How to Align Your Company with OKRs

Introduction

Thanks for spending part of your day chatting with us about goals and OKRs. So our goal today is mostly just to talk about how OKRs function for your company. Obviously most of you here have read about OKRs, you've thought about goal setting for your companies. A lot of you, I know have been inside of Lattice and have talked to us. The goal here is to make sure that we're able to chat with you guys about how do OKRs actually work, how do they work for the rest of your company, how do you teach it to your team. How can you make the most of this, and implement it in a way that makes it work for you. So we're going to start by sharing a presentation that we put together for you guys, and at any point during the presentation, please feel free to ask any questions. I'm not going to spend an incredibly long time going through this; so we'll try to do this for for 15 or 20 minutes, and at the end, I'd love to address any questions you guys might have during the presentation, and we'll do a Q&A at that point.

Brief History of OKRs

The focus today is going to be "How to Align your Company with OKRs." Very, very quick history lesson so we know where we're all at. There have been different frameworks for goal setting throughout history. OKRs is popularized by Google around the late 90s, 2000s. It had been done by Intel before that, but over the last 15 years OKRs has risen as the dominant goal setting framework. Looking out a little bit further, the point of goals, the reasons goals exist period, is because as the company gets larger, getting groups of people to do something focused towards one mission is a challenge. Goals for individuals and aligned across the company have been one of the best management techniques in business and history to get people to focus towards those goals. Today you see companies, it's not just Google, but Amazon, Netflix, Spotify, tons of others from just around Silicon Valley. The broader business world have found that OKRs are really powerful.

What's an OKR?

We're going to talk about two different concepts here. What are OKRs specifically structurally? And more importantly, what's the philosophy behind OKRs? What is it that sort of clarifies what makes OKRs work? And what are those key tenets and principles when you;re actually doing it? So from the building blocks perspective, objectives and key results means and objective is, where do I want to go, what's the directional place I want to head? And key results are a way to measure it. To contrast that with what a regular goal might look like. A regular goal might be something like: We want to close 50 customers. And objective and key result would be structured differently. In that case you might have an objective here, like become a market leader, and you have multiple key results might be closing 50 customers, increasing revenue by a certain amount, driving engagement by a certain percentage, growing brand awareness by, say 30%. So the idea here is that the objective is an aspirational, typically qualitative objective principle that you want to head towards as a company, and the key results are the various ways you want to measure it.

OKR Philosophy

Setting goals as objectives and key results has advantages over just setting them just as a regular goal. There are trade-offs, too, which we'll talk about later in the presentation. But one of the nice things is instead of just saying, "Here's the number we want to get to," you get to give some context about what's the purpose, what's the direction. It's something that can be inspiring, and something that you can measure in multiple ways. But the philosophy around OKRs is even more critical than just this structure. And this is really getting to the core of goal setting. This has been true for OKRs, other types of goals that have predated OKRs. The ideas here are the following:

1)OKRs are Ambitious

First, you want your goals to be very ambitious. You're not trying to do something that's completely unattainable. But you're also not setting goals that you think you should be hitting. So maybe slightly counterintuitive, but if you're accomplishing your goals, that's probably an indicator to you that you should be setting higher goals. So when we say we want goals to be ambitious, we're looking to stretch ourselves up the same way we would if we were setting personal fitness goals, or health goals, or finance goals. You want to stretch yourself to do more, but you want to make it attainable. Typically, in the world of OKRs if you're hitting about 70% of your goals, you set goals about appropriately, and that of course means you've worked very hard to achieve that 70%. So that should be looked as, "We stretched hard, and that made us successful." Rather than saying, you know, "We want to close 50 customers,"and closing 50 customers. You're better of saying you want to close 100 customers, and closing 70. Having that inspirational target will make you push harder, it'll make your team believe they can do more, it'll make you believe you can do more. So that's a really important part of this.

2) OKRs are Measurable

Second, you want your goals to be measurable. There's nothing less useful about saying, "We want to be a great company."Then a quarter later, looking back and saying, "Well are we a great company?"I don't know, what does that even mean? The nice things about OKRs is you can say, "We want to be a great company," and you can measure it with top talent is coming to work at our company at a certain rate, or our customer NPS score has achieved a certain level. Or our revenue growth has surpassed a certain amount. Then that gives you the ability to go back and say, "Okay when we said we wanted our company to be great, we were measuring it in various ways. These are the ways we measured it, and did we accomplish this or not?"Having measurable goals allows people to say, "What should I be working on today?"Not just amorphous sense of, "Yeah, we want to go in this direction, but we really don't have a plan on how to get there."

3) OKRs are Transparent

Transparency is a critical piece, too. Just like in personal goal setting, mentioning your goal and saying that to the world, and proudly standing by it, makes a big impact on how people behave. So when people are transparent about their goals, when they say, "This is the thing I set out to do." They made a commitment to themselves, to their team members, to their company at large, that this is what they set out to accomplish, and that makes people want to set out and accomplish those things. The other benefit of being transparent throughout a whole company is that when you've set your goals transparently that implies that everyone else has set their goals transparently. Which means when you're in Product, you know what's happening in Marketing and Sales, or Engineering and Finance. Generally as a company the better you are to give people the ability to make decisions, the better your company will be because more decisions will be processed today. Transparency is a huge driver of that; there are lots of materials and content around the importance of transparency and growing companies. But OKRs are a big support of transparency. This is the reason, because number one, it lets people set their goals in a way that they're then accountable for. And number two, it gives people visibility through the rest of the company, which ultimately gives them context to make better decisions.

4) OKRs are Aligned

Finally, alignment is obviously a core of goal setting in the company. When you're just one person or just three people, alignment comes very easy. Typically you all know what each other's doing, you all can communicate with each other on a regular basis, the total number of things that are happening in the company when you're very small is just not very high. So staying aligned is a very easy process at that point. People basically undervalue how important that alignment really is towards the success of the company. Later on when you have 50, 100, 150 people, alignment becomes a really big challenge. People all don't know each other, departments haven't necessarily connected with each other this week, or this month, even. So setting your goals in an aligned way allows you to make sure you aren't splaying out the various people's work into different directions, and are instead honing all of that focus towards one goal. If you actually think about a company mission's, and then you broke that down into company-level goals, and then into team-level goals, and then individual-level goals, there's this "nirvana" of company alignment. You could tie every person's work up through this graph towards the company's mission. And if it wasn't towards the company's mission, you would then pull that person from whatever they were working on, and redirect them to something else. When we're talking about alignment we want to make sure the company has set clear overall objectives, and that everybody's work, either on the team-level or the individual-level has then tied back down to those objectives.

OKR Example

Just to give a quick example, here's what you might see. You might see that the CEO has an objective to become the market leader, and they've set up a couple of key results of what that looks like. From a Product and Marketing perspectives you'll see objectives around launching an important new mobile app, or making sure we're delivering high quality level leads. And we have different ways to measure these things. Quickly, from here we'll get into what are some of the challenges of OKRs, and how do you cascade these OKRs and how do you get them to work not just at the company-level but at the team-level. Here's sort of the map of what it can look like, but we'll drill a little bit more about how that works throughout the whole company.

How to write Objectives

So just to summarize here: the way to write OKRs is, from the objective side you want a few goals at each level. So you don't want to have nine goals, you don't want to have typically one goal, although there are examples. Famously Peter Thiel during his PayPal days didn't want anyone to have more than one goal. And if you spoke to him about anything other than that one goal, he would ask you to please redirect your attention back to that one thing. I think in practice being focused around about three objectives per person, per team, and per company turns out to be the right amount of breadth, but also focus. Another point around setting the objective is you want a finite endpoint. So rather than saying "We're going to just expand towards the world," say, "We're going to expand into Europe and China and South America."And that way when you look back, you should say whether you accomplish this objective or not. And finally as we mentioned, objectives should be ambitious, they should be inspiring, and they should be aspirational, so set your objectives to something that gets you out of bed every morning.

How to write Key Results

And when you look at the key results, typically you'll see something like two to four key results per objective. So you do want to measure these objectives in multiple ways. Another interesting topic on this point is you sometimes will want to counterbalance metric. We'll get into this after, but the idea is that you occasionally want to the concept that you have one metric, that is, "We want to grow revenue as fast as we can." But then there's a counterbalance health metric like, "We want to keep turnover as low as we can." So if you make one of the metrics very high while the counterbalance metric is getting out of hand, you can sometimes set those together. Generally though focus on the three key results around an objective, then measure the objective in multiple ways. You also then want to make sure your key results feel like things that if you did indeed accomplish your key results your objectives would be closer to being complete. That doesn't mean the objective has to be complete that quarter so you might have an annual objective in a quarter that has a few key results that bring you closer to that objective. But it does mean that if your key results are being accomplished and you're not being closer to your objective, you need to revisit how the objective and the key results are being tied together. Finally you want your key results to show an outcome and not an activity, so that should be self-explanatory. The idea there though, you want your key results to say did we accomplish these things, not what are the things we're going to do when we walk in the door. So think about outputs rather than inputs. In other words you want to think about what are the things that need to get done rather than what are the things we're going to do to accomplish our goals.

How to setup OKRs at your Company

Just to give you a quick view of how to set up OKRs before the quarter. And the quarter is the most common and I think the most effective cadence "I've also seen six weeks, I've seen as long as six months. I think it's become generally accepted that annual goal setting in not frequent enough. Weekly goal setting would seem more like a task list which is not the purpose of this. And so typically we'll work with companies on a quarterly OKR basis, and this is a great amount of time that gives you sufficient runway to accomplish the goals that you want. But it's short enough that you can make adjustments, quarter every quarter, and you don't ever let things get off the rails without deep diving into them. A typical rollout plan usually involves making sure to start with the leadership team and the company at large agrees what are the most important priorities for the company. So you start with those company-level objectives, and then you collaborate with the teams to draft department-level objectives. And then you can roll it out to the entire company to draft individual goals. This can be done on different timeframes depending on how much the company exercised its goal setting muscle, but this typically takes a couple of weeks, and the idea here, importantly, when you're calibrating and finalizing the OKRs, you should remember that you want people to set their own goals for the most part, and then work with their managers to finalize them. There are cases where it's fine for the managers to set the goals for their employees, but typically goals are more effective when a manager sets objectives at their own level, say the department-level or the company-level, and then says to the teammates, "You should submit what you think are the most important goals for you towards this. We'll work together to make tweaks, calibrate numbers," and things like this. In general when people set their own goals, I think they feel a lot more attachment to the goals, they've signed up for goal signs to hit, it gives them a much greater sense of autonomy. And frankly they often are the ones who know best what they themselves can do to move the higher levels forward.

How to grade OKRs

Just a reminder that "On Target" between 60% and 70% complete is actually very good. If you're getting a 100% on your goals all the time, that's a sign you should set more ambitious goals. If you're getting 0% to 20% to 30% on your goals all the time, then either examine your operations, or make sure you're not setting crazy goals. But this is what the framework for creating goals looks like.

Common Challenges with OKRs

Now I want to jump into the common challenges with OKRs. So these are the things that rubber met the road, you bought into OKRs, you want to give them a try with your company, and you now try to roll it out, and you run into a few of the common challenges. These are things that repeatedly seen, especially early on in the company's OKR life. We wanted to address a few of the topics that we talked about with companies are a regular basis, so we can share this before you run into it yourself.

How measurable do objectives need to be?

One of the challenges is people want to set objectives as measurable. So people say, "My objectives is just to do this measurable thing." "My objective was told to me, I need 10 new customers." "I need to ship this one product." "I don't know how to put this into a way that's an aspiration at the top, and key results on the bottom." The general answer to this is OKRs are meant to be a helpful framework for when you're using them but to the extent that they're getting in the way of what makes obvious sense to you, you don't need to structure the entire goal as an OKR throughout the organization all the time. This is the case at even the largest companies that practice OKRs don't have a definitive system for exactly how the objectives and the key results have to connect together, how many there have to be, how many there are at each level. Ultimately you want to make it work for you. A common version of "working for you"that we've seen is a company will set up objectives and key results at a company-level, maybe at the department-level. By the individual-level, people will simply have goals. Those goals will often look more like a key result. The fact that there are one of them, they are measurable, they don't have the OKR structure, and that's totally fine, and that's even effective. Just to take a practical example for this. Let's say you want to cascade objectives down through Sales and let's imagine that we had an OKR at the top which was, "We want to become the market leader in the social space for teens." I then wanted to measure my key results as ad sales are at a certain rate, engagements are at a certain rate, maybe user-happiness score is at a certain number. So then I'm now the head of the Ad Sales team and now I'm thinking how I'm going to work with my team to assign goals. Do I need every one of my sales reps to have their own OKR operation of closing a ton of sales, or can I give them a goal of, "This is where you need to contribute"? The answers I've typically seen is that it's okay to give individuals a particular number, and have that be their focus, knowing they are part of the team that has this broader OKR. So you do want the objectives to be aspirational, qualitative, and to be focused on the longer term, but that doesn't mean that every single individual has to have it.

Should I make my objectives my manager's key results?

There are cases that can make sense, like the sales example I said. There are other cases where you might have company-level objective of delivering the best product on the market, and then say the head of Products, you might want to create your own OKR that is, "Deliver a beautiful mobile app experience."Then you have key results around how that's going to be measured. In that case the objectives and the key results are directionally tied together, but you don't actually have to make your objective equal to the key results of your manager. So there are different examples like I've illustrated where that does make sense, and where it doesn't. There's no perfect way to do it, the key is you don't want the structure of the goals to get in the way of how you set up and organize your company. It's meant to be helpful. To the extent that the OKR setup can be helpful, use it that way. Otherwise do the thing that's going to get you through the process quickly, and to help set a goal that makes sense for people. Engineers already have JIRA, the sales team already has sales force; do we really need to use an OKR tool in addition to this? The disconnect here is that the OKR tool is not meant to address what you did today, or what project you're working on at the exact moment, what deals you closed, or what bug ship you fixed. The idea here is that you want to be using an OKR system, whether it's just setting your OKRs to each other or using something like Lattice, where you're expressing your higher level goals to each other. And this has bidirectional value. So if you're saying, "Yeah, we're going to use JIRA and sales for our day-to-day tasks, but we then want to share progress on our epics or our monthly sales numbers."Those things are really important. And that gives everybody else in the company visibility and to [ask], "Where are you guys headed? Where do we currently stand against those goals?"And it also allows you to have a place, where you can see all of their things. Just like Waze is sort of a communal where people can share information about what's happening on the road. OKRs are a way for you to bring the work that you're doing in your daily tasks back to one central place so that you know what others are doing, and they know what you're doing. The idea isn't to spend a ton of time with details, but rather just to get those high-level things in place.

t want the structure of the goals to get in the way of how you set up and organize your company. It's meant to be helpful. To the extent that the OKR setup can be helpful, use it that way. Otherwise do the thing that's going to get you through the process quickly, and to help set a goal that makes sense for people. Engineers already have JIRA, the sales team already has sales force; do we really need to use an OKR tool in addition to this? The disconnect here is that the OKR tool is not meant to address what you did today, or what project you're working on at the exact moment, what deals you closed, or what bug ship you fixed. The idea here is that you want to be using an OKR system, whether it's just setting your OKRs to each other or using something like Lattice, where you're expressing your higher level goals to each other. And this has bidirectional value. So if you're saying, "Yeah, we're going to use JIRA and sales for our day-to-day tasks, but we then want to share progress on our epics or our monthly sales numbers."Those things are really important. And that gives everybody else in the company visibility and to [ask], "Where are you guys headed? Where do we currently stand against those goals?"And it also allows you to have a place, where you can see all of their things. Just like Waze is sort of a communal where people can share information about what's happening on the road. OKRs are a way for you to bring the work that you're doing in your daily tasks back to one central place so that you know what others are doing, and they know what you're doing. The idea isn't to spend a ton of time with details, but rather just to get those high-level things in place.

Who should own a cross functional goal?

We'll also see some confusion around cross functional goals. You'll often hear best practice is one goal, one owner, and you should not deviate from that. Theres a lot to be said for that. Typically having ownership and accountability is a very good thing, and to the extent that it's possible, it is best practice to make one goal have one owner. With that said, just with the OKRs cascading down to the company, it's not worth causing confusion and strife when it doesn't make sense, too. For example you might have a goal around "let's go back to shipping a mobile app. This is all head of Design, and the head of Product we're working on. In that case you can say, "Okay we're going to both be co-owners of this goal." Knowing that typically we would try to structure things so that there's a single owner, but in cases where it's truly is cross functional and all that people are working on, having multiple owners to a goal is okay. The key is to be aware that you want accountability, you want people to still have ownership and clear responsibilities. And so that awareness will compensate for the fact that occasionally you can have a couple owners on the goal. If you find yourself in a point where all of your goals are being co-owned by 14 people, that usually is a sign to you that you're not thinking of what's the higher level goal that's being owned by some leader that then is supported by a lot of other people's goals.

How should goals be used in performance conversations?

There are a lot of strong opinions on this. There are people that believe goals and OKRs should be completely separate from the performance conversation. And this is because when people believe there should be their compensation, and their ability to be promoted is going to be tied towards their goals, it leads to strange behaviors, it leads to people sandbagging their goals, it causes undue pressure, and importantly it doesn't take account all sorts of other soft skills that people are bringing into the company, cultural impacts, the support that people might have had on goals aren't their own. So there's a camp that says these are separate things that we shouldn't let goal setting bleed into the performance conversation and we want to be extremely explicit about that. There's a great reason for this, as I've just discussed. On the other side you'll hear people who say, "Wait a minute. Goals are actually a very important part. We set these goals because these are the things we our employees to accomplish, and if they're not accomplishing them, maybe we set them wrong and need to adjust that. But if they're consistently not accomplishing their goals, it seems like something that should be part of our performance conversation." Also a very valid point, and historically this is closer to what's been practiced. I think the answer here is that both work for different types of companies, and ultimately this is a personal leadership decision that has to be made. In general I do think there's a lot to be said about the new philosophy around the fact that having goals be the sole dictator of performance conversations leads to a lot of externalities that you'd like to avoid. At a maximum you want goals to be a part of the company. And I think we see a lot of factoring in this sort of performance culture and values. What are they doing to drive other goals forward? It should be looked at holistically, and it's not just about goals.

Q&A time!

With that, I think we've wrapped up in the major things that we wanted to talk about today. I think at this point we can now we've gone through about 30 minutes. So now what we can do is turn it over to any questions, if people have any. So I'm going to bring my face back on, so you can see who we're talking to. And if people have any questions that they'd like to ask, anything that hasn't been answered, we can now start to go through a few of those.

Do you think OKRs only work for Silicon Valley companies. Can they work other industries beyond information technology?

My general view is that they absolutely can work beyond Silicon Valley companies. Generally I think in information technology workers it is easier to use them because people spend time in front of their computers, and so relative to say somebody in a hospital or government setting, or maybe say on a construction site, or doing other things that aren't behind a computer, I think that it makes it easier, but I definitely think it extends beyond Silicon Valley.

What's the best way to explain the importance of OKRs to individual contributors?

So hopefully most of the things we talked about here will help with that, but there's a few points to this. One, as an individual contributor you're going to get visibility to the rest of the company, and this is one best point. This is a system where everybody's giving to it, and everybody's receiving into it. By participating in the system, you're also getting exposure to what everybody else is doing. The other thing as an individual contributor you get to see, "This is how my work ladders up to the overall company objectives," and that's a powerful thing for people. Finally giving people a clear direction and sense of focus, actually really helps people on a day-to-day basis say, " These are the things I should be working on. This is what matters; this is what doesn't matter."In general people tend appreciate the focus and the structure that it comes with it.

How often, and what are the best practices are when to check in on OKRs around the quarter?

That's a great question. The answer is more than zero times, and less than once a day. There are different cadences that work for different companies, and it also can depend on what goals that you have. There are some goals that aren't going to be updated as often, there are some goals where it makes sense every week to provide an update. So the answer is as often as you have an update to share with people that is valuable information for them to know. This can be as often as twice a week, it can be infrequently as once a month. But generally if you're not providing an update to people at least on a monthly basis at an absolute minimum midway through the quarter, you're probably holding information that others could receive value from. Let's do one more question.

Does Lattice only work for OKRs or are there other ways to measuring set goals?

Lattice works for OKRs, it works for regular, hierarchal goals that don't have key results. The idea with Lattice is that we want to provide a place where whether you're doing OKRs at the top, and cascading down towards people owning things that look more like key metrics, or whether you're not using OKRs at all, or whether you're using OKRs throughout. Lattice unifies what that visual experience looks like, it connects together, and it's one central home for this.

Conclusion

Awesome. So I think that is everything that we're going to go through today. I saw a bunch of other questions in here asking if we could share the deck and the video, which we will post after we're done. If you have any other questions please write me an E-mail, always happy to chat, I'm [email protected] and thank you guys for spending the time, and we will talk to you again soon. Thank you.