Why OKRs?

Why do you need OKRs?

On many occasions, this is the number one question we face from a prospect who has no background information about OKRs. They say, it sounds similar to an employee performance system. Or that they get all their KPI values from their business intelligence systems. And why do they need to invest their time on a new methodology and on top of that, potentially a new software tool?

The short answer is that, many times you don’t know what you don’t know. There is a great chapter in a recent book by McKinsey Fast Times, called “Do you know what great looks like?”. We had line manufacturing and moved to cellular manufacturing. We had waterfall methodology and moved on to agile product development. Now, we are talking about iterative business execution. That really is what OKR will enable you to do — iteratively execute your business strategies and get them done faster.

These are the 5 symptoms that OKRs will help you solve. They are simply the exact opposite situations of the five well known OKR payoffs known by the acronym FACTS

Focus Challenges

In business, you always want to accomplish a lot of things. There are many priorities in front of you. At any point in time you have a million things to do and because of that you know focus is a huge challenge. What needs to get done first? What next? If you don’t put the first things first the next few things may not even matter.

It’s really important to prioritize from a business standpoint. What are the three things or five things that you want to achieve for this year and then how you are going to achieve those on a quarter by quarter basis?

It is extremely important to pick your battles. When priorities are clear, pathways become clear. When pathways are clear, you can ride ahead much faster. Which in turn will get you to your destination faster.

Alignment Challenges

When the focus problem is this pronounced at an individual level, imagine how pronounced it can be, at the organizational level, if you do not have good alignment. The CEO might have had some clear targets set from his standpoint but if the next level is not focusing on the same things and whatever they’re doing is not going to contribute to that, that is a big problem. When the next level is 70% aligned and spend the rest of their time and budget on other things you have a clear resource allocation problem and will end up short on what the overall company goals.

Daily business often consists of tasks and routines that keep your business running. However, you can’t tell if they support the bigger picture. You try different tools and ways to make things happen. While appropriate in uncertain situations, you feel a lack of focus and accountability.

Many times you observe in organizations that the right hand does not know what the left hand was doing. When there is lack of alignment at the higher levels of the organization, it usually gets amplified when you go down the org hierarchy. It’s almost like when you’re launching a rocket you better be absolutely sure about your launch angle. Even if it’s a degree off, when the rocket actually gets launched the trajectory will be way off the desired trajectory.

Your employees tend to concentrate on their own set of goals without understanding and ensuring alignment to your company’s vision and goals. Your company’s vision often is lost along the path since employees & managers are focused on their daily workload and have a tendency to just get things done.

When there is poor alignment, it’s hard to measure the impact of your strategic decisions on operational aspects of your business. For example, your strategic decisions about your team’s projects will impact your macro objectives, but when there is no clear alignment it’s hard to see that impact.

Commitment Challenges

Sometimes you feel like you are an employee trying hard enough to do something. You know that there is something to be done and there are ways to do it, but they are not straightforward. A committed employee will figure out tools to, set himself up for success, that someone who is not committed is not going to.

You simply don’t stand there and say well it’s not reachable. And so I don’t have a way to get to it. Lack of commitment and lack of initiative are definite problems in the workplace, but this may not all be completely an employee’s fault. In an environment where you’re told what to do there is usually a lack of commitment as opposed to when you’re encouraged to come up with your approaches, ways and means. Most of the time, it’s a mindshare problem. Are you going to move and shake to make things happen or simply wait around to be told what to do, now and next. IKEA effect is all about this and has been widely written about.

Tracking Challenges

If you don’t track progress properly, you won’t even know that you are running, sometimes really fast, inside a hamster wheel, pretty much staying put at the same place.

The key to improving any aspect of your business is to have a process that:

• Knows what KPIs to measure to know the health of that aspect of that business
• Knows how to track and measure those KPIs on a periodic basis
• Set improvement targets for those KPIs
• Track progress towards those targets

It seems simple, but like every seemingly major problem in a business usually has simple solutions. When you have people feeling like they are running in a hamster wheel, you know that you have a tracking problem in your hand.

Stretching Challenges

What is your culture? Which of the following statements is true about your organization?

• My organization appreciates when a person commits to completing 3 tasks and actually completed 4 tasks, resulting in a 133% accomplishment rate.
• My organization appreciates when a person commits to completing 10 tasks (comparable to those in #1) and actually completes 7, resulting in an accomplishment rate of 70%.

If you answered #1, then you do have a challenge that you may not even know that exists. This sandbagging effect is pretty prevalent. Sometimes, especially when involving external commitments — customers or investors, it may be necessary to sandbag.

Within the business though, sandbagging will create layers of comfort zones and hence result in a lot of wastage and the worst part is, you won’t even know it. As noted in Fast Times, “many business leaders don’t know what they don’t know. In this vacuum, leaders will tend to set their aspirations too low or focus on the wrong elements of a transformation.”

Conclusion

Many times when executives ask the key question of this topic:

Why do I need OKRs?

We find that the answer is right in front of them. As we outlined in this post, every business usually faces one or more of the challenges listed here. You can argue that you have other ways to address some of those challenges. And sure, yes, OKR is not the only game in town. There are other methodologies that can give you solutions for individuals or a group of these challenges. But OKR as a methodology comprehensively addresses these 5 challenges and provides a systematic solution to the problem. In addition, the OKR methodology also has a huge following. So, you can get trained resources on staff or get short term consulting help to get going with your OKR program.