Last month, my COO of the past four years gave me her two weeks' notice. While she will be missed, her departure provided our company with a unique opportunity to implement changes to strengthen our core operation.
Throughout the years, I’ve come across various operating systems for businesses that could benefit us. I like Traction, started by Gino Wickman, because of its ecosystem and vast community of entrepreneurs. I like Scaling Up, created by Verne Harnish, because of the playbooks and Align software. However, at this time, I feel that the best fit for us is Objectives and Key Results (OKRs) because of its simplicity.
A Brief History of Objectives and Key Results (OKRs)
The term OKRs was coined by Andy Grove, former CEO of microchip manufacturer, Intel. In his book, High Output Management, Grove wrote that there are two questions that must be answered by productive managers:
Where do I want to go? This answer provides the objective.
How will I pace myself to see if I am getting there? This answer provides the milestones, or key results.
John Doerr was one of Grove’s early mentees. He worked at Intel for four years and got a first hand education on OKRs implementation and best practices. After his stint at Intel was over, Doerr joined Kleiner Perkins, where he went on to have an illustrious career as a venture capitalist in Silicon Valley. His most famous and lucrative investment was in Google, where he wagered $11.8 million for 12 percent of the startup. Today, Google’s market cap is over a trillion dollars! But Doerr gave Google much more than money, he introduced them to OKRs.
Google started using OKRs when it had 40 people, and they still use it today with more than 60,000 people. John Doerr wrote a book called Measure What Matters, where he breaks down OKRs from soup to nuts with case studies and examples from some of the world’s leading companies.
A Quick Crash Course on Objectives and Key Results (OKRs)
I’ll explain OKRs using an actual, personal example. I want to learn the Hebrew language. That is my objective. It is important to point out that objectives are not measurable. Learning Hebrew can mean different things to different people, it all depends on how you define the verbs. What does it mean to learn in this case? That is what key results do, they define what success looks like in clear, unambiguous terms. Key results are measurable outcomes.
Lastly, to make things actionable, we have to state how we intend to achieve the key results. The “how’s” are known as initiatives. Initiatives are things we’ll try to do to achieve the key results, but we acknowledge that they might not work. Just because I take a Hebrew class doesn’t mean that I’ll be able to read and comprehend Hebrew at a collegiate level. Anyone who has ever taken a language class knows that far too well. However, as I carry out the initiatives, I can modify or completely change them once I see which ones move me closer to the goal. If the private tutor is really paying off, I can double down. If the podcast doesn’t help, I can find a new one or perhaps try reading the newspaper instead. Initiatives are means to an end, not ends in of themselves.
The key takeaway here is to never confuse activities and outputs (initiatives) with desired outcomes (key results). Once the OKRs have been agreed upon, individual contributors (IC) should have the autonomy to work on the initiatives that they deem appropriate for the task at hand. The manager’s job is to make sure that ICs are engaged and enabled to get the job done.
Implementing OKRs for the 1st Time
Our achilles heel as a small business is sales and marketing. To date, all of our clients have come from word of mouth or customer referrals. Fortunately though, we do good work and our clients love us. Our average customer engagement exceeds 30 months and we tend to get at least one or two good referrals a month. I firmly believe that referrals are a byproduct of creating value and doing good work, but they should never be relied upon as a marketing strategy for any company with intentions to grow. I knew that if we were going to be successful with OKRs, we’d have to use them to solve our marketing problems.
Our first objective was to Build Thought Leadership in Accounting and Dashboards. This made sense for us because we offer accounting as a monthly subscription service and we sell custom dashboard builds on a project basis (similar to how agencies sell websites). When we pitch our combined services, we like to use a car analog wherein accounting is the rearview mirror, it tells you how you’ve performed in the past, and executive dashboards are analogous to the car dashboard with the odometer, speedometer, and gas gauge. They are a set of key metrics and visualizations that track your progress and alert you of problems. Businesses need accounting and dashboards to meet their objectives and key results. Our first goal is to teach them why, and how, accounting and dashboards add value.
By building thought leadership around our two primary service lines, we’ll be well positioned for future growth. We selected reach metrics like follower count and email subscribers as our key results because we feel like they are the best measures of real awareness. Next quarter, we might shift to engagement metrics like shares, comments, and open rates, but when you’re starting from the bottom like us, reach metrics make the most sense.
Lastly, our initiatives (which are shown in gray in the diagram above), consists of content creation and distribution tactics. This blog that you are reading right now is a deliverable connected to our first OKR. We’re going to promote this blog on LinkedIn and see if it has any impact on our follower count and email subscriber list. If it doesn’t, we can make tweaks to the initiatives in real-time. That’s the power of OKRs.
At the bottom of our OKRs card, you’ll see the team member who is responsible for accomplishing the objective. While said team member might not carry out all of the initiatives, they are accountable for getting it done. We set OKRs quarterly, but we review progress concerning OKRs every day in our 9:30 am daily huddles. OKRs shapes our narrative and keeps everyone rowing in the same direction.
In Measure What Matters, John Doerr states that there are 5 benefits to using OKRs. He codifies them in the acronym, FACTS. They provide focus, alignment, commitment, transparency/tracking, and stretch (a culture of setting ambitious goals).
While it’s too early to wax eloquent on our experience with OKRs, it does feel directionally correct. I’ll be sure to follow up with an update soon. Constructive feedback and advice is always welcome.