In 2014, I was working with startups and this was fine. it is not fine now, and I recommend you hop over to Cascading OKRs at Scale
For archival purposes, here is the original.
In Art of the OKR and in my talks I cover the basics of of company setting Objectives and Key Results. if you haven’t read or watched these, do so! Otherwise, this post will not make any sense. If you have read them, journey onward…
On the island of Langkawi, there is a place called the Seven Wells. It is a stream that flows into a river that then passes through seven natural stone pools then flows over a cliff into a spectacular waterfall. It is a pleasure to slip and slide through those wells on a hot day, and a cascade is a fine metaphor for how you get your goals to flow from a wish for the company’s future to the magnificent execution of an entire company working together as one.
It’s one thing to set a clear objective for your company and find the right three key results that tell you when you have arrived. That’s hard. It’s quite another for the company’s teams and employees to figure out what that means for their priorities and choices in the upcoming quarter. It’s easy for a business unit to do whatever they need to keep their numbers up, and set goals to make sure the business unit is taken care of first. Even if it means ignoring the company OKRs. Aligning everyone in a big company to the company’s vision is really really hard. But it can be done.
The most straightforward way to do that is by cascading the OKRs. The company sets an objective and three key results, each business unit sets an objective and three KRs that supports the company, each team sets an O and three KRs that support the business unit, and each individual –this is a little different– commits to personal growth that allows them to be the kind of person who can meet the OKRs. Here’s how you do it.
About two weeks before the quarter is up, the company should know know which OKRs they’ve hit, and what they need to focus on in the next quarter. The company can set the next quarter’s company objective and key results then, announce them and hopefully that will leave another week for the rest of the company to set theirs. Senior management should set OKRs in the fastest way possible if they are heads of a large company, to assure time for the organizations beneath them to have time to react. This means being prepared to gather and disseminate the company feedback on the next quarter’s objectives, and setting aside offsite time to plan. Setting aside to plan can be the difference between letting the future sneak up on you and owning your future.
Next, if you have business units, each business unit will set their own Objective and three Key Results. They start by finding an objective that supports the company objective. Let’s pretend the company we are talking about is a that hoary old cliche of the internet, a portal. If the company says it’s time to get on the social bandwagon, then the autos business unit will ask itself what it means to be a social autos site, and the travel business unit what it means to bring social to travel. The company KRs will have defined what the company considers social. Perhaps the company KRs are number of conversations, or number of connections. Thus each business units will have to decide if it want to inherent and adopt or redefine in context. Autos might decide referrals from friends and family is what makes its social, and look to up that. Travel might decide it was reviews, or forum activity. But each business unit will find a way to make it their own.
If there are centralized service groups such as engineer customer service or design, it can be harder to tie the OKRs back. They have to ask themselves how must they change to meet the goals of the company that have been set. Engineer might decide they have to make latency a goal, because social needs fast response time to create lively conversations. Customer service might focus on handling abuse, because safe spaces are needed for healthy social circles. Within the business units you’ll have service groups or work groups. They can behave as the business units and service teams do, and set their own supporting OKRs to reflect the ones above them. Thus the cascade.
Finally individuals should set OKRs for themselves. This is where it gets a bit more tricky. Rather than tasks (because that will be covered by the weekly cadence) or random personal growth (I’ve been meaning to learn SQL…), they can ask themselves how do I become the kind of person who can accomplish the things we are doing together? What skills do I need to acquire or refine to make the OKRs real? That could mean learning more about virality for a product manager, or studying best practices in social design for designers. But the OKR cascade is all about moving forward as a single powerful unit to make amazing things happen however each person and each group sees fit. Unity of goal, individuality of tactics.
And while it’s generally unwise to tie incentives directly to how many key results you hit, as it encourages sandbagging, it’s fine to make sure you are handing out bonuses to those who really make the objective happen. When the company says one thing (Everyone work on social) but hands out bonuses for another (profits!) the employees become cynical and unmotivated. One way a company I know handles this is by having everyone write a short essay about how their successes helped the company meet its goal. Five hundred words is plenty, and if you have been sending out weekly status emails, it’s even relatively painless. Consider going to quarterly review cycles, so the incentive is more closely tied to the behavior. A year is a long time to wait to see if you are doing things right.
Objectives and Key Results is a very simple method to keep your company working together on what matters most. But that doesn’t mean it’s easy. Pick the right objectives, good key results, and make sure that happens with everybody, every week. You’ll be amazed to find your company is capable for more than you ever imagined.