Setting OKRs to Supercharge Your GrowthKristin Luck
For growth focused firms, properly setting OKRs is key when establishing annual goals. Although many firms set an annual revenue target, research shows that most firms that don’t utilize some sort of goal driven system (whether it’s OKR’s or SMART goals) will fail to meet their targets.
I’m a big fan of the OKR (objectives and key results) framework as it provides a structured approach to setting ambitious goals and measuring progress, ultimately driving your business forward.
Annual OKRs help align your entire organization toward a common purpose. When everyone understands the company's overarching objectives, it becomes easier to focus efforts and resources on what truly matters.
The Power of Annual OKRs
How do companies benefit from an OKR structure?
Alignment and Focus
Annual OKRs help align your entire organization toward a common purpose. When everyone understands the company's overarching objectives, it becomes easier to focus efforts and resources on what truly matters. This alignment ensures that all teams and departments are working cohesively towards the same goals.
Accountability and Ownership
By setting clear and measurable Key Results, you assign ownership to specific individuals or teams. This accountability ensures that progress is monitored, and necessary adjustments are made throughout the year. It also empowers employees to take ownership of their contributions to the company's success.
Adaptability and Agility
Annual OKRs provide a flexible framework that allows you to adapt to changing market conditions. If circumstances evolve, you can adjust your OKRs accordingly, ensuring that your organization remains agile and responsive.
Employee Motivation and Engagement
Internal teams thrive when they have clear goals and can see their contributions directly impacting the company's success. Setting OKRs on an annual basis provides motivation and a sense of purpose, leading to higher levels of engagement and job satisfaction.
More on annual planning.
Best Practices for Setting OKRs
Wondering how to get started?
Start with Company-Wide Objectives
Begin by defining overarching company objectives that are aspirational yet achievable. These should align with your long-term vision and mission.
- Increase market share by 15% in the next fiscal year.
- Enhance customer satisfaction ratings to 90%.
- Launch two new product lines by the end of the year.
Cascade Objectives to Teams
Once company objectives are established, break them down into department or team-specific objectives. These should directly contribute to the achievement of the company's goals.
- The Sales team might have an objective to increase revenue by 20%.
- The Product Development team could aim to reduce time-to-market by 25%.
- The Customer Support team might focus on decreasing response times by 30%.
Create Measurable Key Results
Key Results should be specific, measurable, achievable, relevant, and time-bound (SMART). They provide clear milestones for tracking progress. Good Key Results are quantifiable and directly linked to the objectives.
- Increase monthly recurring revenue (MRR) from existing customers by 10%.
- Launch at least six new product features by the end of Q3.
- Achieve a Net Promoter Score (NPS) of 50 by the end of the year.
Regularly Review and Adjust
Hold regular check-ins and quarterly reviews to track progress on OKRs. If certain Key Results are not on track, be prepared to adjust strategies and tactics. This flexibility ensures that you stay on course to achieve your objectives.
Who Should Be Involved?
Creating effective OKRs is a collaborative effort. Key stakeholders that should be involved in the process of setting OKRs, include:
- Executive Leadership: Top-level executives should define company-wide objectives and ensure alignment with the organization's strategy.
- Department Heads: Heads of various departments should contribute to the formulation of department-specific OKRs that support the company's goals.
- Individual Contributors: Employees at all levels should be encouraged to set individual OKRs that directly contribute to departmental and company objectives.
- OKR Champions or Coaches: Appoint individuals with expertise in OKR methods to guide the process, ensuring that OKRs are well-structured and align with best practices.
Examples of "Good" and "Challenging" OKRs
Lastly, I’ll share some examples of OKR’s designed to drive growth, vs those that are less likely to deliver.
Good OKRs are those that are ambitious yet realistic, measurable, and directly tied to overall objectives.
Here is an example:
Good OKR: Increase annual recurring revenue (ARR) by 25% by the end of the year.
Good Key Results:
- Achieve a 20% increase in new customer acquisition.
- Reduce churn rate to less than 5%.
- Launch two new upsell features.
“Poor” OKRs are those that are tough to measure and are vague or open to misinterpretation.
Here is an example:
“Poor” OKR: Become the market leader within six months.
“Bad” Key Results:
- This OKR lacks specificity and is not measurable.
- It doesn't provide a clear path to achieving market leadership.
Setting annual OKRs is a powerful strategy that can be utilized to drive measurable growth, align internal teams and drive accountability while remaining adaptable, and motivating employees. Following best practices in creating, setting OKRs and involving the right stakeholders ensures that your OKRs are effective in guiding your organization. By distinguishing between good and “poor” OKRs, you can maximize the impact of this goal-setting framework and drive exponential business growth.
Need assistance jumpstarting your company’s 2024 OKR’s? Reach out to us.