Pros and Cons of OKRs

Some organizations find OKRs help them create superior objectives and achieve some of them. (OKRs are Objectives and Key Results.) The idea is that every quarter you use the company purpose to create audacious Objectives. Each objective then has 3-5 Key Results so you can measure how well you do.

You're not supposed to achieve all the objectives each quarter. They're big audacious goals.

However, I've stopped recommending OKRs to most of my clients. That's because the clients don't have an organizational purpose. Instead of superior goals, the Key Results start at the bottom and flow up. (Which is wrong.)

I wrote about OKRs as MBOs before.

Pros of OKRs

Let me talk about a little more about how OKRs can help an organization.

If, as a management team, you're having trouble deciding on the project portfolio, you might find OKRs can help. Here's how it might help:

Set one bold, inspirational objective for the company. If you’re organized in divisions, set an objective for the division. Let's set the objective:

“Establish New Product X as the premier product in its category.” 

Now, you create 3-5 Key Results:

  1. Create and publish benchmarks to prove Product X leads the category in the next quarter. (The product development and marketing teams might either collaborate as a program or create teams to work on this.)
  2. Show Product X at a tradeshow in the next quarter. (Would need collaboration from product development, marketing, sales, maybe support.)
  3. Obtain 3 customer case studies in the next quarter that show Product X works for them in ways other products don't.

Could you achieve all of these in one quarter?

Maybe. The idea is the Objective is a big and audacious goal.

Can you achieve all three Key Results? Only if people collaborate on the measures.

This is why you might use OKRs if you're having trouble deciding on the project portfolio. This is a big Pro: help decide on the project portfolio. Align everyone to this big Audacious Objective.

If you use OKRs, you can:

  • Align everyone to a limited number of Objectives.
  • Measure outcomes.
  • Limit the organization's WIP to just the Objectives.
  • Everything flows down from the Objective.
  • People collaborate to achieve the Objective.

Lots of goodness.

However, that's not what I see often enough in organizations.

Cons of OKRs (Traps)

However, most of the reasons my clients have trouble with the project portfolio and their OKRs boils down to these reasons:

  • The organization does not have one specific purpose. These people think their job is to return value to the shareholders. Or, to make money. Returning value and making money is an outcome of fulfilling a purpose.
  • The division does not have a coherent set of products.
  • Someone wants to measure people, teams, and managers as individuals. They want to cascade objectives and measures up to the organization.

Let me take each of these:

Every organization needs a purpose. (See the Innovation Principles.) The first principle is to clarify the purpose. If you can't clarify the purpose, you can't create an objective where people collaborate.

I've seen divisions that have many unrelated products. Each product is out for itself. When my clients try to clarify their objectives, they fail because there's no overall objective.

If you let HR and the performance management system drive OKRs, you measure people, not the system. Too often, I see this process:

  • Someone decides on the 4500 projects the organization “needs” to finish. (Not an objective.)
  • Those projects cascade down to each person.
  • Each person has measures, often called KPIs (Key Performance Indicators) and the performance management system measures these people.

That's not the point of OKRs.

Which is why I ask this Zeroth Question first:

Why are you in business? What difference do you make in the world? 

When people agree on the answers to these questions, now, we have a purpose. We might not even need OKRs.

Use OKRs as a Focusing Tool

If you choose to use OKRs, use them as a focusing tool. I recommend you choose one Objective. If you have a really big organization, maybe you can choose three Objectives. If you think you need more than 3 objectives, I suspect the objectives are not big audacious goals.

Derive your 3-5 Key Results for each Objective. (See why I suggested one Objective?)

Then, make sure people need to collaborate across the organization to deliver the Key Results.

You might find OKRs useful then.

I'm sticking with the purpose driving the project portfolio decisions. I can then assess the number of KTLO, Grow, and Transform projects. (See Projects, Products, and the Project Portfolio: Part 2, Assess & Rank the Work or Manage Your Project Portfolio for more details.) That's worked well for me so far.

If you find OKRs useful and you have another way to prevent people from falling into these traps, I hope you comment so I can learn from you.

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