What are OKRs, and how can they support business growth? If you’ve found yourself asking these questions, it’s time we explained the basic process of Objectives and Key Results (OKRs).
OKRs represent a performance management methodology which connects the work of individual employees to the company’s overall strategy.
Now let’s break this down a bit further. The Objective is the business-focused outcome you’re looking to achieve. Meanwhile, the Key Results are the measures and targets that will show you’ve hit them.
Bearing this in mind, Objectives should be aspirational and broadly aligned to the organisation. Meanwhile, Key Results need to be specific, measurable and time-related. I’m sure you’ve heard of SMART goals – well, these same attributes need to apply when it comes to your Key Results.
What are OKRs?
Time for an example…
- Increase business revenue by 20%
- Win five new clients by the end of the calendar year
- Increase your average retainer to £2,000 by the end of September
- Reduce monthly outgoings by £100 by the end of June
Now your objectives are broken down into smaller and more specific key results. It’s also easier to see how individual employees can contribute to broader business goals.
For instance, the Key Result of winning new clients may fall under the remit of your sales team, since that’s what they do. Similarly, as your account managers look after client retainers, they may take responsibility for the second Key Result of increasing the average retainer value. Finally, your accountant manages all the business outgoings, so they should be able to look at reducing monthly outgoings by £100.
Just in this example, you can see that multiple employees have different distinct parts to play in achieving the business objective.
Why OKRs Are Critical to Your Growth
The OKR approach to performance has long been championed by pioneering companies such as Google, LinkedIn, Netflix and Spotify. More recently, it’s been adopted by global professional services firms such as PWC, Accenture, Deloitte and KPMG. But what are OKRS going to do for your business?
In our opinions, OKRs are particularly useful for small but fast growing companies. Let me set the scene… you have a small team, but ambitious plans to scale up in the near future. You have a business plan in place which lays out financing, product development, marketing and sales. Costs are on track, demand is high and revenues are strong.
However, as your team continues to grow – and maybe splits into more teams – you’re not as close to the front line as you once were. While you don’t want to micro-manage, you have a small nagging voice in the back of your mind. How do you know your employees will make the right choices for the business, without you being there to make sure they do?
Almost all growing businesses face these two huge challenges…
Accountability: You need to make sure everyone knows the plan for the business, particularly any parts they hold some responsibility over.
Agility: You need to make sure your business stays responsive as it gets bigger. Traditional performance management relies on annual appraisals, but this will create a lag in your business and frustration in your teams.
What are OKRs going to do to help?
Luckily enough, the OKR process involves collaborative goalsetting, regular progress reviews and retrospective analysis. This all helps to balance business agility with accountability, delivering business results while also directing performance management. And this is just the beginning…
At a biological level, OKRs work better than an annual appraisal. It reduces the pressure and expectation associated with an annual meeting, thereby avoiding the flight or flight response. And the calmer we are, the more objectively, creatively and collaboratively we think.
On a behavioural level, we also know that Millennials value personal growth. They expect regular feedback in the workplace, though they may not always ask for it. The OKR process involves regular check-ins on goal progression, satisfying these new employee needs.
Finally, on a practical level, business moves at a breakneck speed in many industries today. Gone are the days where a 12-month plan will stay relevant before it reaches completion. The pace of technology and strength of market competition means that companies need to be able to roll with the punches. The OKR process supports just that. When priorities are clear, decision making can be sped up. People can make decisions without constantly seeking advice or asking questions.
Ready to fuel your business growth?
If you’re reading this and feeling like it might be time to ditch (or avoid) annual appraisals, take a look at our other blogs on OKRs, or get in touch to talk more.