The most successful businesses today have one thing in common: their employees understand how their specific roles contribute to the company’s success. As a leader, it’s important to make sure that everyone in your organization knows what their goals are and how they can achieve them. To allow this to happen, you need to set the right metrics, the ones that can help you have a competitive advantage.
This can be tough; it makes me think of this famous quote: “Not everything that counts can be counted, and not everything that can be counted counts.” I’m not even sure who to attribute this quote to—some say it’s by Albert Einstein while others credit William Bruce Cameron. There’s an interesting debate about who this quote is by here.
But, too many times, people measure everything at the same level. As a leader, you need to realize that not all metrics have the same value, and focus on measuring the most important ones. Focusing on specific metrics will make you more competitive, especially if you concentrate on the ones that will put your business ahead of others. If you aren’t already using a goal-setting technique called OKRs—objective and key results—I recommend switching to using them, as this has allowed companies like Google and The Gates Foundation to exceed expectations. The book, Measure What Matters by John Doerr and the What Matters site are great resources to learn about OKRs.
After setting your OKRs, you need to put them in place with a strategy that will allow the entire team to understand the OKRs and be motivated to meet them.
But how do you do that? Here at Refinery, we recommend these three steps:
Clearly define the OKRs that will make your business stand out.
Make the OKRs transparent to the entire team.
Set goals from the bottom-up.
I recently read a case study about a company here in Columbus, OH that was failing until they implemented all of the above. It tells the story of how Alex Frommeyer (Fro), the CEO of Beam Dental, struggled to figure out why the team was so unhappy and why there was so much tension across departments after the company grew and shifted from doing basic KPI and goal setting to using OKRs.
After talking to several team leaders, Fro realized that some teams couldn’t meet their objectives because to do so, they needed help from other teams, who couldn’t help because they were busy trying to meet their own goals. Fro and the other members of management realized “the tensions were the symptoms.” And what they “didn’t realize early enough was that the disease was poorly written OKRs and misaligned goals.”
A re-examination of company-wide OKRs revealed that they were poorly written and more like key results than OKRs. For example, one of them was to “increase gross margins to XX%.” They then realized that the OKRs needed to be re-written because they put measurable components instead of vision in them, making them more like a KPI.
I don’t blame them—this is a common mistake because too many people don’t know how to align or own actions leading to the OKRs.
But I admire that Fro realized this and held himself accountable for his mistakes. He had a company-wide presentation and revealed new OKRs that were focused with a clearer mission, a detailed roadmap, and more training for staff. As he said, “we wanted to be thoughtful, deliberate, and create a process to help the rest of the company do OKRs at a department level to kind of distribute down from that.”
So they developed more training to help each team member create their own OKRs, which I think was the right decision. I believe all companies should allow each of their team members to create roughly half of their own OKRs in consultation with managers. When goals are set from the bottom up, it promotes engagement and makes employees more motivated and productive. Studies have shown that frontline employees thrive when they can see how their work aligns with the company’s overall goals. When all goals are set top-down, motivation is corroded. According to McKinsey, 91% of companies that have effective management systems say that their employees’ goals are linked to business priorities.
So Fro and his team created more abstract objectives instead of just number metrics. For example, “increase gross margins to XX%” was changed to “delight our broker partners with our product and service.” This allowed for more transparency, clarity, and flexibility within the entire company and supported their overall vision.
Again, I think they did the right thing. It’s almost impossible to fail when you think strategically about which metrics will help you outperform the competition and when you’re transparent and holding yourself responsible—this way, you can put yourself in the position to exceed your numbers and meet the OKRs. I’ve never seen a company not achieve what they wanted to accomplish when they were thoughtful, transparent, and held themselves accountable.
Fro and his management team were also committed to communication and feedback, and alignment between management and teams, which is also very important.
But how do you write good OKRs? This takes time. When writing your OKRs, make sure you put your company’s vision into the Objectives, keep them broad and aspirational, and don’t include anything with numbers. Save those for the Key Results.This allows them to be more flexible, and employees can add their own insight, hence making them clear on their objectives. You will also most likely have to train your team and teach them how to write their own OKRs, so they can own their own goals. I promise you will get better over time as long as you stay committed to the process.
Beam Dental’s OKRs weren’t perfect at first, and it’s ok if yours aren’t either. As Fro puts it, “OKRs work even when they aren’t working.” That’s because even having “imperfect” OKRs helped the leadership team quickly identify problems and adapt. To quote one of Beam Dental’s co-founders, Dan Dykes, “Because OKRs rely on literal measurement, it’s easy to think of them as being highly scientific. In reality, there’s a ton of art to creating a good OKR. You just have to live the experience.” The magic happens as the team struggles through the development of their OKRs and they discovered the natural tension that exists between functions.
As a leader, you shouldn’t be so rigid—the most important thing is that you’re learning as you go. I always tell companies that you have to give yourself a few quarters or so to go through the process of OKRs until you start feeling like you’re really leveraging them well. You’re not going to do it right the first time, so don’t try to be perfect at the beginning. I like to quote Voltaire and say, “perfect is the enemy of good,” and I agree—don’t let the idea of perfection ruin what could be good!