Most companies today are running on practices & principles defined around 50 years back, invented & promoted by Ford and GE. But many new age companies like Google, Amazon and Netflix have adopted new practices and principles that enables them to execute with speed to grow faster. Google, Amazon and Netflix are todays Fords and GE’s. These new-age giants might have different products, services or business model, but if you look at their new-age practices and principles, they can be applied & adopted in any kind of organization.
Few of these new-age agile practices and principles are:
- How they can learn fast about what customers need and deliver the same with speed and agility.
- How to organize teams & company that leads to less bureaucratic and hierarchical organization.
- And how to enable their people & teams to think, plan, execute & course correct expected business “outcome” to promote “distributed ownership & accountability”.
Adopting these new-age agile management practices are imperative because new entrants and companies are arriving on the scene way faster than in past and challenging existing dominant players. These new-age companies are able to achieve outcomes at much faster pace with less effort. Further the technology sector companies are moving into all industries and increasing the speed at which competitors need to respond.
Let’s look at a few statistics that illustrate these changes:
- A third of fortune 500 companies in 1970 were gone by 1983
- Many of the top ten companies in 2015, were just born around 1995
- Leadership attrition is all time high.
- And new generation workforce is not staying in a company for more than 2 to 3 years and constantly looking to learn and grow faster.
Understanding Outcomes and Effort
Outcomes are the results you want to achieve, “efforts” are what will lead to those outcomes. To give you a sports analogy, if you are a coach, and want to win a cricket championship, your “effort” will be “how you recruit your players”, “conduct player training sessions”, and “enhance effectiveness of different coaches”.
Similarly, when you want to grow your company & revenue 10x, your “effort” will be “your plans to recruit your people”, “your plans to achieve your annual or 3 year strategic plan”, “your plans to achieve sales & marketing numbers”, “your plans to enhance customer satisfaction”, and “plans to launch & test new products”.
When a company wants to grow & scale its business, the CEO and leadership makes educated bets to achieve the desired growth. If CEO & management team can sense what’s coming in future and remain radically open-minded, they will be able to come up with the better bets. In management jargon, these bets are called strategic goals or company objectives.
But where most companies fail is, to get execution done against those company objectives. Execution fails or moves slow in most companies because they don’t have a recipe (a.k.a process) in place to
- Link the Outcomes (Key KPIs) and Effort (Action Plan) with company objectives (strategic goals).
- Enable people to think quality outcomes & action plans.
- Set the cadence of review to keep people focused on Outcomes and Efforts to achieve.
Few examples of the outcome and effort are:
|Outcome (Key KPIs)||Effort (Action Plan)
|Your sales target
||Sales & marketing plans to achieve your sales numbers
|Your CSAT score target
||Plans that will help you enhance customer satisfaction/experience.
|Your cost target
||Plans to cut down cost.
Every year, most of the organizations spend much of their time in discussing their sales targets and strategic bets (i.e company objectives or company goals or strategic priorities). This is followed by sales targets cascaded to each region and sales manager. Only few companies go beyond discussing the sales targets and put plans for achieving execution on these strategic bets. And even if companies put these strategic bets in PowerPoint presentations or excel sheets, they die a slow death after 2 to 3 months.
The main reason why those strategic bets & plans die:
- The plans are not designed for delivery & execution.
- Hardly few people beyond leadership can relate with them in actionable way & act on them.
- The recipe (read as simple-repeatable-process) of creating these plans for delivery doesn’t existing in most of the companies.
- And even if the recipe exists, it’s not flexible and agile enough to adjust to the changes in external market condition or internal company changes.
And this is what OKR framework helps you to achieve. It enables your teams to define few key KPIs (Outcomes) & related action plans (Effort) linked with company objectives(a.k.a company goals) which can help the company to accelerate growth.
OKR Stands for Objective and Key Results.
An Objective defines “What I should achieve”
And Key Result defines how we will achieve our objective. Within an objective, we can have multiple key results; each Key Result is either an outcome (Key KPI) or an effort that will help us to achieve that Objective.
Here are few examples of OKR’s:
|OBJECTIVE: Enhance Sales Effectiveness by Q3 end|
|1. Develop the sales training module by Oct, 15th(Effort)|
|2. Complete training of all filed sales executives in north zone by end of Nov,30th (Effort)|
|3. Conduct assessment of all sales executive by Dec,31st. (Effort)|
|4. NPS of new training module >=8 (Outcome)|
|OBJECTIVE: Acquire 3500 leads (or signups) by end of Q1|
|1. Launch 3 targeted online campaigns to achieve 1000 leads by end of Q1. (Effort).|
|2. Launch 4 new nurture and email marketing campaigns to achieve 500 leads by end of Q1 (Effort)|
|3. Deliver 1000 leads through direct mail campaigns by end of Q1 (Outcome)|
|OBJECTIVE: Close Leadership Positions by Q2|
|1.Interview at least 7 candidates for director of finance & operations position by July ,31st (Effort)|
|2.Interview at least 10 candidates for director of operations position by Aug ,31st (Effort)|
|3. Hire 1 director of finance by Q2 end (Outcome)|
|4. Hire 1 director of operations by Q2 end (Outcome)|
Key Learning: OKR is a framework for CEO’s & companies to link Outcomes (Key KPIs) and Effort (action plan) with company objectives. And build the habit of thinking, planning and achieving those outcomes within their teams.