Imagine crossing off every planned action item on your to-do list, only to realize you're still miles away from your desired outcomes.
Sound familiar?
Crafting an objectives and key results (OKR) plan that's both realistic and impactful is challenging.
A report by the Project Management Institute (PMI) states that 37% of projects fail to meet the project charter and its original objectives despite successfully executing the actions.
Why is that the case? Let's dive in to find out.
Let’s take an example of a marketing team that creates and executes a great action plan. A reel every day, two blog posts weekly, three email campaigns every month, concluding with a thought process article or a whitepaper.
All the content is executed as planned, on time, and within budget. Everyone feels great about what has been accomplished. However, when the marketing campaign's performance is reviewed later, it is realized that there is not much website traffic, fewer leads than the budget, and no improvements to brand awareness.
What is the reason for this gap between actions and outcomes?
The marketing scenario highlights the importance of focusing not just on completing the action plan but also on the ability to measure the impact of those action plans toward achieving the business values and outcomes. This is a common pitfall in any strategic planning activities, including OKRs.
Ever heard of causality analysis (cause and effect), actions to results and results to actions, and lead and lag measures? An effective OKR plan should consider these aspects to make the plan more realistic (rather than just being executable), thereby bridging the gap between actions and outcomes.
Renowned business strategist Michael E. Porter says:
“Every organization has a competitive strategy — either developed explicitly through a planning process or evolved implicitly through the ongoing operational execution.”
Michael E. Porter
This statement encapsulates the essence of strategic planning and its importance in bridging the gap between strategic intent and operational execution.
We must master the art of framing OKRs and understand the common challenges that impact the OKR plan.
It is not uncommon for stakeholders to jump into a plan of action for a problem statement rather than focus on how to measure how these actions would solve the problem.
Let’s have a look at the common challenges in OKR planning below.
Lag indicator and lead indicator — the magic wands of getting an effective OKR in place, without which OKRs can’t even be planned. These indicators play an essential role in connecting the outcomes and actions.
Source: Profit.co
Everyone is pumped up to chart the plan to grow the business to the desired targets. While doing so, it is common for the stakeholders to devise a blueprint of activities that need to be done.
Yes, defining the how of initiatives and activities is important, but it should not derail the purpose of doing them. This is where focussing on the lag indicators and defining the measurable success criteria for every objective or goal matters.
It is a metric that helps measure the objective's success directly.
Key results (KR), defined as lag indicators, usually help measure the ultimate business outcome. While crucial and effective, the results of lag indicators are not possible to control directly.
For example, for an objective to “make customers feel happy with our products,” a better lag indicator KR would be to “increase CSAT from 4.0 to 4.5”. While CSAT is a great metric to evaluate if the customers are happy (the ultimate goal of the objective), it is not possible to force the customers to provide a better rating.
So, if the end results of lagging indicators can’t be controlled directly, how can the overall OKR progress be better orchestrated positively? This is where the role of leading indicators comes into play.
It is a metric that measures the road to success.
The outcome of lead indicators can be measured early, ultimately helping to measure the early signs of OKR completion. The lead indicator KRs can be directly controlled and, in turn, used to influence the outcome of the lag indicator KR indirectly. Achieving one or more lead indicators can be the cause of achieving a lag indicator.
For example, if the objective is to “make customers feel happy with our products,” a better lead indicator KR would be to “decrease the lead time for ticket resolution from 8 hours to 2 hours.” Sometimes, the lead indicator KRs can be based on the hypothesis that they lead to the lag indicators (as in speedy ticket resolution, which might help increase the overall CSAT).
The image below shows some examples of lag and lead indicator KRs.
Source: Profit.co
Tip: Remember that lag indicator KRs can lead to a bunch of initiatives (often becoming lead indicators, if measurable) for an objective, whereas a jump start with a blueprint of activities will lead only to project-based tracking, which defeats the purpose of doing OKRs.
At this juncture, it is vital to understand the context of outcome and output KRs.
An outcome KR adds value either to your customers (external or internal) or to your organization (in terms of revenue, profit, market share, reputation, brand value, etc.). In contrast, an output KR is the list of action items performed to achieve the outcome.
Consider an objective that quotes “improve workforce planning,” where KR1 is “complete interview of 10 applicants,” and KR2 is “recruit or onboard two candidates.” KR1 is an output where completing this key result doesn’t add any tangible value to the stakeholders, whereas KR2 signifies that the workforce has been increased, clearly signaling the value for the organization.
Depending on the OKR hierarchy level, lead indicator KRs can be a combination of outcome and output. For instance, corporate-level lead indicator KRs will have to be outcome; mid-management level lead indicator KRs can combine outcome and output, and operational-level lead indicator KRs will mostly be output.
Tip: Lag indicator KRs must always be outcome-focused regardless of the OKR hierarchy level.
OKRs thrive on alignment. It ensures everyone in the company works towards the same goals, focusing their efforts where it matters most. This helps employees see where and how individual contributions connect to the organization's success.
When OKRs are aligned across different levels, employees see how their daily contributions directly impact the bigger picture. This sense of purpose drives employee engagement.
Apart from establishing goal alignment, it also helps to secure buy-in from every stakeholder and ensures that every effort is orchestrated towards the common goal.
Mastering OKR basics will make OKR alignment easy. OKR experts suggest following a simple five-step process to establish the OKR alignment effectively. They are:
Source: Profit.co
By following these simple steps, not only are the plans aligned with buy-in secured, but it also caters to the dual planning alignment approach (top-down and bottom-up) for a speedy planning process.
OKR alignment also helps prioritize strategic initiatives. If any department OKRs are not aligned with the top-level OKRs, reassess whether they truly need to be focused on for that quarter or should be reprioritized for a later period.
While it sounds elementary to correlate quality issues impacting OKR planning, it is true that poorly phrased OKRs will lead to an ineffective OKR plan.
Consider a scenario where the objective is phrased as “commit to gender diversity and make our company the workplace of choice for most people.” The intent is great, but when the focus is on multiple goals in a single objective, it's a case of a “jack of all trades but master of none.”
So, what are some of the most frequent quality pitfalls?
It is recommended that the objective should be simple, memorable, and inspiring so that it is self-explanatory, even to the layperson. The problem of unclear or vague OKR is twofold:
Let’s look at an OKR example from the HR department: “Drive team excellence leveraging expertise to mature assets along with strategic collaboration leading to optimal execution.” What does this mean to both the assignee and the assignor? It can give different perspectives for different personas.
How many have been able to remember and reciprocate the company’s vision, mission, and strategy statements so clearly? The answer is zero. It is not that the stakeholders don’t know about them; it simply means that the strategic elements don’t reach the heart of the operational layer as easily.
Make the objective simple and nimble enough. Consider the impact of rephrasing the same objective as: “Foster a high-performance culture.” The OKRs should be at the heart of the stakeholders through their simplicity. They are not just another form of strategy element to be imposed on the operations layers.
Every key result must be measurable, whether quantitative or qualitative. The easy way to make a KR measurable is by adding metrics or KPIs to the KR (quantitative KRs are measurable by default). However, if the KR is written qualitatively, consider the following aspects to make it measurable.
Scenario 1: Question the intent of qualitative KR to make it measurable
The most recommended way of making a qualitative KR measurable is to question its intent and then convert or rephrase it as outcome-focused.
For an objective to “improve employee satisfaction and lifecycle experience,” one of the KRs written is to “arrange 1-on-1 meetings with a random set of employees.” Let’s see how it can be framed as an effective measurable KR.
The simple act of questioning the intent of everything to be done will help translate a qualitative, mundane KR into an outcome-focused, measurable KR.
Source: Profit.co
In extreme cases where it is not possible to transform into a tangible outcome (steps 2 to 3), the KRs (which are qualitative) can still be made measurable by associating tasks or milestones with them.
Let’s say the KR is to “solve employees’ pain points to make them happier,” the supporting tasks could be:
Now, completing two out of five tasks helps quantify the KR as 40% completed.
This exceptional way of handling qualitative KR measurement is briefly explained in scenario 2.
Scenario 2: Make qualitative KR measurable by associating tasks or milestones
If the person who wrote the qualitative KR itself owns the KR, then add supporting tasks or milestones to enforce measurement.
Source: Profit.co
For example, if the KR is to “establish a customer feedback system to gather insights,” then associate the tasks or milestones that will be performed. Completing three out of five tasks indicates that the KR is 60% complete rather than leaving the progress to a blind guess.
Scenario 3: Make qualitative KR measurable by cascading to the next level
Suppose the person who wrote the qualitative KR is not the executioner of the KR. In that case, the qualitative KR needs to be cascaded to the next level as an objective, wherein it will be the responsibility of the next level to define the measurable KRs.
For example, if the qualitative KR at the top level is to “achieve 3x revenue growth”, then the KR is cascaded as an objective to the sales department to make it measurable at the operational level. This process of cascading is also called top-down alignment.
Source: Profit.co
Benjamin Franklin once famously remarked, "If you fail to plan, you are planning to fail." This timeless wisdom underscores the importance of strategic planning in achieving organizational success. In the context of OKR planning, this sentiment holds true, as OKRs serve as a crucial framework for translating strategic objectives into actionable initiatives with clear success criteria.
A successful OKR plan goes beyond being a mere to-do list; it must be coherent, comprehensive, and aligned with the organization's overarching business goals. Despite the absence of a one-size-fits-all formula for crafting a winning OKR plan, diligent attention to addressing common challenges is key to its effectiveness.
Navigating challenges such as mastering OKR basics, establishing alignment, and ensuring clarity in OKRs is essential.
By understanding the distinction between lag and lead indicators, fostering alignment across all organizational levels, and crafting clear, measurable objectives, organizations can overcome these challenges and use OKR planning's full potential.
In essence, OKR planning serves as a linchpin in the strategic planning process, enabling organizations to translate lofty aspirations into tangible results. With a structured framework for defining objectives, aligning efforts, and driving accountability, OKRs empower organizations to overcome common challenges in strategic planning and navigate toward success in today's competitive landscape.
Unlock the full potential of your team's performance by discovering key differences between OKR and KPI.
Edited by Jigmee Bhutia
Karthick Nethaji, Consulting Practice Head at Profit.co. He has 20+ years of experience in strategy, OKRs, and Agile practice. He has an MBA and IIM-K Diploma and excels in business consulting across various sectors, delivering tailored solutions for sustainable success. Formerly at TCS and HCL Technologies. Nethaji showcases versatility and proficiency in driving tangible results for clients.
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