OKR, which stands for Objective and Key Results was popularized by Andy Grove in the 1970 decade, but the concept was skyrocketed after the extraordinary success at Google in the early years of the 2000 decade. The idea was introduced by John Doerr and quickly became central to Google’s culture and helped to ensure that everybody should be focused on the same important issues throughout the organization.
OKRs are defined for a short period, often for a quarter. The Objective describes the next step toward the organization’s purpose, mission, and vision. But some questions may arise after defining an Objective. What’s the best way to achieve this objective? How do we know that we’re on the right track? This is where the Key Results come in. They allow the quantification of the Objective with measurable parameters so that you can assess whether you are on track.
The OKR definition also encompasses an alignment process to link all organization levels and different teams. The alignment can be established in a top-down, bottom-up, or with a mix of them. The goal is to provide transparency and commitment to all employees.
During this process, teams define initiatives they will develop to materialize the Key Results. The last step is to create a cadence and KPIs on which the Key Results will be checked in a regular basis to track progress (e.g., weekly). This step helps the teams decide eventual change in tactics, initiatives or even Key Results, depending on the context.
Therefore, we all know that any strategy involves uncertainties. Thus, the goal of this article is to explain how Risk Management can be used to improve the adoption and effectiveness of OKRs. The technique, named OrKR, suggests some steps as follows:
- Define the Objective.
- Identify the major risks (maximum 3) associated with the Objective. The risks can be threats or opportunities.
- Check how effective your Risk Management process can deal with the risks identified in the previous step.
- Establish the Key Results based on this scenario.
- Break down the OKR and foster the alignment throughout the organization.
- Verify if the risks identified in an upper level will affect a lower level.
- Identify who can manage the risks along different levels.
- Define the initiatives to materialize the Key Results and manage risks.
- Define the cadence to monitor the progress of the Key Results and the risks.
As can be observed, the only difference between the traditional OKR process and OrKR is that risks were identified before defining the Key Results and initiatives. Also, the risk monitoring activity is performed while tracking the progress of the Key Results.
However, there are some advantages in using OrKR and, in certain circumstances, it may be the difference between success and failure in reaching your Objectives.
- You have the chance to verify if your Objective is realistic.
- You can define if you are able to deal with the risks.
- More accurate Key Results can be defined.
- Additional Initiatives can be planned to deal with the risks.
- You are able to monitor risks together with the progress of the Key Results and redefine them, iteratively, if necessary.
- Your monitoring process is more effective, since the KPIs used to track the Key Results are based on previous events and risks have a future view of what may happen.
Let´s see, in practice, the difference OrKR can make and how it can be applied in some examples. The case below is fictitious and it´s being used just for the sake of illustration.
ACME is an IT company trying to increase its market share in South America (Objective). Two Key Results were defined: increase the sales of product X in 30% and product Y in 50%. Thus, the Software Development department decided to create two new features in product X and repair some bugs in product Y. In turn, the Marketing department decided to launch a huge online campaign to provide more visibility for the products in all countries ACME has business partners. They have planned to have the features ready to deploy, the bugs fixed and the marketing campaign ready in one month. The results are planned to be reviewed every two weeks until the end of the quarter
Now, imagine EMCA, another IT company, which is a competitor of ACME with very similar products. Both have the same Objective (Improve the market share in South America). They got in touch with OrKR and decided to try it instead of the traditional OKR approach.
After the definition of the objective, they have identified one threat and one opportunity. The opportunity is the possibility to create a partnership with a European company trying to enter the South American market. The products developed by this company and EMCA are complimentary and if sold together can boost both products. On the other hand, the threat identified is the possibility of some countries to increase import taxes on products in the coming months, implying a reduction in sales.
EMCA decided to start the partnership process to leverage the opportunity. Also, they have chosen to increase the sales in the counties that are not planning to raise taxes and wait to check what will really happen in the future months. Based on the risks responses, the Key Results defined were: (i) maintain the current market share in the countries with eventual new taxes; (ii) increase the market share in other counties in 60%, and (iii) create a new market in Europe, aiming an extra revenue of 1 million Euros for the next three months.
The initiatives planned to be implemented are: (I) integrate their products with the European company, and (ii) create a marketing campaign focused on this integration and the benefits of buying the products together in all countries. They also decided to monitor the decisions of the countries that intended to raise taxes. If the decision is not to raise the taxes, they will increase the market campaign in these countries too. The results would be monitored as well as the risks every two weeks until the end of the quarter.
Both ACME and EMCA have the same Objective, but completely different strategies and Key Results. Also, EMCA is being more proactive and is ready to maximize its opportunity and minimize the threat. If the threat does not come into reality, they have a backup plan. The initiatives were adjusted to the risks and are more realistic.
OKRs and Risk Management are great tools to manage strategies and as it was demonstrated before. The integration of both can bring more predictability, create better strategies, and increase the chance to accomplish objectives in any company.