This is the second part in our series on OKRs. To read the first part, click here.
OKRs are a proven tool for managing organizational performance as chronicled in John Doerr’s book “Measure What Matters.” Over the past few years, I have been able to exercise this management platform as a business leader, investor, and consultant at seven different companies. Each company has been a bit different in its implementation of the tool. All were able to dramatically improve their business performance. One of the best ways to embed OKRs in the fabric of the organization is to make them the foundation of your planning. You should address the OKRs at annual planning and during monthly business reviews.
One of the first challenges that companies face is the planning horizon associated with OKRs. In general, I would suggest that the objectives are annual, and the key results are a mix of monthly and quarterly measures. The CEO plays a key role in establishing the objectives for the organization while each functional area owns the key results.
The CEO should distribute the objectives a couple of weeks in advance of the annual planning meeting. Each functional area should then develop their key results, aligned to the corporate objectives. The sequence of the review of OKRs should follow “digital production line” of the organization. They should start at product creation, carry over into commercialization, play a key role in execution, and also embedded in the business support functions of the organization . The management team should use this process to ensure that the inputs and outputs of each function align to the greater objectives for the organization.
The OKR system should be a foundational part of the monthly business review. Each functional area should recap their performance based upon their function’s OKRs. This streamlines the monthly business review while focusing the management team on improving performance across the organization. The sequence of your review should follow the “digital production line” much like the annual planning process. An OKR dashboard should label those key results in green that are on track and those not achieved in red. Yellow is not allowed. If a team must mark a key result as red, then that team or individual should develop a corrective action plan. The corrective action plan should include the following sections:
- Problem statement
- Reflection on prior activities
- Root cause analysis
- Action plan
If you follow this planning discipline, it will be relatively easy to embed the OKR system in the fabric of your company. At AngelMD, we encourage our startups to leverage this powerful management tool. The best ingredient to a great idea is great execution.
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