Felipe Castro: How to find the right OKR cadence

Deciding on the right cadence is a major challenge while implementing the OKR framework. As an OKR Coach and Partner at Lean Performance, Felipe Castro helps organizations from all over the world to master the challenge. We asked him to share his experiences and recommendations.

Perdoo:

What cadence do most organizations working with OKRs use?

Felipe Castro:

It is a common misconception that OKR only works with quarterly cycles, which was the model Google used until 2011. After retaking the CEO role at Google, Larry Page decided to adopt both annual and quarterly OKRs.

Most mature OKR implementations understand that different goals have different rhythms as tactical goals tend to change much faster than strategic goals. So OKR adopts a triple cadence, decoupling strategy and tactics:

• A strategic cadence with high-level, longer term OKRs for the company, which are not set in stone. The organization should maintain the strategy conversation throughout the year and review the company OKRs as necessary.
• A tactical cadence with shorter term OKRs for the teams.
• A follow-through cadence with regular check-ins for tracking results along the way.

The most common model I see is:

• Annual Company OKRs (and sometimes for very large departments and business units).
• Quarterly Group OKRs for the teams, with a mid-quarter review.

Some organizations also set quarterly OKRs for the company, but I would not recommend that in the beginning.

It is important to note that organizations can customize the cadences for their needs. For example, Spotify developed their version of OKR called Spotify Rhythm which uses a strategic cadence of 6 months and a tactical cadence of 6 weeks.

Perdoo:

Are there easy-to-use best practices or rules-of-thumb that can help organizations find the right cadence?

Felipe Castro:

The shorter the cadence, the smaller the OKR-setting overhead needs to be. The longer the cadence, the smaller the business uncertainty needs to be.

So to adopt shorter cycles, you have to make sure you have a streamlined process for developing the OKRs in place, or the overhead will kill you. You will be spending too much time setting goals.

On the other hand, if your business deals with uncertainty or your market changes too quickly, longer OKR cycles will not help you.

If you are starting with OKR, I recommend using a quarterly tactical cadence with a mid-quarter review. That will enable you to learn and adapt your model. Most organizations can work with this cadence.

I would add that most teams that I see trying to set monthly OKRs are using activity-based Key Results. They are using OKR as a macro to-do list. When teams adopt value-based Key Results, that measure actual value for the company and the customers, a quarterly cadence makes sense since you need time to develop initiatives, measure and adjust to make sure the metrics will improve.

Perdoo:

How does a typical OKR cycle look like?

Felipe Castro:

It depends if we are talking about a team or a whole organization.

For a team or department, a typical OKR cycle would be:

• Teams develop their OKRs. While developing the OKRs, each group has to answer the question “How can we contribute to the company OKRs?”
• Ensure alignment with other teams and initiatives
• Have weekly check-ins to track results and initiatives.
• For teams using quarterly OKRs, it is common to review the OKRs halfway down the quarter during a mid-term OKR review.
• At the end of the cycle, you can have a quick retrospective/lessons learned and start over.

If we are talking about the whole company, we would also have:

• At the beginning of the cycle, the executive team defines the company OKRs.
• The executive team then validates the company OKRs, gathering feedback from the team. It should not be a 100% top-down process.

Perdoo:

On what levels should a company set OKRs?

Felipe Castro:

The best approach is to start with company and team OKRs. Individual OKRs add more complexity and organizations may want to avoid them in the beginning.

Individual OKRs work well when the person owns one or more metrics: i.e. she is responsible for lead generation using Facebook ads or for the retention of a set of customers.

When there are teams working on the same metrics, the best approach is to stop at team-level OKRs. Having multi-functional teams with different individual OKRs can create serious misalignment issues.

Perdoo:

Should there be a company-wide goal setting cadence throughout all teams?

Felipe Castro:

Starting with a single cadence reduces complexity. The best approach is to have an incremental rollout, beginning with a simpler model and evolving it as you learn.

In Silicon Valley, some mature companies have distinct cadences for different functions. For example, some companies set annual OKRs for the sales team while using quarterly OKRs for engineering and product teams.

The rules-of-thumb here are:

1. always fight complexity
2. adapt OKR to your context as you evolve
3. try to maximize the number of “synchronization opportunities”.

For example, having one team use a 4-month cadence while the rest of the company uses three months, teams will only sync once a year.

Perdoo:

Can (or should) companies set annual Objectives with quarterly Key Results?

Felipe Castro:

When using annual Company OKRs, the pattern is to set partial targets for each quarter. So you set one target for the year but also set expected partial targets for Q1, Q2, and Q3—to make sure you are on track. As you review these partial targets throughout the year, you might find your expectations for the overall larger annual target may change too. So it’s important to make sure you review both each quarter.

On the other hand, some companies view the Objective as a “vision” that the company and teams will pursue over time. For example, an Objective such as “Delight our Customers” is something that a company could use over several quarters, creating new Key Results at each tactical cycle.

Even some of the Key Results themselves can be the same over time, just changing the targets. Metrics such as Revenue and Net Promoter Score tend to be present in almost all quarters of all companies I have seen. But the value drivers that each team will use to improve those metrics will change over time.

About Felipe Castro

Felipe Castro (@meetfelipe) is an OKR Coach and Partner at Lean Performance, a boutique advisory firm focused on helping companies transform how they set goals by abandoning the waterfall, command&control mindset and embracing an agile approach for goal setting. He's a global thought leader in Goal Agility, the intersection between Agile and OKR.