🎯 Best Practices for Implementing OKRs (Objectives & Key Results)

Summary

The video script discusses common pitfalls in OKR (Objectives and Key Results) implementation and goal setting. It emphasizes avoiding a cascading approach that stifles autonomy and adaptability, instead advocating for a top-down, bottom-up method fostering strategic alignment across the organization. The script also highlights the importance of considering both business and customer impacts, balancing leading and lagging indicators, and recognizing that outcomes are not entirely within our control. It advises against tying OKRs directly to performance metrics due to external influences on outcomes.

Takeaways

• 📊 OKRs Should Not Cascade: Companies often mistakenly make OKRs (Objectives and Key Results) cascade down the organizational chart, which can limit autonomy and hinder adaptability and innovation.
• 🔄 Empowerment and Autonomy: Allowing team members to set their own OKRs that align with the company's objectives can foster a more agile and innovative organization.
• 🌟 Strategic Alignment as a Constellation: Instead of viewing strategic alignment as a linear process, it should be thought of as a constellation where different parts of the organization align in various ways, not just top-down.
• 💡 OKRs Require Strategy: OKRs should be informed by a broader strategy, with data and strategic choices driving the selection of objectives and key results.
• 🔄 Balance of Leading and Lagging Indicators: It's important to balance leading indicators, which show progress towards goals, with lagging indicators, which reflect the outcomes after a longer period.
• 👥 Customer and Business Impact: OKRs should consider both the impact on the customer and the business to ensure a balanced approach to goal setting.
• 🚫 Avoid Tying OKRs to Performance Indicators: Because outcomes can be influenced by external factors, it's not fair to tie OKRs directly to individual performance metrics.
• 🌱 Planting Seeds for Growth: The analogy of planting seeds for a lemon tree illustrates the need for patience and the understanding that achieving OKRs may take time and is subject to external factors.
• 🔄 Adaptability in OKRs: OKRs should allow for adaptation and pivoting based on feedback and changing circumstances, rather than being rigid and unchangeable.
• 🔑 Understanding the 'Why': Teams need to understand the rationale behind their OKRs, including how they fit into the larger strategic goals of the organization.
• 🛑 Recognize Uncontrollable Factors: Accept that some outcomes are beyond control and that OKRs should be set with the understanding that external events can influence results.

Q & A

What is the main issue with the traditional cascading approach to setting OKRs in organizations?

The cascading approach to OKRs often lacks autonomy and empowerment, as it forces objectives and key results to flow down from the top, stifling innovation and agility. It also creates a dependency on upper management for any changes, making it difficult for teams to adapt quickly to new situations.

How does a top-down, bottom-up approach to OKRs differ from the traditional cascading method?

A top-down, bottom-up approach allows for more autonomy and alignment within the organization. Instead of inheriting objectives, teams create their own OKRs that align with the broader goals, enabling them to adapt and pivot more effectively without needing approval from higher-ups.

Why is it problematic to have OKRs that are solely focused on internal business metrics?

Focusing only on internal business metrics can lead to a neglect of customer needs and market opportunities. Effective OKRs should consider both the business impact and the customer impact, ensuring that the organization is delivering value to its customers while also achieving its business goals.

What does the speaker mean by considering the organization as a 'constellation of stars' rather than a 'ladder'?

The 'constellation of stars' metaphor suggests that strategic alignment in an organization is not a simple top-down process but a complex, interconnected network where different teams and units may align with various other parts of the organization, not just their direct superiors.

How should OKRs be informed to ensure they are strategic and effective?

OKRs should be informed by a clear understanding of the organization's strategy, supported by data, market research, and a clear vision of the desired outcomes. They should not be arbitrary but rather represent strategic choices that the organization is making to achieve its goals.

What is the importance of aligning OKRs with both leading and lagging indicators?

Aligning OKRs with both leading and lagging indicators allows organizations to measure progress over time and make informed decisions. Leading indicators provide early insights into the progress, while lagging indicators confirm the long-term impact, ensuring a balance between short-term actions and long-term outcomes.

Why should OKRs not be tied directly to individual performance evaluations?

OKRs should not be tied directly to individual performance evaluations because outcomes are not always within an individual's control. External factors can influence the results, and tying OKRs to performance can lead to a focus on outputs rather than outcomes, potentially causing negative behaviors within the organization.

What is the 'value exchange' concept in the context of business and OKRs?

The 'value exchange' concept refers to the fundamental principle where a company provides value to its customers by solving problems or meeting needs, and in return, customers provide value back to the company, often in the form of revenue. This concept should be considered when setting OKRs to ensure they drive meaningful outcomes for both the business and its customers.

How can an organization avoid falling into the trap of creating silos when setting OKRs?

An organization can avoid creating silos by fostering a culture of cross-functional collaboration and ensuring that OKRs are aligned not only vertically but also horizontally. This means that teams should be aware of and consider the objectives and goals of other teams and business units when setting their own OKRs.

What are some common mistakes that organizations make when implementing OKRs, according to the speaker?

Some common mistakes include cascading OKRs in a way that stifles autonomy, focusing solely on internal business metrics without considering customer impact, failing to connect OKRs to a broader strategy, and tying OKR outcomes too closely to individual performance evaluations without considering external factors.

Outlines

00:00

📊 Organizational OKR Traps and Goal Setting

The speaker discusses common pitfalls companies encounter with Objectives and Key Results (OKRs), emphasizing the importance of proper implementation. They critique the 'waterfall' approach to OKRs, where objectives are cascaded down the organizational hierarchy, leading to a lack of autonomy and stifled innovation. The speaker advocates for a more dynamic, top-down and bottom-up approach that allows for greater adaptability and alignment with organizational goals.

05:02

🔄 The Shift to a More Agile OKR Framework

This paragraph delves into a more flexible OKR methodology, where team members at various levels craft their own objectives that align with the company's top-level goals. It describes a back-and-forth process that resembles a 'ping pong' dynamic, fostering a feedback loop for stronger strategic alignment. The speaker also metaphorically compares strategic alignment to a 'constellation of stars' rather than a linear ladder, illustrating a more interconnected and complex structure.

10:02

🌟 Embracing the Constellation Model for Strategic Alignment

The speaker expands on the 'constellation model', highlighting its advantages over traditional hierarchical alignment. They discuss how this model promotes cross-departmental alignment and the ability to skip levels when necessary. The paragraph also touches on the importance of OKRs being informed by a broader strategic context, including vision, market research, and competitive analysis.

15:03

📈 The Strategy Behind OKRs and Value Exchange

Here, the speaker underscores that OKRs should not exist in isolation but should be grounded in a company's strategy. They explain how OKRs are essentially models of strategic choices aimed at driving progress toward overarching goals. The concept of value exchange in business is introduced, emphasizing the importance of aligning OKRs with both business impact and customer outcomes.

20:06

💧 The Parable of the Lemon Tree: Measuring Progress

Using the metaphor of growing a lemon tree, the speaker illustrates the difference between leading and lagging indicators in OKRs. They stress the importance of measuring progress continuously and not just waiting for the final outcome. This approach helps teams to adapt and pivot based on ongoing feedback rather than relying solely on end results.

25:07

🍋 Balancing Leading and Lagging Indicators in OKRs

The speaker discusses the need to balance immediate (leading) and eventual (lagging) indicators within OKRs to ensure that teams maintain focus on both short-term actions and long-term outcomes. They caution against overemphasis on either type of indicator, as doing so could lead to misguided efforts or a lack of foresight.

30:08

🚫 Avoiding the Pitfall of Tying OKRs to Performance Evaluations

In the final paragraph, the speaker warns against linking OKR outcomes directly to performance evaluations, as external factors can influence outcomes beyond an individual's control. They argue for the separation of OKRs from performance metrics to prevent negative behaviors and maintain a focus on meaningful objectives.

Keywords

💡OKRs

OKRs stands for Objectives and Key Results, a framework used by organizations to set and track goals. In the video, it is discussed as a common tool for goal setting that, if not implemented properly, can lead to several pitfalls. The script emphasizes the importance of aligning OKRs both top-down and bottom-up within an organization to foster innovation and agility.

💡Cascade

In the context of the video, 'cascade' refers to the hierarchical flow of OKRs from higher to lower levels within an organizational structure. The script points out that a cascading approach can limit autonomy and adaptability, as team objectives are predetermined by upper management, stifling innovation and responsiveness to change.

💡Autonomy

Autonomy in the video script refers to the freedom and independence teams have in setting their own goals and making decisions. It is contrasted with a cascading OKR approach, where autonomy is limited as teams wait for directives from above, hindering the organization's ability to innovate and adapt quickly.

💡Innovation

Innovation is a key theme in the video, illustrating the importance of allowing teams to come up with their own ideas and plans. The script argues that a top-down approach to OKRs can stifle innovation because it does not encourage or allow for the exploration of new ideas and strategies from within the team.

💡Agility

Agility is discussed as a critical characteristic of organizations that can adapt quickly to changes in their environment. The script suggests that a cascading OKR approach can hinder agility because changes in plans require approval from higher levels, slowing down the organization's response time.

💡Strategic Alignment

Strategic alignment in the video refers to the coordination of goals across different levels and departments within an organization to ensure everyone is working towards common objectives. The script argues against viewing strategic alignment as a simple top-down ladder, but rather as a multi-directional constellation of stars, allowing for cross-departmental alignment.

💡Constellation

The term 'constellation' is used metaphorically in the script to describe a more complex and interconnected approach to strategic alignment. Unlike a linear ladder, a constellation allows for multiple points of connection and alignment, reflecting the dynamic and multi-faceted nature of organizational goal setting.

💡Leading Indicators

Leading indicators are metrics that signal progress towards a goal before the final outcome is achieved. In the script, they are used as an example to illustrate the importance of measuring progress over time, allowing for adjustments and adaptations along the way, as opposed to waiting for the final outcome to assess success.

💡Lagging Indicators

Lagging indicators, as discussed in the video, are metrics that measure the outcome after the process has been completed. The script uses the example of waiting for a tree to bear lemons to illustrate the potential delay in realizing the impact of actions, emphasizing the need to balance these with leading indicators for continuous feedback.

💡Value Exchange

Value exchange is a fundamental concept in business where a company provides value to customers through its products or services, and in return, customers provide value back to the company, often in the form of revenue. The script highlights the importance of considering both business and customer impacts in OKRs to ensure a balanced approach to goal setting.

💡Performance Indicators

Performance indicators are metrics used to assess how well individuals or teams are achieving their goals. The script cautions against tying OKR outcomes directly to performance indicators because of the lack of control over external factors that can influence outcomes, suggesting that this can lead to unfair assessments and potentially drive poor behaviors.

Highlights

Common traps and mistakes companies make with OKRs and goal setting.

The importance of avoiding a cascading waterfall approach to OKRs that stifles autonomy and adaptability.

The need for a top-down and bottom-up approach to OKRs for better alignment and agility.

How cascading OKRs can create silos and hinder strategic alignment across the organization.

The analogy of a constellation for strategic alignment instead of a linear ladder.

The necessity of OKRs being informed by data and strategic choices rather than existing in a vacuum.

OKRs as a model of strategy, representing levers chosen to measure progress.

The importance of considering both business and customer impact in OKRs.

Avoiding the trap of setting OKRs solely focused on internal business metrics.

The concept of value exchange and its fundamental role in business and product strategy.

The need to balance leading and lagging indicators in OKRs for effective feedback and adaptation.

Recognizing that outcomes in OKRs are not entirely within our control due to external factors.

The risks of tying OKRs directly to performance indicators due to uncontrollable outcomes.

The dangers of setting outputs as outcomes in OKRs to ensure control over results.

Encouraging a culture of learning and adaptation when OKR outcomes are not achieved.

The recommendation to separate OKR outcomes from performance evaluations to prevent negative behaviors.

Strategic alignment should be multi-directional, not just top-down or bottom-up.

The final summary emphasizing the importance of strategy, context, and balance in OKRs.

Transcripts

so just a quick video we'll talk about

some of the common traps some of the

mistakes that companies make from my

observation when it comes to okrs and

goal setting

um walk through some of them you can

even think of some of these as first

principles around okrs and how to

actually go about implementing them

properly and and how the best

organizations and places I've seen do

things like okrs really really well and

how they go about it

so the first trap or mistake I see

companies make all the time is to make

okrs Cascade so what I mean by that is

you can think of like you know we have

an organizational chart right so you can

think of your org chart like this

and you know just draw a bit of an org

chart and this is often what

organizations look like and then we have

the teams down the bottom multiple teams

right

and what we do is we try to make the

okrs fit our organizational chart so

what we do is we set I'll change colors

here what's that in okr at the top so

often we'll have an objective and then

we'll have key results and what we then

do is we make it Cascade down like a

like a rolling waterfall and what ends

up happening is we say well these key

results become your objective

for the next layer down and then they

set key results and then those key

results become the next layer Downs

objective and in key results and so

forth and so forth down the ladder and

you can see how like this rolling kind

of waterfall analogy right but the

problem with this is there's well

there's many problems with this

um and some of the problems are that

there's very little autonomy and

empowerment inside this right we're

essentially standing there waiting for

the person above us to tell us what our

objective and key result is going to be

now this looks great from like a

planning point of view like you can have

this nice linear plan that says you know

the person above at the top sets are

okay ours then the next layer sets them

and then the next layer sets them and

this looks great from plan and point of

view

but highly adaptable and agile

organizations aren't really need to nice

and linear they're a little bit more

messy but that enables them to have

Innovation and to adapt and to be more

have greater agility right

so the other problem with this is that

Innovation and Agility part in order for

me to be able to change plans so if I'm

down here and I want to change plans I

actually have to go up and get the okr

above me to change in order for me to

change plans

whereas if we have what I'll go through

in a second which is a more top-down

bottom-up approach it enables me to be

able to come up with my own plans and to

be able to Pivot and adapt in the moment

and within my realm without having to

escalate up and change things because

here's the kicker offered as well it's

not just about changing that one level

up because they inherited theirs it

actually needs to go all the way back to

the top in order to get that changed so

then you can make a change at the bottom

so you can see how this can strifle

adaptability because when we need to

Pivot and move we actually need to run

everything all the way back up to the

top and it needs to all change and then

it needs to run all the way back down

which is not great and not effective or

efficient either

the other thing

that happens here too is if I had a

brilliant idea and this can be at any

level I know I'm drawing it down the

bottom but it could be at any level

if I had a brilliant idea and a

brilliant thing to work on and to do I

can't really work on that until the okr

above me aligns to that right now yes we

need to have strategic alignment we'll

talk a little bit more about that in a

minute

but

because I'm waiting to inherit okrs and

I don't really have a say in it when

it's kind of coming top down

then I am basically just waiting and

trying to come up with new new ideas

is is almost wasted right like why

bother come up with new ideas when I'm

just wait waiting for it to be told

which also makes it very hard to do any

forward planning

because again I'm living my life one

quarter at a time because I don't know

what my okr is going to be next quarter

because I'm waiting to be told what my

okr is going to be or at least I'm

waiting to be told what my objective is

when we move away from this and we move

towards a more

top down

and bottom up approach

Things become a bit more messy but

enables us to do those things the bottom

people at all levels of the organization

can have a roadmap they can have a

vision and a plan and a view on where

things are going to go in three six

twelve two three four years time if they

really want to and that's fine because

we're not dictating to them what their

okrs are they can have a view and then

they can say well I was planning to do

this next quarter how does that align to

your goals to the person Above So how

this then looks to make it look

differently is the person at the top was

set their okrs right we still we still

have that but then the people in the

next run of the lidar rather than

inheriting a key result as their okr

they start to think and the question

becomes what within your realm of

responsibility so what do you own what

slice of the organization do you own is

it marketing is it whatever

um within the realm that you own how can

you

help me as the person at the top or the

CEO or whoever how can you help the CEO

achieve their goal

and then they will come up with their

own okrs which align to that okr it

doesn't Cascade it aligns so they'll say

okay if your target is just growth

number well I own this part of the

business and I think that we can

attribute X percent to that growth

Target and we're going to do that by

focusing in these areas and I'm making

these decisions because that's the

business unit I own and rather than you

telling me what key result I have and I

um I basically inherit I'm then telling

you how I'm going to help you achieve

your goal and this happens throughout

the whole organization so they'll sit

there okr and then the next layer down

will do the same they'll set their okay

eyes you can have multiple okrs and

they'll say Okay based on what I own

this product or this Suite of products I

can help you achieve your goal by doing

these things and again goes down to the

bottom so we have this you know back and

forth it becomes kind of like Ping pongs

and yo-yos throughout the organization

obviously back up again at the end I

know this is getting messy as a pitcher

but this is how it works there's a lot

more back and forth like this is the

goals that I want to chase how are you

going to help me realize those goals and

then they'll come back with what they

think they should focus on as a business

unit or area or group or team or

whatever and then there's a feedback

cycle the person above them their boss

might change their okrs based on that

feedback they might not they might you

know and then they might give feedback

back to their team to say

well I'm not quite sure there's okrs are

like where they need to be you know have

you considered this have you considered

that and again we're trying to

strengthen the okrs not tell people what

to do

and as a result and this gets me into my

second Point as a result

organizationally with okrs and if you

think about strategic alignment in

general it doesn't it doesn't happen as

like this picture-perfect like ladder if

you think about the org chart like we

always think about it like a ladder and

we start to think about strategic

alignment as this perfect ladder like we

just need alignment top down you know

and it just needs to go top down bottom

up and whilst that's true like I'm not

saying that we don't want strategic

alignment top down

strategic alignment in an organization

in my experience especially when we

start doing okrs and stuff too is more

like a constellation of stars

so if you think about it this way

you start to have

start to have like these stars and then

like little little clusters of stars and

these clusters of stars often represent

a business unit and their teams right

and then in the center we have deceased

weight or the organization which is you

know that's what everybody is trying to

drive towards an attribute towards

and then what we end up having is again

yeah like a constellation right of stars

and the reason why I say it's a

constellation too and not a ladder is

because it's not as picture-perfect

again as this top down because we might

have a product over here let's say a

product over there

and that product

might need to align with another

product's okrs that is not in their

business unit right it might be another

part of the organization a very simple

example of this is like sales and

marketing sales and marketing often sit

outside and whatever we do on product

needs to align with sales and marketing

sales and marketing will have their own

okrs to have their own strategy they'll

have their own plans but my product and

they still align with theirs and vice

versa they need to align with me as the

person who owns that product right so we

can't have this like you know ladder

construct anymore because a ladder

construct would ignore that we again

work in silos I just worry about the

fact that I need to align to the level

above me and this is also another reason

why that kind of top-down approach

breaks down because when we allow it to

just go top down we create silos and we

forget those types of impact and yes

whilst we all line back up to the top we

miss out on these opportunities to

create strategic alignment across the

organization not just vertically right

so we also want it horizontally

and then equally as well this enables

like even teams within the same business

unit to again or Department to again

align between themselves

this also does some other things that

starts to get a bit Advanced and it

might break your brain a little bit but

I'm just going to touch on it which is

that it also enables you to have a you

know okr a strategy a plan a thing here

and have that not necessarily aligned

directly to their business unit but they

might line directly to the organization

the organizations okr and the top and we

can start to skip levels because we're

not thinking about the organization as

like a ladder anymore as levels we start

to think about the organization as more

like a constellation of stars which

means that we could have an okr

here that arguably actually best aligns

to our North Star as an organization and

don't whilst it does a line here it's

Loosely aligned and rather than trying

to again do square peg around whole and

make it a line we can say no that makes

a lot of sense it's a strategic

imperative for us as an organization and

it's okay that it just aligns straight

to the organization's goals at the top

and there's nothing wrong with that we

can we can do that we can get away with

that it's okay and this again enables

that adaptability that flexibility in

the organization and again that is going

to drive greater Innovation and Agility

so

think of your organization and at least

strategic alignment I should just say

don't think of it like a ladder think of

it like a constellation of stars so

um that's kind of like first principle

number two uh in regards to definitely

strategic alignment and how to cultivate

that strategic alignment

the next thing I haven't um that I want

to just chat about

um in terms of okrs is that they don't

exist in a vacuum right so you know if

we go back up here if I was to take any

one of these I'll use a different color

any one of these it doesn't just exist

in a vacuum obviously there's context of

the okrs up and down but there's also

context in terms of why did we pick that

okr you know what what's next if we

achieve that what what is a building

towards what's that higher level you

know things like vision and you know

what what are we going to work on next

and who do we Target and what data drove

us to to actually decide on those okrs

what are our competitors doing all those

other types of things and all of this

is strategy

so what I mean by this is your okrs

don't exist in a vacuum they are a

representation or a model of your

strategy

so how does that work well you need to

still have a strategy your okrs can't

just be plucked out of the air they're

not something that you just pick right

they need to be informed by data and

they need to be actual strategic choices

as an organization we are going to focus

on these objectives and we're going to

measure progress by these key results

Great why did you choose them how does

that help us forward ourselves as an

organization you know what data supports

that etc etc this is all strategy

so your okr has become a model of your

strategy because they essentially

represent levers that you have

strategically chosen to pull

and you're going to then use to measure

progress towards realizing your strategy

so I start to make this tangible for you

let's say that you have an overarching

goal that's a growth goal right like

let's say we want to you know start we

want to get annual reoccurring Revenue

you know a certain percentage you know

20 million dollars or whatever it needs

to be right

that's your overarching you know high

level goal that's kind of at the top

company level or Department level or

something like that

you then own a product within that you

then start to look at well what do I

know about my customers with the product

what do I know about the product Health

in general looking at competitors doing

research Discovery all that type of

stuff and you're pulling data points to

think about well

how do we continue to grow this product

in a way that it supports that higher

um that higher goal right so you then

formulate a strategy off the back of it

to say we're going to Target these

people these target market and we're

going to solve these specific you know

needs of theirs and if we can do that we

believe that these are a new these

represent a new market for us

which when we look at competitors

is untapped so no competitors are really

playing in that space too much which

recognize which presents an opportunity

for us to grow right but this is all

strategy you have looked at it you've

chosen where you're going to play how

you're going to win why you're going to

do that all those types of things

from there you start to look at well how

do I then measure that and that is

really where your okrs come into

I need to start to turn this into

okrs in the sense of measuring my

progress towards that so we're going to

focus on these people and these needs

well how about I can have some tasks

success type metrics on that I can start

to look at a you know this Market as a

market share percentage right I can look

at acquisition in that space all those

types of things I can look at retention

that those types of things and this is

important because all this context we

can't forget about it this is all really

important context for our teams and our

people that get across and to understand

that hey we've picked these okrs for

these reasons if I'm measuring you know

task success here it's not because I'm

not focused on you know market share and

growth and and dollars I'm just focused

on it for now because we need to find

product Market fit first again strategy

right we need to find product Market fit

first and once we have that then we can

start focus on acquisition and growth so

yes our okr today is focused here but

our okr in the future might be focused

over here and if you have all these

contacts people can see that they can

understand that they can acknowledge it

you can talk about it and we can have

greater alignment not just within like a

quarter or a short period of time but

long term as well

um another example of this just to make

this and also again tangible and like

how do we measure things

again that's a very simple one I'm

making this really simple

um sorry it's a bad example in the sense

that it's too simplified but it

hopefully it illustrates the point

you could have a growth Target right or

growth objective

now you can achieve that by acquiring

new people as we're just talking about

but maybe you looked at the product

maybe you looked at your data you talked

to your customers and really you don't

have too much of an acquisition problem

you actually got a retention problem or

a churn problem and this is what I often

call the leak in bucket so you can

visualize a metaphorical bucket and

customers are coming in or new customers

are coming in and then essentially

you've got like a lake at the bottom

which is your churn now if you've got a

really big hole in the bottom of your

bucket and your churn is really high

throwing more people into your bucket

might not be the best strategy so whilst

yes you could set an okr up here that's

all about acquisition numbers maybe

again strategy and the context maybe our

okr actually needs to be down here first

we need a resolve churn so we might be

like reduced churn reduce churn by X

percent increase retention by X percent

whatever and then once we've solved that

then we can move on to that acquisition

number again

again churn still aligns that our growth

kind of Target right I can help you

achieve that by just minimizing like we

can grow to user base by minimizing

churn we can also grow it by adding more

customers but again strategy context and

what data drove you to make those

decisions and why are we making those

decisions you can't just have an okr off

by itself because then we don't have

answers to any of those questions right

like why are we doing it what's next you

know who are we doing it for all those

types of things how do we get to these

numbers answering all those questions is

absolutely pertinent in organizations

and you can I definitely have seen my

fair share of organizations fall into

the Trap of not having these types of

things and they just have you know okrs

and people don't understand the okrs

they don't know why we're doing the okr

and that again is going to be

detrimental to the organization because

we need to know why we're doing things

again that's going to enable people and

give people in the organization the

tools and the information to be able to

make smart decisions it's going to

create better Clarity in the

organization ultimately going to help us

be able to execute better and have

greater impact over the long term

now this touches on one of my next

points which is that

and if you do strategy really well you

will actually cover this but I'll make

this really basic because this is a

common trap as well

when you think about any business

so any business

really exists

through or you know business and product

can get distilled down to something as

basic as value exchange so the way value

exchange works is a company exists to

build a product that

people that give value to people so we

give value to people often via the

product Often by solving their problems

and meeting their needs

people then give us value back as an

organization and which is often in the

term of dollars not always in the total

dollars you don't always get paid for

your products it could be data could be

other things it could be you know

acquiring customers and then they buy

other products and then that would then

get us money and revenue but then that

money enables us to sustain the company

right and be able to employ people in

order to work on that product and then

the kind of flywheel kind of continues

from there but that is value exchange

and that is a business and product

at its absolute most fundamental so why

am I talking about this well because

companies can fall into the Trap I've

seen this too often where

they are too focused on the business and

themselves and they set okrs that are

solely focused on the business

things like growth targets growth

revenues costs drive down costs increase

Revenue increase customers do this do

that and it's all internally focused

right which is fine we need to think

about the business impact that we want

again we need to complete this flywheel

this is still an important part of

the whole picture but if we only focus

on these things we can fall into the

Trap of the whole building and they will

come we become too inshallah we look at

ourselves we set our own targets and our

own goals and then we build a whole

bunch of stuff and do a whole bunch of

stuff in the hope that it's going to

achieve that but we have completely

forgotten and neglected this side of

defense and without any insight and

without any measurements against this

side of the fence then the whole thing

fails

you might have success in the short term

but it will fail in the long term so we

also have the customer all the market

all your users whatever term you want to

use here

and what we need to do is we need to

make sure that we are focusing in this

intersect

right so this intersect is super

important this is where we need to be

thinking about both

what business impact do we want to have

and then what customer

impact outcomes align with that business

outcome and we need to Target that that

is where good product is going to happen

that is what good okrs look like good

okrs consider both the business and the

customer it's not just the business

thing and it's not just a customer thing

because it was just a customer thing

we'll just give free money and free

products out to our customers right but

if it's just a business thing then we'll

charge for everything we'll make our

fees really really expensive

um and make life a nightmare for our

customers we need to focus in this

Center so okrs should have both customer

impact and business impact we need to be

thinking about both and we need to be

you know making sure we're balancing

both of them so don't become too insular

need to be able to see your customers in

your okrs need to be able to see the

business as well like you need both it's

really the moral of the story there

which also often means

we're starting to think about things

across different time Horizons now what

do I mean by that

often measuring the customer side of

fans often happens earlier than the

business side so often we give value to

our customers and then it takes some

time to realize that impact back to the

business

what we refer to those things as is

leading versus lagging indicators

and the analogy that I often use is

let's say we want some

lemons to make

I don't lemonade let's just say right

and that's what we ultimately want to

want to have one day

we let's say we decide to plant some

seeds

right

planting seeds and turning into a tree

where we would be able to harvest lemons

is quite a long process this could be a

year two years longer before we realize

and actually have lemons so if our okr

and our measure was up here and it was

like you know X number of lemons

let's say 10 lemons right it could take

us 12 18 24 months before we even

realize that okr which means we planted

seeds and then we wait 18 months

and then we come back and we look has a

tree grown and surprise surprise there's

no tree and we think oh we failed now

it's time to Pivot right that's a long

time to get feedback that what we did is

not working and not achieving our goals

so what can we do instead well we can

measure progress as we go we could plant

seeds and we could measure how many of

those seeds actually germinated into

something we could then

start to look at the growth rate right

so as it starts to turn into a bush we

could maybe measure how quickly it's

growing and spurring up we could then

measure other things right like the

health of the tree does it look like

it's going to actually give us what we

hope it's going to give us those types

of things but what we're doing as we're

set in measures and key results in okrs

along the full time Horizon

and what this again I mentioned before

gets referred to is this is leading

indicators

and this is ligand so we need both we

need the leading and the lagging

indicators we focus just on the ligand

indicators it will take us a very long

time to get any feedback to know whether

our okrs are working or not equally if

we just focus on the leading indicators

we can lose sight of the lagging

indicator because there's also an

argument here of well how else might we

solve given lemons maybe we don't need a

lemon tree maybe we could do something

else so these two things need to be

balanced because if a team is just

focused on planting seeds and then

measuring the growth of it and they

don't know why they're doing it and

where that's contributing to and not so

larger picture and what's that longer

term lag in business impact that we hope

to have then we just get fixated on that

quarter by quarter by quarter and we

just keep doing and doing and doing and

there's no opportunity to get your head

above the trees and to say well why are

we planting a tree is it like maybe we

could do something else we could do we

could go buy some lemons right we could

partner with you know a lemon farmer to

be able to get a good deal on the lemons

that we need to have on a regular basis

but again without that lagging will you

miss that and then equally without

deleting we could wait 18 months and

have no lemon tree and no lemons and

that's a long time to find out that the

stuff that you're working on is not

working

equally we might also you know plant

seeds and try maybe we tried to plant

the seeds three times

and every time it failed this could be

an indicated Shin at that point in time

to then pivot and to say well maybe we

just suck at growing lemon trees maybe

we should just change tactic and to do

something else but again without that

leading metrics and indicators you won't

know or you won't have any feedback in

order to be able to make that decision

and pivot and adapt

which brings me to my second last point

and that is that okrs outcomes one of

the hard things of outcomes is we don't

have full control over it

if I planted lemon seeds and my yard

flooded or my farm flooded

and that's just the bad weather event

like I might not have known that was

going to happen right so just because

that happened doesn't mean I failed per

se right I did all the right things I

checked the soil level I fertilized it I

watered it I planted the seeds

everything like that I might have done

everything correctly but I still didn't

realize that outcome at the end of the

day and this could be because of things

outside of your control now this doesn't

mean it's a get out of jail free card

don't use this as an excuse for not

hitting your outcomes but it's something

that we need to acknowledge that

outcomes aren't completely in our

control there are external factors that

are going to influence it economical

factors interest rates all those types

of things

that doesn't mean we shouldn't focus on

the outcomes the outcome is still the

outcome that is still what we want to

achieve we still want lemons we still

want to focus on that and try to achieve

it it doesn't make the goal any less

worthy but what it does is we need to

acknowledge that hey if at the end of

the quarter we haven't realized that if

if it flooded and all those my lemon

trees all died or we got a cyclone or

something like that that's just bad luck

and we need to look at it through that

lens of what can we learn from this is

it anything that we did that we could do

better next time and sometimes there is

and sometimes there isn't and that's

okay

and that also means that if you're not

hitting your okrs all the time that's

also okay

because those unexpected events can

happen and they can influence us and as

a result we miss out on it but that's

again it's okay that we missed out on it

um it doesn't change the goal we just

try again let's clean the field let's

plant the seeds again let's do what we

did last time because we did things

right maybe we do have some learnings we

can tweak things but we couldn't have

stopped a cyclone right

um

which brings me into my last point which

is that a big anti-pattern and a big

No-No is tie in your okrs to people's

performance indicators

this becomes very hard or very bad to do

because of that reason because we don't

have full control over it you can

essentially punish people like hey

you're not getting your bonus this year

or you know you're not getting promoted

Because by the way a cyclone came

through and destroyed all your lemon

trees that's not their fault

so when you look at different things in

order to measure people's performance

and to work those types of things out if

your organization wants to do that but

those things are not outcomes we need to

separate those two things yes over time

some people the better people should hit

more outcomes than others but it's so

contextual and it's so you know tied to

external factors that it is not fair and

it's generally an anti-pattern to tie

those two things together because guess

what's going to happen when you tie

those two things together

people are going to then not set worthy

and good outcomes they're going to set

more outputs as outcomes as their okrs

because they have control over that why

would I have a key result about you know

getting X number of lemons when I don't

have full control over how fast that

tree is going to grow when it's going to

grow whether a cyclone is going to

happen I'll probably end up sending okr

that's a really bad okr it'll be

something like plant five lemon trees or

plant them take that off happy days but

we know that just planting trees which

is an output is not an outcome right we

need to realize those benefits from

those trees that is the ultimate outcome

so it can drive bad behaviors in the

organization it's just generally a bad

thing to do so that's my last point to

kind of just touch on and to leave on

um but that's really it I recognize I

covered a lot of ground so I might just

summarize here

think of your organization more as a

constellation and not as a ladder which

means strategic alignment can happen

multi-directional it's not just a

biodeirectional up and down it's

multi-directional which also also means

that our okrs shouldn't Cascade don't

make him Cascade just make him online

they need to align to each others and

have cohesion they don't Cascade down in

the organization

Cascades um okrs also don't exist in a

vacuum they have strategy behind them

they are really a model and a

representation of your strategy they we

need to have this information in context

that sits behind it so we can make

informed decisions

which means that we need to consider

both customer and business impact

and not just one or the other and we

need to consider both leading and

lagging indicators and we don't have

full control over our outcomes that is

part of it that is the nature of

outcomes which means we shouldn't time

to people's performance it's really that

at the end of the day so hopefully you

found that useful hopefully that covers

a lot of ground around okr strategic

alignment those types of things like I

said you can think of this in just terms

of goal setting in general but in

particular okrs common traps some first

principles around them so hopefully

that's helpful and useful and if you

want to learn more about product check

out our productpathways.com we have

online courses self-based courses and a

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templates for you to use so plenty of

great resources there so check it out