16. September 2022 By Joachim Flierdl
From the mission statement with OKRs to everyday operations
How to bring a corporate mission statement to life using OKRs –
In my last blog post, I summarised why a company should have a mission statement, my understanding of it and how you can use key questions to develop such a mission statement. It is essential to involve a broadly diversified group of people in the company and their opinions as part of the development process. Nevertheless, up to this point, only an initial step has been taken.
This is because it is a process of change. And, as with any change, it is important to take people onboard step by step and bring them along with you. Otherwise, the best mission statement essentially remains nothing more than a paper tiger.
Therefore, today’s topic is how to bring such an ambitious construct to life. To give you a better understanding, I will first briefly summarise the essential elements of a mission statement and their definitions before moving on to the OKR method.
Our purpose, our vision and our attitude and values (mindset) are ideally both universally and continually relevant. The mission gives us a target vision for a period of one to three years. The strategic fields of action ultimately give us an idea of who or what we need for a successful mission.
Next, it is a matter of operationalising the mission – in other words, taking specific action without losing focus. This is where the objectives and key results (OKRs) come into play. These are the link between the strategic and operational levels and define the short to medium-term goals (quarterly and annual targets) within the strategic fields of action.
The interrelationships are reillustrated in the following figure:
Basics of the OKRs method
An objective describes an operational goal or a target state – first of all, qualitatively. The associated key results then quantitatively define the target state or the various drivers of success along the way to the target state.
Based on the mission statement, we start with a maximum of three to five objectives – about one per strategic field of action. Then, we define three to four key results for each objective. Every objective at this top level should be achievable within one year.
By doing this, we have laid the foundation for being able to break down the goals into the various business units. Each business unit can now specify the strategic fields of action for itself and determine three to five annual OKRs that should contribute to the corporate OKRs.
However, this should not be a hierarchical assignment of goals, rather, the OKRs must be determined by both management and the individual units in a negotiated procedure. When doing so, the units can also define OKRs within the strategic fields of action that do not directly contribute to corporate OKRs. After all, the units have more and better detailed knowledge about their own area than management does.
By the same token, the key results should not consist of only purely monetary goals. These can be seen in balance sheets at the end. The monetary effect, however, can very often not be attributed to individual measures as a cause. For example, it is common practice in customer-centric companies to ask for customers’ feedback after every business transaction – usually as a five-star rating or NPS. This feedback also makes it possible to formulate excellent key results. But in the end, no one can say how much money things such as an improvement from 4.2 to 4.6 stars has earned us.
If we have reconciled the annual OKRs for the business units, they can be broken down further to the team level. Each team then has a clear direction for the next year and can start defining the goals for an initial stage – usually a quarter. For this purpose, the teams create three to five quarterly objectives, each with three to four key results, which they then coordinate and negotiate with the unit above them.
When implemented consistently, this creates a stringent link between the operational and strategic levels, which directly contribute to the mission statement’s mission and vision.
The OKRs are neither purely hierarchical nor completely cascading in this context. In fact, it is recommended to define only about 40 per cent of the OKRs from the top down and up to 60 per cent from the bottom up. That way, the detailed knowledge from the operational level can also naturally play into the strategic level.
OKR planning meetings, reviews and retrospectives
Negotiating and determining the annual and quarterly OKRs is another step towards success. This requires preparatory planning, in the course of which the parties involved align and finally agree on their idea of what their OKRs should be (from the top down versus from the bottom up). This OKR planning meeting is therefore more of a preparatory phase than it is a single meeting.
In daily operational business, the teams then regularly report on the extent to which the goal has been achieved. In agile companies, such OKR reviews can be very easily combined with sprint reviews; just like the regular OKR retrospectives that help us readjust can be linked to the agile retrospectives.
History of the OKR method
A few words on the history of the OKR method: This method is nothing new. Its roots date back to the 1950s. In 1954, Peter F. Drucker described the management technique ‘management by objectives’ in his book The Practice of Management.
Later in the 1970s, Andrew Grove refined the method as CEO of Intel and published additional information on the subject in 1975 in his book High Output Management. Also involved at the time was one John Doerr.
At the end of the 1990s, it was this same John Doerr who moved from Intel to Google and popularised the method under the name ‘objectives and key results’ (OKR) (Measure What Matters, John Doerr, 1999). In doing so, he has arguably made a substantial contribution to Google’s success.
Since then, countless large and small companies around the world have adapted the method for their own use. Among them are Amazon, Meta (Facebook), Samsung, Baidu, Tencent, Netflix, Spotify, Adobe, as well as German companies such as Zalando, BMW and E.ON.
The most important basis for business success is to set goals for the benefit of the customers. A mission statement is needed to ensure that everyone in the company has a uniform understanding of this. Only on this foundation can a strategy be built. To ensure that these short, medium and long-term goals are meaningfully interlinked at all levels of the company, they must be formulated in a way that everyone can understand and they must be transparent.
The OKRs and the associated processes help us to do this. The latter also ensure that we talk about and negotiate our common goals at the right time and at the right level. The OKR method fits well into our agile processes, but you should not underestimate the additional effort that goes along with it, which is, however, time well spent. This allows us to work in teams in a way that is self-determined and focused, and it ensures that we contribute to the strategic business goals. What is more, permeating the OKRs from the bottom up enables us to positively influence the business strategy.
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