Setting measurable objectives and key results for business success

Most organizations have the problem of not being ambitious but rather being able to do it. Strategic plans set by companies have impressive goals that they fail to realize. A report by Project management Institute shows that most organizations (55 percent) of them complain that their biggest problem is poor implementation of organizational strategy. The disconnect between strategy and execution is hardly ever based on effort or resource scarcity. Rather, it tends to be an indication of ambiguous goals, immeasurable goals, and cross-team misalignment.

Sponsored content

This is the place Objectives and Key Results – OKRs – come in with transformative value. OKRs offer a connection between the strategic vision and the implementation. They turn grand visions into tangible and achievable goals that help create organizational focus, team thematicity, and support decision-making through data. As opposed to the old school methods of goal setting where goals tend to be open-ended and immeasurable, OKRs make organizations answer the question of what success means and how they will know they have achieved it.

The companies that have perfected the implementation of OKRs such as Google, Intel, and numerous high-growth startups are always ahead of the pack. They are strategically aligned in dispersed teams, have rapid response to the market changes, and attain high ambitions more consistently than the traditional planning organizations.

Learning the Basics of OKRs

It is necessary to comprehend the basic elements before going in establishing measurable OKRs. An Objective is a statement of what you desire to accomplish. It is directional, qualitative, and inspirational, that is, something that activates the teams and concentrates organizational attention. Goals provide answers to this question: What do we want to achieve?

Key Results, on the contrary, assess the movement towards the goal. They are defined, measurable and time-sensitive. Key Results provide the answer to the question: “How will we know we have succeeded? A combination of goals and key outcomes is a fully featured system that comprises of inspirational leadership and accountability.

There is a critical difference between objectives and key results. Most organizations mix this up, and end up having a hodgepodge of uninspirational and unspecified goals. Good OKRs ensure a distinction between the qualitative goal and the quantitative key results that indicate an improvement on the same.

The Architecture of Measurable Key Results

The development of really measurable key results involves knowing what they are effective. The biggest error that organizations commit is to mix key results with tasks or initiatives. An important outcome is measured by a key result; an action to achieve the outcome is called a task.

As an example, one of them is a task or an initiative like Implement a new customer relationship management system. It outlines what you will do not what you will accomplish. One of the measurable key results could be something like; lower the average customer support response time, 48 hours down to 4 hours or higher customer satisfaction score, 72% to 85%. These important results are defined in terms of desired results, rather than actions.

Successful key results are characterised in a number of ways. They are result oriented and are said to describe results and not activities. They are precise and measurable and allow objective evaluation of progress. They are time-constrained, usually on a quarterly or annual basis. They are not far-fetched and attainable, meant to stretch organizations beyond what would result in minor enhancement but not insurmountable.

To know how to set measurable key results & objectives which are quantifiable, it is important to understand that measurement methodology is important. The significant results that should be chosen by organizations are those that indicate progress towards the goal. In the case of the objective being to dominate our segment of the market, the key results must be a market share, number of customers, increase in revenue, or a position in the market (not activity ones such as complete 100 customer meetings or introduce 5 features).

Developing Baseline Metrics and Success Criteria

Organizations have to set key results before baseline measurements are made. You cannot quantify how far you are going to get without knowing where you began. This involves the auditing of the existing performance in terms of the relevant metrics.

In case customer retention is a strategic goal, you must have the rate of retention of customers by customer segment, the causes of churn, and the trends of retention over time. When cutting time-to-market matters, time-to-market measurements involve current concept-launch cycle times. Under the condition that employee engagement should be improved, it is desirable to set baseline scores of engagement.

The foundation set up in this case is usually surprising. Companies often end up finding that the perceived problems are not exactly what was going on, or that other departments define the same metrics by different values. These measurement inconsistencies can be sorted out prior to establishing OKRs so that there is no confusion and alignment.

The criteria of success need to be on meaningful improvement and not on minor incremental change. In case the current customer retention equals 85, it would be a stretch to give a key result of acquire 86. Better would be to be able to achieve retention of 92% or lower an annual churn rate of 15% to 8%. The definite target is conditional upon the organizational ability, the situation in the market, and the priorities of the strategies, however, the general rule is: the key results must be the significant improvement.

Cascading OKRs to Organizational Alignment

The ability of OKRs in establishing alignment within organizations is one of the strongest points. Company-level OKRs flow to team OKR, which flow to individual OKR. This hierarchy system will ensure that each person is aware of the role that his work plays in the success of the organization.

There has to be discipline in effective cascading. The strategic priorities should be set by company-level OKRs. The department and team OKRs should then be set on how each team will contribute to the success of the company. Personal OKRs are expected to relate the work of particular employees with that of teams.

But it does not mean that cascading implies strict hierarchy. There should be freedom in lower level teams on how they are going to support higher level OKRs. The company OKR of grow revenue to $50M may be broken down into sales OKRs with a goal of acquiring more new customers, and customer success OKRs with a goal of retaining its current customers, and each team operates freely in specifying their own key results.

The cascade should have an intelligibility of connection. The employees are expected to be able to easily follow the connection of their personal OKRs to team OKRs, which are in turn related to company OKRs. This transparency brings in conformity and makes the employees aware of how their respective contribution to organization mission is.

Measuring and monitoring Improvement

Attainable key outcomes necessitate well-developed monitoring systems. The baseline measurements should be set and the progress of an organization should be measured at regular points at least once every quarter usually on a weekly or biweekly basis. Such tracking helps to reveal off-track initiatives in a timely manner and make necessary adjustments quickly.

To have proper tracking ownership is necessary. All important outcomes must take the form of one owner who is needed to make progress and report on status. Even though several individuals might be involved in the attainment of a critical outcome, ownership will provide responsibility and avoid the spread of responsibility.

There is also the need of honest assessment in tracking. Companies need to design psychological safety concerning the OKR performance. When the key results are too closely related to compensation or performance appraisal, the teams will have conservative targets that will ensure that the final result is 100% as opposed to the ambitious targets that are meant to challenge the organizational capabilities. Most organizations discover that the closer the OKRs are connected to compensation, the lower the performance becomes.