OKR

Why progress on Objectives is based on Key Results only

5th October 2017 · 3 min read

Why progress on Objectives is based on Key Results only

Organizations usually implement OKR company-wide, meaning that they set OKRs on a Company level as well as a Group level (departments, teams, etc.). A common question then is whether Group OKRs should directly drive progress on the Company OKRs. The answer to that is simple: No, they should not. In this article, I’ll explain why Key Results make an Objective specific and measurable

Key Results kill 2 birds with 1 stone.

On the one hand, they help specify what is meant by the Objective. Objectives can be a bit vague, so you need Key Results to quantify the Objective and signal to everyone what it means. Imagine your Objective is to become one of the fastest-growing companies in your industry. You could measure that by revenue, number of customers, number of employees, or multiple indicators at once. The Key Results will make it clear.

On the other hand, Key Results help you measure progress toward the Objective. Key Results are, as Andrew Grove, the father of OKR, says: “meant to pace a person—to put a stopwatch in his own hand so he can gauge his own performance.” In other words: the Key Results define whether the Objective has been achieved.

In short, an Objective needs Key Results to specify and quantify it, and it needs Key Results to measure progress toward it.

Let’s have a closer look at what happens if progress on Company Objectives is defined by its Sub-Objectives.

Group Objectives don’t guarantee success on a company level

Imagine you have a Company Objective for 2018 to Have the steepest revenue growth in our company’s history. The Sales Team aligned their Q1 Objective to Put a top-performing Sales funnel in place, to this Company Objective.

The Sales Team did a fantastic job: they managed to increase the opportunity-to-customer conversion rate to 75%, meaning that they won 3 out of every 4 opportunities. They also increased the “sales qualified lead (SQL) to sales opportunity” conversion rate to 60%. It’s fair to say that they have a top-performing Sales funnel in place and their Objective Put a top-performing Sales funnel in place reached 90% overall progress.

If progress on the Company Objective were based on this Sales Team Objective, you would think that the company has been progressing toward its Objective to Have the steepest revenue growth in our company’s history. But what if only very few leads were put into their top-performing funnel by the Marketing Team? Then the funnel improvements wouldn’t have been able to contribute much to the revenue growth that the company was after. Employees will see the Company progress on its Objective to Have the steepest revenue growth in our company’s history while actually, it is not making any progress on that Objective at all.

OKR progressIn most cases, there is no mathematical relationship between the progress of a Group Objective and progress of the Company Objective. In the example above, the Sales Team Objective clearly affects the Company Objective, which is why the two are aligned with each other. But pretending that there is a mathematical relationship while actually there isn’t, will lead to confusion and a misplaced feeling of progress.

In short, Group Objectives should always help achieve the Company Objectives. However, only by looking at the Company Objective’s Key Results, you will know for sure what your overall progress is.Conclusion

Make sure progress of the Objectives is always based on its Key Results (and make sure to not confuse Key Results with Initiatives). Ask yourself the question: how will I know we’ve achieved this Objective? The answer will most certainly not be a (Sub-)Objective.

If you don’t apply this strictly, you’ll often find yourselves in situations where it’s not clear what is meant by the Objective, or where you think you’ve made progress but actually you didn’t.

2 Comments

  • Anton says:

    Isn’t “Put a top-performing Sales funnel in place” an initiative?

    • Henrik-Jan van der Pol says:

      Hi Anton,

      I understand where your confusion is coming from. In some cases, the line between an Initiative and Objective can be a bit vague. In the e-book How to write great OKRs, I’ve devoted a section to explain the difference.

      Let me know if that answered the question for you.

      Best,
      HJ

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