Let’s assume a few things: You want to spend your time wisely. You don’t have unlimited resources. You need to coordinate a multitude of simultaneous efforts across several organizational layers. It’s important for you to make progress quickly. And maybe you have looked to OKRs as a solution. Let’s make sure you avoid a very common pitfall: using OKRs without a clear strategy.
The Challenge of Prioritization
Not that I expect people starting out with OKRs to read a book on them, but there is a reason why Christina Wodtke’s book on OKRs is named “Radical Focus”: OKRs are a tool to help you pursue the few things that really make a difference. Not knowing what these few things are will lead to trouble.
Maybe you recently started using OKRs. During your second or third (or fourth or fifth) OKR setting session you might hear a discussion like the following:
- "We really need an objective for the East Asian market!"
- "Hm… Are you sure? I think we need to focus on the adoption of our new product line instead."
- "Are you two crazy? Our core business needs much more attention!"
What’s going on?
The Role of Context
Deciding on OKRs for the next time frame and identifying the few things that really matter is exceedingly difficult to do without a context to judge the options against. How do you tell which one is more important? Team members will arrive with implicit prioritization criteria in their minds. Everyone will fight for their idea and for them it will absolutely make sense to choose one over the other.
Without a helpful context to help you evaluate your options you will face one or more of the following:
- Long, unproductive discussions that often end with the most dominant person “winning”
- A commitment to something that is not the best use of your time and resources (something which you will probably realize much, much later)
- Flip-flopping between different goals from iteration to iteration (note that this is very different from decisively exploiting emerging opportunities)
The context for evaluating your options and setting effective OKRs should come from your strategy.
A strategy sets helpful boundaries. It narrows the decision field. It cuts out unnecessary conversations. It gives a direction.
The Importance of Strategy
Before I start work with my clients I ask them if they have a strategy. They will think about the question for a moment and then say “Yes, we do.” When we explore this further I usually find out that, a long time ago, a few people sat together to craft something that they call a strategy. When I ask my clients to see it, they need quite a while to find it because it’s not actively being used. Their strategy usually doesn’t answer basic questions, provides no guidance, and doesn’t have any impact on the employee’s daily work life. It just exists. Like the workout equipment you bought during the pandemic that’s collecting dust in the corner.
This is not a guide on how to set a good strategy. If you’re struggling in this area, I recommend checking out these three complementary approaches:
- the work of Richard Rumelt
- Patterns of Strategy by Patrick Hoverstadt and Lucy Loh
- Liberating Strategy by Keith McCandless and me
And yes, if you want direct help, just send me a message.
For now, let’s focus on what strategy can help with. A solid strategy will explain
- what it is you’re trying to achieve
- how you want to get there
- how you will deal with the challenges that make getting there difficult
Too often, strategy is thought of as a long-term plan. Execute x, then y, then z. As a final step, reap the benefits. Most organizational leaders want to punch me when I say this, but it rarely works out that way. Our assumptions are usually way off.
If it’s not a plan, strategy is often a vague ambition of reaching certain numbers: X amount of market share, y amount of profit, z amount of new products. Great goals! But now what?
Integrating Strategy and OKRs
OKRs can really help with the challenges I’m outlining in this post! They are an amazing way to test the effectiveness of your strategy.
To be able to do this, it helps if your strategy is measurable in some form. You can take the most important chunks and break down the indicators step by step to arrive at something you can influence within a single iteration. Pursuing these smaller Key Results lets you generate valuable information which sheds light on the effectiveness of your strategy. I talk about this in the section “A Theory of Success” in the Holisticon OKR Guide.
While OKRs will mercilessly expose a lack of strategy it also works the other way around. A lot of times, strategy without the help of OKRs will simply have no effect and provide no learning opportunities.
Your OKR cycle should provide measurable results to determine the progress of your strategy. I encourage my clients to include a review of the strategy every time they set new OKRs. This should let you gauge your position, inspect progress, and help you decide what to focus on next. Options can be evaluated by usefulness. “This is what we set out to do. This is where we are right now. Do we really believe this is going to get us closer to our strategic goals than this?” is a much more precise question than “What’s important this quarter?”
Aligning OKRs with strategy: an example to make it clearer
Let’s take the fictional company Artistream from the Holisticon OKR Guide as an example. (You’ve read the guide, right? Right?) You offer music that is being generated on-the-fly by artificial intelligence, tailored specifically to an individual listener’s taste. You’re focused on scaling your business and becoming profitable. You already know that marketing and setting the right price point don’t play the most important roles. It’s actually the listening experience that counts. That’s why you identified average minutes of music played per customer as your North Star metric. Over the course of the next year, you want to increase that metric from an average of eight minutes to 18 minutes.
Half a year later you start your third OKR cycle. Your North Star metric is moving in the right direction. During the last cycle you found out that generating cover images for the music does absolutely nothing to improve the listening experiences. Since this eats up additional compute time, you decide to remove that functionality. Instead, you discuss your team’s theory that increasing the algorithm’s ability to match music to the listener’s taste and decreasing the load time between songs will significantly reduce their tendency to stop playback and close the app.
A team member suggests also adding the option to pay for a subscription using crypto currencies. After a few minutes of discussion you agree that this doesn’t align with your main goal of improving the listening experience. You decide to stick to your strategic intent and shelf the crypto feature for later use.
Go Get’em, Tiger!
Coupling strategy and OKRs is not just beneficial, in a way it’s essential. By establishing a clear strategy, organizations set the stage for focused action and meaningful progress. OKRs then serve as a powerful tool to test, refine, and execute that strategy effectively. Together, they form a dynamic duo, ensuring that every effort aligns with overarching objectives and that progress is not just measured but guided by strategy. As you embark on your journey of leveraging OKRs within your organization, remember that while strategy provides the direction, OKRs offer the learning cycles on your way to success. Embrace this symbiotic relationship, and you'll find yourself not only avoiding common pitfalls but also improving your chances of success significantly.
Part 2: OKRs will Expose Your Inability to Describe Outcomes
