OKR stands for Objectives and Key Results, a popular goal-setting framework that can be very effective if implemented correctly. Many businesses use OKRs to centralise focus and cascade key business priorities from the CEO level throughout all layers of an organisation, so all teams are fully aligned and working effectively together to achieve results faster. For more background information on OKRs, check out our blog What are OKRs?
One of the main benefits of working with OKRs is that they provide a structured way to communicate the business vision and direction effectively so even the objectives and daily priorities of frontline employees will correspond with what the CEO has set out to achieve for the business. Having a well-communicated tight focus helps employees realise how they can significantly impact business performance. Check out our blog 9 ways to stay focused, boost concentration and not be distracted.
Unlike other goal-setting methods, OKRs can be set at a company, team and/or individual level allowing for collaboration and a high degree of visibility of roles and responsibilities as well as transparency of performance and achievement. When teams become misaligned, inefficiencies emerge as departments and individual employees begin pulling in too many different directions. Cascading OKRs allows a business to maximise performance as employees and departments are aware of the bigger picture and work together towards a common purpose.
CEO or company level OKRs filter downwards to department heads, managers, supervisors and frontline individuals, each taking ownership of relevant key results from those directly above them. They then turn the filtering key results into objectives and create new key results as stepping stone measures to help them succeed. Frontline individuals can see how their work impacts the objectives of senior managers and can be recognised for their efforts in driving business performance.
The best way to explain this is with an example.
Objective One - Strategy: We have developed a clear business strategy that delivers our planned 12-month growth of 20% whilst maintaining our gross margin of 30%. We’ve hit our profit target of 15%, and the strategy is fully adopted across all business areas.
Key Result 1: The Marketing Strategy is established and in progress. Planned marketing activity has launched successfully and is generating 100 leads per month with a conversion of 30%.
Key Result 2: Our Channel Partner Sales Strategy is highly effective, delivering 10 SQLs per month, and conversions have increased to 60%.
Key Result 3: The Customer Success department has been established and is fully functional, achieving a customer retention rate of 85% or above.
Key Result 4: We have successfully implemented new team collaboration software to facilitate remote working and effective communication amongst expanding teams.
Key Result 5: New product has launched successfully and is generating a sales uplift of 10%.
The Head of Marketing would then take the key result above, which focuses specifically on their area of expertise and make that their primary objective, as follows:
Objective: The Marketing Strategy is established and in progress. Planned marketing activity has launched successfully and is generating 100 leads per month with a conversion of 30%.
Key Result 1: Email marketing list growth is up 20% on the previous year, and email automation is in place with market-leading open and click rates.
Key Result 2: We have successfully hired 2 new marketing assistants.
Key Result 3: Net promoter score is consistently 65 or above.
Key Result 4: Monthly MQLs have increased by 30%
Key Result 5: We have attended 5 high profile events to raise brand awareness in our industry.
The Marketing Manager would then take one or two of these key results and make those their objectives as follows:
Objective: Monthly MQLs have increased by 30%.
Key Result 1: We have launched 10 new lead magnets, generating a competitive level of interest.
Key Result 2: Lead magnet email follow-up journeys have been set up and automated, with consistent open and click rates, driving 10% traffic back to the website.
Objective: Email marketing list growth is up 20% on the previous year, and email automation is in place with market-leading open and click rates.
Key Result 1: Social media campaigns have been successfully implemented to drive an increase in email sign-ups.
Key Result 2: A new strategic business partner has been identified to enable cross-promotion and list growth.
Cascading OKRs in this way dramatically helps centralise focus and allows employees to concentrate their efforts where it really matters to make a difference and achieve great results for the business. Furthermore, it helps employees at all levels feel involved in the overall direction of the business and allows them to see how their hard work makes an impact. Such positive effects can improve employee engagement and enable a culture of employee recognition and reward through transparency of achievements. For more information, check out our blog covering 8 steps to cascade your vision effectively.
Cascading OKRs empowers employees to make more decisions as they are aware of the overall purpose and vision for the business. They are then able to make more effective decisions and, in doing so, feel more valued and involved. If you are considering implementing OKRs in your business, check out our blog OKR examples to help you get started. If you are the CEO and feel the pressure of setting the business vision and company level OKRs, visit our blog on How to set impactful business OKRs to achieve high performance.
If you would like to discover how Reclaro could help you set and cascade OKRs effectively throughout your business for full team alignment, improved employee engagement and high performance, get in touch by emailing firstname.lastname@example.org; we will be happy to help.