Strategy Execution

Managing Effectively with OKRs

November 11, 2024
By Bill Gelbaugh

_{Image Courtesy of Adobe Stock: AdobeStock_102205126}

After going through the process of creating OKRs, it’s essential not to fall into the trap of “setting and forgetting.” Creating OKRs without regularly sharing and reviewing results is like hoping to win the lottery without buying a ticket. The modern business environment offers countless distractions, each vying for your attention. However, to execute successfully and elevate your performance, regular and disciplined reviews of OKR results must become part of your operating rhythm—a cadence embedded in your corporate culture.

Weekly Meetings

Let’s start with the basics: Weekly Meetings. The purpose of these sessions is threefold: assess progress, identify potential issues before they escalate, and, especially as you begin using OKRs, ensure your team stays focused on what truly matters. Here are some key topics to cover in your weekly meetings:

Logistics: Begin by determining who should attend the meeting, what time works best for everyone, and where the meeting will be held.
Priorities: What are the key priorities—the tasks that must be accomplished this week to move closer to achieving your OKRs? It’s easy to get caught up in the whirlwind of urgent issues, but it’s crucial to ensure the priorities discussed are directly tied to the achievement of your OKRs.
Status: During the meeting, gauge the team’s current level of confidence. Has it increased or decreased? More importantly, why? If progress is on track, implement mechanisms to maintain momentum. If confidence is waning, it’s time to discuss how to shift resources strategically to get back on course.
Engagement: OKRs should challenge and motivate people to engage in the breakthrough thinking necessary to reach new heights. Use the weekly session to assess the team’s mood. Are they still actively engaged, or are they simply going through the motions without genuine commitment?
The Big Picture: Earlier, we defined a health metric as something the company monitors frequently because it represents successful strategy execution. Well-designed OKRs should ultimately drive the success of your overall health metrics, so ensure you’re keeping an eye on the bigger picture.

Weekly Quadrant Focus

One way of managing your OKRs effectively is to break down your weekly focus using a quadrant approach. This method ensures that your team stays aligned with the goals that matter most, while also keeping an eye on the broader picture.

Upper Right | Setting Bold Objectives and Quantitative Results

At the start of each quarter, we set a bold, qualitative Objective along with three quantitative Key Results. The Objective serves as the inspiration for the quarter, guiding our efforts and providing a clear direction. The Key Results are the measurable outcomes we expect if we focus on the right activities.

Each week, we revisit these Key Results and ask ourselves: Are we getting closer to achieving them, or are we falling behind? At the beginning of the quarter, we start with a 50% confidence level—a 50/50 (0.5) chance of hitting the target. As the weeks progress, this confidence level may fluctuate. If it drops from, say, 80% (0.8) to 20% (0.2), it’s a signal that something has changed. The critical question then becomes: What happened, and how can we address and improve this Key Result?

Lower Right | Monitoring Health Metrics

While we aim high with our Objectives, we can’t afford to ignore the fundamentals—our “health metrics.” This lower-right quadrant is where we track these vital signs of our business, ensuring that while we reach for ambitious goals, we don’t lose sight of what’s already working well.

For example, if our Objective is radical revenue growth, it’s easy to get caught up in the pursuit of new clients. However, we must also protect our relationships with current clients. In this quadrant, we might monitor Customer Satisfaction, rating it green, yellow, or red. This helps us ensure that our drive for growth doesn’t come at the expense of the clients who have already invested in us.

Upper Left | Weekly Initiatives to Advance OKRs

In the upper-left quadrant, we focus on the specific initiatives we need to tackle this week to advance our OKRs. These are the three to five critical actions that will move the needle.

We don’t list every task here—just the ones that must happen for us to achieve our Objectives. Life always throws plenty of distractions our way, but the secret to success lies in focusing on what truly matters. By sharing these initiatives, we can challenge ourselves to ensure we’re investing our time in activities that directly contribute to our Key Results.

Lower Left | Heads Up for the Month Ahead

Finally, the lower-left quadrant is our “heads up” space—a pipeline of important activities expected in the coming month. This area is crucial for keeping the entire team, including Marketing, Sales, Operations, and Admin, prepared and aligned.

By anticipating what’s coming down the road, we avoid being caught off guard. This forward-looking approach ensures that everyone is ready to support key initiatives when the time comes.

A house with graph showing value over time — _{Image Courtesy of Adobe Stock: AdobeStock_668453216}

End of Quarter Reviews

At the end of each quarter, it’s time to move beyond subjective assessments and grade your performance. The two primary components of the quarterly review meeting are the “what” and the “how.”

The “What”: This involves assigning grades (scores) to each of your key results based on performance throughout the quarter. Each team (or individual, if your OKRs are connected that far into the organization) will determine their final score and provide the rationale to peers, colleagues, and superiors. This transparency offers a valuable opportunity for teams to learn from each other’s objectives, key results, triumphs, and challenges—showing what’s possible when the entire organization is aligned.
The “How”: While the grades are important, the real value lies in the discussions that follow. These conversations should challenge conventional views, uncover assumptions, and test hypotheses. In our experience, many organizations struggle with these meetings, where honesty and candor should take center stage. Some companies are able to engage in passionate, no-holds-barred discussions, while others are hampered by an overly polite culture that stifles genuine debate. Recent research into effective teams highlights the importance of psychological safety as a critical enabler of group success. To make the most of your OKR data, you need to carefully structure your meetings to maximize learning and drive meaningful change.

Updating OKRs at the End of a Quarter

The mechanics of OKR creation are straightforward. At the beginning of each year, the company establishes its highest-level set of OKRs, which may include both strategic annual OKRs and more tactical quarterly OKRs. These “corporate” OKRs provide the context for the connecting process, where business units, teams, and possibly even individuals create their own OKRs to demonstrate their contribution to the overall strategy.

At the end of each quarter, OKRs are graded, and new OKRs are developed throughout the organization. Some OKRs may remain the same for several quarters, especially those that are critical given current strategic or operational challenges. You may also carry forward OKRs that weren’t fully achieved but remain strategically important. Any OKRs that were successfully completed will likely be replaced with new ones that once again stretch the team to deliver their best.

Scoring the Results

Here’s a quick guide to interpreting OKR scores:

1.0 Score: This represents an extremely ambitious outcome—one that may have seemed nearly impossible at the outset. All key results should be written as a 1.0 to foster breakthrough thinking. It might feel like a “moonshot” if the company has never approached that level of performance before.
0.6 – 0.7 Score: This level signifies difficult but attainable progress, and it’s what you hope to achieve at a minimum. It’s a lofty target—challenging but achievable based on past results.
0.3 Score: This is the “business as usual” target, representing performance that can be achieved with standard effort and little or no assistance from other teams. It’s considered mediocre—precisely what OKRs are designed to eliminate. If a team only reaches a 0.3 on a key result, it’s crucial to understand why.

In our experience, those new to OKRs often encounter one of two outcomes: either they score all ones, or they find themselves scratching their heads because despite their best efforts, their reports are filled with zeros.

After a few quarters, your key result scores should average around 0.6 to 0.7. If your scores are consistently higher, it may indicate that your targets aren’t aggressive enough, and you’re not fully leveraging the talent and potential of your teams.

By following these practices, you can ensure that your OKRs aren’t just another set of goals but a powerful tool for driving strategic execution and achieving your company’s most ambitious objectives.

And with that, we conclude our five-part series on OKRs. We hope these insights help you harness the full potential of OKRs in your organization. Here’s to your success!

CONTACT INFO NEEDED

Bill Gelbaugh is one of our Senior Partners here at Outhouse and champions our OKR efforts.

Summarized by Bill Gelbaugh from: Objectives and Key Results by Paul R. Niven and Ben Lamorte

With additional material from Measure What Matters, Lattice OKR 101 and Perdoo

Driving OKR Alignment to Create Employee Engagement

November 11, 2024
By Bill Gelbaugh

OKR target with bullseye arrow — _{Image Courtesy of Adobe Stock: AdobeStock_1012677617}

Now that we’ve crafted our OKRs, it’s time to focus on how teams within your company can work together to accomplish these goals. While OKRs empower teams with a significant amount of autonomy, the key to overall corporate success lies in connection and alignment. As you communicate your corporate OKRs, it’s crucial that everyone in the organization not only understands them but also recognizes their importance and how they contribute to the company’s success. A well-executed alignment process creates a direct line of sight from every individual employee back to the corporate OKRs.

Connecting OKRs from top to bottom within your organization helps illuminate the relationship between what employees do and how those actions lead to overall strategy execution. This connection fosters learning in two directions. First, as business units, departments, and individuals develop their OKRs, they showcase their unique roles in creating value for the company. To do this effectively, they must understand the business’s strategy, which deepens their grasp of the organization’s purpose. Second, as leaders analyze OKR scores across the company, they gain valuable insights into how different parts of the business are contributing to the overall strategy.

How Deep to Connect

Ultimately, your goal should be to extend the use of OKRs throughout the entire company. But how quickly should this be done? Should you rush to connect all levels within the first year, or take a more measured approach over several years?

OKRs have the potential to be a transformative tool for your business, sparking new thinking that leads to previously unimagined levels of success. To realize this potential, the framework must be embraced and utilized at all levels of the company, helping you foster fluency in a new corporate language: strategy execution. The faster you connect, the faster your employees will master this new approach, and the sooner you’ll see results.

We believe in the power of momentum and recommend moving aggressively but thoughtfully when connecting OKRs. Aggressively means connecting quickly and deeply across all levels of the company. Thoughtfully means ensuring you can answer these critical questions affirmatively before proceeding:

Do we have executive support for OKRs?
Do we have a clearly documented strategy reflected in our top-level corporate OKRs?
Are we committed to using OKRs to manage the business, regardless of the initial results?

If you can overcome these hurdles, a rapid rollout may be appropriate.

Preparing Your Groups for Connecting

Young people putting their fists together as symbol of unity and achievement, top view. Group of people fist bump assemble together over workplace. Teamwork concept, copy space in middle — _{Image Courtesy of Adobe Stock: AdobeStock_909279080}

In a previous post, we discussed the importance of a mission statement, which conveys your core purpose as an organization. Every business group that will create connected OKRs should develop a mission statement that clearly outlines why they exist and how they add value to the organization.

Armed with their mission statements, each group must then answer a fundamental question: “How do we support the organization’s mission and strategy?” This question primes groups for the task of connecting by having them enumerate in advance how they are going to support the company’s overall strategic goals.

The Key to Connecting Is Influence

The purpose of the connecting exercise is to allow all groups—even individuals—to show how they influence the overall corporate OKRs. This process begins with the top-level set of OKRs. These are the critical levers of your success, and everyone in the company must deeply understand them before you begin connecting. Let’s assume you’re starting from the corporate level. The first real connection occurs when business units study the corporate OKRs and ask, “Which of these OKRs can we influence the most, and how?”

The goal of a well-executed connection process is to provide a direct line of sight from every individual employee all the way back to the corporate OKRs.

Creating Alignment

Ensuring your people are aligned around a common purpose is the number one job for any successful corporation. Connecting OKRs provides an outstanding opportunity to drive that alignment through every job and function in your firm. There are two types of alignment you’ll be fostering during the alignment process: vertical and horizontal.

Vertical Alignment

This is the type of alignment most people think of when considering connecting goals across an enterprise. Vertical alignment creates OKRs that flow downward, eventually reaching the individual employee level. However, as we’ve previously noted, this does not mean the executive team dictates a number of obligatory goals that are forced upon lower-level groups regardless of fit or necessity. Instead, vertical alignment is facilitated when teams, departments, or individuals look to the OKRs of the group to whom they report and ask: “How can we influence those OKRs? What can we do and measure at our level to drive both our success and theirs?”

Here’s an example of driving vertical alignment: The CEO of a mid-sized company declared that customer retention was the top priority. Traditionally, customer retention had been the sole domain of the customer success team, which managed ongoing client interactions and renewals. After the CEO’s announcement, everyone assumed that the customer success team would simply work harder to drive retention while other departments would continue focusing on their current priorities. However, with OKRs in place, the company could create a culture of alignment across all teams.

The product team, for instance, had typically focused on features that would attract new customers or differentiate the company from the competition. With the new focus on customer retention, they began asking, “How does this product improvement drive customer retention?” The marketing team also shifted its outlook, taking time at their user conference to interview customers and gather valuable survey data on retention. Even the sales team adjusted its approach, now taking time to call on their installed base to ask how they could add more value and emphasize long-term relationships.

Each of these teams did something different—something relevant to their specific function—but the common denominator was identifying actions that supported the corporate strategy of increasing customer retention. That’s vertical alignment in action.

Horizontal Alignment

While most companies are familiar with the concept of vertical alignment, horizontal alignment is equally important but often overlooked. In the modern enterprise, much of the work involves disparate teams coming together to solve customer issues or create new value. When one unit can’t depend on another, damaging consequences such as duplication of effort, missed opportunities, and escalating conflicts can occur. OKRs can help fill this gap.

Creating horizontal alignment isn’t complicated. It simply requires having the discipline to hold detailed conversations with other units throughout the company to discover mutual dependencies. Both teams then create OKRs that reflect these dependencies. The resulting OKRs may be unique to each unit, or in some cases, they may decide to use “shared OKRs.” Shared OKRs are particularly useful when multiple teams work closely together to achieve a result, ensuring that everyone is aligned and contributing to the overarching goal.

Dividing line down road painted as an arrow in Autumn scene. — _{Image Courtesy of Adobe Stock: AdobeStock_894649161}

Confirming Alignment of Connected OKRs

Creating a set of corporate OKRs that improves focus on what really matters is one thing. However, the value of an OKR implementation increases exponentially when you connect, allowing all participants to announce their contribution to the bigger picture. Connecting may be the most essential part of your OKR process, so it’s critical to ensure it’s done well. Once you begin rolling out the program and having lower-level groups develop their OKRs, you can’t assume that those OKRs are aligned. You must check each set to ensure they draw a clear line of sight back to your strategic goals.

Next up… Managing Effectively with OKRs.

Bill Gelbaugh is one of our Senior Partners here at Outhouse and champions our OKR efforts.

Crafting Great OKRs Part Two

October 30, 2024
By Bill Gelbaugh

Stock Image of happy group of people using sticky notes on glass board for planning OKRs. — _{Photo Courtesy of Adobe Stock: OKR3-1-AdobeStock_275135207}

In our previous post, we discussed the characteristics and tips for creating effective OKRs. Now, it’s time to dive into the actual process of crafting OKRs that can drive your business forward. This post will guide you through each step, from creating and refining OKRs to aligning them across your organization and finalizing them for action.

The Process to Create Great OKRs

Create

The first step in crafting OKRs is to start small. Rather than using a large brainstorming group, which can lead to chaos and diluted focus, we recommend forming a very small team—just two or three people. This small group can dedicate the deep, time-consuming concentration needed to draft a set of OKRs that truly address your business challenges.

These small teams are tasked with tackling specific business problems and discovering creative solutions. They need the bandwidth to immerse themselves in the details—analyzing your competitive environment, scrutinizing your strategy, and identifying your core capabilities. These elements are the raw materials that lead to effective OKRs, and they must be carefully considered.

Whether you’re working at the corporate level or within a team, your small group should aim to document two to three objectives, each with one to three key results. These should be set at a stretch level—the 1.0 scoring level—to inspire high performance. (To be explained in detail later.)

Refine

Once your small team has drafted the initial set of OKRs, it’s time to bring them to a wider audience for review. Before your first full team meeting or workshop, share the draft OKRs with the relevant leadership group. If you’re working on corporate-level OKRs, this will involve the senior leadership team. For team-level OKRs, the team’s leadership group will need to be involved.

The purpose of this session is to critically examine the draft OKRs. The small team should explain their choices, and there should be vigorous debate to ensure that the OKRs are aligned with the broader goals of the organization. The objective is to reach a consensus on the OKRs that will guide your efforts for the upcoming quarter.

Align

In today’s business environment, much of the work is cross-functional, with teams collaborating to solve problems and create new ways of working. When crafting OKRs at the team level, it’s crucial to keep this context in mind.

After you have refined the OKRs, it’s time to take them on a “road trip” around the organization. This involves discussing your draft OKRs with other team leads, especially those on whom you depend or who depend on you. This step is all about ensuring alignment across teams, so everyone is working towards the same goals.

For instance, if one of your key results is highly dependent on another team’s assistance, you’ll want to ensure they acknowledge this dependency and pledge their support. Similarly, you’ll want to understand how your team can support other teams in achieving their OKRs.

Finalize

Once the alignment process is complete, it’s time to finalize your OKRs. If you’re working at the team level, the team lead and partners should meet with their superior—likely a member of the senior executive team—to get final approval for the OKRs.

Transmit

The final step in the crafting process involves two key tasks. First, you need to load your OKRs into a software system or a tracking tool such as Google Sheets or Excel. This is a simple but vital process. OKRs must be rigorously and formally cataloged to maintain the integrity of the entire OKR process.

Second, you need to communicate the OKRs to your team and beyond. We strongly recommend sharing them widely using a variety of media. An in-person meeting, such as an all-hands or town hall style gathering, is particularly effective. This provides an opportunity for employees who weren’t directly involved in the OKR creation process to ask questions and gain a deeper understanding of the decisions made.

The OKR Crafting Process

OKR Football Example

How Many OKRs Should We Have?

The late screenwriter Nora Ephron, famous for writing classics like When Harry Met Sally, Sleepless in Seattle, and Silkwood, had a remarkable talent for capturing the essence of a story. But before she became a Hollywood legend, Ephron was a journalist. She often credited her high school Journalism 101 teacher, Charlie Simms, with teaching her the most valuable lesson she ever learned about storytelling.

On the first day of class at Beverly Hills High School, Simms introduced his students to the concept of a “lead”—the opening sentence that captures the most critical elements of a news story. He explained that a good lead answers the who, what, when, and where. To drive the point home, he gave the class their first assignment: write the lead to a story based on the following facts:

Kenneth L. Peters, the principal of Beverly Hills High School, announced today that the entire high school faculty will travel to Sacramento next Thursday for a colloquium on new school methods. Among the speakers will be anthropologist Margaret Mead, college president Dr. Robert Maynard Hutchins, and California Governor Edmund “Pat” Brown.

The students furiously hammered away on their typewriters, each trying to craft a concise lead that summarized the who, what, when, and where. Their leads were variations of: “Margaret Mead, Maynard Hutchins, and Governor Brown will address the faculty on…” or “Next Thursday, the high school faculty will…”

When they finished, Simms reviewed their leads and set them aside. Then he told them they were all wrong. “The lead,” he said, “is ‘There will be no school Thursday!'”

In that moment, Ephron realized that journalism—and storytelling in general—wasn’t just about regurgitating facts. It was about figuring out what really mattered, cutting through the noise to find the point that resonated most.

Ephron would later say that this lesson worked as well in life as it did in journalism. And, as it turns out, it works great for OKRs too.

When you gather with your team to decide on your OKRs, you’re faced with a universe of possibilities. Customer concerns, shareholder interests, employee needs, competitive pressures—the list is endless. These are the organizational equivalent of the “who, what, when, and where.” Your challenge is to cut through the clutter and identify what is most important, what will have the most impact right now—essentially, the “lead” of your business story.

Woman giving thumbs up, holding a sign that says "Less is More." — Courtesy of Adobe Stock (edited in Canva Pro): OKR3-2-AdobeStock_295108345

So, how many OKRs should you have? We recommend following the principle of “less is more.” There is a significant opportunity cost to increasing your inventory of OKRs—namely, a lack of clarity and focus around what the company’s true priorities are. When you begin your OKR process, we suggest generating a small number—a handful at most—of objectives that are crucial to executing your strategy for the year. Then, as the year progresses, adjust your tactical objectives each quarter to keep moving those strategic objectives forward.

Next up… Driving OKR Alignment.

Bill Gelbaugh is one of our Senior Partners here at Outhouse and champions our OKR efforts.