What are 10 biggest pitfalls using OKR in strategy leadership, and how to avoid them?
Insights | 13 February 2024
What have I learnt from past 4 years of applying OKR (Objectives and Key Results) in strategy leadership for a Finnish subsidiary of a large corporation with some 2000 employees and 250MEUR turnover? I am guessing these lessons learnt will be particularly useful for those companies, who have not yet started their OKR journey or are at the very beginning of it. I got so excited about the OKR in general that besides implementing it I wrote an eMBA final thesis around it.
- Start small and do not rush!
You are doing pioneering type of work, and it’s not going to be easy nor fast. Consider assembling a small team of forerunner-minded early adopters to get it started by a minimum 6-month pilot. When we started our strategy transformation journey, it was less than 10% of the staff led by 10 business leaders. It took us 12 months before we officially launched OKR method in strategy leadership and involved all the teams. Within the trial period we created everything from the scratch, including process, tools, instructions, communication plan, alignment plan etc. Even though the theory of OKR is quite easy to understand, it takes time for people to really reach the full benefits of it.
- The importance of communication
Regular townhalls are a great medium to communicate strategy in the beginning of each cycle, and in my opinion, upper management should always be present in these kinds of events. It is crucial for fluent strategy execution via better people engagement. We are having these type of events three times a year, and we have both the retrospective and the introduction of the new KRs. This also eases up the work of the sub-team leaders when they engage their teams. In addition to townhalls, it is of a great importance that OKRs are 100% transparent and visible for all teams and from bottom to up and vice versa. It enables team alignment but is not sufficient alone. We are having systematic 30min cross-team alignment meetings each month, in which people can have discussions with each other to reach better understanding of dependencies. This is important not to forget, alignment does not happen by itself. It has to be lead.
- It’s not about the tool!
We have been very pleased with Microsoft Excel for the past 4 years, so the good news is that you do not need any fancy & expensive tools to get the OKR train going on. However, since OKR process is at its best both human centric and even inspiring to some extent, you could have a plan in place to replace the boring spreadsheets as soon as people have learned the process itself and you are ready to advance. That might take years as a sidenote. According to my understanding, there are a few modern OKR tools in the market such as Monday.com, Tangible Growth and Microsoft Viva Goals. The latter one can be quite interesting should your company Microsoft Dynamics 365 services, since then the Viva Goals is basically just another app to be found from the basic Teams user interface.
- About the cascading process of getting everyone aboard
Cascading process at the Group level takes place three times per year and continue until all teams are involved. At country level there are usually 5 Objectives with 2 KRs under each of them. Quality should always be primary target instead of quantity. If we think about individual teams, they are not enabled to modify Objectives at all in our case, but it is within their power to choose the KRs they can support and/or write new KRs to support the Objectives. One should remember that KRs are not a one-way shared to-do-list. People need autonomy and OKR makes no exception. When properly cascaded simultaneously engaging people, results can improve radically via better strategy execution.
- The difference of KR and KPI
It took us considerable amount of time for everyone to understand the difference between KPI and KR. That might be due to reason that our company is on business transformation journey from a process centric approach towards people centric approach. So, what is the difference? To put it very simple, OKRs set direction whereas KPIs measure the performance. They can co-exist in a perfect harmony.
- Its ok to fail and try!
This is very important aspect not to fail. As a leader you need to communicate to your people that it is very much ok to fail and try! OKR theory is not most complicated, but people will need time to understand that and that happens by pivoting. So, to succeed as soon as possible, you should enable 100% psychological safety by encouraging your teams to play with OKR without any fear of failure or punishment. Empower your people and they will deliver the results for you.
- Grading of KRs
All KRs should be measurable and easily gradable according to SMART principle (Specific, Measurable, Achievable, Relevant and Time-bound). According to Google most optimal range for the result of KRs is 60 – 70%. If a team consistently achieves their defined KRs by 100% or even more, most probably they are not ambitious enough in setting up the bar sky high.
- Use Moonshots or Roofshots with caution!
Should you want to prioritize or stress some of the Objectives or KRs above others, you can use roofshots or even moonshots on a group – or country level to gain extraordinary results. That happens by marking an Objective and/or KRs with appropriate coding to get all teams involved with everything they got. Furthermore, it is commonly agreed that when employee’s income is not linked to success with KRs, they dare to play big. That might be better for the company on a long term, and to be precise, OKR theory does not encourage to link monetary compensation to the process at all.
- It’s all about the People
OKR is a human-centric and modern approach to execute strategy, no doubt about it all. Sometimes, it’s hard for some leaders not to micro-manage people, but with OKR it becomes a must. Otherwise, the process really does not differ much from task-based leadership. With OKR leaders should stick to their role – engage, set targets and inspire – and trust employees to do their part as well.
- Remember to ask feedback!
Mastering OKR process takes time, energy, and perseverance. Without systematic reflection the road will be longer and more painful. I truly recommend asking open feedback from all the teams at the end of each OKR cycle. For us these four simple questions have done the drill: (1) what worked well, (2) what did not work at all, (3) what we should do more and (4) what we should do less. Analyze the comments and share openly your key takeaways with employees.
I hope that these small pieces of advice were useful and provided some inspiration for you to start your journey towards 10x results. Should you want some individual sparring sessions I am more than happy to help.
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