Using OKRs to deliver your strategy

We spoke to Dan Montgomery, from Agile Strategies, about strategy and the role that goals play in successfully delivering such strategies. The interview touches upon what strategy and goals are, how goals help organizations deliver strategies, OKR and people performance management and best practices for C-level executives to work with OKR.

Perdoo:

Hi Dan, please tell us a bit about yourself and your journey with OKR.

Dan:

I’ve always had a passion for how organizations tick. I saw many unhealthy organizations early in my career and always thought there had to be a better way to run organizations. I don’t think healthy culture and bottom-line performance have to be a contradiction. I’ve worked a lot with leadership development, coaching and organizational learning; I worked in strategic planning and with the Balanced Scorecard framework for many years; but I always found the process too rigid.

I started my own company and developed my own agile model for strategy delivery. About a year into it, I discovered it was already happening in Silicon Valley and it had a name: OKR!

Perdoo:

What’s your definition of ‘strategy’, and what’s your definition of ‘OKR’?

Dan:

I have a holistic definition of strategy. Every organization lives in an ecosystem with a lot of stakeholders who all get some value from the business. Customers and owners typically come first, but we also consider employees, suppliers, regulators and communities. This stakeholder model is increasingly becoming the new paradigm.

In my opinion, a strategy is a set of choices about what value we will deliver to whom, how we will organize our financial and other resources to deliver that, and how we will measure success. That’s where OKR comes in. OKR gives you the freedom to dream big (the Objective) combined with scientific rigor about results and value (the Key Results).

Perdoo:

What does it take for organizations to successfully deliver their strategy, and what role do goals (eg, OKRs, KPIs) play within this?

Dan:

Focus. The organization needs a clear purpose and direction that everyone understands. But the way forward has to engage all the employees and leave room for unconventional ideas about how to get there. That’s why you need the right mix of top-down planning with bottom-up innovation. That mix is going to be different for every company and industry.  And most importantly you need to focus only on the most important goals. Just a handful at a time, maybe even one at a time in some cases. That’s why I called my book Start Less, Finish More.

KPIs are like health metrics. They monitor the performance of your business as usual (ie, the activities that keep the lights on). OKRs help you move your business forward, they are transformational for your business. You need both, but they measure different things.

Perdoo:

A number of organizations use OKR for people performance management. They put HR in charge of the OKR program. What’s your view on this?

Dan:

In most organizations it’s impossible NOT to address employee performance management when you’re introducing OKRs. Most of our clients use some variation on Management by Objectives (MBO) as part of their annual goal setting and performance evaluation routine for individuals. Performance on these goals is considered as part of annual compensation decisions.

We’ve come to believe that individual goals are good if they measure things like behavior and learning. But individual goals shouldn’t be confused with OKRs. It’s time to get rid of the myth of the heroic individual employee who makes it all happen single-handedly.  Complex work requires teams to collaborate, so OKRs have to be a team sport. And any connection to compensation, even if it’s a team bonus, runs the risk of people sandbagging.

With most of our clients, our main point of contact is either the senior HR person or the CEO, or both. I think it’s fine if HR manages (the implementation of) OKR—as long as the CEO is fully behind it. And the entire executive team has to understand OKR as the way that they will manage the delivery of the organization’s strategy.

Perdoo:

How should C-level executives work with OKR? Are there best practices and pitfalls specifically for them?

Dan:

The CEO must see OKR as the way that they communicate and manage strategy. If the OKRs don’t address the things that are keeping the CEO awake at night, they quickly become irrelevant (if they aren’t already). It’s inevitable that there are some goals that can’t be shared widely, such as an M&A target. But otherwise, they should be transparent.

Managers and teams at other levels should be encouraged to let their OKRs support the company OKRs. I’ve often seen executives who genuinely want this kind of engagement—but unintentionally default to behaviors that discourage it. Coaching can be helpful when this happens.

Perdoo:

Can you use OKRs to validate your strategy? If so, how does that work? How often should you revisit your strategy?

Dan:

OKRs are the way to validate your strategy. If you can’t translate your strategy into 3 or 4 company OKRs, your strategy is too complicated for anyone to understand, let alone execute.

How often you revisit strategy depends on the dynamics of your industry. Industries with long capital cycles, like electricity generation or pharma, can’t change strategy on a dime. Cloud-based software platforms are the opposite end of the spectrum. But more and more industries are undergoing rapid disruption, so a faster cycle is better.

Perdoo:

Leaders might be afraid, for example, that their strategy will be leaked to a competitor. What if leaders don’t want to share their strategy with everyone throughout the organization?

Dan:

A strategy is just words. What makes the difference is having the culture, systems and processes to implement it. Your investors probably already know this.

Perdoo:

Thanks for sharing your views with us! A large part of our audience are people in leadership positions. Before we end our conversation, is there any other advice that you’d like to share with them?

Dan:

You don’t need an OKR to explain everything that everyone is doing anyway - that’s what we call business as usual, that’s what you have KPIs for. OKRs should focus on your ambitions.

People can’t act on too many goals at once, so the fewer KPIs and OKRs the better. The art in the process is to have the simplest, most elegant list of goals that express who and what you want to become.

I always ask my clients: “What’s been the most useful piece of advice I gave you?” The most common answer I get is “You gave us a limit for how many OKRs we could have.” In one case, I limited a startup to two OKRs at each level in the organization. They’ve had the most dramatic bottom line success of any company I’ve worked with in that time.