OKR: What it is and how this tool can help your business grow

Também disponível em português

It’s nothing new to us that planning and executing business strategies are some of the key challenges organizations face. In a context of globalization and an extremely competitive scenario in which companies are inserted, having a well-consolidated strategy is essential for the well being of the company.

Nevertheless, many still don’t give the attention needed to the subject because they believe that business strategy is for generating profit only.

In the context of Small and Medium Enterprises (SMEs), the lack of strategic management is one of the main reasons for Brazilian companies’ bankruptcy, according to SEBRAE – the national institute of Small and Medium Enterprises.

Although uncommon, for a short period of time some companies can achieve success without having a formal model of management tool, this is because in some cases the strategy is well delimited in the heads of the founders. In addition, the direct communication in a smaller team could ease the alignment of employees in the culture and strategy of the company.

With this scenario in mind, also in a marketing area, we found many companies that aren’t able to prioritize marketing actions based on the results they can generate and don’t have clear goals to achieve success.

This article addresses the importance of an effective management tool, why traditional tools no longer work, the role of OKR (Objectives and Key Results) within a marketing operation and how to implement it in your company.

The Importance of a Management Tool

The increase of the team and the growth of the company starts generating some challenges for the managers, mainly in communication and alignment of the company’s strategy with the employees.

In fact, a study conducted by Leadership IQ with 400 companies revealed that only 15% of employees believe which of their activities directly contribute to the company’s goals.

For a sustainable growth, it is critical that all employees know how to answer questions like:

  1. What are the company’s priorities today?
  2. What am I doing to achieve the organization’s goals?

For years, there have been many solutions to this problem.

In the 1950s, Peter Drucker said, “If you can not measure it, you can not manage it,” and developed tools like APO and theories on how to have great management to improve performance.

In the late 80s, the Harvard professors, Robert Kaplan and David Norton, created the BSC (Balanced Score Card), a tool to clearly show the company’s objectives divided into four main perspectives: Financial, Customer, Internal Process, and Learning & Growth.

In Brazil, we also had great researchers on the subject, for example, Vicente Falconi, who brought the concept of Management by Guidelines (Gerenciamento pelas diretrizes).

Each theory its particularity, but what they have in common is trying to visually show the company’s goals in order to track them and improve its performance efficiently.

Why traditional tools don’t work

Traditional tools have worked very well for a long time, and are still widely used in specific industries. Although they seem simple and efficient, there is a high complexity in the implementation process that can cause a loss in its success.

Traditional methods make it difficult for all employees to understand the company’s priorities since they are extremely systematic and have a high rigidity in their implementation and execution.

In addition to the factor of misalignment, this lack of understanding can be the major cause of non-engagement and lack of productivity within the organization, according to Gallup, resulting in goals not achieved and stagnation of the company’s growth.

As a way of exemplifying this, when searching for “Balance Score Card” images, we obtain the image of the strategic map presented below, which shows how these methods don’t indicate the strategic goals of the company in a simple way and how they unfold in the departments in a short, medium and long-term.

In the context of fast-growing companies such as Resultados Digitais, the evolution of processes and priorities is so fast that it becomes necessary to have methods for agile companies. Making a strategic planning that defines annual metrics is impractical given the speed with which market conditions change and the rapid evolution and understanding the best way forward.

Bringing it to marketing, let’s assume that the market undergoes a change during the year and your company already has a well-defined strategy. How do you deal with this sudden change? With a traditional tool, your company would have two options: keep this plan anyway, even if it won’t bring results, or completely change the plan, but that way it would be difficult to measure annual performance success.

Thus, agile firms noted that they needed a less bureaucratic and leaner strategic management approach. This new method should give clarity to the objectives of the company, iterating quickly for continuous learning and in a simple and transparent way. With that in mind, the OKR was created.

OKRs: What they are and how to implement it in your company

As more and more startups and innovative business models emerge, different management methods are set to continue supplying the fast and dynamic pace of this scenario.

OKR – Objectives and Key Results – was created by Andrew S. Grove, former CEO of Intel, but became popular with Google in 1999 when John Doerr, one of the company’s investors, introduced the tool to Googlers around a ping pong table.

Yes, all Google employees fit around a ping pong table.

The method became famous for support Google’s growth from about 40 people in 1999 to more than 60,000 today, showing that it can be used by both small and large companies according to Felipe Castro, OKR Coach and partner of Lean Performance.

In a simplified way, Doerr has established the formula for setting goals like this:

“I’m going to” (Objective) “measured

by “(set of Key Results)

That is, in the OKRs we have two main components:

  • Objectives (O): Concise statement of the desired direction by the company. A good goal has to be vividly described so that people can imagine how impactful it will be to reach it;
  • Key results (KR): goals that directly impact the achievement of the objective if successful.

The Objective is qualitative and the KRs (often between 2 and 5 for each objective) are quantitative.

While the objectives should be concise, clear and aspirational to always be in mind of the employees, the key results are used to indicate if the goal has been reached at the end of the period, usually quarter for tactical OKR and annual for strategic OKRs. They are used as a very effective management and communication tool as they help to create focus and alignment of the effort of the entire team around a challenging goal.

Resultados Digitais has been using this tool since the beginning of 2016 and since then has been obtaining very satisfactory results.

These effects don’t come only from the fulfillment of key results, but also from process improvements such as weekly reports to the team, a process to plan the OKRs each quarter, the Key Results being simpler and more objective, defining few objectives each quarter to have more focus and, especially, the learning and correction of mistakes made.

Why is OKR different?

One of the most interesting aspects of OKRs is that the model isn’t systematic with a large number of inflexible rules such as traditional management tools.

In creating the tool, Andrew S. Grove did not indicate specific and rigorous practices of what should be done for the tool to be successfully implemented.

In fact, most organizations adapt some details of the tool to the reality of the company and follow good practices and success stories from a growing collaborative community of those who already use OKR.

In addition, we can list six main differences between OKR and traditional tools:

  1. Your goals are set for a shorter period of time, being more tangible that you can reach and also allowing you to fix a mistake quickly;
  2. The clarity and simplicity of the Objectives and Key Results are the basis for the tool to generate a high team engagement;
  3. The Key Results are reported weekly, making it possible to anticipate the end of the quarter and to recover to achieve the goal defined. If it isn’t successful, the learning and iteration will be in a quarter and not in a whole year, as in traditional tools;
  4. As a way to facilitate alignment, OKR is a tool that prioritizes transparency. All employees can see the company’s OKR; in addition, the directors speak clearly about the priority of the company and how this will unfold in the Objectives and Key Results;
  5. OKR reinforce the data-driven culture within a company – as it is in Resultados Digitais – because it makes decisions based on data. The results of many analysis have been given priority and become OKR in the following quarter. To succeed in the goals, a project is planned and developed according to our own project tool;
  6. Using OKRs, you will measure the result and not the effort to do the tasks as is commonly found in companies that use traditional management tools. Great efforts will be required to achieve great results. However, only dedication won’t make you reach your goals.

Making an analogy to the world of football, in 2012, Barcelona with the famous Tiki-Taka was led by Josep Guardiola and was considered the best team in the world for its engaging soccer, with a high ball possession in most matches. In the semi-finals of the European championship, the UEFA Champions League, Barcelona faced Chelsea and, as expected, had a wide advantage in statistics in both games.

However, it was no use having all the favorable stats (effort) if the team failed to turn them into goals (results). Chelsea were more efficient, they generated more results and were placed in the final, eliminating Barcelona that was favorite, according to football commentators and bookmakers.

Despite these advantages, the tool, like any other process within the company, doesn’t generate results without the engagement of all those who work there. The greater the effort of planning, execution and monitoring of employees, the faster the perception of impact and the generation of results.

Implementation and follow-up of OKRs

This is considered to be the most important part of the whole process, as it doesn’t matter if you have created a good plan and have made several analyzes if the execution is not done correctly. Goal tracking is the best source of information to know if the execution is as planned and, if it’s not, take action to reverse this scenario.

At Resultados Digitais, as a way of aligning the team and in order to execute as planned, we measure the Key Results weekly and, throughout 2016, we developed some processes and tools to help us with the planning and communication of OKR.

Ceremonies

For a great use of the tool, there are several ceremonies for planning and defining the OKR and, one in the end of the quarter to present the results of the past quarter. Thus, the first step in implementing the tool is when the board defines the company’s annual strategic OKR.

After that, we have the ceremonies that occur every quarter. With strategic the OKR defined, the areas discuss their priorities in the quarter to help them achieve the company’s goals.

Once this is done, a schedule of deliveries and ceremonies of OKR is defined:

  1. The first ceremony is done when the director brings the vision of the area for the quarter, already aligned with other departments of the company to generate synergy;
  2. The second ceremony is a seminar with the leaders of the teams exposing the vision and alignment of each team;
  3. Based on these first two events, the teams draw an outline of the OKR that are presented in the next step. This step is an area outline where leaders show the OKR draft and everyone in the area can ask and give feedback to improve it.
  4. The next step is to make the adjustments according to the feedback received, leaving everything ready for our main ceremony: the Presentation of OKR and Projects.
  5. In this last ceremony, it’ll be exposed for the whole company the results of the last quarter, the OKR of the next quarter and the projects that will make the company reach the Key Results. This stage, besides being the water splitter of the quarter, is very important for the clear and transparent communication between the executive team and the employees in relation to the results achieved and the priorities of each area, generating a greater alignment of the team.
Last Presentation of OKR and Projects of RD

Dashboard

Once the OKR is defined, there must be someone responsible for the weekly measurement of each area KR. The main objective of weekly measurement is to react as soon as possible if things don’t go as planned.

For example, if the KR is to increase the qualification rate from 50% to 80% and it stays at 50% for several weeks, it is very difficult that the KR will be reached by the end of the quarter. This way, it is quickly observed that the KR isn’t converging towards the goal projection and an action is should be taken to change the panorama.

The RD Dashboard is where the weekly performance of each key result is inserted and it is possible to have a complete overview of the company’s progress by all employees. In the Dashboard tabs will show the OKRs for each area with the explanation for how it is calculated, measurement frequency and extra comments.

Download here a dashboard template that RD uses for OKR (Portuguese version).

In addition, for each Key Result, its progress against the target value is calculated and also the Quarter-to-date (QTD), which is basically the calculation of how the KR is in relation to the projected target value for the current day considering that the progression is linear. For example, if the KR is to sell 10 new accounts and in the middle of the quarter the current value is 5, the progress is 50% and your QTD is 100%.

Communication

The Dashboard is available to everyone in the company and can be accessed from Google Drive. However, just like many documents on your own computer, it can get lost in the world of cloud computing, not being accessed by employees and having little effectiveness in communicating, aligning, and tracking company goals.

To ensure that OKRs are in everyone’s everyday life, we have developed online and offline communication tools such as:

  • OKR on the walls;
  • Weekly Reports;
  • Notifications in Slack;
  • Quarterly Reports.
OKR time de marketing

On each floor, we have all the OKRs of the company glued to the wall.

Through an automatic script, every Thursday an email with area OKRs are sent.

Collaborators can access the Dashboard by typing #okr in the slack. In addition, a script is scheduled for every Thursday morning to remind those responsible to fill in the results of the week.

Prior to the presentation of OKRs for the next quarter and the results of the quarter that has passed, a report with all the Objectives and Key Results of the areas of the company is written, with the director’s comments on the results of the OKR and the team performance. This report is intended to emphasize the company’s strategic transparency with its employees and to prepare them for the start of quarter ceremony.

Conclusion

The OKR arrived to help management in a simple and agile way, being a great tool for communication and alignment of the company. It’s important to point out that just saying that the company uses that tool because it is “on the rise” won’t generate great results without efforts.

In the first quarter of OKR implemented in Resultados Digitais, we had 84 KRs and, today, we have a little more than half of that, because we realized how few (but good) goals end up delivering a clear message to the team.

Throughout the other quarters, we have established the ceremonies, processes, developed scripts to automatic report, and sought this continuous improvement every quarter to achieve ever greater results.

Today, the RD’s entire digital marketing strategy is measured through OKR. Thus, we clearly know what are our objectives, what are the results we need to achieve and what is the progress of each of these objectives. If the results aren’t being as expected, we can act quickly to circumvent the situation and create new alternatives to guarantee the achievement of the goal.

Like every agile method, you have to be ready to fail (a lot). However, with much effort and continuous improvement, the routes will being corrected more and more rapidly, and the results begin to emerge.

And you? How do you measure the results of your company? Have you had any experience with OKR or are you planning to implement it?

If you have any questions about OKR, especially how it would work in your company, send me an email that we talked to thiago.rocha@resultadosdigitais.com.br.

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