We were delighted to listen to a recent McKinsey podcast with Workboard co-founder and CEO, Deidre Paknad (you can read the podcast transcript here).
In our firm, we help clients focus on what matters to successfully execute their strategy, just like Paknad.
And one of the keys to successful execution is to have clear metrics. We often think of metrics as a way to understand the health of the business, but an even more critical role for metrics is to guide employees’ behavior into doing the things that matter. Metrics should remove any ambiguity as to what needs to be done.
Paknad makes the case for using simple OKR metrics (OKR stands for Objectives and Key Results) to do exactly that. Let’s review how OKRs work and why they are so useful compared to traditional business metrics.
What does it take to execute well?
Strategy execution is simple: you need clear market discipline (understanding how you compete in your market), a well-defined strategy, and complete alignment of your people and resources with your goals.
You gain execution alignment when a relatively small number of conditions are met:
- All employees (not just the leadership team) understand the strategy
- The leadership is trusted to manage execution
- Daily activities are directly relevant for the strategy, and the company structure makes it easy to perform them
- Talent is recruited and developed to directly support the strategy
- And finally, metrics guide employees in their daily decisions to focus on what is important
We call these conditions the 5 Keys to Strategic Execution, or KSE.
Out of the 5 KSEs, metrics are notoriously challenging: there are often too many of them, they may not be explicit enough to inform decisions and behaviors, and their collection and analysis may take valuable time and resources away from… execution.
This is why Paknad’s advice to focus only on a small number of OKRs is so refreshing and effective for execution. It also yields many benefits compared to traditional metrics.
What are OKRs?
OKRs are Objectives and Key Results. They are outcomes that a team or an entire organization wants to achieve, typically within the next 90 days.
OKRs differ from regular business goals in several ways:
- There should be a very small number of OKRs. Paknad suggests no more than 3-5 Objectives and 4 to 5 Key Results for each Objective
- The 90-day short-term horizon forces teams to focus on what will make the biggest impact on their performance
- They are re-evaluated every 90 days, which makes them well suited for environments where change happens fast
Think of OKR as the “metric of the realist”: it acknowledges that most organizations are constrained in terms of time, money, resources, and people; it forces everyone top to bottom to focus on what will yield the biggest result within these constraints.
As Paknad says, “The objectives are a statement of intention. What is it we’re trying to accomplish? (Do) The key results cover what is success in the next 90 days? What will we have more of or less of?”
Less is More
As Paknad puts it, “The inability to know what matters most right now is a huge drain for organizations.”
Leaders are often told that their organization should operate like a start-up to be nimble and grow fast, and “keep their eyes on the ball;” in reality this is very hard to achieve, as organizational complexity increases with scale, and many balls end up competing for everyone’s attention.
OKR may be the best way to replicate the environment in which entrepreneurs operate, and fight complexity: this is an easy-to-use device to be laser-focused on what will generate the biggest results, in the shortest amount of time, and within the scarce resources at hand.
Paknad summarizes the value of OKRs well: “(OKRs are a) ‘single source of truth’ around a company’s strategy, alignment, execution, and outcomes, all feeding into the various regular weekly, monthly and quarterly reviews, and status reports.”
Where to Start
If you’re a leader who wants an unbiased view of the execution capabilities of your organization, give us a call.
In our client work, we use the Line-of-Sight analytics platform to evaluate execution performance; we show the discrepancy that can exist between the leaders’ assessment of their company’s execution capabilities, and that of their managers and employees directly involved in daily tasks and activities.
We provide every organization with simple, confidence-inspiring analytics and solutions (like OKRs) that build their internal alignment – and get things across the finish line.