“Ideas are easy. Execution is everything. It takes a team to win.” -- John Doerr
As a leader, your primary task is to define the priorities and objectives of your organization and lead your team to achieving them. Most organizations do things like annual planning, where strategy and capital allocation decisions are made, and hold periodic management meetings, where progress and results are reviewed. Yet, in our experience, these processes are painful, time-consuming, and only semi-effective in most organizations.
Performance management is not a new subject.[1] Peter Drucker formulated Management by Objectives (MBOs) in the 1950s. Andy Grove, the legendary former CEO of Intel, adapted MBOs into a system of “objectives” and “key results”. John Doerr, the venture capitalist who funded Google and Amazon (among many others), popularized OKRs in his book “Measure What Matters”, where he credits Grove with being the “father of OKRs”. Our approach, which we call strategic results management, is heavily influenced by the teachings of Grove and Doerr. Yet it is also informed by the top challenges we’ve seen many organizations struggle with, as well as best practices that have allowed other organizations to supercharge their performance.
Strategic results management is fundamentally about deciding what’s most important, aligning the organization on those priorities, and holding everyone accountable for achieving these priorities. It may include but goes well beyond meeting financial and operational targets. And we distinguish it from individual performance management, which focuses on the goals and personal growth of individual employees.
The most common challenges we’ve seen include the following.
OKRs are one of many frameworks for strategic results management. Whether you call them OKRs or not, every company has top priority objectives and measures for assessing results.
In our vocabulary, objectives are WHERE you want to go or WHAT you want to achieve. Objectives should be significant, concrete, and aspirational. They tend to be long-term, spanning a full year or many years. We want them to be energizing and directional, serving as a North Star for the organization.
Key results benchmark and monitor HOW to achieve the objective. KRs are measurable and verifiable. KRs should be achievable in the current review period and change as the work progresses. KRs should provide timely feedback that tells you how you’re doing, so you know if you’re on track and can make adjustments if necessary.
The value of any strategic results management program, including OKRs, depends directly on the quality of the content and processes that go into them. As the saying goes, garbage in garbage out. What are we aiming for? We want high alignment AND high accountability. We want execution to be smart and fast, not dull or slow. Here we summarize the practices that we’ve found most helpful for supercharging strategic results.
1. Align with and drive the strategy – It’s imperative that your top objectives align with your strategic priorities. What are the key factors that drive competitive advantage in your firm? Strategy maps and flywheel diagrams are among the useful tools that we use to clarify strategic priorities and define OKRs that drive exceptional performance.
2. Balance – Great OKRs balance the short-term and long-term. They consider external factors (customers, suppliers, investors, …) and internal ones (people, processes, efficiencies, …). They typically address some combination of growth in the current business with innovation in adjacent or new businesses.
3. Focus – OKRs should provide focus and clarity. As Andy Grove explained, “If we try to focus on everything, we focus on nothing. A few extremely well-chose objectives impart a clear message about what we say ‘yes’ to and what we say ‘no’ to.” (Grove, 1995) How many top objectives does your organizations have? How well do capital and resource allocations align with these priorities? The 80/20 Rule, also known as the Pareto Principle, is a powerful tool for clarifying our highest leverage priorities.
4. Dreams + Reality – The life principles of Ray Dalio, founder of Bridgewater Capital, include this gem: “Dreams + Reality + Determination = A Successful Life”. (Dalio, 2017) This principle applies well to OKRs. Great OKRs inspire and energize, reflecting our highest dreams and ambitions. We aim for our OKRs to reflect our best possible results, rather than our most probable or safest to achieve results. We want them to stretch ourselves and our teams. Yet, they also need to be realistic and grounded in what is possible.
5. Visibility and transparency -- Great OKRs are highly visible and transparent across the organization. Without visibility and transparency, alignment is impossible. How well understood are your strategic objectives and priorities? Is lateral alignment across functions a challenge? Getting alignment on cross-functional teams tends to be more challenging than on functional teams. This is especially prevalent in matrix organizations. We see a lot of organizations that struggle with what they call “silo” behavior. To what extent do silos hold you back from accomplishing your best possible results?
6. Clear, unambiguous measures -- Are your performance measures (key results) clear and unambiguous? Are they achievable in the current review period? If not, you will struggle with accountability. “The key result has to be measurable. At the end you look and without any arguments ask, did I do it or did I not do it? Yes? No? Simple. No judgments in it.” (Grove, 1995) Clear, unambiguous KRs make a manager’s job easier. Rather than debating whether a squishy measure was achieved or not, managers can focus on what they’re going to do or how they’re going to improve.
7. Support from the top – It’s essential for senior leadership to fully embrace and be committed to the practice. If this is viewed as a passing fad or the latest management practice du-jour, it will certainly fail.
8. Regular progress reviews and updates – We want OKRs to be top-of-mind. One of the most common failure modes we see with these programs can be summarized as: “set it and forget it”, where people define goals at the start of the year and then file them away until the end of year. This almost guarantees failure (or at least marginal usefulness). We generally recommend that progress towards key results is reviewed at least monthly (sometimes more frequently) and OKRs themselves should be reviewed and refined at least quarterly.
9. Integrate with business processes and culture – Ultimately strategic results management and OKRs should become part of the fabric of the organization, where priority objectives are front-and-center, teams are aligned on those priorities, and results are discussed regularly as part of business reviews. You don’t want this to be viewed as yet another chore or data call.
10. Decouple from compensation – You want OKRs to encourage boldness and risk taking and avoid sandbagging. Hence, OKRs should be decoupled from compensation. That’s not to say that OKR performance should not inform performance evaluations. It is saying the two should not be mechanically linked, apart from things like sales quotas. Grove described OKRs as a tool, not a weapon. “It is meant to pace a person – to put a stopwatch in his own hand so he can gauge his own performance. It is not a legal document upon which to base a performance review.” (Grove, 1995)
More advanced practices include the following:
11. Aspirational and committed OKRs – A common and helpful practice, popularized by John Doerr and Google, is to distinguish committed OKRs, which are expected to be accomplished in full (target = 100%) from aspirational OKRs, which are recognized as stretch goals (target = 70-80%). Aspirational OKRs should reflect the best possible outcomes, not the most likely outcome (business as usual) nor the most conservative (sandbagging).
12. Global and local (top down and bottom up) – It is common for organizations to cascade goals top-down, one level at a time through every level of the organization. This can be limiting and cumbersome, especially in large organizations. We recommend the practice of communicating enterprise OKRs globally and allowing local teams to write their own OKRs, in their own language, informed by the enterprise OKRs as well as their local knowledge. This increases engagement and ownership. It also ensures that strategically relevant information flows in all directions – down, up, and across the organization – and not just top down.
13. Outcomes, not activities or even outputs – We aim to define OKRs that measure outcomes. Outcomes reflect the tangible benefits achieved from a customer or end-user perspective. It is extremely common to see OKRs that reflect completing an activity or a task. Is completing the project enough? Why are you doing this project? What will be true if this project is wildly successful? How might we measure that? It’s not very meaningful to measure activities. “There are so many people working so hard and achieving so little.” (Grove, 1995) It is insufficient to only measure outputs. “There is surely nothing quite so useless as doing with great efficiency what should not be done at all.” (Drucker, 1963)
14. Headlights and taillights (leading and lagging indicators) – Outcomes are what we’re ultimately after. Yet, we also want to be able to measure progress along the way. Hence, in addition to lagging indicators, we also want to incorporate leading indicators or short-term lagging indicators. We generally aim for key results that are achievable in the current review period.
15. Escalate shortfalls promptly – The natural tendency is for good news to travel up the chain quickly, while bad news moves more slowly. At Berkshire Hathaway, Warren Buffett requires of his companies, “Always tell us the bad news promptly. It is only the good news that can wait.” (Munger, 1995)
16. Stay flexible and adaptable – The reality is that things change, sometimes rapidly. You want people and teams to adapt to changes quickly. Hence, OKRs can and should be modified or discarded mid-cycle when that makes sense. Companies like Amazon and Spotify value both alignment AND autonomy. According to retired general Stanley McChrystal, “I tell people, ‘Don’t follow my orders. Follow the orders I would have given you if I were there and knew what you knew.’” (O'Reilly, 2017)
17. Tailor the methodology – Every company is different. The specifics of your strategic results management system should reflect the unique needs and culture of your organization.
18. Learn and iterate – Most companies require multiple quarters to fully refine and mature their approach. Each review cycle we identify what’s working well, so we can build upon those things. We also look for improvements we can make. By continuously learning and iterating, you can greatly improve the value of the system. “Create a culture in which it is okay to make mistakes and unacceptable not to learn from them.” (Dalio, 2017)
19. Look forward more than backward – It’s inevitable that some portion of OKR reviews will address current status with explanations for any shortfalls. Certainly we want leaders to understand the factors and causes underlying their results. Yet, we want leaders to focus more on what they’re going to do next, looking forward and playing offense, rather than spending excessive efforts concocting explanations or covering their rears, playing defensively.
20. Use an enterprise system – Many companies use tools such as Excel and PowerPoint to manage their OKRs. This can be cumbersome, if not downright painful. An enterprise web-based system can greatly enhance the value of your OKR program, by significantly improving OKR transparency, visibility, and reliability (since these systems can pull actual results data from systems of record), while also improving efficiency and timeliness. According to an R&D executive at 3M, “After our first quarter with OKRs and [an enterprise tool], our teams reduced meeting preparation time from a week to 30 minutes. Gone are the days where people spent a week preparing for a gate review. That’s not valuable work – people get time back to focus on the customer and move innovation forward.” (WorkBoard, 2021)
Companies with effective OKR programs have achieved high alignment, high accountability, AND high agility, leading to transformational results.
Google CEO Larry Page, an advocate of OKRs, says that:
OKRs enable “conscious, careful, and informed choices about how we allocate our time and energy… OKRs are manifestations of those careful choices, and the means by which we coordinate the actions of individuals to achieve great collective goals.” (Doerr, 2018)
According to an executive in Microsoft’s Azure cloud business:
"One of the reasons why we pursued OKRs was because the cloud business at Microsoft Azure is measured in billions — and it’s growing 76% year on year — and they don’t teach you in business school how to operationally support that kind of business. So OKRs help us to drive alignment and transparency in a very agile way.” (WorkBoard, 2021)
Reflecting on their OKR program, the CEO of LexisNexis Special Services & Risk Solutions Government,
“It's amazing how much better the organization works when priorities and work are completely visible... I would say, to any leader considering implementing OKRs, that our conversations are different -- we now base them on a very clearly articulated strategy with clearly articulated results. And when we're not getting there, our coaching conversations are not meant as performance conversations. As a result, we're going to have a record year of revenue growth. our pipeline is at a record level, and our employee satisfaction is at its highest level -- and that's during a worldwide pandemic.” (WorkBoard, 2021)
These are the practices that we have found to be most effective for supercharging strategic results programs. We would love to learn from your experience. What’s missing here that you’ve found helpful?
In future posts, we will dig more deeply into these topics. Questions that may be of interest: Why is a high quality OKR program especially valuable for high growth firms? What are OKR best practices for innovation teams? More specifically, how do you measure results of R&D teams or other long-term strategic projects? How do you avoid incentivizing bad behavior?
What questions are top-of-mind for you? What do you find most challenging or painful about your current strategic results management processes? Reach out to us. We would be delighted to discuss further.
Dalio, R. (2017). Principles. Simon & Schuster .
Doerr, J. (2018). Measure What Matters. Portfolio/Penguin.
Drucker, P. (1963). Managing for Business Effectiveness. Harvard Business Review.
Grove, A. (1995). High Output Management . Vintage Books.
History of Performance Management . (2021, August). Retrieved from KPI 101: https://smartkpis.kpiinstitute.org/kpi-101/history-of-performance-management
Munger, C. (1995). The Psychology of Human Misjudgment.
O'Reilly, T. (2017). WTF - What's the Future and Why It's Up to Us. Harper Collins.
WorkBoard. (2021, August). Retrieved from https://www.workboard.com/customers/
[1] Performance appraisals date back to at least the 3rd century in the Wei Dynasty of northern China! (History of Performance Management , 2021)
“Ideas are easy. Execution is everything. It takes a team to win.” -- John Doerr
As a leader, your primary task is to define the priorities and objectives of your organization and lead your team to achieving them. Most organizations do things like annual planning, where strategy and capital allocation decisions are made, and hold periodic management meetings, where progress and results are reviewed. Yet, in our experience, these processes are painful, time-consuming, and only semi-effective in most organizations.
Performance management is not a new subject.[1] Peter Drucker formulated Management by Objectives (MBOs) in the 1950s. Andy Grove, the legendary former CEO of Intel, adapted MBOs into a system of “objectives” and “key results”. John Doerr, the venture capitalist who funded Google and Amazon (among many others), popularized OKRs in his book “Measure What Matters”, where he credits Grove with being the “father of OKRs”. Our approach, which we call strategic results management, is heavily influenced by the teachings of Grove and Doerr. Yet it is also informed by the top challenges we’ve seen many organizations struggle with, as well as best practices that have allowed other organizations to supercharge their performance.
Strategic results management is fundamentally about deciding what’s most important, aligning the organization on those priorities, and holding everyone accountable for achieving these priorities. It may include but goes well beyond meeting financial and operational targets. And we distinguish it from individual performance management, which focuses on the goals and personal growth of individual employees.
The most common challenges we’ve seen include the following.
OKRs are one of many frameworks for strategic results management. Whether you call them OKRs or not, every company has top priority objectives and measures for assessing results.
In our vocabulary, objectives are WHERE you want to go or WHAT you want to achieve. Objectives should be significant, concrete, and aspirational. They tend to be long-term, spanning a full year or many years. We want them to be energizing and directional, serving as a North Star for the organization.
Key results benchmark and monitor HOW to achieve the objective. KRs are measurable and verifiable. KRs should be achievable in the current review period and change as the work progresses. KRs should provide timely feedback that tells you how you’re doing, so you know if you’re on track and can make adjustments if necessary.
The value of any strategic results management program, including OKRs, depends directly on the quality of the content and processes that go into them. As the saying goes, garbage in garbage out. What are we aiming for? We want high alignment AND high accountability. We want execution to be smart and fast, not dull or slow. Here we summarize the practices that we’ve found most helpful for supercharging strategic results.
1. Align with and drive the strategy – It’s imperative that your top objectives align with your strategic priorities. What are the key factors that drive competitive advantage in your firm? Strategy maps and flywheel diagrams are among the useful tools that we use to clarify strategic priorities and define OKRs that drive exceptional performance.
2. Balance – Great OKRs balance the short-term and long-term. They consider external factors (customers, suppliers, investors, …) and internal ones (people, processes, efficiencies, …). They typically address some combination of growth in the current business with innovation in adjacent or new businesses.
3. Focus – OKRs should provide focus and clarity. As Andy Grove explained, “If we try to focus on everything, we focus on nothing. A few extremely well-chose objectives impart a clear message about what we say ‘yes’ to and what we say ‘no’ to.” (Grove, 1995) How many top objectives does your organizations have? How well do capital and resource allocations align with these priorities? The 80/20 Rule, also known as the Pareto Principle, is a powerful tool for clarifying our highest leverage priorities.
4. Dreams + Reality – The life principles of Ray Dalio, founder of Bridgewater Capital, include this gem: “Dreams + Reality + Determination = A Successful Life”. (Dalio, 2017) This principle applies well to OKRs. Great OKRs inspire and energize, reflecting our highest dreams and ambitions. We aim for our OKRs to reflect our best possible results, rather than our most probable or safest to achieve results. We want them to stretch ourselves and our teams. Yet, they also need to be realistic and grounded in what is possible.
5. Visibility and transparency -- Great OKRs are highly visible and transparent across the organization. Without visibility and transparency, alignment is impossible. How well understood are your strategic objectives and priorities? Is lateral alignment across functions a challenge? Getting alignment on cross-functional teams tends to be more challenging than on functional teams. This is especially prevalent in matrix organizations. We see a lot of organizations that struggle with what they call “silo” behavior. To what extent do silos hold you back from accomplishing your best possible results?
6. Clear, unambiguous measures -- Are your performance measures (key results) clear and unambiguous? Are they achievable in the current review period? If not, you will struggle with accountability. “The key result has to be measurable. At the end you look and without any arguments ask, did I do it or did I not do it? Yes? No? Simple. No judgments in it.” (Grove, 1995) Clear, unambiguous KRs make a manager’s job easier. Rather than debating whether a squishy measure was achieved or not, managers can focus on what they’re going to do or how they’re going to improve.
7. Support from the top – It’s essential for senior leadership to fully embrace and be committed to the practice. If this is viewed as a passing fad or the latest management practice du-jour, it will certainly fail.
8. Regular progress reviews and updates – We want OKRs to be top-of-mind. One of the most common failure modes we see with these programs can be summarized as: “set it and forget it”, where people define goals at the start of the year and then file them away until the end of year. This almost guarantees failure (or at least marginal usefulness). We generally recommend that progress towards key results is reviewed at least monthly (sometimes more frequently) and OKRs themselves should be reviewed and refined at least quarterly.
9. Integrate with business processes and culture – Ultimately strategic results management and OKRs should become part of the fabric of the organization, where priority objectives are front-and-center, teams are aligned on those priorities, and results are discussed regularly as part of business reviews. You don’t want this to be viewed as yet another chore or data call.
10. Decouple from compensation – You want OKRs to encourage boldness and risk taking and avoid sandbagging. Hence, OKRs should be decoupled from compensation. That’s not to say that OKR performance should not inform performance evaluations. It is saying the two should not be mechanically linked, apart from things like sales quotas. Grove described OKRs as a tool, not a weapon. “It is meant to pace a person – to put a stopwatch in his own hand so he can gauge his own performance. It is not a legal document upon which to base a performance review.” (Grove, 1995)
More advanced practices include the following:
11. Aspirational and committed OKRs – A common and helpful practice, popularized by John Doerr and Google, is to distinguish committed OKRs, which are expected to be accomplished in full (target = 100%) from aspirational OKRs, which are recognized as stretch goals (target = 70-80%). Aspirational OKRs should reflect the best possible outcomes, not the most likely outcome (business as usual) nor the most conservative (sandbagging).
12. Global and local (top down and bottom up) – It is common for organizations to cascade goals top-down, one level at a time through every level of the organization. This can be limiting and cumbersome, especially in large organizations. We recommend the practice of communicating enterprise OKRs globally and allowing local teams to write their own OKRs, in their own language, informed by the enterprise OKRs as well as their local knowledge. This increases engagement and ownership. It also ensures that strategically relevant information flows in all directions – down, up, and across the organization – and not just top down.
13. Outcomes, not activities or even outputs – We aim to define OKRs that measure outcomes. Outcomes reflect the tangible benefits achieved from a customer or end-user perspective. It is extremely common to see OKRs that reflect completing an activity or a task. Is completing the project enough? Why are you doing this project? What will be true if this project is wildly successful? How might we measure that? It’s not very meaningful to measure activities. “There are so many people working so hard and achieving so little.” (Grove, 1995) It is insufficient to only measure outputs. “There is surely nothing quite so useless as doing with great efficiency what should not be done at all.” (Drucker, 1963)
14. Headlights and taillights (leading and lagging indicators) – Outcomes are what we’re ultimately after. Yet, we also want to be able to measure progress along the way. Hence, in addition to lagging indicators, we also want to incorporate leading indicators or short-term lagging indicators. We generally aim for key results that are achievable in the current review period.
15. Escalate shortfalls promptly – The natural tendency is for good news to travel up the chain quickly, while bad news moves more slowly. At Berkshire Hathaway, Warren Buffett requires of his companies, “Always tell us the bad news promptly. It is only the good news that can wait.” (Munger, 1995)
16. Stay flexible and adaptable – The reality is that things change, sometimes rapidly. You want people and teams to adapt to changes quickly. Hence, OKRs can and should be modified or discarded mid-cycle when that makes sense. Companies like Amazon and Spotify value both alignment AND autonomy. According to retired general Stanley McChrystal, “I tell people, ‘Don’t follow my orders. Follow the orders I would have given you if I were there and knew what you knew.’” (O'Reilly, 2017)
17. Tailor the methodology – Every company is different. The specifics of your strategic results management system should reflect the unique needs and culture of your organization.
18. Learn and iterate – Most companies require multiple quarters to fully refine and mature their approach. Each review cycle we identify what’s working well, so we can build upon those things. We also look for improvements we can make. By continuously learning and iterating, you can greatly improve the value of the system. “Create a culture in which it is okay to make mistakes and unacceptable not to learn from them.” (Dalio, 2017)
19. Look forward more than backward – It’s inevitable that some portion of OKR reviews will address current status with explanations for any shortfalls. Certainly we want leaders to understand the factors and causes underlying their results. Yet, we want leaders to focus more on what they’re going to do next, looking forward and playing offense, rather than spending excessive efforts concocting explanations or covering their rears, playing defensively.
20. Use an enterprise system – Many companies use tools such as Excel and PowerPoint to manage their OKRs. This can be cumbersome, if not downright painful. An enterprise web-based system can greatly enhance the value of your OKR program, by significantly improving OKR transparency, visibility, and reliability (since these systems can pull actual results data from systems of record), while also improving efficiency and timeliness. According to an R&D executive at 3M, “After our first quarter with OKRs and [an enterprise tool], our teams reduced meeting preparation time from a week to 30 minutes. Gone are the days where people spent a week preparing for a gate review. That’s not valuable work – people get time back to focus on the customer and move innovation forward.” (WorkBoard, 2021)
Companies with effective OKR programs have achieved high alignment, high accountability, AND high agility, leading to transformational results.
Google CEO Larry Page, an advocate of OKRs, says that:
OKRs enable “conscious, careful, and informed choices about how we allocate our time and energy… OKRs are manifestations of those careful choices, and the means by which we coordinate the actions of individuals to achieve great collective goals.” (Doerr, 2018)
According to an executive in Microsoft’s Azure cloud business:
"One of the reasons why we pursued OKRs was because the cloud business at Microsoft Azure is measured in billions — and it’s growing 76% year on year — and they don’t teach you in business school how to operationally support that kind of business. So OKRs help us to drive alignment and transparency in a very agile way.” (WorkBoard, 2021)
Reflecting on their OKR program, the CEO of LexisNexis Special Services & Risk Solutions Government,
“It's amazing how much better the organization works when priorities and work are completely visible... I would say, to any leader considering implementing OKRs, that our conversations are different -- we now base them on a very clearly articulated strategy with clearly articulated results. And when we're not getting there, our coaching conversations are not meant as performance conversations. As a result, we're going to have a record year of revenue growth. our pipeline is at a record level, and our employee satisfaction is at its highest level -- and that's during a worldwide pandemic.” (WorkBoard, 2021)
These are the practices that we have found to be most effective for supercharging strategic results programs. We would love to learn from your experience. What’s missing here that you’ve found helpful?
In future posts, we will dig more deeply into these topics. Questions that may be of interest: Why is a high quality OKR program especially valuable for high growth firms? What are OKR best practices for innovation teams? More specifically, how do you measure results of R&D teams or other long-term strategic projects? How do you avoid incentivizing bad behavior?
What questions are top-of-mind for you? What do you find most challenging or painful about your current strategic results management processes? Reach out to us. We would be delighted to discuss further.
Dalio, R. (2017). Principles. Simon & Schuster .
Doerr, J. (2018). Measure What Matters. Portfolio/Penguin.
Drucker, P. (1963). Managing for Business Effectiveness. Harvard Business Review.
Grove, A. (1995). High Output Management . Vintage Books.
History of Performance Management . (2021, August). Retrieved from KPI 101: https://smartkpis.kpiinstitute.org/kpi-101/history-of-performance-management
Munger, C. (1995). The Psychology of Human Misjudgment.
O'Reilly, T. (2017). WTF - What's the Future and Why It's Up to Us. Harper Collins.
WorkBoard. (2021, August). Retrieved from https://www.workboard.com/customers/
[1] Performance appraisals date back to at least the 3rd century in the Wei Dynasty of northern China! (History of Performance Management , 2021)
