You’ve got a problem. Something needs fixing in your business. Maybe you’re losing margin to a competitor or there’s a service issue that’s hitting customer retention. What’s your first reaction? ‘We need to do something – fast’. Before you know it, you’re focusing on individual tasks. And by doing that, missing the bigger picture.
There’s a big difference between objectives/OKRs and tasks. And it’s not always clear. A good OKR is always about the problem statement – what you’re trying to achieve. It takes time to work out the outcome you’re aiming for and why you need to do it. Once you’ve found the right objective, you can roll it down to your teams. It’s up to them to work out the who, what and when of individual tasks. Set them the objective, not the key results. Then they can take responsibility for making meaningful progress over the next 90 days.
Getting clear on this difference has the potential to transform your business. As CEO, you can move from being a task-master to a true leader. And you’ll find motivation and productivity levels will rise as a result.
Objectives lead towards an ultimate goal
An objective should always link closely to your BHAG or mission. It needs to take you towards this ultimate goal. Get your Executive team together and work through the brutal facts. Where are you now, where do you want to be and how are you going to get there? Make sure you’re clear on why you’re doing what you do – your purpose. And then come up with a few, focused objectives for the next 90 days.
It’s so easy to fall into being task-focused and not purpose focused. We’re all overwhelmed. Life is busy and it’s hard to see the wood from the trees. But in a purpose-driven business, it should be blindingly obvious when a task is useful and has meaning and when it doesn’t. This will save your team from getting lost in ‘busy work’ that doesn’t push the needle forwards.
Here’s a great example I read about recently. Some Disney execs were involved in training and development at one of their parks. Dressed in shirts and ties, they looked a bit incongruous in such an informal setting. As they tried (unsuccessfully) to take a decent selfie at lunchtime, one of the cleaners noticed them. She came over to chat, offering to take the photo. They were really struck by her friendliness.
After lunch, they went back into their training session and used this encounter as an example of being ‘on-purpose’. Disney’s reason for existing is to create happiness, and this cleaner was the embodiment of that. She acted like one of the park staff rather than the cleaning team. It showed clearly how you can be ‘off-task’ but never ‘off-purpose’.
Avoiding ‘learned helplessness’
Managers need to focus on setting objectives and not tasks. There’s a massive difference here. You can tell when this isn’t fully understood when teams get into a state of ‘learned helplessness’. Because managers are promoted for being domain experts, they fall back on this expertise when times get tough. If their team is struggling with something, it’s tempting to dive in and get too involved.
We’ve all been there. You can’t help thinking, ‘It would be quicker if I do it myself.’ Fatal! Then the focus is all on the task and expertise. And the team gets more and more helpless. They know there’s no point in them doing it. If they look lost, you’ll step in and sort it out. You need to avoid this at all costs.
I hate the word ‘empower’ (it’s such a cliché) but this is exactly what an objective is there to do. It will help you move from a situation of learned helplessness to developing the team to think for themselves. Instead of being a taskmaster, you move to be a coach, setting objectives and not tasks. The team can determine the key results and what inputs and outputs are needed to get there over the next 90 days.
Fostering cross-functional working
More often than not, an objective is likely to be cross-functional. After all, objectives should be all about change. They might be through a customer lens and are unlikely to sit in one department. If they’re done correctly, OKRs should be completely transparent so that they foster this cross-departmental working.
Maybe a cross-functional team needs to come together to decide who does what and when over the next quarter. Because managers have risen through the ranks for being domain experts, they often have blinkered vision. It constantly surprises us when we come across directors who think their functional team is their priority. It’s not. Their number one team is the Executive Team. Always. This is why we spend so long building high-performing leadership teams.
Linking with ‘willingness to pay’ drivers
Gross margin should be the ultimate arbiter of objectives. They should always link to ‘willingness to pay’ drivers. There’s no point doing something unless it improves this. Put simply, if you have a higher margin than your competitors then you have a more sustainable business model.
You need to focus on developing and sustaining your differentiation as an organization. A freight distribution company, OnTruck is an outstanding example of the difference this can make. When they first started working with SU, they hypothesized that selling ‘FTL’ (meaning Full Truck Load) would lead to cross-selling from existing customers. But this wasn’t correct. When they stepped back, they realized there was no sustainable advantage here and no way of driving up the willingness to pay in FTL. So, they switched their focus to LTL (Less Than Load).
Originally, LTL was only 5% of their revenue. The two business areas were split and a separate team was put on FTL. This meant the entire Executive team could focus on LTL. Their new objective? To test a hypothesis that their bespoke software algorithms enabling rapid pickups might lead to a competitive advantage. A series of projects and tasks resulted, all split down into quarters. They needed to run their own warehouse – something they hadn’t done before – test cross-docks and launch a new product.
This translated into an exciting new strategy. It involved a complex set of activities in different parts of the business – logistics, software, sales training etc. But the objective of what they were trying to achieve spanned it all. And the result? Amazing growth.
Focusing on improvements in efficiency
Because there’s transparency, OKRs tend to minimize waste and improve efficiency. Maybe your company’s 10 people strong. Before you do anything, you want to make sure that you’re in sync with everyone else. So that’s 90 conversations. You could have individual OKRs here. But when the business gets larger, say, 100 people, objectives need to be set at the team level. And you need to do fewer of them. Spend time working out the small number of things that will make the biggest difference.
These team objectives might be the same for the next 3 years. You might have a plan around competing on service that requires a whole range of initiatives. These will need to be planned out quarter by quarter and year by year. They need to be broken down into key results and cross-functional activities. Never lose sight of what you’re trying to achieve. Without this, you won’t be able to make crucial decisions to stop or change tack.
We recommend using a labor efficiency ratio here. It will enable you to set out your stall at the beginning and work out your return on investment. If you’re not getting the planned return within a given timeframe, or there’s no clear path, then you’ll know when to pull the plug. Without this, people keep ploughing away on barren ground.
Measurement and performance management
There are different ways you can use OKRs in a business. They can be used as an HR led performance management system with individual goals. But be careful this doesn’t become too task-focused, losing the meaning of what you’re trying to achieve. I’ve been guilty in the past of taking priorities and just changing the name to objectives. Then you’re changing the words but not the behavior.
My view is you should use objectives to make a change. Something that will take you towards your ultimate goal for the business. And success needs to be measured. How many times have we spoken to marketing teams who are fixated on spending their budget, thinking this was a measure of success? We ask them, ‘What was your objective?’ Blank faces. Surely their job is to generate a certain percentage of the sales pipeline through their activities? Where is the recognition of this? They may have spent the budget, but where’s the measurement? No wonder some sales teams label marketing as ineffective!