Operations

A Modern Guide to Lean OKRs, Part I

Retrofitting a classic tool with purpose, values, and systems that scale for startups

Andrew Beebe | 01/28/2020

Volumes have been written about measuring and managing objectives over the last century, and with good reason. If we can improve our processes and execution, so the theory goes, we will have better outcomes.

We’ve come a long way since the days of Taylorism in our effort to improve output by measuring performance. We’ve seen greater value in treating humans as creative, thoughtful people rather than cogs in a machine. Moving from W. Edward Deming and Peter Drucker, through to Andy Grove and now John Doerr, modern theories on management have been upgraded, for both businesses and the humans who power them.

Just as our world and world views are constantly evolving, so too should our methods of work. Today’s generation of founders and rising executive leaders are looking for a way to tie their personal values to their careers. They are looking to ensure that the companies they found and lead stay true to core values that are world positive and resilient. Values to value. This is hard, and yet it’s increasingly core to what matters most to founders.

While the historical texts by the gurus referenced above are insightful, they are also dated, and don’t quite effectively connect this deeper meaning to today’s workforce: how to embed an organization’s purpose and values into goal setting, especially from the earliest stages of growth.

What follows is a practical framework for setting Objectives and Key Results (“OKRs”) in a flexible, modern way that aligns a company’s purpose and core values with every day goals and outcomes. Doerr’s and Grove’s guides offer greater depth; the below is a leaner reinterpretation, with purpose- and values-based enhancements. I call these Lean OKRs (h/t to Eric Ries for the modifier).

When it works, when it doesn’t, and what’s needed

For starters, I love this stuff. I’m an OKR geek. For the past 25 years I’ve been building businesses—some prevailing, some failing—whether running startups or 500-person global organizations. While the contexts have varied greatly, there are truisms that hold no matter where I’ve been.

When OKRs work for an organization, it’s because of these four As:

1. Authenticity. OKRs get the company speaking the same language organizationally. Talking to one another with common vocabulary will enable you to connect on what matters most: the purpose of the company, and what it takes to deliver against it.
2. Accountability. Knowing precisely what you and your team are working on is a gift, making the work more transparent while deepening the group’s responsibility to one another. The flip side holds true, too: declaring what you’re not going to do is both valuable and liberating.
3. Adaptability. When well-articulated, OKRs can help be the lens through which you organize virtually all your high-value work time—especially for startups, where goals and timelines shift more frequently. It removes the paradox of choice that paralyzes so much of our time.
4. Alignment. You will know it’s working when all your activity, from daily stand-ups to company-wide meetings, are lined up and *feel* like they’re moving toward the same destination on the same timeline.

It’s safe to say that you can’t simply lay these down and expect instant success. There are additional prerequisites that leaders, especially startup founders, should reflect on before diving in headfirst.

1. Senior Commitment. While elements of this process can and should be delegated, leadership must be committed to this as a practice. This means dedicated training, making it part of a daily practice, and devoting real-time to the process ongoing.
2. Maximum Adaptability. OKRs should be adaptable to your context, serving as effective guideposts without being counterproductively rigid. There are many pathways to success, and you should find the one that works best for your team. More about this in Part II.
3. Continuous Improvement. This is a basic question, but a necessary one. If you’re a “set, reflect, and reset and…” rather than a “set and forget” type of leader, this is for you.

Even if you check these boxes, there’s one more element that is critical to the success of modern companies today: a clear articulation of purpose and values. One’s purpose is the “animating force” of achieving profits today, according to BlackRock CEO Larry Fink. Yet purpose and values—a north star and navigational system—have historically been absent from the OKR process.

While this omission has not always been intentional, it is far from trivial.

The fatal flaw begins its voyage from within the OS of an organization: when the purpose for being is either (a) not well-defined from the beginning, and/or (b) broken down and fading into the background amidst daily operations. Counterintuitively, this happens to startups with great frequency due to a number of all-too-familiar factors: the day-to-day pressures of the business, being in constant “survival mode”, and sometimes that “fake it ’til you make it” mentality. Those factors can lead to a startup never taking the time to reflectively and collectively derive and articulate either purpose or core values, let alone connecting them to a definition of success.

This is where the literature falls short: the connection of organizational purpose, the values under which it operates, and company goals. Fast-moving startups today need to practically connect the dots between their purpose and objectives.

How might we implement OKRs which are so connected to our purpose that they reinforce it as we scale, rather than leaving it behind at the expense of long-term value creation?

A north star for your OKRs: purpose

This all starts with the team. You want everyone to have ownership of this process. Building buy-in is time-consuming, but worth the investment—and some might argue, part of the investment process itself before launching a company (see: The World Positive Term Sheet).

Step One: Define
Bring the founding/executive team together for a discussion first with the explicit goal of articulating purpose through the language of operating values and/or philosophies. This can be challenging, and if you need a third party to facilitate, it’s worth the investment. [Patagonia, Netflix, and Valve are all classic case studies here.]

A great recent example here is Virta Health, which articulated its purpose from day one (“Reverse diabetes in 100M people by 2025”), and its core values shortly thereafter (below). These are integrated into their OKR process: on a quarterly basis, they revisit current year main objectives and the BHAG for the team that are aligned to their 100M mission.

Step Two: Screening (Positive & Negative)
As you start to outline your OKRs, recognize this as an opportunity to reaffirm purpose. Integrating it into the OKR process is easily done by running each objective through a simple question:

Is this objective supportive, neutral, or contradictory to our purpose and values?

This will not always be clear and may provoke discussion and even deep disagreement on the team. It will at times get uncomfortable. If one of your values is Total Transparency, and you have specific sales goals that may require differential pricing structures, are you sure you can achieve those goals while staying true to that value? If one of your values is Always Balanced, and you have an ambitious goal requiring an unusually high time commitment from the team, might it fly in the face of that value and cause longer-term harm to the team and your credibility? Goals should be challenging, so this is just a reminder to gut-check them against the values and purpose.

Remember that this tension is positive, and the act of talking it through will keep purpose and values top of mind throughout the process. They should also be explicitly written in the OKR document as a persistent reminder and reflective, “always-on” screen.

Step Three: Set, Reflect, and Reset
As with OKRs themselves, regular checks back to the purpose and values are critical. With each cycle of OKR reviews and check-ins, it may be valuable to build in review questions like “are these OKRs adequately aligned with our purpose of X, and core values ABC?”

Johnson & Johnson offers great lessons here, both successes and failures. Their credo is a long-form explanation of the values under which it operates, and the company values have been tested over the years as a direct result of sometimes setting goals that have contradicted its credo. In some cases (e.g., Tylenol recall) the company’s short-term revenue goals suffered deeply while its longer-term results flourished—and in other more recent cases (e.g. baby powder, opioids), it came to light that their short-term goals (selling more opioids > considering the health of patients) clearly contradicted its credo, and the company is now suffering as a result.

If its credo had been brought to life in goal-setting conversations, might it have turned out differently?

So far so good, right?

We should have a clearly stated purpose with supporting, sound core values. Check. Our team should have full buy-in and be ready to charge ahead with passion. Check.

But somehow, you still hear nightmares about implementing OKRs. Things don’t quite work out as planned. Isn’t this just overhead? Doesn’t this just mean endless reviews, and never really “getting stuff done?” Well, the reality is that that can happen too. As with much of management, implementation matters a great deal. But it can be designed to scale with you. Start simple, and grow the complexity, if and when you need it.

[This is Part I in a three-part series. Here is Part II, and Part III.]