Organizations today must radically rethink how they approach things. The speed of change, the magnitude of disruption, the evolving preferences — it’s hard for leaders to make sense of the complexity, decide next steps, and execute on their goals in an agile, adaptive way.
In a recent McKinsey Five Fifty, analysts noted that the frequency and magnitude of disruption is increasing every year. To stay focused and achieve their goals, leaders need a better way to manage goals and deliver results. Enter: Objectives and Key Results (OKRs).
So what difference can OKRs make for your organization?
OKRs is a simple yet powerful goal-setting system relied upon by businesses around the world to improve (among other things) focus on strategy, alignment, and engagement. The system consists of objectives (what you want to achieve) and key results (quantitative statements that measure the achievement of your objectives).
Objectives follow this formula: Verb + what you’re going to do/aspire to do + in order to/so that (business impact). An example could be: “Increase attendance and engagement at our annual user conference to drive customer renewal rates.”
Key Results follow this formula: Verb + what you’re going to track + from x to y. An example for this could be: “Increase customer renewal rate from 70% to 90%.”
OKRs operate differently from most goal-setting systems in two ways:
- They are established, monitored, and updated frequently. This frequent cadence allows enterprises to be agile in response to what’s happening in their environment.
- They demand a relentless focus on what matters most right now in driving your business forward.
So, how can OKRs help you tackle some of your biggest business problems?
Problem 1: The World Changes Faster Than Ever
Studies tell us the vast majority of organizations fail to execute their strategies. Estimates vary, but on the low end it’s suggested just 10% of companies achieve the goals in their strategic plans, which “are often too vague, noncommittal, or unwieldy even in ‘normal’ times.” So, how are you supposed to up the ante when business needs vary at a faster pace than ever before?
Solution: OKRs Let You Shift Strategy Quickly
OKRs demand that you identify just the vital few drivers of strategic impact and success. When selected with rigor, OKRs help you avoid time-consuming and costly distractions by highlighting the goals that will actually get you to the next level. This requires disciplined and strategic thought, but the rewards — in the form of consensus on the true levers of your company’s success — far outweigh the effort.
Problem 2: Scaling Can Be Dangerous
As your company scales, the importance of alignment will increase exponentially. Many fast-growing companies lose their coherence or alignment across teams, going through this process, and it’s no mystery why. If everyone is not moving in the same direction, you may be working against one another.
Solution: OKRs Require Full Alignment
A first test of every OKR is its ability to impact overall strategy, ensuring the people across your organization have goals that specifically align with the overall business strategy — and are updated frequently. Planning for months at a time or waiting for an annual update won’t cut it. Agility is key if you’re going to ride out the massive changes occurring in the business world.
Each OKR chosen should have the potential to move the needle in the desired direction for the company. We call that strategic alignment. A second type of alignment is horizontal — how well your company works together cross-functionally. As teams create OKRs, they will identify dependencies on other teams. These will lead to powerful and strategic conversations highlighting opportunities and reducing redundancies.
Problem 3: Disengagement Hurts the Bottom Line
Gallup found that disengaged employees are costing U.S. companies up to $550 billion a year. You can’t afford to neglect employee engagement and leave potential on the table.
Solution: OKRs Increase Engagement
OKRs by nature are a result of spirited debate and discussion among teams and their leaders regarding what priorities they should be pursuing and why. These conversations are strategic, increase everyone’s knowledge of strategy, and drive employee engagement as everyone works to meaningfully impact it. When your teams are highly engaged, they become more productive and notably increase profitability.
There is a growing body of evidence to suggest that having frequent conversations and touch-bases, rather than a formal “annual review,” has a direct impact on increased employee engagement. Take the time and effort to regularly review your OKRs in this same way. For example, each quarter a manager can sit with an employee and ask them what they learned, how they contributed to a shared OKR, and so on, and hold a discussion of the next quarter’s OKRs to ensure there is alignment around priorities and expectations.
When you encourage and support ownership of goals and increase communication through OKRs, not only will your employees be more engaged and productive, they’ll stick around longer in the midst of a competitive job market.
Implementing OKRs in Your Organization
Are you ready to start using OKRs? With an exclusive partnership with Paul Niven and his company OKRsTraining.com, Inspire Software is uniquely equipped to support your business. You’ll have access to best-in-class strategy from our OKR-certified team, and software with our integrated continuous performance management platform. That’s a winning combination for any organization looking to optimize OKR initiatives and deliver strategic results. Schedule a free feedback session on your OKRs and learn more about moving forward successfully with Balanced Scorecard, OKRs, and Continuous Performance Management.
In the meantime, check out the "ABCs of OKRs" white paper authored by Paul Niven that covers this same topic and takes you even further to create, implement, and measure OKRs successfully.