September 28, 2021
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Companies want to build a culture where every employee can visualize how they contribute to the growth story of the company. Many high growth companies use OKRs to drive the amazing strategic advantage it helps them gain while driving business at 10X growth rate. However, one of the most spoken about, but least addressed dilemmas, many face is ‘Can we use OKRs for deciding compensation reviews?’. Read more to know how 6 High growth companies are using the bright side of OKRs and managing their way through compensation increases in their own creative ways.
Irrespective of the different options that companies adopt, knowing what best to do especially when it comes to managing compensation reviews while using OKRs is no easy feat.
But we hear you totally, and that’s why we bring you 6 best practices from OKR practitioners, who have stepped forward to share how best to deal with this dilemma.
Common Terms used in
When there is clear owner for each Key Result, Milestone or action, that is when OKRs are successful.
Orphan Key Results or actions with no owners are often a sign of danger. On the other hand, sometimes KRs (Key Results) or actions have more than one owner which can also lead to lapses in achievements of Goals and Key Results. 'Being accountable' fundamentally implies responsibility towards Outcome or Key Result. While ownership is the initiative, accountability is the follow-through.
Attribution is an act of giving a team member credit (not necessarily the owner of the KR) for contribution towards moving the KR forward. For example. the Marketing Team may help Product Team drive product-led growth with user interviews, insights and crafting in-app marketing messages to move onboarding experience score from X to Y.
Using CFRs is great way to give attribution in OKR culture. A recognition badge or a mention is often adopted to cheer team members for their contribution and actions.
Aspiration OKRs, often known as "Moonshot" goals, trace back their history to US President John F. Kennedy. Kennedy said “This nation should commit itself to achieving the goal, before the decade is out, of landing a man on the moon and returning him safely to the Earth.”
Companies have their moonshots with "Future-back" as thinking strategy and align their Objectives & Key Results. Aspirational Objectives may span across multiple quarters, if not a decade. The Key Results establish progress towards the Aspirational Objective quarter on quarter.
Agile is a popular project-management approach to driving initiatives/projects in OKRs with focus on continuous progress, while incorporating feedback and changes in strategies with each iteration, while moving towards accomplishment.
Teams which embrace Agile methodologies tend to increase their speed of outcomes, expand cross-functional collaboration, and nurture the ability to better react to rapidly changing markets/ecosystems. OKRs take a few cultural elements from Agile such as Weekly Check-Ins and recalibration of Key Results to drive strategy execution.
A/B testing is a concept borrowed from Digital Marketing and applied in OKRs.
In Digital marketing A/B testing involves the process of comparing two variations of a page/marketing campaign element, usually by testing users' response to variant A vs. variant B and concluding which of the two variants is more effective.
In OKR parlance, A/B testing is used as an approach to pick Key Results which can move the Objective forward when the metric to be picked remains in ambiguity.
When all employees and teams across the organization can connect their tasks to larger organization outcomes and how their tasks impact and contribute to progress of organizational goals, alignment sets in. Unless teams and individuals are aligned to larger company goals, engagement and focus does not not set within organizations.
Blocker refers to an event, process or hinderance (arising due to internal or external reasons) that prevents the movement of the needle on the Key Result. In OKR culture,
Blockers are highlighted by team members to Team Champions. The Team Champion in turn may solicit help of others or establish a strategy to overcome the blocker.
Business As Usual in OKR parlance is often a synonym to KPIs or metrics which would be measured in the normal way with or without OKRs. For example - "Visitors to Website is 1 million" is a BAU metric.
An example of Key Result would be - Objective: Improve effectiveness of social campaigns in holiday season in order to drive sales
KR 1: Increase organic social referrals to website from 0.5 million to 1 million
KR 2: Increase social referrals to on sale product from 100k to 150k
KR 3: Increase referral revenues from social referral coupons from 10 million to 25 million
Benchmark is point of reference or a standard against which the metrics chosen for Key Results may be compared. An example of KR with Benchmark would be: "Win Fitbots as High Performing OKR Software in G2 Quadrant".
Here, G2 is an external collector of software reviews is recognized industry standard and the badge is validation against the external benchmark of customer reviews.
Balanced Scorecard is a strategy tool which helps organizations bring their unique strategy to life. The premise is simple with Balanced Scorecard: Companies execute strategy, by translating it into a balanced set of objectives and measures which they then use to hold themselves and their teams accountable for successful execution.
The balanced scorecard approach examines performance from four perspectives -
1) Financial analysis, which includes measures such as operating income, profitability and return on investment.
2) Customer analysis, which looks at investment in customer service and retention.
3) Internal analysis, which looks at how internal business processes are linked to strategic goals.
4) The learning and growth perspective assesses employee satisfaction and retention, as well as information system.
Bi-Directional Key Results are cross-functionally aligned Key Results or KRs. A Bi-Directionally aligned KR impacts the KR of another function. Bi-Directional alignment requires alignment of targets or outcomes.
For instance, 'Increase MQLs from 15 to 20 per week' can be Bi-Directionally aligned to the Sales KR of 'Increase Demos from 20 per week to 40 per week.'
Many times, an OKR picked by a team may be too ambitious in its scope to be achieved in just a quarter. As a result of that, teams branch it into sub OKRs to ensure key milestones are achieved towards the overall Objective. Such sub OKRs nested/branched under the main OKR are referred to as Child OKRs.
OKR Check-in meetings are one of the most important OKR rituals to get teams to keep making progress after the initial high of writing OKRs has passed. This is crucial to prevent teams from falling into the set-and-forget the trap. Check-In meetings are to OKRs, what multiple reps are to building a strong muscle. For continued success with OKRs, teams should get together weekly or at the most fortnightly to discuss the task outcomes, KR progress, what's hot, what's not and plan for the next 2 weeks. This sets in the agility and focus on achieving outcomes at all times.
An OKR champion is the member of the team who owns and runs the weekly check-in meetings on OKR progress, updates, team OKRs and highlights obstacles that will become constraints on achieving the goals of the team.
OKRs is just not about setting a bunch of Key Results & getting to work. Something that creates magic and aids progress to OKRs is Conversation. So what are these conversations?
OKR conversations are specific, focused and outcome-based discussions where teams come together to discuss progress on their outcomes, achievements and blockers. While they celebrate their achievements and wins, a lot of conversations should focus on addressing the blockers and work on finding solutions to address them and decongest the route to achieving your OKRs.
Often when teams define their Key Results, they don't have clarity on the priorities or sometimes, teams need to prioritize their Key Results and Tasks due to other unavoidable priorities or changes in business focus. This leads to certain Key Results either getting stalled mid-quarter or not reaching the desired progress levels. Such Key Results can be reprioritized and carried forward to the next quarter - the only condition being, they should get priority it in the next quarter and reach fruition.
OKRs need regularity and rhythm in order to help teams execute strategy with the much needed agility. The typical OKR cycle needs discipline around defining/crating OKRs, having regular check-ins within teams and with Leadership Teams while conducting a retro reboot to prepare for the next quarter with learnings from the previous. This regularity and discipline sets the much needed muscle and rhythm that your teams need to achieve your strategy with speed and rigor. This rigor is otherwise known as Cadence.
For OKRs to work, Leadership teams need to define the strategic direction in which the companies want to proceed. These also act as the North Star for everyone across the organization, when it comes to aligning focus and outcomes. The act of picking organization level strategic priorities and communicating it across the respective corporate roles is called Cascading.
CFR is short for Conversations, Feedback and Recognition. OKRs and CFRs go hand-in-hand. CFRs are key to having transparency, providing support, and keeping teams inspired by reinforcing teamwork. CFRs act as the spine to a solid OKR implementation. When OKR Check-in meetings are backed by conversations, feedback and continuous recognition, teams get clarity on progress made and initiatives to focus on. Fitbots has automated features to boost your CFR, where you can give badges of recognition (and more) to teams and individuals.
Christina Wodtke says "Treat your company culture as if it was a really critical product that you constantly have to be caretaking and evolving. You can never just leave it there and go, 'We're done now.'"
A solid company culture is a result of communication, collaboration and accountability; none of these can be achieved without transparency. For companies which have a solid and open culture, establishing OKRs is always easier because the key pillars of OKRs - Conversation, Collaboration and Transparency help in building the much needed foundation. CFRs are the backbone of OKRs and in companies with the right cultural streaks, establishing and succeeding with CFRs is not a far-fetched tale.
When you choose OKRs, they can be of two types - one is Aspirational, because true to nature of OKRs, it allows you to experiment and try different ways to achieve your outcomes. The other is known as Commit KRs, which means they need to be achieved for progress to happen. These are predetermined KRs without which teams may not be able to indicate much progress towards their Objectives.
Alignment is the secret sauce in OKRs. OKRs are vertically and bi-directionally or cross functionally aligned. Alignment also calls out the allegiance each team has to another, and which Key Results are to be achieved to help move another one within the organization.
Failure is the state of not meeting the desired or expected aim. In OKR culture, failure is welcomed as an opportunity to grow, especially if your aspirational or moonshot KRs are not met. One should not be so afraid to fail that they do not attempt to reach their stretch goals. Committing to OKRs as a team is another way to diminish fear as teams should be able to push and inspire each other - as compared to one individual being personally responsible for a failure, which may negatively affect confidence and performance.
Focusing on what matters most, helps take away the time spent on high effort, low impact tasks. Focusing is the ability to understand what is priority and why it is priority. OKRs as a framework highly promote focusing on the vital few versus the trivial many. When efforts are focused on the right goal at the right time with the right attitude, goal progress becomes a reality vis-a-vis an ambition.
Goal can be defined as the ideal state or the destination that a company, department or team wants to reach to. Goals are set keeping in mind the company's vision, market scenarios and strategic priorities of the business.
The process of defining and picking up the right priorities which help teams, departments and companies reach the desired state of achievement is called Goal Setting. Goal setting is one of the most critical and high priority activities in every company.
Individual OKRs are the outcomes and Key Results that an individual desires to work on in order to progress towards achieving their professional commitments and contributing to their company OKRs.
Input KRs are sometimes confused with Lead Indicators. Input KRs are not always the best examples of OKRs, but may need to be achieved to move an outcome.
For instance, 'Increasing touchpoints from 10 to 25' is an Input KR. The touchpoints would not always move the needle on increasing Sales-Qualified Leads from 100 to 200. However, they may be necessary to accomplish in the first few quarters of introducing OKRs.
The internal OKR Champion is someone nominated by the sponsor of an OKR Roll-Out (usually the CEO), to introduce the concept of OKRs to the organization and work closely with teams to adopt them. Such Champions are generally certified and come with a wealth of OKR implementation knowledge.
KPI is short for Key Performance Indicator. It is a performance evaluation framework that is evaluated during performance review cycles. KPIs focus on individual performance and ensure maintenance of a steady state against benchmarks. KPIs mostly focus on lag indicators. Unlike OKRs, they focus on measuring inputs and activities.
Teams can create OKRs that don't fall directly under their management team or the tiers above while aligning with the essence of the objectives set at the company level. These are called Laddering OKRs.
A lead indicator is a metric which can predict or forecast the achievement of a lag indicator. The more lead indicators you have in your OKRs, the higher is the probability to predict the achievement of your Lag Indicators.
Lag indicator is a metric which is difficult to change, but is necessary to measure for the health of your business. Lag indicators are important to measure future success. For instance, Revenue, Churn or Satisfaction ratings are lag indicators. They are necessary for your business, but difficult to change once reported.
'Measure What Matters: OKRs: The Simple Idea that Drives 10x Growth' is the #1 New York Times Bestseller book written by John Doerr. It describes how companies, like Google, grew exponentially by leveraging the goal-setting framework of Objectives and Key Results.
A mission statement is the short but articulate reason for an organization's existence. This includes the purpose and vision of organizations/companies and why they show up to work everyday, their big goal and how they want to reach it.
Strategic or company OKRs are aligned to a company’s vision and mission.
Launching something (a goal here) that is very aspirational despite it being a long shot is known as a Moonshot or an Aspirational OKR. Moonshot OKRs are aimed at tracking very high goals, probably the highest in the organization or team. While being able to make a 100% progress on this goal may not be possible, any progress on this metric is still a great sign of progress.
Milestones are the stones/marks set on your road to progress. These help mark the distance, see how long you've come on your journey and indicate how much is left. You can add custom milestones to each of your Key Results on the Fitbots app.
Objectives are 'The big Why/ Idea', in short - it is the propeller for your company to shift out of the existence mode to the competitive mode. It tells you what you want to do to get to your desired state.
OKRs are about Outcomes. These are metrics which help you measure business impact, and are the real indicator to progress of your business. When inputs or tasks are well aligned to Outcome metrics, you achieve more.
The internal OKR Champion or OKR Champion is someone nominated by the sponsor of an OKR Roll-Out (usually the CEO), to introduce the concept of OKRs to the organization and work closely with teams to adopt them. Such Champions are generally certified and come with a wealth of OKR implementation knowledge.
An OKR Coach helps their client organizations quickly get onto the implementation phase by - enabling teams to understand the concept, intervene in bringing about cultural changes that can help teams build and sustain maturity while dealing with OKRs, help teams get aligned vertically, bi-directionally & cross-functionally; and also communicate and build the rhythm around OKR progress and achieving outcomes.
An Owner is someone who is assigned to be responsible for a specific Key Result or milestone. The role of the Owner is to ensure the delivery of the KRs & milestones assigned to them, even if it is a Team OKR. They do this by updating the progress on a regular basis during check-ins to their teams.
While OKRs are by themselves a superpower which help teams connect and align to strategic priorities in the company. There are 5 superpowers of OKRs, which if done right help in achieving success with the implementation. These superpowers are Focus, Alignment, Engagement, Cadence & Stretch.
OKRs are a critical-thinking framework that optimize the bridge between strategy to execution, by helping teams cherry pick the metrics which are most important to move the needle on business. OKRs stand for Objectives and Key Results.
O - Objectives: This is the 'Big What and Why' - where the key question is: What do I need to achieve and why do I need to achieve it?
KR - Key Result: These are the metrics you choose to measure progress towards, where the question is: How do I measure success?
Tasks/Initiatives - Although not a part of the phrase 'OKR', these are equally important. These are the actions towards achieving your goal, the question being: What do I need to do to get there?
The OKR sponsor is a key role to the success of an OKR roll out. The best sponsors are the CEO, COO, Chief of Staff or the Chief Strategy Officer. The OKR sponsor defines success criteria for the OKRs program and communicates why the organization is using OKRs. The Sponsor also reviews OKRs as part of the Leadership reviews, approves budgets and serves as an escalation point on OKRs.
Progress is when your actions have resulted in bringing you closer to your goal. Progress is measured through specific benchmarks. Not every activity results in progress, which is why one needs to be thoughtful about setting KRs to measure only what matters.
Many times, in the desire to over achieve, teams tend to pick up goals which can be qualified under commit, over achieve category. This behavior is very prevalent in cultures where there is fear of failure/experimentation. Setting goals that under-promise so it’s easy to over-deliver. Sandbagging is prevalent in cultures that have a fear of failing. Companies focused on leveraging the true potential of OKRs should cut sandbagging off their cultures in order to allow employees to work at their maximum potential and capabilities.
Stretch goals are the aspirational part of OKRs where teams take an extra element in their targets to achieve their goals. These allow for teams to experiment, innovate & try new methods to push beyond their comfort zones. This comes with a rider - teams should not take stretch goals, which are unachievable 70% of the times, instead, they need to be slowly introduced & picked as teams get comfortable with their OKR cadence
Strategy is the plan of action designed to achieve a long-term or overall aim. OKRs are the framework that help in executing your strategy in an efficient, seamless manner by aligning teams, setting clear objectives, and tracking functional performance to build a goal-oriented culture.
Team OKRs are OKRs set by Teams and also owned by the team. They fall between Company OKRs and Individual OKRs. Team OKRs ensure that all members of the organization are working towards the same goals by aligning together. The correct way set Team OKRs is the to have an open discussion take the ideas and observations from every team member.
Tracking is the process of keeping a regular cadence on the progress made towards achieving OKRs. Tracking is an important exercise to ensure that teams don't fall into the set-and-forget trap. This takes place through regular Check-ins and CFR (Conversations, Feedback and Recognition) systems.
This refers to being open and honest about OKRs at all levels. When outcomes are visible, the alignment and connections between teams and departments becomes more obvious, which leads to greater focus and engagement across teams. Keeping outcomes and alignment transparent is vital to successful OKR implementation.
Work Plan is the execution plan to achieve different Key Results. It comprises of activities, tasks, experiments and new initiatives - essentially everything that could help teams focus on achieving the outcomes.
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