Organizational culture is defined by a shared set of values, norms, and behaviors that should guide everyone in a company. But this isn’t a static process, and that means culture change in the workplace is often inevitable.
As a result, maintaining a strong, consistent workplace culture can be a challenge. There’s no easy fix when it comes to cultivating, or recultivating, corporate culture. But one effective option that’s becoming increasingly popular is using objectives and key results (OKRs).
Most of us are familiar with OKRs in the context of goal-setting, but building an OKR culture within the wider work environment can have a transformative effect. From driving innovation to creating alignment and reinforcing key company values, here’s what you need to know about the impact of OKRs.
What are OKRs?
OKRs are a goal-setting methodology designed to link day-to-day activities to the overarching strategic priorities of an organization.
Lawrence Walsh, cofounder and managing director of There Be Giants, explained that the use of OKRs helps ensure that there’s a “golden thread throughout the business that connects and drives that sense of purpose in all employees.”
But while this golden thread connects all employees, OKRs should be applied at the team level, not the individual level. Doing so leads to more effective and impactful culture change, because shared metrics help teams zoom out to company-wide goals, while also connecting how individual actions move the needle toward achieving these.
What are the 5 elements of OKRs?
Done right, OKRs create a sense of purpose and clarity. Clearly defined OKRs should be broken down into five key elements:
- Focus: By prioritizing only a small number of objectives, teams can stay focused on their targets.
- Autonomy: Clearly defined key results help your team work independently because they know what they need to achieve.
- Alignment: Team goals should always be connected to the overarching vision so that everyone is aligned.
- Accountability: OKRs need to be regularly reviewed, with managers and leaders tracking how objectives and key results are being completed.
- Transparency: Using an OKR system helps promote transparency by allowing employees to connect the dots between their work and the overarching company goals.
How OKRs Transform Company Culture
Using OKRs to transform company culture requires reframing how you think about OKRs, said Walsh. Instead of only thinking about OKRs in the context of performance management, consider how OKRs can impact the strategic execution of organizational goals, too.
Research has shown that effectively using the overall OKR framework can lead to the spread of OKRs and a positive corporate culture throughout an organization. Here’s what that can look like in practice.
Increasing Employee Engagement
In the State of the Global Workplace 2023 Report, Gallup uncovered that 41% of employees think that changing the engagement or culture of their workplace would make it a better place to work.
One of the key improvements these employees are looking for is more clearly defined goals — which is essentially what OKRs are. If you can set up your OKR framework correctly — by defining your goals and the desired outcomes, making them transparent to everyone in the organization using software and communication processes, and updating the company on progress — you can improve employee engagement.
Boost engagement and productivity will follow. Gallup research also found that business units with highly engaged employees are 17% more productive and 21% more profitable.
Improving Corporate Culture
Multiyear research on corporate culture conducted at the MIT Sloan School of Management detailed the top 10 elements your corporate culture needs to get right. Here are the top three cultural elements that mattered most to employees.
- Employees feel respected. This ties back to psychological safety and employees' feeling that their perspectives are taken seriously in the workplace.
- Leaders are supportive. The role of the leader should be focused on providing direction and enabling employees to get their jobs done.
- Leaders live the organization’s core values. The study noted that many employees don’t expect their leaders to live the core values they preach. However, when leaders do embody the company’s values, employees rate their organization’s culture more highly.
Although neither study specifically mentions OKRs, Walsh pointed out that implementing a robust OKR framework can address the areas that are key to employee engagement, such as transparency, alignment, and a sense of purpose. By setting clear outcomes without being prescriptive about how they should be achieved, leaders can empower employees to innovate to reach solutions.
Asking individuals how they demonstrate the company’s core values when working on OKRs and performance reviews is also important for holding everyone — including leaders — accountable for living those core values.
Using OKRs to Increase a Sense of Belonging
Due to the nature of OKRs, not every team will be directly involved with them at all times, said Walsh. To make up for this, leaders should expend more effort to create a sense of belonging for all workers — if not directly in the OKR-setting process, then in the communication around OKRs and what the company is trying to achieve.
And never set someone else’s OKRs for them, stressed Walsh. He warned against having a CEO write the company OKRs as well as all those of their direct reports, because this doesn’t create a sense of belonging in the C-suite, let alone for everyone below the C-suite.
Instead, leadership should set the direction for OKRs but not be prescriptive about how they need to be accomplished. That enables employees to take end-to-end accountability on the projects they’re working on so they feel invested in the OKR process.
How to Assess Your Current Company Culture
Before making major changes, leaders should take a pulse on the current state of their company’s culture. Even if most leaders have a general feeling about the culture, asking team members’ opinions is crucial, as it can uncover valuable new perspectives.
Options for measuring company culture include conducting peer-to-peer interviews, reviewing performance management data, and providing surveys with room for detailed comments. But to get employee feedback that can inform any desired changes, you have to ask the right questions.
Questions to Ask to Identify Challenges With Company Culture
To identify problems with company culture, we recommend surveying employees. We’ve included engagement survey questions that focus on themes including pride and core engagement. Questions should be presented as statements, and responses should be collected using a Likert scale ranging from “strongly disagree” to “strongly agree.”
- I'm proud to tell others that I'm part of this company.
- I'm proud of the contributions I make to this company.
- I talk up this company to my friends as a great place to work.
Growth and Development
- I have the opportunity and time in my schedule to grow and develop in my role.
- I can see myself growing and developing my career in this company.
- I have had a meaningful conversation at work about my career development in the past six months.
- I find my work to be a positive challenge.
- I feel fulfilled by the work that I'm doing.
- I feel invested in our mission, vision, and values.
- I'm motivated to do my best work.
- My team communicates effectively.
- We have the right people on my team to do the work we need to do.
- My manager communicates clear goals for our team.
- I feel connected to the people at this company.
Employee responses to the above questions should help uncover where your culture currently stands.
Walsh advised that further key sentiments to identify within employee responses are: if there’s a fear of failure, if people are willing to collaborate, and if people at every level of the organization feel safe enough to test new ideas.
Depending on these results, you might decide that your company culture needs a major overhaul, a few minor tweaks, or something in between.
A Complete Overhaul
If your culture needs a complete revamp, Walsh encouraged conducting a full Cultural Values Assessment (CVA). This evaluates what employees consider their current versus desired corporate culture to be. Companies in this situation may find their employees lacking a sense of belonging or a shared understanding of the company culture.
There Be Giants, one of Lattice’s service partners, offers their clients an assessment in which they obtain responses from the entire organization and then put together a plan for improving its strategy for culture. This plan includes defining what matters to the company and how that’s currently being exhibited, as well as where the company should go and how. This could include formulating a new mission statement, vision, values, or more.
Just Some Tweaks
If your company’s culture doesn’t require a full overhaul, pulse surveys are an effective place to start. Leaders have to be comfortable knowing that results may come back that are negative, but if they do, that will give your organization clear areas to work on. Using a tool like Lattice Pulse Surveys will allow you to gather as many responses as possible, talk to people at all levels of your organization, build dialogue and discourse, and uncover opportunities for improvement.
It often makes the most sense to start incorporating OKRs into the areas of greatest weakness, like company or team priorities, effectiveness of communication, or work-life balance. But, you may find some straightforward changes that can have a huge impact on company culture too, said Walsh.
OKR Best Practices to Implement and Pitfalls to Avoid
Before setting OKRs, you need to make sure that you have the basics of an OKR culture in place, including:
If you’re getting engagement survey feedback that employees don’t feel like these elements are in place, this can signal issues with your company culture. If that’s the case, go back to square one and figure out these fundamentals first. Then, you can focus on setting up an OKR culture.
Once your OKRs are set, it’s essential to have regular conversations across the organization about the initiatives needed to ensure you’re making progress toward those results.
An OKR-based way of working should always be agile so you can iterate, test, learn, and adapt. You should constantly be working to ensure you’re making progress toward the outcome-focused key results you set.
Common mistakes include being too descriptive with objectives and using key results to measure outputs rather than outcomes. The objective should be what you want to achieve and why you want to achieve it.
For example, what is a challenge your company wants to overcome in the next 12 months? The key results are the impact you’ll see if you achieve your objective. If your objective is to build a thriving company culture, your key results could be an increase in employee net promoter score (eNPS), an improved employee retention rate, and a drop in churn rate.
How do OKRs differ from other goal-setting frameworks?
The top-down alignment of OKRs distinguishes them from other goal-setting frameworks, such as SMART goals.
SMART goals are standalone metrics, useful for tracking individual goals and the specific actions these require. But unlike OKRs, they’re not reliant on an objective — the aspirational statement that links the desired destination of the team, department, or company (depending on at which level you’re setting the OKRs) with the work that needs to be done by the organization as a whole.
That means sometimes, SMART goals may not be as motivational as an OKR, because they don’t directly connect with how individual actions help a company progress toward its overarching priorities.
OKRs and SMART goals can be used at the same time, but it’s important to communicate to employees when you’re using which framework to avoid confusion. OKRs should not be used to measure business-as-usual activity; rather, they should be used to drive growth, change, and innovation by delivering improvement over previous results.
How to Share OKRs Throughout Your Organization
Setting your OKRs is only half the equation. You also need to communicate them and make them visible to all employees.
If your company has more than 10 people, Walsh advised investing in an OKR system. This allows employees to log in at any time and see what their colleagues at every level of the organization are working on, how different initiatives connect, and how their work relates to the company level.
OKR systems like Lattice OKRs & Goals make it easy to track and report goals and have regular check-ins and conversations among managers, their direct reports, company leadership, and more.
How to Get Leadership Buy-In on OKRs
In an OKR culture, it’s essential to get executive buy-in on the overall OKR framework. It’s also crucial for leaders to understand that because OKRs are aspirations, not all of these goals might be achieved.
If you’re struggling to present the results effectively to executives, Walsh said that’s a sign there’s a problem with your OKRs. If the OKR framework is working correctly, the established OKRs should align directly with top-level company objectives, and leadership will see progress toward those objectives. If it’s not working correctly, you need to reevaluate your OKRs to ensure that you’re setting impact-focused key results.
Should OKRs be attainable or stretch goals?
OKRs should be aspirational stretch goals, said Walsh, who recommended aiming for 70-80% achievability with 20-30% stretch on top. OKRs should be realistic enough that you can make progress on them while keeping in mind that they’re designed to encourage innovation.
“Committed OKRs,” or goals you must hit 100%, should only be used in extreme scenarios. For example, if there’s a situation that poses a risk that prevents the business from operating, you should use a committed OKR and spotlight it as a high priority throughout the entire organization. These types of OKRs usually fall into categories like regulatory compliance or health and safety standards.
Balancing OKRs With Performance and Compensation
While 83% of HR professionals believe compensation and performance should be linked, OKRs shouldn’t form part of conversations about individual performance. That’s because this approach can stave off innovation. Walsh cautioned that if bonuses and promotions are tied to OKRs, there’s no incentive to set a stretch goal.
But because OKRs are an intrinsic part of how a company operates and moves forward, they can have a place in conversations at every level. Just take care not to directly link them to individual performance.
The most impactful goals are achieved at a team level. At that level, it becomes too complicated to link OKRs to individual performance because it’s unclear what everyone is trying to achieve individually rather than as a team.
A key point in striking this balance is that OKRs should be tied to performance development — how people demonstrate company values while working on OKRs — but not performance management.
Instead, move the focus toward how people can enact the behaviors set in team OKRS — like taking accountability; leading check-ins; team-building; and being open to testing, adapting, and learning from failure — instead of trying to achieve key results all the time.
Optimizing OKR Levels and Frequency
Setting OKRs at the departmental level can lead to working in silos, which can result in misalignment. Instead, Walsh recommended getting department heads together to create a set of cross-functional OKRs that require employees and departments to communicate and collaborate.
This way, there won’t be competition for resources or siloed work, and everyone will be aligned and working toward the same goals.
There’s no hard and fast rule, but in general, you should aim to set OKRs both quarterly and annually. Progress on quarterly OKRs should feed into the key results of the 12-month OKRs. Different organizations have different cycles though, so you’ll need to find the cadence that works best for your business.
OKRs are important tools for setting goals at all levels of the organization, but there are also more widespread benefits. Implementing an effective OKR framework and OKRs can result in increased transparency and alignment, which in turn creates a positive organizational culture, employee engagement, and overall success.
Ready to get started? Our Quarterly OKRs Template includes everything you need.