Is having goals and tracking performance good for your organisation?
Should you set goals for your organisation? Also for all departments and all the people in it? Should you even measure how everybody is doing towards those goals?
YES: You want to know where you’re going—it’s called having focus. And you want to know whether you are on course and are using sufficient acceleration. Maybe everybody in your organisation should be able to know.
NO: Having one or a few goals are good for direction, sure, but to track your progress on all levels and even for every person? That seems like a huge strategic decision to make. It also sounds like micro-management, which is not efficient and harmful for creativity and freedom.
A model that can be useful for anybody on that YES-NO spectrum is getting popular recently: OKRs—Objectives and Key Results. I like this model because it offers a way to attain focus on day one, but there is no need to change the whole organisation at once, in order to test OKRs out. You decide how far you take it.
I read “Measure what matters” by John Doerr, who used OKRs at Intel and brought them to Google early on. “Measure what matters” is not a handbook on OKRs, but more an introduction to a simple concept, plus a collection of case studies. It’s an illustrative read this way—but as there are not too many details, you’ll have to try out OKRs yourself. That is probably a good thing.
OKRs help you to focus by connecting a desirable objective to a few measurable key results, which define how far away you are from achieving the objective. At the core, this is what an OKR is, and it already is useful! In fact, we at Seita have seen that simply formulating OKRs for the first time is already a very worthwhile exercise as it often makes you look at your ambitions in a new light. OKRs are therefore part of our Technology Roadmap workshop.
In the context of an organisation, the aim of OKRs is that anybody can answer the crucial question: “What is the most important thing to do?”. And to then be able to argue why that task is the most important.
In comparison to KPIs, OKRs tell you why you are measuring in addition to what to measure. With OKRs, everybody involved can agree faster, because they can see how measuring something is linked to a goal (ultimately, the overall company mission).
The big picture
In the OKR model, there are not many technicalities. Objectives are described as contextualised language (e.g. “Demonstrate that X is good.”), and they have a deadline, e.g. next quarter. Each objective is paired with a few key results, by which one can without a doubt measure how close one came, e.g. “write three benchmark tests” and “publish two blog posts”. Key Results have a measurable target, so they are different from KPIs, which show you a current state. There should be only a few OKRs, which everybody can remember (at least the objective). At any time (e.g. bi-weekly), the state of the key results can be reviewed. For instance, a simple score can be calculated, to see which OKR is in danger of being missed.
Doerr gives some context on how OKRs came to be. Mainly, management guru Peter Drucker transformed the way company goals should be treated. For instance, Drucker wrote that subordinates should be consulted on company goals, which was quite novel for the 1960s. Then, Andy Grove at Intel developed OKRs and made the whole company use them in the 1970s and 1980s, to great success. Doerr then took OKRs to Google in 1999 when his company invested in them, and Google uses them ever since.
As I said, OKRs are simple at heart, so one could start trying them out at any level, in any part of an organisation. What makes them attractive in my opinion, is that they can also be combined with other useful management tools. For example, next to finding focus with OKRs, an organisation could easily make other choices, like having a Theory of Change to develop the overall objectives for the organisation, using Sociocracy to structure people and communication, and using Scrum within teams for agile knowledge workflow.
OKRs are embraced by commercial tech companies and startups, but recently the impact sector also became interested. For instance, Ann Mei’s book “Lean Impact” suggests using OKRs to all impact entrepreneurs. She adds that when formulating key results, so-called vanity metrics (like “a hundred thousand people reached” or “two million dollars raised”) should not be used. Instead, use unit level targets like adoption rate of your service.
Reasons to use OKRs
According to Doerr, OKRs have four “superpowers” (their names are his):
Focus and commitment
OKRs are a tool for focusing. And by giving them a deadline they become a commitment. It’s pretty simple. Doerr emphasises that the leadership should start using them and never stop calling for their usage.
Align and connect for teamwork
OKRs can be used on all levels (company, departments, persons: CEO and employees). Their usage takes practice over time. If everyone eventually finds out how to align with the company goal, managerial or entrepreneurial thinking is trained. This also enables more engagement. Finally, an auto-detection of missing alignments is performed by everybody.
How to form goals across the organisation, so that they complement each other? Doerr shows a contrast: Cascading goals down the org chart (hierarchy) versus over-time conversion of goals, where bottom-up forming of OKRs should be enabled and cross-functional (horizontal) coordination is likely to happen. Doerr suggests maybe half top-down cascading, half bottom-up forming of OKRs.
Track for accountability
Transparency is important in OKR land. All OKRs are visible, so people will learn to only write down OKRs they can stand behind. This fosters early discussion of disagreements. It might require a mindset not everyone has, so in some case studies people tell how they let some people go who didn’t believe OKRs worked for them.
Stretch for amazing
Are you into big scary goals? Then you can use OKRs to “stretch”. For example, Google looks at all OKRs in a traffic light visualisation. If every OKR is green, they say you’ve failed, because you’re not being ambitious. Google thinks reaching 70% of your OKR means you’re doing well. The book also contains case studies of entrepreneurs who like their OKR dashboard all green, though. I have something more to say on the effects of this goal stretching below.
How not to use OKRs
How to use OKRs across an entire organisation is important, so pitfalls from management practices of the 60s (when objectives initially increased productivity but soon felt too rigid and top-down) are not repeated with OKRs. Doerr cites a few wrong ways to use them:
- Just using them as KPIs (no context)
- Only top-down (no ownership)
- Only tracked by accountants, not managers or employees (no real buy-in)
- Tied to compensation or bonuses (reduces motivation)
This last one is the most crucial. Measuring goal performance has it uses, but not to judge how well a person is doing. Certainly not in a monetary way, but more crucial than that, not as primary tool in evaluation of any kind. Doerr cites Peter Drucker: “A manager’s first role is the personal one (…) the development of mutual confidence”.
In fact, Doerr spends a whole part of the book to argue that Human Resources (HR) and managers should use modern models like CFRs (Conversations, Feedback, Recognition) to engage with employees. OKRs and even CFRs should be decoupled from bonuses and compensation as far as possible (they do offer some information, but should not drive them), if the company wants to work effectively in the long term.
Some bad taste from the case studies
This book provides a Silicon Valley perspective, which for instance shows in its subtitle: “The simple idea that drives 10x growth”. Silicon Valley, of course, is obsessed with scaling fast. Substantially, OKRs are about organisation-wide focus and I do agree that scaling up is a time when you need focus. But I don’t believe that OKRs are fundamentally about scaling up organisations. OKRs are for everybody, certainly also for impact makers.
However, we should note that some of these case studies talk about practices that I don’t believe are in line with social entrepreneurship. These two examples come to mind:
Peer pressure at Intel
Andy Grove created an ambitious key result for sales targets in a time when Intel needed to beat its competitor Motorola. He also gave a bonus (trip to a tropical island) for reaching this key result, but any sales representative would only go if their whole team made the individual targets. This is for me a questionable management method (even if it is effective), and this part of the case study also was not essential to explaining OKRs in principle. It is not much more than Silicon Valley martial arts.
Watch time objective at Youtube
When Google started running Youtube, the Youtube team also had a stretch goal: one billion hours in daily watch time. This was a tenfold increase. They tweaked their algorithms relentlessly, so the site would recommend users videos to watch, to keep them hooked. All in the name of showing more ads. We know today what horrible consequences this had (Youtube radicalises its viewers as a direct effect). As I said above, I don’t see this as an OKR attribute, rather this is a capitalism attribute. In the end of the case study, they remark how they “may” soon pursue other metrics than watch time—maybe “user satisfaction” and “social responsibility”.