CEOs like to set goals—attract top-tier employees, expand globally and increase sales by 20%. You know the drill. Identifying goals answers the “What do we want to accomplish?” question. But it leaves many more open, such as “How will we go about achieving the goal?”, “How will we track progress and know that we’re on the right track?” or “How will each department and employee contribute?”
Unless leaders translate big goals into concrete steps that can cascade a series of measurable key results, mid-level managers tend to fall victim to decision-making paralysis. Priorities start conflicting or contradicting, resource wars spring up and morale-killing interdepartmental squabbles threaten progress.
So, how do we re-engage? One way is with OKRs, or objectives and key results. An OKR framework is a system that teams and companies can use to define measurable goals and track progress in a structured manner.
OKR efforts have become trendy among big tech companies that are looking to improve employee engagement, but the concept is applicable to any organization that believes they could better execute goals. In this article, we’ll look at responses NetSuite collected from business executives on how they successfully leverage OKRs.
How Do OKRs Work?
In an OKR framework, leaders define objectives as statements that describe what should be achieved or improved. Teams then compose focused, quarterly targets that advance objectives together.
Let’s say it’s a midsized, full-service accounting firm looking to win those 100 new B2B customers that will each spend $50,000 or more annually. Department heads now convene to create lists of tasks they can accomplish within the quarter.
- All: Craft a value-added offering that will increase spending from current customers and appeal to larger prospects. Maybe your firm has good visibility into client financials, so for Q1 you decide to offer cash flow projection reports and advice on how to access low-cost bridge financing if required.
- HR and IT: Evaluate whether current staff and technology are sufficient to generate and provide context to cash flow projection reports.
- Finance: Calculate pricing that will appeal to the target demographic, achieve the $50,000 objective and deliver acceptable margins. Maybe you’ll provide quarterly projections free for two quarters. Customers that want daily, weekly or monthly insights pay a tiered rate.
- Marketing: Create content on why cash flow analysis is critical for companies. Deploy that collateral to generate 500 marketing qualified leads (MQLs) at companies with annual revenues of $5,000,000 or more.
- Business Development: Speed up the MQL to sales qualified lead (SQL) process. Decrease the time from the first call to a demo of the service by 30%. Convert 75 MQLs to SQLs. Stress the benefits of a one-stop shop for all financial, payroll and accounting needs and advice.
- Sales: Decrease the time from the demo to signing the contract by 30%. Close 25 deals for a bundle of accounting, audit/compliance, payroll and tax services, plus weekly cash flow projections and financing assistance at $4,250 per month.
Repeat quarterly to achieve 100 new logos, each spending $51,000 annually.
Armed with this plan, teams can prioritize and develop metrics to track success. The “key results” part of OKRs is quantitative and shows whether you’ve achieved or advanced on the objective.
Weekly check-ins are critical to OKRs. Because initiatives are laid out in quarters, this cadence keeps everyone aligned and allows for adjustments as needed.
If that sounds a lot like tracking key performance indicators (KPIs), you’re right—KPIs are important components in an OKR initiative.
What Are the Benefits of OKRs?
Proponents argue that OKRs are the best way to motivate and align personnel to achieve goals. Managers regularly cite failure to get people moving together toward the right objectives as the single greatest challenge to executing company strategy.
Marek Cieszko is the CFO at Packhelp, a fast-growing marketplace for custom-branded packaging that’s been using quarterly OKRs since 2020. Cieszko says the methodology was already in place, so they just formalized it.
“Most of the teams already had OKRs,” he said. “We just didn’t recognize them as OKRs. The frameworks we were using needed to scale.”
- Priorities are clarified at the top
- Input is welcomed from the teams being asked to accomplish an objective
- The objective is adjusted based on that input
- Tasks and expectations are shared transparently across the organization
- Weekly check-ins across the company realign teams
Lewis Miller, CFO of global recruitment firm Frank Recruitment Group, says that managers at companies that use OKRs become more results-oriented and data-driven, with less of a top-down “command and control” mindset that focuses purely on near-term output.
CFOs at companies that use OKRs say that through employees understanding the context of their work, they’re more engaged, creative, confident and secure in taking informed risks or thinking outside the box.
5 Key OKR Benefits
“What I like about OKRs is they provide a healthy practice of getting teams organized around a vision, goal and common definitions and a method for holding middle management accountable in an objective manner,” said Kevin Adolphe, former CFO of executive coaching firm CEO Coaching International.
Other benefits include:
- A laser-like focus that empowers teams and individuals to say “no” to ad hoc requests that won’t forward objectives.
- Deeper relationships among clients and peers, which aid in the retention of top-quality talent. In the accounting example, advisory services on how to improve cash flow let employees flex their expertise and engage more meaningfully with customers.
- A two-way ecosystem of vetting objectives and tasks that is simultaneously top-down and bottom-up, garnering the best of both.
- Flexibility increases because the quarterly cadence of an OKR platform doesn’t lock you into an annual plan in which the company doggedly stays on one track—because it’s the plan—regardless of events that might call for serious rethinking.
- OKRs often uncover interdepartmental dependencies that aren’t evident when disparate teams set KPIs in a vacuum. Maybe IT has an idea on how to automate cash flow reporting that delivers faster, more timely reports to customers at a lower cost to the firm.
Daniela Sawyer, the founder and business development manager of the people search site FindPeopleFast.net, says the quarterly evaluation and modification cadence OKRs bring is invaluable in today’s fast-paced environment. Quarterly deliverables help teams optimize their workflows and each quarter benefits from the prior quarter’s learnings.
For some companies, OKR success does require a cultural shift from “checking the boxes” to “we just made a measurable improvement to the business.”
“Most goal-setting methods focus on the result,” said David Reid, sales director at global manufacturer VEM Tooling. “OKR is distinct in that it includes the individual’s actions to achieve the ultimate aim.”
What Are the Downsides?
As valuable as OKRs can be, there are “gotchas.” Most downsides are tied to poorly defined objectives, a failure to trust teams to execute, a lack of proper resourcing and/or tying success too tightly to rewards and thus discouraging experimentation.
Daniela Sawyer sees the trickiest part of OKR execution relating to one perceived benefit—as teams work together, that reveals interdepartmental dependencies that can raise political hackles. She also warns of the pitfalls of bottom-up feedback.
“While it’s excellent OKRs are developed with input from everyone, there are drawbacks,” she says. “For the bottom-up method to be effective, there must be clarity on what the organization is trying to accomplish.”
The fix here is for a leadership team to vet department-level tasks for alignment with overall organizational goals.
OKRs, like mission statements, are effective only if there’s full buy-in from the people who actually do the work. Many of our experts have seen expensive corporate initiatives to craft frameworks only to abandon them once “implemented,” as if implementation was the goal, not ongoing improvements.
Debbie Schleicher, CFO of EasyKnock, a company offering home sale/leaseback solutions, has seen both useful and useless OKRs.
“An [objective] for a developer might be to build the world’s tallest building,” said Schleicher. “This lofty objective is broken into results to be achieved in each period—making progress manageable and expectations clear. The departments can then align on making the key results happen through activities, such as procurement selecting the engineering firm by a certain date or legal reviewing and executing the contract by a certain date.”
A poor objective is murky and subjective as to the expected outcome. An objective to build the “best building” isn’t a strong objective, because “best” is open to interpretation.
More examples of strong objectives include:
- Achieve $100,000 in sales in the EU in FY23
- Increase average deal size by 15%
- Increase our Net Promoter Score from 45 to 60
- Launch a reseller program and sign on 20 partners in 2023
OKR Best Practices
A shortcoming of the KPI system is that goals are often self-selected with the intent of making them a sure thing. This happens when goals are tied into employee reviews, promotions, raises or bonuses. Teams need to feel safe challenging or stretching themselves, and OKRs provide room to make that happen.
Another best practice is that leadership should minimize top-down command and control and empower the people tasked with day-to-day execution. Teams stay on track with quarterly, monthly or even weekly assessments and adjustments.
Ensure objectives are not overly complex. Good OKRs show employees a clear path to success.
7 Tips for Writing Effective OKRs
- Aim for two to five key results for each objective.
- Key results are not activities. They are measurable metrics that illustrate advancement. Work within the SMART framework. If it’s specific, measurable, achievable, relevant and timebound, it’s likely a good OKR.
- Key results should clearly reveal whether the opportunity has been seized or the problem solved.
- Every key result should have an action plan for pursuing it.
- Establish a grading system for results. It can be as simple as “yes we did/no we didn’t” meet the goal, or it can be a graduated scoring scale.
- Resist the urge to allow key results to become employee-evaluation metrics.
- Remember that OKRs are about driving change, not seeking new ways to maintain business as usual.
The executives agree: OKR success is tied to strong leadership. A focus on achievable outcomes and committing to quarterly goal setting with weekly progress check-ins keeps the organization agile and fosters a culture of ownership and motivation.
If you’d like to learn how NetSuite can help your organization accomplish its goals, contact us online or give us a call at 410.685.5512.