Organizational culture is created by a shared set of values, norms, and behaviors that everyone in a company abides by. It’s hard to maintain a strong culture in the best of times, let alone during turbulent ones. In the past few years, we’ve seen a shift to hybrid work, a Great Resignation, and countless other destabilizing events nationally and globally, all of which have impacted workplace culture in various ways. There’s no easy fix when it comes to cultivating (or recultivating) corporate culture, but one effective way to approach culture at your organization, which you may have not considered, is using objectives and key results, or OKRs.
By now, most of us are familiar with OKRs in the context of goal-setting, but this framework can also drive innovation and transform culture by creating alignment throughout a company, empowering employees to innovate, and reinforcing key company values. In our recent webinar, Managing Cultural Change in the Workplace With OKRs, Lattice spoke with Lawrence Walsh, cofounder and Chief Operating Officer of There Be Giants, which is part of our fast-growing Lattice Partnerships Program, a network of trusted companies that have expertise in People teams, performance management, and more. At There Be Giants, Walsh helps businesses with OKR implementation, OKR coaching and support, and setting up the values and culture organizations need to thrive. Read on to learn how OKRs differ from other goal-setting frameworks, and why and how they can lead to cultural transformation at your organization.
What Are OKRs and How Do They Differ from Other Goal-Setting Frameworks?
OKRs help align day-to-day activities to the strategic priorities of an organization, and ensure that there’s a “golden thread throughout the business that connects and drives that sense of purpose in all employees,” explained Walsh. This top-down alignment is what distinguishes OKRs from other goal-setting frameworks, such as SMART goals. Unlike OKRs, SMART goals have no objective — or an 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. A SMART goal is a standalone metric, which is useful for repetitive processes or tracking individual goals, but it’s not as motivational as an OKR because it doesn’t show a direct connection to making progress toward achieving company priorities.
You can use OKRs and SMART goals at the same time, but it’s important to clearly 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 significant improvement over previous results. On the other hand, SMART goals are effective for measuring KPIs, health metrics of an organization (such as employee engagement and retention), and personal goals.
What Is OKR Culture?
Having a strong OKR culture, said Walsh, means having a level of psychological safety
throughout your organization that’s going to allow individuals and teams at every level of an organization to challenge the status quo. In his book The 4 Stages of Psychological Safety: Defining the Path to Inclusion and Innovation, researcher, author, and speaker Timothy Clark, PhD, defined psychological safety in four stages. The last stage he lists, and the highest level of psychological safety, “Challenger Safety,” allows people to feel safe and empowered enough to look at things differently and achieve innovation. Walsh said that it’s in this environment that OKRs thrive — if you have an OKR culture that is inspiring innovation throughout the company, you’re going to achieve great business impact at pace and scale.
How OKRs Transform Company Culture
Using OKRs to transform company culture requires a reframing of 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 an organization, too.
Research has shown why effectively using the overall OKR framework, rather than specific OKRs, can lead to both OKRs and a healthy corporate culture spreading throughout an organization. A 2016 Deloitte study found that one of the factors that has the highest impact on employee engagement is clearly defined goals — specifically, goals that create clarity and alignment, 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.
And multiyear research on corporate culture conducted at MIT Sloan School of Management detailed the top 10 elements your corporate culture needs to get right. The top three are:
1. Employees feel respected. This ties back to psychological safety and employees feeling that their perspectives are taken seriously in the workplace.
2. Leaders are supportive. The role of the leader should be focused on providing direction and enabling employees to get their jobs done.
3. Leaders live their core values. The study found that there’s not a huge negative impact on company culture if leaders just practice lip service and don’t actually demonstrate core values; it’s become the norm and not the exception that employees don’t expect their leaders to live the core values they preach. However, there is a lot of potential upside to company culture when leaders have integrity and alignment in what they say and do.
Although neither study specifically mentions OKRs, Walsh pointed out that implementing a robust OKR framework can address all of 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. And asking individuals how they demonstrate the company’s core values when working on OKRs and performance reviews is important for holding everyone — including leaders — accountable to living those core values.
How to Use OKRs to Positively Impact Company Culture
Before you start making major changes, it’s necessary for leaders to take a pulse on the current state of the company; most leaders should have a general feeling about where their culture is at. Then, depending on where the culture currently stands, your organization can choose from a range of options.
A Complete Overhaul
If your culture needs a complete revamp, Walsh encouraged conducting a full cultural values assessment (CVA), which would evaluate what employees consider their current versus desired corporate culture to be. Many companies will likely find themselves in this situation, as the events of the past several years during the pandemic have led to teams that have never met in person or built a sense of belonging and a shared understanding of the company culture.
There Be Giants offers their clients an assessment in which they obtain responses from the entire organization and then put together a plan for executing and improving its strategy for culture, including defining what is important to the company and how that’s currently being exhibited, and where the company should go and how. This could include formulating a new mission statement, vision statement, values, and more.
Just Some Tweaks
If your company’s culture doesn’t require a full overhaul, engagement 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 dialog and discourse, and uncover opportunities for improvement. It often makes the most sense to start incorporating OKRs into the greatest areas of weakness (for example, this could be things like company or team priorities, effectiveness of communication, or work-life balance), but you may also find some low-hanging fruit where applying OKRs could have an impact. People don’t always realize there are often some really simple changes that can have a huge impact on company culture, said Walsh.
Best Practices to Implement and Pitfalls to Avoid
Common mistakes that a lot of organizations make is being too descriptive with their 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. For instance, if your objective is to build a thriving company culture, your key results could be an increase in employee net promoter score (eNPS) and employee retention rate, and a drop in churn rate.
Once 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.
Before setting OKRs, you need to make sure that you have the basics of an OKR culture in place. Things like accountability, transparency, and collaboration only work if you have your company culture set up to allow for them. If you’re getting feedback in engagement surveys that there are red flags in your company culture, figure out the fundamentals before setting up an OKR culture.
Questions to Ask to Identify Culture Challenges
In order to get employee feedback that’s going to help you make the desired changes, you have to ask the right questions in the first place. Gallup has done a lot of research on the most effective survey questions to measure employee engagement. Based on that research, here are some suggested topics to address in your employee engagement surveys, and possible sample questions provided by Gallup, measured on a scale of strongly disagree to strongly agree:
- I know what is expected of me at work.
- I have the materials and equipment I need to do my work right.
- At work, I have the opportunity to do what I do best every day.
- In the last seven days, I have received recognition or praise for doing good work.
- My supervisor, or someone at work, seems to care about me as a person.
- There is someone at work who encourages my development.
- At work, my opinions seem to count.
- The mission or purpose of my company makes me feel my job is important.
- My associates or fellow employees are committed to doing quality work.
- I have a best friend at work.
- In the last six months, someone at work has talked to me about my progress.
- This last year, I have had opportunities at work to learn and grow.
Key sentiments you’ll want to identify in 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, advised Walsh.
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 will allow 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 to each other, and how your work ladders up at 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 OKRs Can Increase a Sense of Belonging
OKRs shouldn’t be used for measuring business as usual, but rather for strategic execution that drives growth, change, and innovation at an organization. Due to the nature of OKRs, not every team will be directly involved with them at all times, said Walsh, who noted that it’s notoriously difficult for companies to be comfortable with this.
To make up for the fact that there will be times when an employee or team isn’t involved in the company’s OKRs, leaders have to expend more of an 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, stressed Walsh, never set someone else’s or another team’s OKRs for them. 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, which enables employees to take end-to-end accountability on the projects they’re working on so they feel invested in the OKR process.
Should OKRs Be Attainable vs. Stretch or Aligned to Performance and Compensation?
OKRs should be aspirational or stretch goals, said Walsh, who recommended aiming for 70-80% achievability with 20-30% stretch on top. And OKRs should be realistic enough that you’re able to make progress on them, while keeping in mind that they’re designed to push you to think of innovative ways to do business.
“Committed OKRs,” or goals that you have to hit 100%, should only be used in extreme situations. 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, health and safety standards, and things of this nature.
Linking OKRs to performance and compensation is a surefire way to stave off innovation, cautioned Walsh, because people are going to set key results that meet just the minimum requirements if bonuses and promotions are tied to them. There’s no incentive to set a stretch goal if your bonus is tried to it, so Walsh advised against having a direct correlation between an individual’s OKRs and their rewards and compensation.
Similarly, OKRs shouldn’t be tied to individual performance management because that’s focused on individual goals. The most impactful goals are achieved at a team level, and 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. OKRs should be tied to performance development — how people are demonstrating company values while working on OKRs — but not performance management.
OKRs can have a place in the conversations about rewards and compensation — as long they’re not directly linked. Because OKRs have to do with how a company operates and moves forward, they should be part of conversations at every level. But teams should be focused on embodying and enacting the behaviors set in OKRS — such as taking accountability; leading check-ins; bringing together teams; and being open to testing, adapting, and learning from intelligent failure — instead of trying to achieve key results all the time.
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, as well as buy-in on the fact that because OKRs are aspirations, 100% of these goals might not be achieved.
If you are struggling to present the results effectively to executives, Walsh said that’s a telltale sign there’s a problem with your OKRs, because OKRs are all about impact and executives love impact. If the OKR framework is working correctly, then the established OKRs should align directly to top-level company objectives, and leadership will see progress toward their own OKRs. If it’s not, you need to reevaluate your OKRs to ensure that you’re setting impact-focused key results (e.g., hire new salespeople) and seeing how they’re helping you overcome challenges (e.g., increase sales).
What Level to Set OKRs at and How Frequently to Set Them
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 will require employees and departments to communicate and collaborate with each other. This way, there won’t be competition for resources or siloed working, and everyone will be aligned and working toward the same goals.
There’s no hard and fast rule, but in general, the standard for setting OKRs is three and 12 months (e.g., quarterly and annually). Progress on quarterly OKRs should directly 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.
- Lattice OKRs & Goals: A tool for accelerating growth by connecting individual achievement to organizational success
- There Be Giants OKR Resources: Guides and templates
- Giant Talk Podcast: A podcast about OKR methodology
Watch our full Managing Culture Change in the Workplace With OKRs webinar here.