Creating an OKR Practice to Achieve Business Goals
Creating an OKR framework in collaboration with executive, product and data teams can help business achieve ambitious goals.
Strategic frameworks help us focus on the work that will be the most impactful across teams. This is critical because it aligns everyone around the objectives we need to hit and provides a mechanism for holding ourselves accountable. In this post, I walk through how I support creating an OKR framework in collaboration with executive, product and data teams.
Data informed decision making is critical at almost every stage of the product life cycle. One way that Data Science supports good product decisions is through strategic frameworks such as OKRs and cascading metrics. OKRs, or objectives and key results, are by nature data-informed tying strategic company goals to concrete data points that can be measured and tracked over time. Creating OKRs helps individuals align as an organization and focus on the work that will be the most impactful across teams.
Setting Good Goals
Setting the right quantitative goals is critical in product development because we are creating measurable incentives for specific behaviors. If we aren’t careful this can create problems because employees may try to ‘game the system’ to hit the target goal, even when they understand this is not what is best for the business.
Ambition and Morale
Building a culture around how we think about our goals is a critical part of making the OKR framework impactful. Most people would like to have perfect performance - hitting all of our goals and getting 100% of our bonus. However, if we knock it all out of the park every time you have to wonder, what could you have accomplished if you raised the bar? Some people call this sandbagging where people will stop being ambitious once we have hit ‘good enough’.
Somewhat counter intuitively, well set goals should not all be hit because we want to make sure we stretch ourselves to find the edges of what we are capable of. This can be facilitated by creating a more modest goal and a stretch goal. This way we aren’t hurting morale if we ‘miss’. We knew it was a stretch and we are pushing ourselves to grow.
Guard Rails and Qualifiers on Metrics
It is difficult to set a metric that doesn’t have a potential downside. For example, if we ask Marketing to “increase acquisition by 20%” they might flood the product with low-value users that are easier to obtain. This actually hurts the business instead of helping it because of the opportunity cost of gaining valuable users and the churn that comes with users that have poor product market fit.
I have found that creating a guard rail metric or qualifier on the target can help keep the gamers’ enthusiasm for the target in check. For example, if we set an ambitious acquisition goal for new users, I might also put a qualifier that they must be engaged in the product 4 out of their first 7 days. Or I might make a guard rail metric that says week over week retention must be over 40%. This ensures that only more deeply engaged new users are attributable to the goal and should shape employee behavior. This is how data informs good tactical decisions in an organization.
Creating Cascading Metrics
Cascading metrics help us decompose a high-level KPI into work that is meaningful to each individual’s responsibilities and spheres of influence. To tell the complete picture, we need to decompose these KPIs into tactics that drive business change at the individual contributor level.
Decomposed metrics are mapped at a finer granularity and might be different than the company KPI or target a smaller population, but we hold a hypothesis that they are meaningfully related. The most granular cascading metrics are usually monitored by line managers and individual contributors. The coarser cascading metrics are usually monitored by the line managers and directors orchestrating the work and reporting up.
When we break metrics out in this cascading way we get two benefits:
We feel ownership over the problem and the solution because line managers and individual contributors can help set the right tactics which directors and line managers shape and connect to strategy. We can all see how our efforts make an impact on our mission and this is a great motivator.
Individual contributors are focused on the same goal and have a shared understanding of success. Working together has a force multiplying effect on our productivity and impact. We can learn faster when we complement each other’s efforts.
The true magic of the OKR framework stretches beyond tracking metrics. It happens when we can see the connection between a vision that we believe in to our day-to-day work. Thus, when OKRs are created they should be couched in the company and team vision.
Company Vision & Mission
A company vision is the north star with which it operates and should serve to motivate and focus the efforts of every employee from junior independent contributors to senior executives. A vision is relatively stable throughout the course of a few years, but it can be updated as technologies, markets and user needs evolve.
Employees tend to look at this statement as a big part of their reason for working at an organization and they want to know how their work relates to their calling. This should be short, aspirational, motivating and easy to remember. Your org probably already has one, this is not something that teams set ad hoc.
Vision Example: Connecting businesses to global talent.
A strategy applies to an epoch of time that typically spans a year or a quarter. This is a statement for a particular approach that will help us accomplish our vision.
Strategy Example: Create a new talent pool in Spanish speaking countries.
A KPI is a Key Performance Indicator that helps everyone in a company understand business performance. A company KPI should be a high-level quantifiable way to measure success as we strive to reach our company strategy. A common metric to use is a measure of user growth such as Daily or Monthly Active Users. Another might be to increase the depth of engagement through Cumulative Days of Use over some period.
Keep in mind how this metric will influence employee behavior. A measure of Monthly Active Users includes folks that only come once and those that come multiple times in the last 28 days equally. Is that how we want to measure success? It probably depends on the stage of the business and your goals.
Company KPI Example: Increase Spanish speaking monthly active talent on our platform by 5% year over year.
OKRs, or Objectives & Key Results, are a set of metrics that help teams focus on what is important each quarter. Though usually said in the same breath, OKRs represent two nested concepts: an objective with it’s tactics + key results. The goal of this set of metrics is to align the work of specific teams with the work of the broader organization. These are usually set at the director and/or line manager level, depending on the depth of our org chart. These objectives should be relevant to the specific team in question while also providing a means to move our higher level cascading goals.
An Objective is a metric that should be positively affected by tactics and key results. This should be at a high enough altitude to give individual contributors and/or line managers flexibility to pick the right tactics. This goal should make sense as a driver for our higher-level business Objectives. If you pick too many objectives you are not helping the team focus on what matters so try to keep it to 3-4 objectives at a time.
Objective Example: Activate spanish speaking new talent (14 active days in first 28).
Team Key Results
A Key Result is a metric that represents the way specific tactics affect an objective. Key Results are projects proposed by the individual contributors doing the work and validated by those setting the objectives. These metrics should be very specific and relevant to the tactic in question. KRs should not be tracking higher level goals in the cascade.
Key results are most impactful when they are proposed by the team's individual contributors and line managers that understand the technical challenges and dependencies. This leverages the talent on the ground in service of the higher-level strategy in a meaningful way. It also helps everyone understand how their work is supporting our vision.
Tactic Example: Localize onboarding experience for Mexico and Spain.
Key Result Example: Increase percent of talent in Mexico and Spain coming back on their second day by 5%.
Create an OKR Practice
It is not enough to set KPIs and OKRs at the beginning of the year and check in at the end of the year to see if we were successful to distribute bonuses. A successful OKR framework should become another business ritual. This practice becomes more meaningful over time as we learn how to talk about performance and learn together. In fact, it is the practice of revisiting our OKRs on a regular meaningful cadence that is critical in achieving success.
I have seen teams gather monthly or biweekly to review the metrics and discuss what tactics are working. When things aren’t working I know because I have connected the data dots and learned something new. I use these insights in conjunction with the broader context to make a recommendation on how to pivot.
Because we are having a conversation on connecting strategy to tactics, it is good to have individuals that are familiar with both the higher-level strategy and tactical work in the room. When only higher-level strategic thinkers consider the OKR framework they might struggle to diagnose the problem because they are most familiar with the aspirational side of the story.
Further, we can’t hide this practice, we must make it transparent sharing our mental model of success and our current status with the greater org. The highest level metrics should be top-of-mind at the start of each day for most employees as well as their own more granular metrics that are most relevant for them. In a remote culture this might be a daily email. In a physical office I like to see them on the monitors around our workspace reminding everyone where we stand.
Putting this all together, we have a robust practice to drive positive business change. Don’t worry if this doesn’t play out perfectly the first time you try - you are building new muscle and will need to grow into it. If you want to learn more I recommend reading Radical Focus, a business fable about making OKRs happen at a startup. Try applying this strategic OKR framework to your business and let me know how it focuses your team on what matters.
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