Weekend Reading – Are OKRs Worth the Effort?

„Only 55% of the middle managers we have surveyed can name even one of their company’s top five priorities.“ HBR authors Donald Sull et al.

Dear all,

 „OKRs seem to have become a bit of a management fad.“ one of our prospects recently started the discussion „Are they really worth the time and effort?“ OKRs – despite their apparent simplicity – require a considerable time- and resource commitment and there is preciously little research on their effectiveness available.

But let’s take a step back: CEOs on average spend more than 20% of their time on developing strategy plus a significant 43% of their work on pushing their resulting agenda (M. Porter & N. Nohria, 2018).

Contrast that with the quote at the top of this post. The Strategy quickly dissipates in the layers of an organization. Less aligned and as a consequence lower-performing teams spend a whopping 83% more time fire-fighting and dealing with issues at a tactical rather than strategic level (N. Leonard & O. Wilta, 2017).

The same research suggests that successful organizations invest more time in three activities:

• strategizing and translating strategy into actionable goals
• interacting with key stakeholders to ascertain opportunities and anticipate roadblocks
• engaging and aligning the organization around the strategy

Over time, several tools to support strategy implementation like e.g. Hoshin Kanri (with a focus on employee engagement) and OGSM (linking objectives, strategies, and KPIs) had been developed, but only address elements of what’s required for success.

In contrast, the OKR framework in our experience delivers on all three counts.

Consider this example:
A new client of ours presented us with a well-developed strategy based on three strategic pillars. Goals for the year were outlined clearly and already broken down into initiatives.

In our first OKR workshop with the executive team, we transformed strategic initiatives into actionable Objectives and Key Results for the year by focusing on their desired outcomes and linking them to measurable leading indicators as Key Results.

Working with the management teams of the client’s individual departments, wesubsequently developed quarterly departmental OKRs, addressing near-term opportunities like e.g. regional expansion, as well as roadblocks – inadequate data quality for certain product decisions – in support of the yearly OKRs.

All OKRs were shared and discussed in a town hall-style online meeting, aligning and engaging the whole organization.

With quarter-end approaching, teams are currently engaged in identifying potential contributions to the quarterly departmental OKRs, codifying and aligning them between teams and departments as Team OKRs in a three-day workshop flow.

According to McKinsey research, at least a quarter of surveyed managers are also concerned about a perceived lack of strategic agility. The quarterly OKR cadence chosen by our client’s executive team in conjunction with the OKR framework’s innate outcome- (as opposed to task execution-) focus, in addition, addresses that. This has, as the same research suggests, an average impact of 30% on returns.

Research from the same source also points to up to 30% more employee engagement when purpose is clear and autonomy is provided. Outcome-focus and strategic clarity of well-implemented OKRs typically provide teams with just this.

We estimate a full OKR implementation to consume about 5% of quarterly available working hours across typical tech- or services organizations. Considering that OKRs have the potential to successfully bridge the strategy-execution gap while fostering strategic agility, as well as boosting employee engagement, with all the beneficial effects (less firefighting, improved returns, significantly boosted employee engagement) outlined above, we believe them to be well-worth the effort.

If you want more background for these assertions, here is some further reading:

Performance Management in Agile Organizations

McKinsey authors Lucia Darino, Marcus Sieberer et al. explain why agile organizations need to adapt their goal-setting approach…

Click to view!

Enjoy the rest of your weekend!

Cheers,
Godehard