okr-handbook

A better way to align teams and get execution done for faster growth

To accelerate growth and get results faster, CEO’s & companies need a simple, repeatable & scalable recipe (a.k.a process) to drive execution on company objectives. The recipe that puts the discipline of thinking, planning and executing WHAT needs to be achieved and HOW it can be achieved in your teams; every quarter.

OKR is one such recipe used successfully by many fast growing companies. qilo “OKR Implementation Handbook” gives you step by step recipe (a.ka. process) to implement OKR in your company.

What’s inside

qilo's OKR Implementation Handbook is goes beyond the basic introduction of Objectives and Key Results. We are sharing a valiable lessons from our number of implementations and failures we have seen during our journey till date.

You'll learn

  • How to start with qilo implementation give brings focus, speed and agility
  • Priciniples of successful OKR implementation
  • Mistakes to avoid
  • Case Studies

Table of Content

  1. Introduction
  2. Why you are implementing OKR’s
  3. Building OKR implement team
  4. Drafting your Company Objectives
  5. Getting buy-in from your business heads & beyond
  6. 4 Principles of successful OKR implementation
  7. Stages of OKR Implementation
  8. OKR design patterns
  9. Apply Principle-1: Define Few Important Objectives every Quarter
  10. Apply Principle-2: Define proper mix of LEAD and LAG indicating Key Results
  11. Apply Principle-3: Marry your review routines & OKRs
  12. Apply Principle-4: Enhance managerial effectiveness
  13. Linking OKR with Performance & Rewards
  14. Frequently asked questions

1. Introduction

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:

  1. How they can learn fast about what customers need and deliver the same with speed and agility.
  2. How to organize teams & company that leads to less bureaucratic and hierarchical organization.
  3. 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:

  1. A third of fortune 500 companies in 1970 were gone by 1983
  2. Many of the top ten companies in 2015, were just born around 1995
  3. Leadership attrition is all time high.
  4. 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

  1. Link the Outcomes (Key KPIs) and Effort (Action Plan) with company objectives (strategic goals).
  2. Enable people to think quality outcomes & action plans.
  3. 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:

  1. The plans are not designed for delivery & execution.
  2. Hardly few people beyond leadership can relate with them in actionable way & act on them.
  3. The recipe (read as simple-repeatable-process) of creating these plans for delivery doesn’t existing in most of the companies.
  4. 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
KEY RESULTS
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
KEY RESULTS
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
KEY RESULTS
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.

2. Why you are implementing OKR’s

We have seen the two primary reasons why companies what to implement OKR’s:

  1. to get execution done on company objectives and support growth.
  2. Or to do goal-setting exercise 4 time in a year.

Most of the CEO’s who hear the concept of OKR’s, want to implement it because they know that it can help in making things happen on the outcomes teams and people should achieve with speed.

But most of the time, CEO’s are unable to drive the implementation of OKR’s in their company. And the people who end up getting the responsibility for implementation, implements it in a way that its perceived and implemented as goal-setting exercise; now done 4 times an year. And after few months, people start felling it as another monkey on their head.

At qilo, after number of implementation we have learned that implementing OKR should be to help in making things happen & support growth, not to do the goal-setting exercise 4 time in a year.

In the sense, much of this 3-series blog post is about implementing OKR in a way to help in making things happen & support growth for the company. OKR is a framework for CEOs and companies to build the habit of thinking, planning and achieving outcomes with speed.

As Jim Collins author of Good to Great says “Every company would like to be the best, but most companies are unable to create a culture of discipline where people across the teams can figure out with egoless clarity WHAT OUTCOMES they can achieve. And the will to do whatever it takes to achieve the WHAT”.

Key Learning: OKR implementation should be about how it can help in making things happen to achieve desired outcomes. There are high chances of implementation failure, if your people perceive it as another goal-setting exercise now done 4 times a year.

3. Building your core OKR team

Once the OKR framework makes sense to you, the next step is to define the core team for implementing OKR successfully across the teams. You must create the team whose responsibility is to make sure that OKR implementation is a success. The ideal core team should have 2 members:

  1. OKR Program Management Head: Responsible for the adoption of the OKR initiative in the company.
  2. OKR Program Management Manager: Responsible for executing plans of action for OKR implementation under guidance of program head.

An OKR Program Management Head should be someone who understand company business, operations and challenges horizontally and have enough authority to get work done across company. A program head can either be the Strategy Head or Chief-of-Staff or CHRO.

The mistake to avoid here is, if your company is growing at a rapid pace & your HR head is day-in and day-out busy in closing the hiring positions, don’t nominate your HR to head the OKR implementation. Hiring right should be the 1st priority for HR and she should be completely focused on it. Creating the culture of discipline starts with hiring right people.

An OKR Program Management Manager can be a team member under program head who execute the plans to implement OKRs successfully. This person should possess leadership qualities, should be assertive, be an excellent executer and articulator.

As a company, if you don’t have the strategy head or business performance team, it’s time to hire one. The Strategy Head or Chief-of-Staff will work closely with the CEO to drive “business performance” horizontally. And OKR framework can help them in driving this performance.

Pro tip: Unless you don’t put a person, who is accountable for making OKR a success, but expect it to run on auto-pilot on its own or by a software tool, your implementation will never succeed.

Key Learning: Defining your core OKR team is the first step towards successful OKR implementation.

4. Drafting your Big-Arrow & Company Objectives

Once you have finalized your core OKR team, it’s time to draft the big arrow & the objectives to be achieved in next 12 months. The big-arrow is the ultimate company goal that you want to achieve. And the company objectives are the high-level strategic themes to achieve that big-arrow.

In our experience, most companies struggle to get the company objectives right first time. When we ask most companies what their Company Objectives are, all they have is - their revenue projection and sales target plan.

A typical sales & financial budget plan looks something like below. The problem with just preparing those sales target plans is that it does not providing enough guidance to the team beyond sales on how they can achieve these targets.

okr-handbook

On another side, your company objectives (also called strategic themes) should not to be a long laundry list like below. The problem with this is:

  1. It’s too long and theoretical.
  2. Beyond leadership team, people cannot understand this easily.
  3. You are trying to define too many things at a same time.

okr-handbook
source: https://ww w.tokiomarinehd.com/en/ir/management/strategy/

And the Company Objective should also not to be a detailed 5 to 10-year plan. Because no plan survives by the time you go to market and try to execute that.

The value of your company objectives is inversely proportional to the number of pages required to express it. Your Company Objectives should be based on your

  1. The strategic bets you are chasing
  2. Your competitive landscape,
  3. Technological & market condition changes.
  4. And above all, what all it will take to enhance your product/service & company to be more customer-centric.

Many companies call their company objectives as strategic priorities or strategic objectives or areas of focus or strategic themes. Regardless of which term you are comfortable with, the intent is to come up with 3 to 5 Company Objectives that can give the entire company the guiding force and focus. And those company objectives should help your people to define the kind of outcome(Key KPIs) they should chase in next 12 months. All your OKRs will be aligned with these company objectives.

Let’s look at below screenshots and see which company objectives are more effective and are clearly understandable.

okr-handbook Source: Developing a Strategy for Execution-MIT Sloan School of Management

And here are the general guidelines to draft your big-arrow & company objectives

  1. CEO define the big-arrow & create a list of all possible company objectives that will help you to achieve that big-arrow. A big-arrow is always a “big sales target” to be achieved in most cases and company objectives are statements that will help you to achieve that big-arrow.
  2. All the company objectives should be mutually exclusive.
  3. Drafting and putting company objectives is about choices. You must do trade-offs when drafting them.
  4. Once CEO drafts them, block the calendar of all of your functional heads for at least 2 hours and discuss about your big-arrow and company objectives. This will lead to buy-in from your functional heads.

Mistakes to avoid while drafting your company strategic objectives/priorities

  1. Avoid putting company objective that if you remove your company logo and put-in your competitor logo, the statements still make sense.
  2. Your company objective statement should not be complex to understand and relate with..
  3. Don’t define more than 3 to 4 company objectives.
  4. Don’t define the key results to achieve your company objectives.These are ultimate company goals that you want to achieve in in next12 months.
  5. As a CEO, don’t just tell everyone these are our company objectives, brainstorm it with your leadership team before that.

For further understanding on how to define your company objective, there is a great video from MIT you can watch.

Key Learning:: Your big-arrow & company objectives defines your company and leadership priorities for next 12 months. All outcomes (Key KPIs) and efforts (action plans) should help you to achieve your company objectives.

To Read Further

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