the curve, but they also have to compete to hire the best and most productive and talented employees. To hire and even retain such talent, their salaries should be lucrative with constant raises and benefits. With growing inflation, revenue growth is an absolute necessity. Furthermore, the lack of revenue growth can lead to declining profits, equity, employees, goodwill or a combination of all.
While revenue growth is extremely important it’s not the only factor of growth in a business. It is equally important that each individual within the company grows in terms of skills, expertise, and productivity levels. This highlights the growth culture within a company, and growth culture is crucial. Consider this: employees join a company for salary, and benefits, but also to learn, grow and improve. If a company does not challenge its employees to strive, learn and constantly perform better, then they lose interest, and the work atmosphere becomes stagnant. The best and brightest minds don’t even want to work at such a company, and if this situation occurs, you will see all your talent flocking to change jobs. That is why a growth culture with constant challenges and aspirational objectives is a must in every organization.
Every business that needs growing revenue, can only achieve it by growing customers. Businesses need to grow their marketing strategies, sales efforts, and overall performance to attract new clients while retaining old clients. But that isn’t possible if your customer outgrows your company’s ability to meet its demand. Often market demands for certain products increase, and if a company cannot grow to scale their supply, they lose their clients to a competitor. This is especially true for B-to-B models.
GROWTH OF TECHNOLOGY
We cannot consider any advancement in today’s age without talking about technology. Going digital and constantly evolving technologically is essential for every company. More than a billion people are connected on social media platforms, one-third of the population uses smartphones, and Millennials and Gen Y are all about technology. If a business doesn’t constantly keep up with the latest innovations, then it stands to lose an immense number of potential customers. Technology provides the benefits of higher engagement, increased data security, better time management, and detailed analytics, just to name a few. The importance of digitization is so widely recognized that most companies are expected to have a Chief Digital Officer soon. And the only way for a business to survive in this environment is to follow these trends or lead in creating new ones through the adaptation of the best and latest technology.
Now that we have looked at the different aspects and dimensions in which an organization has to grow, we can see that they are all interlinked, and crucial to the survival of any business. But how can such growth be achieved?
The simple(but not easy) way is execution. Any company that isn’t focused on the discipline of execution cannot grow. But how can a business instill a culture of execution? The answer lies in OKRs (Objectives and Key Results). OKRS are a tool or a framework used to define the main goals or focus of a company and measure the performance based on the execution of these defined objectives. But how should these objectives be defined? The same goals are often not necessary for every individual as they are for the company. One of the ways to implement OKRs is to do it in various levels.
These can be:
What is the vision of the company? Why was it founded and what is its purpose? This is what the driving focus of everything should be in the long run. This decides what your company’s primary objectives are, in alignment with the vision of the owner or founder, which truly defines the purpose of that company. Some key aspects of these are:
Summarizes the vision of the company.
Set for 1 to 3 years aligned with your vision
We don’t define the Key results for company objectives.
These are objectives set for the CEO They can be objectives like revenue goals, minimum growth targets, expansions, acquisitions, increased goodwill etc. They must be in alignment with one of the company objectives.
These are objectives set separately for every team in the company. They are created in tandem with the annual objectives of the company, in order to ensure their execution. Every team through it’s own set of objectives and key results works together to contribute towards the company’s annual goals. These OKRs are monitored by executives and can help them quantitatively judge the progress towards the company’s objectives. Some key aspects of these are:
Objectives set quarterly.
Managers own the objective and key results are owned by people under him or in different teams.
Growth initiatives which need cross-functional collaboration can also be created as OKR’s.
Used to align the aim of every team to the aim of the company.
Individual Learning OKRs
These are objectives set for every individual employee which fulfills the learning agenda of the individual. If every employee works towards its success, through individual learning goals, it clearly enhances their professional growth and in turn their skills & capability. This allows for smooth execution and easy monitoring of performance. Some key aspects of these are:
Very precise in nature; Easy to understand.
Very short term, perhaps monthly.
No company is formed with a static vision or purpose. Every company has a vision of expanding and growing. Hence growth is not only aspirational but, as the article highlights, essential for every company. As business leader & author, Jack Welch states in his book Winning, ‘Change before you have to’, so that you can remain ahead of the curve and grow. But the only way to consistently achieve growth is to maintain the discipline of execution.
With varying departments, competing employees, bureaucratic processes, execution becomes increasingly hard. That is why a strict framework is necessary to maintain an upward trajectory. There is no better or more customizable tool for this than OKRs. If your business isn’t growing in this fast paced competitive age, it surely is dying. OKRs can be the weapon to stop this stagnancy and ensure constant growth.
We interviewed around 91 Strategy, PMO and Business Performance Heads to understand what actually it takes to actually implement the strategy? While companies will do internal brainstorming or will take the help of consultants to define the strategic direction of the company. But when it comes to execution and actual implementation of the plan that will help them to achieve that strategy, things move terribly slow.
And we didn’t conduct a typical survey but talked to them 1:On:1 to understand the challenges they face. And did analysis after converting our conversations into text and doing text and sentiment analysis on top of that text.
Here are the top 5 reasons which came out of this analysis that leads to the delay in achieving the required revenue growth expected because of strategic direction are:
Missing implementation plan
Existing company culture
Lack of Agile Process to think, act & refine the execution plans
1. Managing Change
Why change management is required? Because you are dealing with humans. Humans which are at top most senior positions with big egos and “know it all” attitudes. The main aim of a strategic plan is to change the way people are doing things and building new habits; with the hopes that it will enable the change in process and see better results from operating in a new way. But things dont move and people struggle to change their habits.
Solution: When you introduce your strategic plan (or operational plan, or merger & acquisition plan, or cost reduction plan – you get the idea – any plan that introduces new initiatives), it’s important to remember that most people aren’t involved in the planning process. The way the plan is initially introduced needs to be carefully crafted so as to address concerns and the what’s-in-it-for-me right away to start out on the positive path to change adoption.
2.Missing implementation plan
You won’t believe, but apart from the sales number plan for the next 3 or 5 years, the plans to achieve the sales targets are not there. For me, it was a surprise; why? Because
(a) Creating the plan is difficult
(b) No one likes to take the ownership of taking the action items
(c) There is no standard, easy & repeatable way to creating the plans linked with strategic directions/goals.
Solution: Implement frameworks like OKR to create a recipe for defining the implementation plan. OKR as framework helps your teams to think, plan, execute the plans every quarter to achieve your strategic goals.
3. Resource Allocation
Doing the resource allocation is one of the toughest jobs for business heads who are ultimately responsible for allocating people to programs and projects created to achieve the strategic objectives. There is no visibility at the strategy head and business unit head level where their people are actually busy and who are the people who can be allocated.
Solution: Take the help of tools and technology to determine the people who can be allocated to the initiatives, programs, and projects.
4.Existing company culture
Company culture cannot be quantified, but you can feel it. Most of the organizations over the years have become bureaucratic, hierarchical and lacks the speed, agility & candor to achieve the required execution.
Solution: Involve an awesome Organizational Behaviour & Development Professional in your strategic planning and implementation phases.
5. Lack of Agile Process to think, act & refine the execution plans
Now, this is where almost all companies struggle. Strategy heads own agenda of strategy, don’t own the people who do the required execution on initiatives, programs, and projects that help us to achieve the strategic goals. Teams(people from different functions) who are execution the plans don’t come together enough on their own and do the required review and course correction of the action plan, which results in the delay of execution.
Solution: Take the help of a habit-forming technology tool that helps you apply the agile process of execution in your teams.
The future of strategy execution is about how you can implement a simple, repeatable process that can be applied at scale to get execution done on your strategic goals.
That step was a disaster, so Google conducted a research project named the “Oxygen Project” to determine the qualities that make a great manager. Their finding highlighted that the qualities that make a manager great are:
Form a clear strategy based on the company’s vision
Ability to communicate
Be a good coach and guide to the team
Help employees grow and develop their careers
Enable team members and not micromanage them.
Care about employee’s well being
Be productive and focused on results
Possess key technical skills that benefit everyone on the team
But all these findings seem very obvious. The real use of the research was that statistical findings directly correlated these qualities to employee performance, customer satisfaction, revenue, and turnover etc. But what do these qualities can these be implemented and executed, rather than simply theorized?
The answer perhaps lies in Objectives and Key Results (OKRs), a tool that Google itself implements along with other big companies like Amazon, Deloitte, Samsung as not just goal-setting framework but perhaps the way to enhance their managers effectiveness.
Setting Team Goals
One of the most important roles of the manager is to set goals or objectives for the team. These objectives need to align the manager’s strategy to achieve the company’s vision. Such objectives can help establish a culture of execution in the company. Further setting aspirational goals can cause the employees to be inspired, strive to perform better, and grow in the process. Using Objectives and Key Results to set a few key objectives quarterly for their teams in alignment with the company’s vision is the best way to ensure productive teamwork.
Ability to Communicate and Coach
The importance of teamwork is not lost on anyone. However, a manager’s individual relation with every team member is equally important. Statistics show that 69% of managers are uncomfortable communicating with employees. Sometimes it is hard to communicate to individuals the work that is expected of them. Using OKRs to set goals will enable better communication between the team member and the manager. Further doing quarterly OKR reviews will enable all the team members working under the manager to communicate better with one another and see what others are doing and how they can contribute to the progress to achieve company objectives.
Being Execution and Result Focused.
This is the single most important aspect of management. A company that isn’t execution oriented is definitely one that will fail. As the Harvard Business Review States, visions, revolutionary ideas, and the best of strategies are only as good as their execution. And OKRs are one of the best ways to convert strategies into actionable plans. Setting specific, well-defined objectives, and monitoring the executing based on Key Results, can cause managers to effectively lead their teams to excel.
The role of a manager is indispensable however the attributes that a manager must process to successfully carry out his responsibilities are of even more significance. While training, guidance and support help them perform better, what truly makes them great is the ability to enable their teams to execute aspirational objectives into reality. This can only be possible through a strict discipline of goal setting, execution, and performance reviews. All these processes are better achieved by technical skills, and adaptation of tools and services. OKRs happen to be one of the best tools to assist managers through this entire process. Managers account for 70% of the variance in employee engagement and are easily the makers or breakers of a company. Building great managers with the right tools for success is the only path forward for any company seeking to be not just good, but great.
In the last 30 years, many concepts were introduced in the companies claiming to have been that final solution that it will accelerate business growth. As part of these, concepts like Enterprise Performance Management, Business Process Management, Balanced Scorecard, and Knowledge Management where introduced in the market and promoted by consulting companies & leading business schools of the world. But they had a low impact on revenue growth, enhancing customer satisfaction and launching new products faster. And have only increased the revenue of consultants & consulting companies.
Nowadays OKR (a goal-setting framework for CEO and companies to get execution done) seems to be the hot topic. And every CEO is talking about implementing the same in their company. OKR is a part of the debate that companies need to adopt agile management practices; so that companies can respond to changing market dynamics faster.
New entrants, especially from developing markets and technology sector companies are moving into traditional companies and leveraging the power of Software+Hardware to disrupt the existing business models. And this is happening right now.
Let’s look at a few statistics that illustrate these changes:
A third of Fortune 500-companies in 1970 were gone by 1983. And many of those that were in the top-10 in 2015, didn’t even exist ten years before that.
The attrition in leadership positions in big companies has more than doubled in the past 10 years.
Google, Microsoft, Amazon, NetFlix, Uber and AriBnB are replacing the Coca-Cola, Big Retail, Media House and Established Hospitality industry Companies as most valuable companies.
Though these 20 year old new-age organizations are leveraging technology to deliver the product/services, they are also challenging the traditional management practices. They are adopting new agile principles and practices that enable them to remain closer to their customers, build a more transparent company and build a culture of thinking, planning and execution in their teams which enable them to move faster than existing traditional mindset companies.
But does this mean that every organization must adopt agile management practices and implement goal-setting frameworks like OKR. To answer this, we must under from where the “agile” as a concept came from.
The agile as a concept was first introduced around 2001 to better deliver the software. Before the agile practice came to picture, software’s were delivered to customers using the waterfall model of development. With the waterfall model, customers used to get the working software after 9 to 12 months. And by the time, they have received the software, customer requirement and business process to which the software was catering has changed. At the end, customer end up paying millions of dollars for something which was not near to what is required.
Then came the Agile way of delivering the software, in which software was delivered every 2 weeks. The customer gets the working software every 2 weeks. And the software developers adjusted to the evolving needs of customers. This resulted in customer end up spending less money and is more satisfied with something tangible for what he is paying for.
I have personally developed the software under the waterfall model and agile models. Frankly, adopting agile mindset was very difficult and was a change. People resisted it because it forced them to be on their toes, be more focused & accountable and forced then to be more collaborative across various teams. And you are clearly able to identify who is not performing within 2 weeks.
Now let’s look at the organizational age-old practice like “annual practices of budgeting & planning” and how it gets delivered by people in the company. Leadership team meets before the start of the financial year, sales targets are negotiated, CEO and management pushed for higher numbers and sales heads push back the numbers given and tried to freeze targets which can be achieved. New initiatives that needs to be completed are decided and everyone goes back happily to the workplace next day.
Think of your annual budget and planning process as software. Currently most companies are trying to deliver the budget & planning by following the waterfall model. A better way is to follow the agile way of quarterly process which is aligned with the company annual budgets & initiatives to be completed. Objectives (a.k.a goal) & Key Results(a.k.a milestones or action plan) to achieve the annual plan are created executed, reviewed & updated every quarter.
Frankly, achieving business results (sales plan, marketing plan, strategic initiatives) are different from programming a software. Unlike software programming, you might or might not achieve result (0 or 1) in a day, week or 2 week. But creating the OKR plan at the start of every quarter and reviewing it every month, will help you understand that will the outcome be achieved or not. Or enable you to understand that if you are all this time, trying to achieve the wrong outcome. The current execution design followed in companies leads people to focus on outcome rather then focusing on input that will lead to that outcome.
If I connect the dots, I have no doubt that adopting the agile management practices and frameworks like OKR(Objectives & Key Results) are much better approach to deliver the required business outcomes. What you think?
We live in a dynamic age, where things are constantly changing, especially for businesses. Companies have had to adapt to ever-increasing customer expectations, adopt new marketing channels, utilize new technologies, and compete at a global level, all in a single generation.
While you focus externally to address these challenges, you need to align people internally with your strategy to move faster. One such way to achieve internal alignment is using a framework called OKR.
OKR or Objectives and Key Results is a simple habit-forming framework for CEOs and companies to build the habit of thinking, planning and executing company objectives and strategy. Few of the benefits your company will get with OKR implementation are
TRANSPARENCY AND OPEN COMMUNICATION
MONITORING AND ACCELERATING PERFORMANCE
With increasing diversification, employee roles are becoming more and more specialized. With such an acute division of labour, sometimes people can lose sight of what the most important goals of the company are. Employees instead focus on their individual roles within the institution, giving those tasks higher priority. With the help of OKR, setting objectives which highlight the priorities of a company, can help employees work better in pursuit of a common objective rather than compete based on their individual performance.
This also helps in team building. OKRs are more effective at uniting a company than KPIs because they combine qualitative and quantitative goals. The objectives are often aspirational and can create enthusiasm in a certain category of employees like design or customer service departments. On the other hand measurable Key Results create quantitative goals to drive people in the accounting and sales departments. Hence OKR can cause the company to unite around its primary focus so that everyone can be simultaneously working towards the same overarching goals.
2.TRANSPARENCY AND OPEN COMMUNICATION
Transparency and open communication is a very hard concept to achieve. And the challenge only grows as the company expands. Each department within a company becomes an independent unit. While this is great for intra departmental efficiency, what suffers is the realization of common goals, and effective communication. Often the goals of a company are clear, but there is no clear path to communicating these goals. Managers spend majority of their time ensuring that no one is acting on misinformation. OKRs are a great way to communicate and ensure that everyone understands the company’s goals, and how it measures strategies and success. Through OKRs Company goals can be reviewed and set, for a predetermined period of time (example: quarterly or biannually). Once these goals are set they can be percolated down from the executive to individual levels in order to ensure that everyone is working in support of the main objectives. Setting specific and quantifiable Key Results helps to communicate these objectives with even greater efficiency. Since the process is time-bound it creates transparency and eradicated confusion. Key Results also help in breaking down and highlighting small steps in order to achieve a bigger common goal.
3.MONITORING AND ACCELERATING PERFORMANCE
Each individual employee can make a massive difference in the success or failure of a company. That is why monitoring employee performance is crucial. However, there is no clear way to measure this performance or efficiently create metrics that highlight an employee’s work. Most companies simply use financial indicators to determine growth and success. However financial indicators are not enough. Using a meaningful set of rounded performance indicators that can be quantitatively measured is the solution. This is where OKR steps in. Quantifiable Key Results serve as excellent metrics to judge the progress towards achieving a company’s main objectives. These Key Results are targeted with a specific deadline, and measurable steps, hence clearly indicating the employee’s performance to whom these tasks were assigned.
However ,it is not necessary that OKR is the sole tool for deciding an employee’s value to an organization. Sometimes OKRs can be set as seemingly impossible, but rather aspirational goals to be achieved, to drive people to perform better. Such goals can tend to attract the best people and create the most exciting work environments. Furthermore, when high goals are set, even failing at them can produce substantial results. Google, which is one of the many companies successfully implementing OKR follows such a practice. In their OKR’s they set what are known as ‘stretch goals’ because their achievement is very hard, and unlikely. They then clearly communicate the nature of such goals and create vestibules for success were achieving 70% of the objectives is considered success. And achieving a 100% of these objectives is considered exceptional performance. Because OKRs are always stretch goals, they encourage employees to continually perform the best that they can.
Employee disengagement is a very detrimental problem to institutions. The full extent of its impact is only now being understood. Statistics show that 70% of the workforce remains disengaged, and that disengaged employees cost companies roughly $500 billion annually. While the common assumption of why employees are disengaged or dissatisfied is money, studies suggest that more relevant causes could be their bosses, or even not understanding their role within a company, and what their work is contributing to it’s success.
OKR can solve these problems by creating Objectives on central and individual levels, linking these objectives and creating co-dependencies. This will help employees understand their part in the machinery of the company hence creating engagement. It also helps keep executives in check,and prevents them from taking advantage of employees that they are managing by setting quantitative Key Results that measure performance.
To conclude, it is important to remember that OKR is only as good as it’s implementation. It is a flexible and dynamic framework that can provide a lot of benefits for small and big companies, however ,it’s strength lies in adapting it to your company’s needs for maximum success. To blindly follow the OKR practices of some famous companies like Facebook, Deloitte or Accenture can actually be detrimental to your institution. So the best practice would be to follow the scientific method of trial and error, combined with research to generate strategies to implement OKR that best serve your company.