OKRs: ITS USES AND IMPAIRMENTS IN VISIONING

We often wonder how successful companies continue to navigate and grow and know exactly what direction to go. The trick seems to be an almost irresponsibly aggressive approach to growing key objectives with a talented group of people.  OKR is an acronym for Objectives and Key Results —  a framework for visioning and setting goals within an organization that was popularized by Google.

Today, OKR is used at a seemingly broad variety of companies, from larger established firms like Anheuser-Busch and Deloitte to younger tech companies like Eventbrite and Twitter. Therefore, what are OKRs and how do they work, and — most importantly — do they work. Many leaders ask how they can align their team to the vision and set goals within their team.

What is OKR?

OKR is a goal-setting methodology originally developed by Andy Grove, former CEO and Chairman of Intel. In his book, High Output Management, he describes OKRs as being the answer to two questions:

We can expand the definitions of each part of the OKR to something like:

Objectives: Memorable, qualitative descriptions of what needs to be accomplished in a given timeframe. They may be ambitious and feel somewhat uncomfortable. They may also be short, inspirational, and public so everyone knows what everyone else is working on.

Key Results: A set of 2–5 metrics that measure progress towards the Objective. The focus must be on an outcome, not an activity (shouldn’t include words like “help”, “consult”, or “analyse”).

John Doerr, who learned OKR from Andy Grove while at Intel, was the one to teach and instil OKR at Google. He explains that the objective can be broad, aggressive, and even inspirational. But for the key results, the more specific, measurable, and verifiable, the better. Doerr recommends setting a limit of three to five OKRs per cycle, and that each objective should be tied to five or fewer key results.

OKR – An Example

Let’s say our business relies on giving a better customer experience than our competitors. So, our quarterly objective may be – to create an awesome customer experience. But how do we know if we are succeeding in doing this? What form of measurement shows we are creating an “awesome” customer experience?

Net Promoter Score (a tool that measures what people think of the brand) and customer churn rate (how many customers we are losing a month) may be some metrics. A great experience would mean people both say nice things about us and staying or coming back. By saying we want to improve our NPS score and lower churn, it sounds like we are willing to do whatever it takes to make our customers happy. But to run a sustainable business, we need to keep costs under control. Which is why we may add a third Key Result around cost as a countermeasure. Therefore, the sample OKR may be:

Example — YouTube

Suppose the goal is to increase the total usage time of Google products. The tricky part is finding the right metrics in which to progress. Understanding the business is key in being able to identify key growth nuances and folding those nuances into company objectives. Similar to Facebook, YouTube wants viewership, measured in minutes, to go up, because a fixed percentage of that viewership are advertisements. So as total time goes up, so do revenues.

In this case the Key Results may reveal part of the strategy to increase watch time. The first key result sets a numerical goal to hit for the objective. Having this number is crucial (and theoretically could be included in the objective itself) to score the outcome of this objective. Other examples of OKRs:

Why use OKRs?

At first brush, the appeal of OKR is obvious. It simplifies everything. By calling out objectives, you help your team identify and zero in on what matters most. With the key results, you create measurable benchmarks that help clarify what tangibly needs to happen, and likely hold folks accountable for those outcomes. And lastly, it’s probable that OKRs promote alignment and transparency across the team since everyone knows what each others’ OKRs would be.

Making OKRs Effective

There are nuances around how effective OKRs are in practice. John Doerr himself admitted that “goal setting isn’t bulletproof” and OKRs should not be blindly nor rigidly adopted. Some learnings from those who have used OKRS are:

Know why we are implementing them:- . . . For OKR to work, we have to have a deeper “why” for how OKRs might help you achieve that performance.

Focus on Crafting of Effective OKRs:- . . .

Separate OKRs from compensation — and try hard to separate it from performance reviews:- . . . Tying OKRs to compensation can cause employees to purposefully set lower goals in order to achieve them. Combining performance reviews with OKRs can be counterproductive since someone’s past performance is emphasised more than the binary result of whether the goal was achieved. This can be a challenge to achieve in practice.

Someone who hits their OKRs is going to look better than someone who totally fails to hit them. As a result, it’s important to consider the unintended negative consequences OKRs might have on your team’s performance.

Challenges of OKRs

Missing the big picture:- . . . When goals are too specific people can focus attention so narrowly that they overlook other important features of a task. For example, new ideas or feedback that are brought forward can often be ignored or seen as irrelevant, when in fact they are salient to the task at hand.

Optimizing for short-term, over long-term :- . . . Sometimes the narrowness of goals can come at a cost. It is easy to react to immediate outcomes and focus myopically on short-term gains and to lose sight of the potentially devastating long-term effects on the organization.

Dilution of focus:- . . . Research has shown that individuals are prone to focus only on one goal at a time. As a result, the OKR framework which recommends 3–5 objectives at a time, may prove to be distracting, since multiple goals are being pursued.

Shifting risk attitudes :- . . . Studies show how goals tend to increase risky behaviour. Depending on what domain we are in, this could be positive — but if we are in a negotiation situation, a higher propensity for risk can harm negotiation performance.

Promoting unethical behaviour: – . . . Goal setting can encourage cheating behaviour. For instance, one study found that “participants were more likely to misrepresent their performance level when they had a specific, challenging goal than when they did not.

Harmful to learning, cooperation, and intrinsic motivation:- . . . Goals can detract from our ability to learn and cooperate, as well as, our intrinsic motivation to do a task well. Narrow goals can inspire performance but prevent learning. Goals can foster a culture of competition that can be adverse to an organization.

Motives for Collapse of OKRs (Managerial Perspective)

Smaller teams and organizations tend to have faster rates of change, and so for them, it felt like more work to manage the framework to stay nimble as a team, than to simply execute on the work itself.

Concluding thoughts

The most salient feature of an OKR is the thinking it produces, i.e., focus on what matters most, and think about clearly how we know if we are going to get there. Whether that’s through the precise OKR framework — or not — is less important. Articulating a vision of the future is important, and providing support and guidance for what progress looks like is what matters.

The research is persuasive: Goals can do more harm than good, especially if overprescribed. At the same time, there is plenty of research that also shows the power of well-defined, thoughtfully instituted goals. More so, it is enlightening to know the range of negative consequences so that leaders can consider (a) if a goal-setting framework like OKR would work in our own team and (b) how in general to think about setting goals productively in our team.

Content Curated By: Dr Shoury Kuttappa

HENRI FAYOL VS ABRAHAM MASLOW: BEHAVIOURAL PERSPECTIVE ON LEADERSHIP

As our career progresses, we may find we do fewer technical tasks and spend more time guiding a team or planning strategy. While that’s often a given today, in the 19th century most companies promoted the best technicians. But Henri Fayol recognized that the skills that made them good at their jobs did not necessarily make them good managers.

Who Was Henri Fayol?

Fayol’s 14 Principles of Management identified the skills that were needed to manage well. While inspiring much of today’s management theory, they offer tips that we can still implement in our lives and organizations. Fayol also created a list of the five Primary Functions of Management, which go hand in hand with the Principles.

What Is Administrative Theory?

Fayol called managerial skills “administrative functions.” In his 1916 book, “Administration Industrielle et Générale,” he shared his experiences of managing a workforce. Fayol’s book – and his 14 Principles of Management – helped to form what became known as Administrative Theory. It looks at the organization from the top down, and sets out steps for managers to get the best from employees and to run a business efficiently.

Caveat: . . . . . . . . . . Administrative Theory is characterized by people “on the ground” who share personal experiences, improve practices, and help others to run an organization. This contrasts with the Scientific Management Ideas led by Frederick Taylor , which experimented with how individuals work to boost productivity.

The 14 Principles of Management: A Revisit

By focusing on administrative over technical skills, the Principles are some of the earliest examples of treating management as a profession. They are:

What are Fayol’s Five Functions of Management?

While Fayol’s 14 Principles look at the detail of day-to-day management, his Five Functions of Management provide the big picture of how managers should spend their time. They are:

Is Fayolism Still Relevant Today?

Fayol highlighted the differences between managerial and technical skills. What’s more, he was one of the first to recognize that “manager” is a profession – one whose skills need to be researched, taught and developed. We only have to look at the language he used to see that Fayol was writing over 100 years ago. For example, he refers to employees as “men.”

But, without the contributions of these pioneers, such as Fayol, we would probably be teaching industrial engineering, sociology, economics, or perhaps ergonomics to those who aspire to manage. To be doing so would push us back to the 19th century, when technical know-how reigned supreme as a path to managerial responsibility. When we look closer, we discover that many of Fayol’s points are fresh and relevant. Such as:

Some of these ideas may seem a bit obvious, but at the time they were ground breaking. And the fact that they’ve stuck shows just how well Fayol’s Principles work.

Criticism Of Fayol’s Principles Of Management

That’s not to say that everyone is a fan of Fayol’s Administrative Theory. Some detractors claim that:

The Interlinks Between the Theories Of Henry Fayol & Abraham Maslow

Fayol’s perspective of the overall success of an organization was to include the formulation of goals, strategies and plans and to work through others to ensure that these activities were implement. These principles also had to be supplemented and supported by discipline and anticipation. Fayol also believed that management could be taught and was concerned about improving the quality of management.

Maslow’s theory of motivation, on the other hand, took a more psychological approach, which focused on employee motivation. This theory proposed that within every person lied a hierarchy of five needs – starting with physiological needs and ascending to safety, social, esteem and finally, self-actualization needs. Hence, in order to motivate a person, Maslow stated that lowest level needs must be substantially satisfied before the next level can be activated and so on.

Application of Fayol’s Concepts

Fayol believed that the responsibility of general management is to lead the enterprise toward its objective by making effective and efficient use of available resources.

Fayol’s five functions are the rules of his administrative doctrine. He had shown sustained effort that his administrative principles could be applied to all social organizations from the family to the state. He stressed that the 14 principles must be flexible and adaptable to the situation at hand. The principles of management were aimed at helping managers manage more effectively.

Application of Maslow’s Concepts

In Maslow’s theory, it is assumed that when an individual has the knowledge and skills to perform his or her job, a manager can influence their motivation to achieve levels of excellence. Maslow’s five needs are arranged in a hierarchy of importance that can be described as prepotency. The higher-level needs are not important and will not manifest till lower-needs are met and satisfied. This hierarchy can also be divided into two orders of needs. The lower-order needs are physiological, safety and social concerns, and the higher-order needs are esteem and self-actualization concerns.

Comparisons

Fayol’s ideas of the five functions and 14 principles are good frameworks for managers to follow if they want to manage more efficiently and effectively. Maslow’s ideas on how an individual behaves in a working environment has helped us understand the importance of motivation complementing administration from a managerial point of view. These two concepts complement each other as they help managers better manage administratively and psychologically. It depicted how effectively and efficiently a workplace should function and how employees should be motivated to commit and perform at their best. Hence, Fayol and Maslow’s ideas and concepts have indeed helped us understand the job of getting things done through people.

The Interlinks: Management, Leadership And Transformational Leadership

Management is about the mind. It is the manager’s job to stay focused on the task and goals, to set action plans, thereby helping followers deal with complexity. Leadership is more about the heart, or staying focused on the people and their individual characteristics, creating a shared vision that helps followers to participate in a change process. Transformational leadership is about breaking down resistance to change. This is done both through “assigning meaning to change” and through the change within the leader (him)/(her)self.

Content Curated By: Dr Shoury Kuttappa