We distinguish two main tasks of successful companies: to develop a clear vision of where the company should be in ten years and to place the right focus regarding what actually needs to be done in the next three months. While most companies do have a vision statement, it often remains unnoticed hanging on some meeting room wall. A powerful, compelling guiding force is missing here, as well as the willingness to deal with the particular formulation. For a simple reason: the benefit is not apparent. A clear vision is much more than a colorfully formulated sentence which could just as well serve as an advertising slogan.
A sound strategic framework consists of:
- A clear vision
- A tangible mission
- Sound values, and
- A formulated strategy for the coming one to three years
Taken together, these elements formulate with increasing granularity the strategic direction of the entire organization. If strategy is not linked to business operations, however, the benefit attributed to it remains hidden. But there is a solution to this problem—at last!
Google has made it popular, and it is now widely used by other renowned Silicon Valley companies, like Twitter or LinkedIn. I am talking about a management method called Objectives and Key Results, short OKRs. The framework is ideal to translate corporate strategy into operational performance and choose the right focus. OKRs is an extremely agile management model comparable with the scrum method for agile software development.
OKRs formulate the five key objectives of an organization for the next three months. Each objective is described with four concrete and measurable key results. By focusing on the results, the OKRs method differs from primarily milestone-oriented project management approaches. It is mostly about identifying the key drivers of success, determining metrics, and influencing them positively.
The OKR model permeates through all levels of the organization: individual employee objective are derived from departmental objectives which are derived from the overall corporate objectives. All objectives are described with key results that are translated into new objectives for the subsequent level. This ensures that the entire company is moving into the same direction during an OKR period and all employees are doing their best to push the achievement of the common objective.
Central instrument of the model is the coordination of resources between different departments prior to the beginning of the next OKR planning period. Teams not only openly share their objectives among each other, but also coordinate the necessary resources in advance to ensure that they are actually available to others during a quarter. If resources turn out to be insufficient, departments get a heads-up on that and can decide to focus on other issues for the time being postponing projects to some later quarter.
Shortly before the end of the quarter, the set of OKRs is evaluated in a so-called grading process. The individual key results are measured and evaluated based on the pre-defined KPIs. A forecast for the remaining time till the end of the quarter is included in the gradient as well. This allows teams to focus even more on certain issues at the end of a planning period if it becomes apparent that the remaining resources will not be sufficient to achieve all the stated objectives. Thus, the departments have the option to meet and improve on key results or corresponding KPIs at the end of a period in a short sprint.
The basic idea of the model fosters a performance-oriented culture. The objectives are usually quite ambitious, challenging even. With other words, they may make the individual employee feel a bit uncomfortable. However, as the system is not used for evaluating individual performance and it is explicitly not linked to an incentive system, it promotes the ambition of achieving more together.
About the author: Marco Alberti has more than ten years of consultancy experience in the fields of strategy, innovation, and leadership. With Murakamy, he advises medium-sized businesses, start-ups, and large corporations on management, digitization, and strategic marketing issues. Among other things, Murakamy is specialized on the implementation of the OKR model as a leadership model in rapidly growing organizations.
Additional information: An introduction to the OKR model as well as case studies and FAQs can be found at http://murakamy.com/okr/