Scaling OKRs, Part 2: Writing OKRs from Strategy
How to identify your organization’s targets from strategic statements
In the last edition of this newsletter, I started a series about how to scale OKRs throughout your organization. I specifically talked about the foundation you need to even start: strategy—a clear strategy communicated transparently and thoroughly to the whole organization.
Once you have the strategy, you can set goals—OKRs—to measure your progress towards achieving it and empower teams throughout the company to determine how they will support these high level goals. That’s this week’s focus.
But before we get to that, I’ve got a guest spot in the Monthly Feature section. Last week, I highlighted Naseem Malik’s newsletter The Supply Times (also on Beehiiv), in which he talks about the future of work, supply management, and executive search. For my newsletter this week, Naseem shared his bets on how he sees OKRs shaping the future of work from here on. Wise bets, if you ask me.
Monthly Feature: The Future of Work by Naseem Malik
As an executive search specialist, I’m constantly observing how companies are (or aren’t!) innovating their operations, and lately I’ve noticed a growing commitment to using OKRs for talent management. I expect this to continue in the following three areas:
1. Integration with Technology: According to a Vendr SaaS trends report, purchases of HR-related SaaS tools have increased nearly 40% in the last two years, becoming the third-highest spend category after IT Security and Customer Support. I foresee that companies will increasingly leverage AI to track and evaluate their OKRs to better facilitate real-time progress assessments and decision-making.
2. Personalized Goal-Setting: To increase employee performance and engagement, organizations have started tailoring OKRs to employees’ individual strengths and career goals. In the private equity world, for example, clients have ditched boilerplate job descriptions when hiring and instead created individualized team member scorecards, which they use to both evaluate prospective employees and measure employees’ progress toward their OKRs.
3. Sustainability and Social Impact: For decades, companies have given lip service to the importance of protecting the environment, ethically sourcing their products, and using equitable hiring practices. With more recent increased social pressure and legislation, they’re being forced to put their money where their mouth is and actually rethink the way they run their business. I predict we’ll see a lot more OKRs tied to social impact as a result.
The pandemic showed businesses more acutely than ever how quickly things can change. One positive result is that many are experimenting with new processes. Considering how much OKRs help deal with uncertainty, I’d bet the framework will take an increasingly prominent position in business management for years to come.
Article: Scaling OKRs, Part 2: Writing OKRs from Strategy
Many organizations want to scale OKRs throughout their organizations, but they don’t know where to begin. First things first: You need a solid, clear strategy. Second things second: You need to share the strategy throughout the organization so that it is understood by everyone. That is the foundation of scaling OKRs.
Once you’ve done those things, you start getting into the nitty gritty: writing OKRs based on the strategy (a.k.a. strategic OKRs) and having all teams write their team- and department-level OKRs based on the strategic OKRs set at the top. It sounds more dizzying than it is.
So, let’s dive in. How do you write strategic OKRs?
Strategic statement → objective statement
For the purposes of this article, let’s say your company is a lender in the financial services industry. The leadership team set the following strategy for 2023:
Successfully expand our low-cost U.S. online lending practice into the student loan market by Q4 2023.
This strategic statement answers the two questions we need it to most.
Where will you play? Your online lending practice in the U.S.
How will you win? By successfully establishing your low-cost lending business in the student loan market for the first time by the end of the year
When the strategic statement answers those two questions well, it should also be unambiguous in the ways we need for it to be a solid objective. In other words, it’s specific, qualitative, aspirational, inspirational, and time-boxed. Check and check? Then the strategic statement becomes your objective in your top-level OKRs.
Photo by Dave Photoz on Unsplash
Identifying top-level key results
After answering the questions “Where will you play?” and “How will you win?” the next question you need to address is “How will you know you have won?” Your answers become your key results.
Typically, with OKRs, key results should be rates or ratios (e.g. “Increase [behavior] by X%”), because rates and ratios give us a better sense of how we’re trending, quarter over quarter.
The trick, though, is that in order to be able to measure a percentage increase or decrease in something, you need a baseline. You need to have some idea of where you’re starting and what percentage change would be substantially beneficial for your business. If you’re in the position of starting something new—creating a new product or, as in the case of our example, expanding into a totally new market—you don’t have the baseline numbers yet. Your baseline is zero. When that’s the case, your key results can start as absolute numbers.
For our lending company, whose goal is to expand into a new market, the key results might look like this:
Objective: Successfully expand our low-cost U.S. online lending practice into the student loan market by Q4 2023.
Key Result 1: Acquire 20,000 new student loan borrowers
Key Result 2: Generate $1M in revenue from the student loan service
After you’ve worked with these key results for a quarter or two and have a real baseline to operate from, you can set rates and percentages for your next OKRs. If you swung too high or too low on your original numbers, you can reset with more informed estimates.
Once you (leadership) have finished setting the top-level, strategic OKRs for your organization, then every department and team can set their team-level OKRs, each one identifying how their work affects the targets in the key results and what they believe they should focus their own work on to support the strategic goals.
More on that—writing team-level OKRs based on the strategic OKRs—in the next edition. Stay tuned.
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