How Zalando sets goals

As employee #3 at Zalando, Christoph Lange (VP Brand Solutions) has seen the company evolving into Europe's largest online fashion platform. Inspired by Google, he decided to implement the OKR (Objectives & Key Results) framework to make goal setting successful and transparent. We talked to Christoph about Zalando's successful OKR story.

Perdoo:

How did you first find out about OKR and what excited you about it?

Christoph:

After receiving great feedback from companies using OKRs (Google for example), I visited Google headquarters in 2013 and spoke with many people about how strong an instrument they were. During my visit, I also had the chance to meet with Rick Klau, Google Ventures Startup Lab partner, who referred to his YouTube video that explores the value of the OKR system.

Perdoo:

How did you win the management team for the idea of piloting the OKR framework?

Christoph:

We are very fortunate within Zalando to enjoy a lot of freedom to try new things. I was in the process of setting up a new department, Zalando Brand Solutions, and decided to use OKRs from the outset. Our founders, David Schneider and Robert Gentz, were supportive from the very beginning and were excited by our initial results.

The OKR framework provides global alignment, full transparency, and is based on trust and collaboration. We also appreciate that it is an easy to understand framework, so taking it on for our various departments was an exciting step in a positive direction.

Perdoo:

How did you approach the implementation of OKR at Zalando’s Brand Solutions department?

Christoph:
Our pilot for departmental OKRs flowed into the team and individual levels. Within the department it took us eight hours per person (for a full team of 6-8 employees) to develop our very first quarterly OKRs.

What Brand Solutions now achieves was only possible with the growth of the overall team, together with transparent alignment of our overarching Technology department. This meant looking at what aspects of OKRs are vital for our own team, and making sure our team-level and individual-level goals helped managed the complexity that a growing team encounters. We went from a team of 20 when OKRs were introduced to approximately 100, and we’re still expanding.

Perdoo:

How long did the pilot run for and how did you define and measure success during the pilot?

Christoph:

Before the pilot, we started by conducting a lot of research on the topic. On top of speaking to representatives from Google, we also read a lot of blogs and articles that dived deeper into the process. Our pilot lasted for three quarters, a total of nine months.

When it comes to measuring success, this varies by department. With the pilot for Brand Solutions, we looked at the team’s level of happiness, commitment, alignment, and understanding of vision. We measured these factors before implementation, during the process, as well as after the three-quarter period. We found that all measured determinants had significantly improved after the introduction of the OKR process.

At a company level, we use many approaches for measurement and reporting, including All-Hands meetings where OKR grades are shared, bi-weekly grading meetings that are open for all to attend, and the use of shared documents in Google Drive. In Brand Solutions, we complete a mid-quarter review with all teams where they present their results, to make them tangible.

Perdoo:

What were the main challenges while rolling out OKR and how did you tackle them?

Christoph:

OKRs support in adjusting and connecting the company's objectives to those of our departments and teams, thus the challenge is aligning goals top-down and bottom-up between individual teams to break silo thinking and promote cooperation. Within Brand Solutions, we conduct an end-of-quarter OKR workshop with our full team to come up with a draft of department OKRs that gets us 80% of the way there. In the past, this input was collected in single teams, but we found that gathering all teams that comprise Brand Solutions to draft OKRs together from the start was much more efficient.

Perdoo:

How did the rollout go from Brand Solutions to the rest of Zalando?

Christoph:

After the initial success that Brand Solutions had with the OKR process, the program was rolled out to the whole company, starting at the senior management level, and then progressing within our larger departments and teams. Although we used the Google model, we adapted it to fit our specific company needs.

For the broader company rollout, we had external support from OKR coach Ben Lamorte and conducted a series of training sessions and workshops for leaders. These covered a range of topics, from learning the basic theory of OKRs, to how to ask questions. Additional support was also provided to teams in OKR drafting sessions. Off the back of this, we now have an established OKR expert roundtable to discuss learnings and challenges in order to evolve the OKR approach at Zalando.

In order to ensure OKRs enabled more alignment across teams, we recently implemented a Zalando wide OKR alignment week. This week is intended to ensure alignment of overarching OKRs between our different departments and all necessary teams. This week falls at the beginning of every quarter.

Perdoo:

How does a typical OKR process at Zalando look like?

Christoph:

We have an OKR committee at company level to ensure enough bottom-up OKRs are set. Zalando leadership also reviews company level OKRs on a quarterly basis. But, in general, there is no central process for OKRs – each team takes care of them on their own. We do, however, have central support to assist employees. Where possible, we encourage our OKR experts to help facilitate OKR drafting sessions.

To ensure we drive focus, we began with a maximum of five objectives every quarter, each with a maximum of four key results. We are now exploring the possibility of reducing the number of OKRs even further to increase focus.

Perdoo:

How do you and your team feel about stretch goals?

Christoph:

While we don’t use the term much internally, we implement stretch goals rather regularly throughout the company. For OKR scoring we use a 0 to 1.0 scale, where 0.7 is considered the “sweet spot.” The 1.0 score could be seen as our stretch goal – it’s an achievement that we may not think is possible, but keeps teams motivated to accomplish more than they initially think they’re capable of.

Perdoo:

What role do OKRs play in performance reviews?

Christoph:

For Zalando, OKRs are not a performance management tool. However, we believe OKRs should, in the long-term, be consistent with employee and/or team performance, so that they can be included as part of performance discussions. In short, there is no direct link.

Perdoo:

What would your advice be for organizations that are completely new to OKR?

Christoph:

If you want better alignment for employees around your company’s purpose and drive, then the OKR framework is a fantastic driver. For companies who are just implementing the process, I would recommend that they assign owners to company-level key results, like we eventually did. This is important as it doesn't work, or provide the right level of transparency, to just assign all company key results to a select group of executives.

Perdoo:

Now that you have worked with OKR for 2.5 years, why would you recommend other organizations to adopt OKR?

Christoph:

OKRs are a simple and powerful approach for generating alignment and staying focused on what's important for the company and your own department. Given we present company-level OKRs each quarter, everyone at Zalando understands the direction of our company.

About Christoph

Christoph Lange is VP Brand Solutions at Zalando in Berlin. He joined as employee #3 to lead the product management organization for Zalando’s complete tech portfolio and has helped scale Europe’s largest online fashion platform throughout all phases of growth and expansion (generating over €3bn in revenue in 15 countries in 2015). He’s now responsible for the new B2B products area, helping brands and partners connect to consumers through the most delightful shopping experiences possible. Next to being an absolute product enthusiast, Christoph is a passionate traveler and a Berliner by choice. You can follow him on Twitter: @christoph_la