DON'T THINK OF OKRs AS A PROJECT

When you think of the word project, what comes to mind? Probably something along the lines of a planned undertaking utilizing both human and financial resources that has a defined beginning, finite scope, and anticipated end date. In the corporate world, projects—sometimes referred to as initiatives—typically reflect all of those characteristics, and are a common accompaniment to your daily work life.

OKRs reflect many of the attributes noted above, with the primary exception of one, and that is “anticipated end date.” Your OKRs program will have to begin on some unique day, it will entail the use of financial and human resources, and the implementation will be carefully planned. What you should not do, however, is assign an anticipated end date. Projects come to a natural end, whether successfully completed or not; at some point the endeavor is terminated. OKRs on the other hand should be ingrained in your culture, and ultimately become part of the way you do business on an ongoing basis.

An OKRs implementation is never really complete because your business is never finished. Is there ever a point at which you can confidently declare victory? A glorious day when you've vanquished your competitors far and wide, achieved complete domination of the market, and surpassed all of your customers' wildest hopes and expectations? Of course not, because the environment in which you operate is constantly shifting under your feet. Macro elements such as the overall state of the economy and the political landscape will impact your decision making and success, while closer to home the effects of competition, your ability to master core processes, attract the right talent, leverage the latest technology, and a host of other issues will necessitate constant strategic course corrections. Your partner in this sometimes perilous, always challenging, journey should be OKRs. As conditions inevitably change, your OKRs must reflect the fluctuating reality in which you work, providing a compass of sorts for employees to ensure that, while there may be uncertainty, everyone is focused on the most important goals to move the business forward.

Someone once asked the prolific British playwright, novelist, and short story writer Somerset Maugham if he wrote on a schedule, or only when inspiration struck. Maugham replied, “I write when inspiration strikes. Fortunately, it strikes every morning at nine o'clock sharp.”¹ That is a quintessential example of commitment and the discipline it takes to do something well. The same applies to your OKRs program. Creating OKRs can be arduous, especially if your organization has no history of goal setting. Ensuring there is alignment throughout the company is also challenging. But perhaps most difficult of all is finding the energy and requisite passion, when faced with the constant whirlwind that is modern business, to keep using the system day in, day out, week in, week out, and quarter in and quarter out. However, with every OKR cycle you're building a skill, one of learning and insight, and as you continue the process with rigor the revolutions of the flywheel come faster and the odds of success accelerate rapidly. Stick with it!

WHO OWNS THE OKRs PROCESS?

We hope the previous section convinced you that OKRs should never be considered a temporary project, but must instead be embroidered into the fabric of your culture. One of the ways to imbed the process is to designate just a couple of key ownership roles, which are discussed in the paragraphs that follow.

In Chapter 2 we argued that executive sponsorship is an absolute must for any change initiative, OKRs included. Therefore, the first role that needs filling is that of executive sponsor. Ideally, your CEO will assume this responsibility, but in their absence any member of the C-suite will suffice. What matters in the end is having a senior executive who is willing to vocally advocate for and support the OKRs implementation from its humble beginnings as just another good idea, through the rocky shoals when momentum stalls and doubt creeps in, to the promised land of a process fully ingrained as part of your management practices.

Regardless of the nature of a change initiative, the sponsoring executive must have a partner. We'll term this person the OKRs champion. The champion works at the front edges of the implementation, working with those impacted, liaising with consultants if necessary, and providing logistical support. Perhaps the champion's most important function is that of in-house OKRs expert. When team members have a question on the theoretical or practical aspects of the model, it's the champion's number they'll dial. This individual will be an indispensable ingredient to OKRs success. Someone with a background in OKRs is obviously an attractive candidate for the role, but we believe a superior trait is enthusiasm. Find someone for whom the passion of OKRs burns bright—someone who instantly grasps the potential of the model and is anxious to share it with colleagues. The champion is typically a mid-level manager who is gifted with exceptional communication skills and enjoys credibility throughout the organization. Expect the champion to devote 50 (or perhaps a little more) percent of their time during the 3- to 5-week period when OKRs are scored for one period and created for the next. In the intervening time their commitment, depending on how you decide to structure the role, will likely entail just a few hours per week.

One final consideration is where to “house” the OKRs process. Should it be a denizen of the finance function? HR? Strategy? Operations? When we researched this topic and shared notes on our findings and personal experiences, no single corporate office predominated. For some the finance group, which often serves as the reporting hub of the organization, assumed ownership of OKRs. For others it was HR. Still others housed OKRs under the strategy mantle. In the end the name on the door doesn't matter so much as a commitment to the principles embodied by OKRs. Having said that, it's imperative to avoid a situation in which one single department is seen as driving the OKRs process to the exclusion of any other groups. The last thing you want is people thinking or saying: “OKRs are just an HR thing,” or “Finance is shoving OKRs down our throat.” While one group may ultimately be recognized as the custodian of OKRs, there must be a shared belief throughout the organization as to the value of OKRs. You're looking for a home in which the executive sponsor believes in the merits of OKRs and is willing to support, develop, and constantly evangelize the tool.

OKRs AND PERFORMANCE REVIEWS

In his book High Output Management, the father of OKRs, Andy Grove, devotes an entire chapter to the topic of performance reviews.² He begins it by posing a basic question to a group of his managers: Imagine yourself to be a supervisor giving a review to a subordinate. What are you feeling as you're doing this? The responses were telling: anger, anxiety, guilt, discomfort, embarrassment, and frustration were frequently mentioned. Next, he asked the group to think back to some of the reviews they had received and what, if anything, was wrong with them. They were only too happy to oblige and quickly rattled off a number of shortcomings, including comments that were too general, mixed messages, poor feedback on how to improve, and only recent work considered.

In our experience, few corporate relics are as quick to produce eye rolls and grimaces as the not so esteemed topic of performance reviews. They're a required activity in virtually all organizations, large and small, yet as a recent survey from Deloitte discovered, 58 percent of managers feel they don't serve their purpose well.³ Outlined below are just some of the criticisms aimed at performance reviews. Most are general in nature, but one is directly related to OKRs:

• Performance reviews focus on the past: Most reviews dwell almost exclusively on goals set in the past, often the distant past. By the time an employee and manager sit to discuss the goals they've become stale and largely irrelevant. As you know, performance isn't an annual event, it fluctuates; based on changes in the field and required adjustments. Performance reviews should reflect the dynamic nature of business.
• They are susceptible to biases: When we meet with our boss to go over our performance, it's an emotionally charged experience for both parties. And, unwittingly we're both bringing unconscious biases to the meeting that will likely increase the emotional tension even more. The person being reviewed will in all probability fall prey to the effects of “illusory superiority.” English translation: We all think we're above average. But when we're reviewed, and undoubtedly criticized, that unexamined and invisible self-perception of superiority is challenged, leading to frustration and alienation. On the other side of the desk is the reviewer, who is the unsuspecting sufferer of “idiosyncratic rater effect.” Another English translation: When reviewers rate qualities such as “potential” (which often surface in a review), they are driven not so much by who you are, but more by their own idiosyncrasies: How they define potential, how much they think you have, and how tough a rater they generally are. Studies show that as much as 61 percent of a rating is a reflection of the reviewer and not the person being reviewed.⁴ Little wonder Grove heard adjectives like frustration, anger, and anxiety when he asked about performance reviews.
• They are an enormous time drain: We mentioned a Deloitte study on the effectiveness of reviews above, and we're wondering if they included themselves in the research. We ask because the company determined it was spending around 2 million hours a year on performance reviews. And, no, it wasn't time well spent holding frequent one-on-ones to provide fast feedback and learning to employees. Rather, it consisted of primarily bureaucratic headaches such as filling in forms, holding meetings, and deciding on ratings. No organization has the luxury of devoting time to pushing paper while ignoring the feedback employees need and crave.
• Linked to OKRs, they can produce sandbagging: As we've discussed throughout the book, OKRs are designed to tug at the edges of organizational capacity, stretching people to deliver their very best. Linking OKRs to performance reviews holds the very real potential to diminish this most vital of the tool's attributes. It's simple human nature; if you know that your next job, a tantalizing new project, or even a bonus or raise (something we'll cover a bit later) hinges on your ability to meet OKR targets, then of course you're going to scale back on your aspirations and avoid unnecessary risks. Who wouldn't? Our intention is not to impugn you or your team's integrity with that assertion; it's a simple matter of self-preservation. But even those bold enough to aim high and take risks when setting OKRs will ultimately suffer if, despite deploying Herculean efforts, they fall short and therefore must suffer the consequences in a formal review. It is for this reason that the vast majority of organizations we've worked with, studied, and spoken with do not formally align OKRs with performance reviews.

The purpose of this section is not to vilify the performance review process, although it has been widely pilloried in the business literature for some time now, and a number of high profile companies, including Accenture, Adobe, and the aforementioned Deloitte are eliminating them in favor of tools that provide more frequent feedback.⁵ In fact, when performed with diligence and care, performance reviews remain a valuable exercise for both reviewer and employee. Andy Grove acknowledged this when he said, “The fact is that giving such reviews is the single most important form of task-relevant feedback we as supervisors can provide.”⁶ What is necessary, given the current realities of both the workforce and the business environment, is a fundamental alerting of the seemingly antiquated process.

One very positive development, that has ramifications for the use of OKRs, is the transition underway in many leading companies from stale, end of year performance reviews to real-time tracking, coaching, and mentoring that seeks to constantly shape an employee's development. Rather than doling out praise or criticism in one big bureaucratic chunk at the end of the year, organizations are now encouraging regular feedback between employees and managers, fostering an ongoing dialog designed to accelerate skill development and minimize the debilitating impact of festering poor performance. OKRs, with their quarterly cadence, beautifully facilitate this tempo of review, allowing managers to regularly assess a contributor's performance and offer feedback on a much more timely basis. Additionally, our dramatically shifting workforce demographics support this evolution, as 79 percent of millennials state that they want their bosses to serve as a coach or a mentor.⁷

Even if yours is one of the enlightened organizations moving to more frequent one-on-one conversations between managers and employees, we don't recommend formally linking OKRs to the process. The potential downside of “sandbagging” through weak targets outweighs the benefits conveyed by using OKRs to judge performance. However, because OKRs operate on a more frequent cadence and ideally represent what is most important to the company, they should set context for, and inform, the frequent one-on-ones between employees and managers. Once again, as we've done several times in the book, we can refer to the groundbreaking work of Peter Drucker on this topic. He recommended employees write what he referred to as a manager's letter. In the letter, the employee begins by defining the objectives of his superior's job, and of his own job as he views them. Next, he outlines the performance standards he believes are being applied to him. He then documents the things he must do to attain those standards of performance, and lists any potential obstacles in his path. The letter also includes an inventory of things the company does to assist him in his efforts, and the items that hamper him. Finally, he drafts what he proposes to do the next year to meet his goals. If the superior accepts the letter it becomes the charter under which they operate.⁸

We can draw on the essence of Drucker's manager's letter to outline a number of items that you can use in order to ensure OKRs—while not directly linked to—are informing your performance reviews. We'll pose them in the form of questions an employee can answer before and/or during the review:

• What are the company's OKRs? This provides an opportunity to ensure the employee is aware of, and understands the nature of, the highest level OKRs.
• Which key results do you feel you contributed to the most, and how did you do so?
• Which of your team's OKRs did you help define?
• Which of your team's OKRs did you contribute to, and how?
• How did you apply what you learned from last quarter's OKRs to the present quarter?

If you're holding regular status meetings and have been diligent in reporting results, compiling responses to these questions shouldn't be a burden for any employee, and it will go a long way in enabling a productive dialog on performance.

OKRs AND INCENTIVE COMPENSATION

Let us ask you perhaps the single most fundamental question possible: Why do you work? Are you motivated by the challenge of exceeding expectations, the fulfillment derived from cracking what was considered an inscrutable problem? Or, does your drive stem primarily from collecting a fair salary and perhaps a monetary bonus for reaching previously negotiated targets? That doesn't make you a bad person. After all, you have to put food on the table and try to squirrel away a few dollars each month for retirement and your kids' college funds.

The basic principle in play here, one we're confident you're aware of as it has been the subject of intense inquiry for literally decades, is intrinsic versus extrinsic motivation. The former, pursuing an activity for the inherent joy it brings, may produce fulfillment and a sense of pride, while the latter, engaging in a task to receive promised rewards, holds the possibility of sharpening our focus on what must be done in order to succeed. Most of the academic research on the subject suggests that extrinsic (incentive-based) rewards have the net effect of reducing intrinsic motivation, and actually lowering performance.

Author Daniel Pink in his popular book Drive supports this theory, noting the potential unintended consequences of employing monetary incentives, including extinguishing intrinsic motivation, lessening performance, diminishing creativity, encouraging unethical behavior, and fostering short-term thinking.⁹

The debilitating effects of extrinsic rewards seem particularly caustic to endeavors requiring creativity and innovation, which of course every business in the world relies on for success. So, given the apparently overwhelming evidence condemning the use of extrinsic rewards, how popular are they in actual practice? In a word: extremely. In one recent study of incentive pay practices, the researchers reported that 99 percent of organizations surveyed used some form of short-term incentive program to reward employees.¹⁰

TOP 10 OKRs ISSUES

Throughout this book, we've done our best to provide a comprehensive guide, outlining what it takes to successfully implement objectives and key results. We're confident that if you follow the advice offered in these pages, your organization will be able to avoid the hazards that inevitably appear as part of any change-related initiative. However, based on our experiences and extensive research, there are a number of issues that are so pervasive we feel they warrant additional attention before you launch your campaign. Listed here are our top 10 OKRs issues. We've broken them down into three chronological sections: Before you begin creating OKRs, developing OKRs, and once you've created OKRs.

HOW NOT TO IMPLEMENT OKRs…AND WHERE CONSULTANTS CAN HELP

If you're a business leader responsible for shepherding the implementation of OKRs in your organization, after reading this book you might think, “This seems pretty straightforward, I can hammer our OKRs out over the weekend.” Let's say you do that. On Sunday night after getting the kids to bed you sit down, maybe with a cup of coffee (or something stronger) and draft what you think are the perfect set of OKRs. Monday morning rolls around and you announce them to your team. Depending on your unique style you may note that the OKRs reflect intense deliberation on your part and are therefore basically set in stone, or you act in a more benevolent fashion and invite comments. Either way the message is pretty clear: I'm the leader, here are the OKRs, any questions? We doubt any hands will spring into the air. Your team is defensive from the start and you've failed to take advantage of one of the system's chief benefits: receiving bottom-up input in creating effective OKRs.

The story above is of the extreme variety and we don't expect you would actually engage in that sort of behavior…would you? In practice, a more likely scenario when developing your initial OKRs is for the team leader to, rather than unilaterally set the OKRs, facilitate the creation process with no outside assistance. We understand and applaud your enthusiasm and commitment to be directly involved by leading the facilitation process, but believe it's a bad idea for a number of reasons:

1. Roles quickly blur. Are you a facilitator, a participant, or both? Your answer will greatly impact how you act in the workshops.
2. We all fall prey to unconscious biases, and without knowing it's possible you may steer the discussion of OKRs in a direction that reflects your own thinking, rather than collecting input from, and synthesizing the collective wisdom of, your team. You may feel great after the meeting (“Those OKRs are terrific!”), but your team, who had no say in what was crafted, will likely be grumbling (or worse) about how OKRs are just another way of dishing out more work.
3. The team loses your valuable input as a leader and arbiter of key decisions. Your role as a leader is to weigh the opinions of the team, and when disagreement fogs the air, use your professional judgment and experience to render a well thought out decision.

If going it alone isn't the answer, then what is? It's difficult to not sound self-serving as we write this because we are consultants. However, we're convinced that a well-trained and experienced consultant can add tremendous value to, and rapidly accelerate the success of, your OKRs implementation.¹³ Especially if you're new to OKRs, a consultant brings something you simply don't possess at this time: implementation experience and proven methodologies for completing the work in a timely fashion.

Consultants also offer objective advice. As a neutral facilitator or naïve coach, someone who is not an expert on the team's work and therefore not immersed in the minutia of what keeps the team up at night, a consultant can pose questions that often unearth basic assumptions, forcing everyone to take a step back and revisit their core mental models. Finally, consultants offer a quality sometimes in short supply during an implementation period—credibility. It's a sad but undeniable fact that senior management may be more receptive to OKRs when they are co-developed by an outside expert with legitimate bona fides in the field.

Should you feel a consultant's assistance may be right for your OKRs work, here are a number of factors to consider when selecting a firm or individual:

• OKRs experience: As OKRs continue to make their way into the mainstream of strategy execution and performance management they will undoubtedly draw the attention of consulting firms large and small, eager to capitalize on a growing trend and potential source of untapped revenue. You may think step one for you, as a client, is to discuss a prospective consultant's track record of success, but we actually see that as the second step. Your first order of business is to ensure their definition of OKRs and yours are consistent. Again, as the tool rises in prominence you can expect more and more firms to offer OKRs services. But are they really OKRs? They may be peddling not-so sophisticated dashboards, KPIs masquerading as OKRs, or an irrelevant software solution. Ensure their working definition of the framework is in alignment with your expectations. With that condition satisfied, you can examine their past client engagements to determine how they work, typical scope, and of course, how their clients have benefited from their intervention.
• Look for a range of skills: Talented consultants must wear a lot of hats. They must be skilled in communication and able to present concepts clearly and cogently, while liaising comfortably with all levels of the company. Facilitation skills are obviously a must, as much of the work will involve leading conflict-filled workshops to craft and refine OKRs. Analytical skills are also necessary for combing through data and materials in order to properly prepare to effectively facilitate. Ensure the consultant you're considering possesses the requisite skills to confidently and competently lead the engagement.
• Knowledge transfer: A key component of every work plan devised by consulting firms will be sufficient and timely knowledge transfer from the consultants to the employees of the contracting organization. Knowledge transfer implies just that—a passing of knowledge on key concepts and techniques from the consultants to the clients. However, in their zeal to complete their work on time and on budget, consultants may inadvertently sacrifice knowledge transfer activities in favor of more tangible work efforts. Organizations pay a heavy price when this occurs. As the consultants are walking out the door they leave behind an organization bereft of the skills and knowledge necessary to sustain the momentum that was so difficult to achieve. Ensure any consultants you work with will devote the necessary time to a comprehensive sharing of OKRs knowledge.
• Cultural fit: When one of us (Paul) was still in the corporate world, he had an interesting experience when the company he was working with hired a well-known consulting firm to assist with a restructuring project. The culture at the company was very open, collegial, and chummy. Some meetings actually started a minute or two late because of participants hugging one another. The consulting team assigned to the company couldn't have been more different in their approach. They cloistered themselves in a meeting room, barely made eye contact in the hallways, and spoke with no one but the senior executive team. They may have considered themselves professional, but to the staff, their cool demeanor appeared standoffish, aloof, and even condescending. This conflict of style had an impact on the engagement, as staff members weren't comfortable working with, and certainly wouldn't be candid with, the consultants. The rift quickly became irreparable and the firm was let go. Cultural “fit” is an often-overlooked attribute when considering a consulting partner, but one that should stand on even ground with knowledge and experience. While you won't be wedded to your consultants, they will be an extremely important part of your organization during OKRs development. Look past the lavishly illustrated brochures or websites to the real people you'll be dealing with every day. Will they be compatible with the culture of your organization? Will executives and frontline staff alike be willing to work shoulder to shoulder with them? If the answer is no, keep looking.

CONCLUDING THOUGHTS

While some old business irritants never seem to fade away, office politics come to mind for example, for the most part this is a very exciting and rewarding time to be working in organizations. In the past several decades we've witnessed stratospheric gains in an array of fields—change management, organizational structure, the application of neuroscience to the work world—that have elevated the practice of management to near art form.

Despite the prodigious theoretical and practical advances, however, many organizations continue to struggle with the most basic of challenges: Communicating and executing their unique strategy. We believe execution results from a workforce armed with knowledge of the company's top priorities, aligned around a common purpose, and motivated to succeed. OKRs serve each of these functions in an elegantly simple and utterly effective fashion.

As we chronicled early in the book, the model's origins can be traced to the middle of the past century, but we're confident its greatest period of growth and development is just beginning to gather around us. One of the boons of our digital age is the lightning fast spread of productive ideas, and OKRs certainly fall into that category. As more organizations around the globe become aware of, and begin to harness, the framework's potential, we expect their experimentation, tinkering, and modifications to advance OKRs to new and previously unheralded heights of efficacy. We feel privileged to lend our voice to this revolution in organizational effectiveness, and thank you for allowing us to be your guide during this portion of your OKRs journey. We wish you great success.