Set OKRs – on the right side

The Objectives and Key Results (OKR) method, when used correctly, is an immensely powerful tool to lead your organization to success. However, the OKR software industry has developed in such a way that companies often have to choose between solutions with different orientations, which often only map OKR pages on one side. Providers often tend towards either task management or employee appraisal. However, both of these orientations harbor dangers and risks that can limit the effectiveness of your OKR implementation.

When talking to clients and prospects, we often get the question: Will OKRs improve the performance of underperforming teams or employees? They often ask: “There are great performers and there are mediocre performers. Our goal is for OKRs to help mediocre performers become better performers”.

This is the problem we want to focus on in this article:

• How can I boost my team’s performance with OKRs?
• How can I turn my (under)performing team members into better employees?

We believe that OKRs are the best possible way to improve the performance of a team or an employee. But it depends very much on how you use them.

From a height of 1,000 meters, you can still see several core business processes in a company. They use inputs, such as personnel and raw materials, to generate outputs. These outputs in turn help your company to achieve relevant results.

The main reason for this question is that most of us are biased towards output or input.

• Do I have the right people?
• Are they doing the right things?

All successful organizations realize at some point in their development that they need to measure their steps on the road to success. This is the only way to get them to their destination on time and at low cost.

This need has created a market for a variety of vendors, each claiming to have the best state-of-the-art measurement tools and software. One category of these is the area of OKRs. It is obvious that not every measuring tool has the same degree of usefulness. For example, some use selective data sets, which can send erroneous messages to those who rely not only on the accuracy of the reported metrics, but also on their broader organizational relevance.

This applies in particular if a measuring tool has been selected hastily without taking into account the environment in which it is used. Making decisions based on faulty or selective data sets has the potential for catastrophic consequences.

What happens if you focus OKRs too much on outputs?

To become aware of the hidden dangers of this approach, consider the following example.

A finance director monitors the activities of his credit control team via a dashboard. The activities of each individual credit controller are divided into measurable tasks. Each task theoretically triggers a different task, which should lead to effective credit control management and help companies as a whole to overcome their liquidity problems. The cash position of the organization is a key focus of the management team.

The organization has several hundred medium-sized customers with varying degrees of late payment tendencies. The dashboard shows that all tasks and all follow-up measures are carried out in accordance with the required KPIs. The dashboard shows an overwhelming number of green lights and checked checkboxes. And yet the organization is still struggling with considerable cash flow problems. Why?

The main cause in this hypothetical example is that the company has a very large customer whose relationship is managed outside the remit of the credit control team. This one customer accounts for 50% of the company’s problem debt. The dashboard reports a green light because it has been used to focus on specific tasks. However, it is not in a position to take into account the effects of this one large, late-paying customer.

This example may seem extreme. The consequences can certainly be mitigated through effective management communication and cross-functional cooperation. However, problems are often not as easy to recognize as in this example. The more complex an organization becomes and the more sophisticated its silos and departmental structures, the more dependent it becomes on reliable systems and reporting to keep management informed of progress.

In our example, the finance team can happily report that they are meeting or exceeding their performance standards and all tasks are being completed to plan. And yet the company is still struggling.

The focus on output meant that a decisive event and a decisive relationship within the system was not captured.

What happens if you focus OKRs too much on employees?

Our client with liquidity bottlenecks in the previous example has now shifted its focus to the development of the responsible employees. The company felt that a focus on tasks was not providing the right data and is now hoping for a more effective approach. They try to ensure that objectives are effectively passed on from the management team to the individual team members.

That sounds good in theory. However, you are now faced with the same problems as before. They just have a different name. While developing an employee’s skills sounds like a good idea, it doesn’t take too much imagination to come across a number of situations where this approach proves problematic.

Let’s assume that this company has an ambitious expansion plan. Accordingly, management assumes that their path to success is largely dependent on the performance of the sales team, which consists of a team of sales representatives.

However, the data suggests that this team is performing below average overall. The HR department reacts to these findings and recommends an expensive personnel development program.

So far, nothing about this measure seems to be particularly controversial. Nevertheless, as in the previous example, it is not clear from the available key figures where the actual problem lies. To expand, the company would need a large team of low-cost telesales specialists instead of a few sales representatives.

We have deliberately used simple scenarios in the two examples. One should hope that every organization can skillfully identify and solve them. And yet, due to the complexity of organizations, it is often the case that problems that could actually be solved remain undiscovered.

These are examples of how data can be misleading if the framework is not right. The larger and more complex an organization becomes, the more important it is that this framework is reliable and uses tools that are not biased towards task management or employee appraisals.

Set OKRs – on which side?

You can theoretically set OKRs anywhere – results, outputs, inputs and even down to the individual input component. But the key to a really good OKR is to see if you can stay on the right side of it. Our recommendation: Concentrate on the results. Instead of focusing on improving the performance of their employees, they use OKRs to set targets that focus on the results they have set. Why?

The results are clear. There are no ambiguities. Either you have reached them or you haven’t. Good results are influenced by good outputs. These in turn are the result of good inputs.

Sometimes it can be difficult to define your key results based on outcome targets. In this case, concentrate on the output rather than the input.

Let’s say you know that you receive an average of 5 leads out of 100 calls. For example, instead of working 8 hours, ask a call center agent to make 100 calls a day.

Finally, if you have no other choice, concentrate on the inputs when setting your OKRs.

Interactions in the business process

We know that processes do not exist in isolation, but that there are many interrelationships between processes. The output or result of one process is the input for another process. For example, the result of the “lead generation” process is “qualified leads”. “Qualified leads” is the input for the “sales process”. Visualize these relationships and understand the results. Based on this, they could define key results for the relevant people.

For example, take a look at the sales process below:

You can see that 3 different departments are involved in this process – Marketing, Sales and Account Management. Marketing carries out campaigns that lead to MQLs or qualified marketing leads. These are then passed on to the next department to qualify qualified and general SQLs or sales leads and guide them through the process as required.

As you can see, the result of one department or function is usually an input for another function. Consider these interactions and KPIs carefully when defining your OKRs.

The Google problem

Another important aspect of setting goals is to incorporate your current culture. Google is one of the most prominent proponents of the benefits of OKRs and prides itself on using them as a methodology to drive success. However, using Google as a case study for OKR best practice brings a number of challenges for companies.

Take a look at this statement by Don Dodge from 2010:

“Achieving 65% of the impossible is better than 100% of the ordinary”

Many organizations see this as a mantra for the goal of setting their OKR framework. It is another version of the philosophy of “Aim for the moon. Even if you miss it, you will land among the stars”. And at first it seems both plausible and commendable in its ambitious approach. And yet this thoughtless imitation of Google’s goals can do more harm than good in certain organizations.

Think of an organization that has developed with well-established, conservative and regularly achievable goals. Employees in a company like this would experience a bitter disillusionment if they suddenly switched to a set of goals that are extremely ambitious and unattainable.

A workforce that has become accustomed to being praised for 100% target achievement does not want to feel that “65% of the impossible” is even close to success. This is a significant risk for companies.

The GLUT effect and the Anna Karenina principle

What connects these companies? Google, LinkedIn, Uber and Twitter?

Well, apart from your handy acronym, they are all known to be passionate advocates of the OKR method. In fact, these four companies are cited as role models in most articles and publications on OKR case studies.

Is that a problem? Possibly yes. And part of the reason is the Anna Karenina principle. For those familiar with Russian literature, the introductory sentence to Tolstoỳ’s Anna Karenina may already be ringing in your ears. Reminder: As a rule, the translation reads:

“All happy families are the same,

Every unhappy family is unhappy in its own way”

The authors Lutz Bornmann and Werner Marx extended this analogy to the field of scientific research. Essentially, they discovered that you can often learn more from failures than from successes. The same insight can also be applied to the question of what actually makes successful companies successful.

The GLUT companies certainly used OKR software in an extremely effective way. But there are many additional and arguably unique factors that maintain their success.

Copying the OKR approaches of these high-profile success stories is very unrealistic without a holistic approach to goal setting and the selection and implementation of OKR providers. To do this, you need a much more holistic approach to setting OKRs.

Summary

Good implementations put accurate measurement results in the hands of decision makers. The data is as objective as possible. You should empower those entrusted with the success of your organization to increase the likelihood that a stated goal will be achieved within an acceptable set of parameters.

And yet software vendors have shaped the field with one of two possible OKR orientations that distort the focus of the customers for whom the software is intended. Approaches that focus on outputs or inputs (which translate into task management or employee performance) focus disproportionately on these areas as a panacea for improvement.

At the same time, they may be missing opportunities to improve other areas of organizational functionality that their software may be less adept at capturing and measuring.

So the idea is that OKRs are “on the right” side of this business process equation. They bring in a very positive, results-oriented culture that focuses on business results rather than worrying about employees working harder or smarter. Show your employees where you want to go and make them understand the big picture. Show them what to expect when they get there. You will see how everyone is making every effort to get there.

We, the OKR experts, will be happy to advise you on how to set OKRs correctly.