Setting measurable objectives and key results for business success

Most organizations have the problem of not being ambitious but rather being able to do it. Strategic plans set by companies have impressive goals that they fail to realize. A report by Project management Institute shows that most organizations (55 percent) of them complain that their biggest problem is poor implementation of organizational strategy. The disconnect between strategy and execution is hardly ever based on effort or resource scarcity. Rather, it tends to be an indication of ambiguous goals, immeasurable goals, and cross-team misalignment.

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This is the place Objectives and Key Results – OKRs – come in with transformative value. OKRs offer a connection between the strategic vision and the implementation. They turn grand visions into tangible and achievable goals that help create organizational focus, team thematicity, and support decision-making through data. As opposed to the old school methods of goal setting where goals tend to be open-ended and immeasurable, OKRs make organizations answer the question of what success means and how they will know they have achieved it.

The companies that have perfected the implementation of OKRs such as Google, Intel, and numerous high-growth startups are always ahead of the pack. They are strategically aligned in dispersed teams, have rapid response to the market changes, and attain high ambitions more consistently than the traditional planning organizations.

Learning the Basics of OKRs

It is necessary to comprehend the basic elements before going in establishing measurable OKRs. An Objective is a statement of what you desire to accomplish. It is directional, qualitative, and inspirational, that is, something that activates the teams and concentrates organizational attention. Goals provide answers to this question: What do we want to achieve?

Key Results, on the contrary, assess the movement towards the goal. They are defined, measurable and time-sensitive. Key Results provide the answer to the question: “How will we know we have succeeded? A combination of goals and key outcomes is a fully featured system that comprises of inspirational leadership and accountability.

There is a critical difference between objectives and key results. Most organizations mix this up, and end up having a hodgepodge of uninspirational and unspecified goals. Good OKRs ensure a distinction between the qualitative goal and the quantitative key results that indicate an improvement on the same.

The Architecture of Measurable Key Results

The development of really measurable key results involves knowing what they are effective. The biggest error that organizations commit is to mix key results with tasks or initiatives. An important outcome is measured by a key result; an action to achieve the outcome is called a task.

As an example, one of them is a task or an initiative like Implement a new customer relationship management system. It outlines what you will do not what you will accomplish. One of the measurable key results could be something like; lower the average customer support response time, 48 hours down to 4 hours or higher customer satisfaction score, 72% to 85%. These important results are defined in terms of desired results, rather than actions.

Successful key results are characterised in a number of ways. They are result oriented and are said to describe results and not activities. They are precise and measurable and allow objective evaluation of progress. They are time-constrained, usually on a quarterly or annual basis. They are not far-fetched and attainable, meant to stretch organizations beyond what would result in minor enhancement but not insurmountable.

To know how to set measurable key results & objectives which are quantifiable, it is important to understand that measurement methodology is important. The significant results that should be chosen by organizations are those that indicate progress towards the goal. In the case of the objective being to dominate our segment of the market, the key results must be a market share, number of customers, increase in revenue, or a position in the market (not activity ones such as complete 100 customer meetings or introduce 5 features).

Developing Baseline Metrics and Success Criteria

Organizations have to set key results before baseline measurements are made. You cannot quantify how far you are going to get without knowing where you began. This involves the auditing of the existing performance in terms of the relevant metrics.

In case customer retention is a strategic goal, you must have the rate of retention of customers by customer segment, the causes of churn, and the trends of retention over time. When cutting time-to-market matters, time-to-market measurements involve current concept-launch cycle times. Under the condition that employee engagement should be improved, it is desirable to set baseline scores of engagement.

The foundation set up in this case is usually surprising. Companies often end up finding that the perceived problems are not exactly what was going on, or that other departments define the same metrics by different values. These measurement inconsistencies can be sorted out prior to establishing OKRs so that there is no confusion and alignment.

The criteria of success need to be on meaningful improvement and not on minor incremental change. In case the current customer retention equals 85, it would be a stretch to give a key result of acquire 86. Better would be to be able to achieve retention of 92% or lower an annual churn rate of 15% to 8%. The definite target is conditional upon the organizational ability, the situation in the market, and the priorities of the strategies, however, the general rule is: the key results must be the significant improvement.

Cascading OKRs to Organizational Alignment

The ability of OKRs in establishing alignment within organizations is one of the strongest points. Company-level OKRs flow to team OKR, which flow to individual OKR. This hierarchy system will ensure that each person is aware of the role that his work plays in the success of the organization.

There has to be discipline in effective cascading. The strategic priorities should be set by company-level OKRs. The department and team OKRs should then be set on how each team will contribute to the success of the company. Personal OKRs are expected to relate the work of particular employees with that of teams.

But it does not mean that cascading implies strict hierarchy. There should be freedom in lower level teams on how they are going to support higher level OKRs. The company OKR of grow revenue to $50M may be broken down into sales OKRs with a goal of acquiring more new customers, and customer success OKRs with a goal of retaining its current customers, and each team operates freely in specifying their own key results.

The cascade should have an intelligibility of connection. The employees are expected to be able to easily follow the connection of their personal OKRs to team OKRs, which are in turn related to company OKRs. This transparency brings in conformity and makes the employees aware of how their respective contribution to organization mission is.

Measuring and monitoring Improvement

Attainable key outcomes necessitate well-developed monitoring systems. The baseline measurements should be set and the progress of an organization should be measured at regular points at least once every quarter usually on a weekly or biweekly basis. Such tracking helps to reveal off-track initiatives in a timely manner and make necessary adjustments quickly.

To have proper tracking ownership is necessary. All important outcomes must take the form of one owner who is needed to make progress and report on status. Even though several individuals might be involved in the attainment of a critical outcome, ownership will provide responsibility and avoid the spread of responsibility.

There is also the need of honest assessment in tracking. Companies need to design psychological safety concerning the OKR performance. When the key results are too closely related to compensation or performance appraisal, the teams will have conservative targets that will ensure that the final result is 100% as opposed to the ambitious targets that are meant to challenge the organizational capabilities. Most organizations discover that the closer the OKRs are connected to compensation, the lower the performance becomes.

The best practice puts a distance between OKRs and compensation and applies them to resource allocation, strategy and learning in the organization. Teams that exceed by 70-80 percent of ambitious OKRs have a higher performance compared to 100 percent achievement of conservative goals.

General Pitfalls in Measurable OKR-Setting

The challenges associated with the use of OKRs by organizations are usually predictable. Confusion between activities and outcomes is one of the pitfalls. The suggestions to the market research or introduction of new software or employment of 10 engineers say what you will do rather than what you will accomplish. Good OKRs keep track of the changes in an organization that have taken place, not organizational activities.

There is a second trap of setting up excessively many OKRs. Organizations that strive to quantify progress to 20+ key results are making focus watered down instead of generated. OKRs is a field that does not tolerate soft skills. The majority of organizations are supposed to have three to five company-level OKR and teams should have fewer key results to their objectives.

The third trap is to establish key results that cannot be measured or are ambiguous. The objective progress of customer experience in the form of improvement or market awareness is not the specificity of the task. Key results are effective: they contain measurements and goals: to improve Net Promoter Score by 45 to 60 or brand awareness by 18 to 35 among target demographic.

Organizations also tend to fail because they set time limits which are not equivalent to reality of execution. Majority of the OKRs have quarterly or annual cycles. The establishment of annual OKRs in fast-evolving markets or quarterly OKRs in long-cycle projects creates a mismatch between the measurement and implementation.

Adjustments of OKRs to Various Organizational Functions

The approaches to OKRs should be a bit different in different organizational functions. The measures of sales organizations are usually on revenue, customer acquisition, and customer retention. Product organizations focus on bringing features to the market, quality indicators, and usage. The engineering groups normally work on the infrastructure upgrading, reliability and scaling indicators. Examples of lead generation, brand awareness, and pipeline contribution are the OKRs established by marketing organizations.

The HR and people teams can quantify the OKRs based on recruitment metrics, retention, engagement score, eNPS, and development programmes. The finance teams are concerned with cost minimization, accurateness of the budgets and financial forecasting. The metrics used to represent the contribution of each of the functions as part of strategy are appropriate.

It is important to make sure that departmental OKRs help the company OKRs instead of maximising locally at the cost of organizational achievements. The sales should not strive to grow revenues at the expense of not retaining customers. Features that the engineering cannot support should not be shipped in the product. Marketing must not be limited to the quantity of leads taken without considering the quality of the leads. These conflicts in corporation should not occur due to the cascade of the OKR.

The Success of the OKRs Implementation

Effective implementation of OKR needs the organizational commitment and regular practice. The initial quarter is generally the most difficult since organizations get familiar with the art of establishing real quantifiable OKRs. The distinction between objectives and key results, or the development of the necessary level of specificity, is a challenge that many organizations find challenging at their initial stage.

Training and coaching are necessary to be implemented successfully. Leaders must have a sense of the basics of OKR, practice establishing measurable key results and learn to coach teams on the basics of setting OKRs. A lot of companies employ external consultants or use internal champions of OKR to develop expert skills.

Psychological safety is also needed in implementation. Companies need to establish a culture in which high-targeted OKRs with completion rates of between 70-80 percent are applauded instead of punished. Groups have to be comfortable reporting on honest progress without the fear that failure to meet the targets can destroy careers and remunerations.

The Business Impact of Quantifiable OKRs

Those organizations that practice the use of OKRs achieve quantifiable business gains. Strategic alignment Enhances significantly. Organizational coherence has been observed when all the employees are aware of organizational priorities and how their work relates to organizational priorities.

Implementation would be better as the goals are measurable and specific as opposed to vague. When everyone is aware of the exact metrics used to define success then accountability will be enhanced. The level of decision-making will be more data-driven because organizations can be able to monitor the progress toward quantifiable objectives.

When the employees know the organizational priorities and how their inputs are important, the level of engagement will be enhanced. The retention is better since in purposeful organisations working towards a goal, the employees are more likely to stay engaged.

The effect of the financial performance is usually enhanced upon improved execution of the strategy by organizations that do not waste their efforts on misaligned initiatives and concentrate their energy on activities that make a difference.

Conclusion

The establishment of quantifiable goals and essential outcomes is a paradigm change in the way organizations implement strategies and progress. Instead of having abstract goals and wishing that they happen, organizations that implement OKRs convert the strategic vision into specific, quantifiable goals that cause focus, alignment, and accountability. Through the principles of a good OKR, setting clear baseline measurements, goal cascading to align an organization, and rigorously measuring progress, organizations can dramatically execute well and ensure business success. 

Those organizations who get the OKRs right, and especially the art of establishing key results that are really measurable in terms of actual success rather than the continuation of improvement, will always beat the competition. In the world of organizations that want to close the strategy-implementation gap and propel themselves to quantifiable business success, understanding how to master OKRs is one of the best investments an organization can make.

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FAQ – Objective Key Results – OKRs