One of the biggest benefits of OKR goal-setting methodology is that it provides strategic goal alignment across your company; it can align executives all the way down to individual teams. Many companies choose to implement OKRs because they want different teams in the company to be more aligned with the overall company direction.
Still, alignment can easily go wrong if people are not aware of how it should work and what the process looks like. It’s not just about having goals somehow linked to each other. OKR alignment is deeply rooted in the goal-setting process and requires a mindset for creating good OKRs.
Before you can start to align OKRs throughout the organization, you need to take the time to get everyone onboarded with the new methodology. If you are in your first quarter of setting OKRs, start with just one OKR per Team and forget about alignment for now. Let your employees practice and implement the new workflow. After the first quarter, you can focus on the alignment process.
In this article we will share the best practices to align goals using OKRs and common mistakes to avoid.
If you don’t know much about the goal-setting methodology of OKRs (Objectives and Key Results), made famous by Intel and Google, then please read Objectives and Key Results.
How to align OKRs successfully
The successful implementation of OKRs and, consequently, improving your business starts from the right process and approach! There are two alignment methods you often read about. Those are the bottom-up approach and the top-down approach.
To keep it simple, we will introduce you to the best and the most successful way to align goals. It is a combination of the two approaches.
Step 1: Set overarching Company Objectives
When you are looking for alignment, you should always start by setting the overarching Objectives on the company level. It’s nearly impossible to have any company alignment if you do not have a central focus.
Let’s learn how to align your company through an example story:
Let’s say you have a software as a service (SaaS) company that has been struggling with achieving your revenue targets. After management examined the problem more closely, you have reached a conclusion that the revenue is low because of high customer churn. You are happy with the new customers coming in but churn is too high and customers stop using your service too quickly. It indicates that there’s some kind of a problem you need to solve. Your customers are not satisfied enough to stay. So management does the first step and sets the Objective for the company – “Improve customer retention to drive up the revenue”.
Step 2: Communicate the Quarterly Objectives with the teams
After the Company Objective is set, it should be shared and communicated to start aligning teams. You can set some high-level, Company Key Results, but it’s not required. A Company Objective is enough because all the main work will be done on the team level.
Besides sharing the Objective itself, management should also take time to explain why this is important and where the need to work on that comes from. Do not underestimate this step because when people do not understand or do not agree with the overarching Objectives, it’s actually pretty hard to get teams and individuals aligned and working together.
Leave room for discussion and feedback. Team managers might see the situation from a different angle. If they do not agree with the focus area, take time to understand why: maybe there is a really good reason. Do not move forward before everyone has agreed to pursue those Objectives.
Step 3: Teams set their contributing OKRs
After all of the teams and management have agreed on the Company Objectives, it’s time for teams to set theirs.
Team leaders need to think how they could contribute to what company is trying to achieve. Setting the team level OKRs should mean that the whole team is participating in the process, it shouldn’t be just the manager setting the goals without any input or feedback from the team members.
Teams should take time to organize OKR discussion sessions where everybody can brainstorm and evaluate the ideas. First, focus on putting a lot of ideas on the table, and then move on to choosing the important ones that make the most sense right now.
Let’s return to our example. The Company Objective was to “Improve customer retention to drive up revenue”. The Product team is aware that the goal is to improve customer retention and they are starting to brainstorm on how they could contribute to that.
As a result of the brainstorming sessions, they understand that the software onboarding feature is not good enough. Data shows that only 13% of customers are completing the onboarding steps. A high amount of support tickets asking about the product features also indicates that people need more product guidance. If a product is confusing to use, it can easily push people to change the software. So having a better onboarding process would help with retention. That being decided, the team sets its own Objective and defines measurable outcome-based Key Results to know when they have achieved the Objective.
Objective: “Improve our in-product onboarding”.
KR 1: Reduce the number of product-related support tickets from average 220 to 120
KR 2: Increase onboarding completed rate from 13% to 45%
KR 3: Improve first 30 days product usage activity average from 40% to 70%
Step 4: Share, agree and align
If everything goes smoothly, then the next step is simply sharing the Team OKRs with everyone else and linking them to the Company Objectives.
Of course, there might be occasions where Team OKRs need some discussions and explanations for the management as well. It’s a two-way street.
Management should have an overview of all of the OKRs set. Even though it’s crucial that teams should decide their goals, it’s also important that different Team OKRs work in parallel and not against each other.
Continuing with our example, alignment between Company and Product team OKRs would look like this:
Following the same flow, teams who can contribute to that Company Objective should set, agree, add and link their goals. The Company Objectives will progress when teams update the progress on their Key Results. This means, when the teams achieve success, the company does as well. Once alignment and linking is complete, everybody can start working on their goals!
Let’s say the Marketing and Customer Success teams have also set their OKRs to contribute to the Company Objective. Marketing works on improving the MQL numbers and Customer Success focuses on long-term relationships with customers. If the teams succeed with their Key Results, it would move the progress of their respective Objectives. And as you can see on the picture below, if Team Objectives progress, it all feeds up to the Company Objective which moves forward as well.
If you have more than company and team level OKRs to set
It doesn’t actually matter how many levels you have in your organization’s structure, alignment logic says the same. The actual work is done by teams, and higher level Objectives are there to make sure that there is a unified focus area!
Also, having too many levels of goals might easily overcomplicate the whole process and it might mean lower chances of success. So think it through: do you really need this much complexity or not? Especially, when you are just starting with OKRs, we would strongly recommend to keep it as simple as possible.
If you need to set department level goals (in order to be more specific about the focus area for several teams), then you should do this after setting and communicating company goals (step 1 & 2). Once the department agrees on their top priority for the quarter (we recommend to set Objectives only), the teams can continue with setting their OKRs and align them with the department level (step 3 & 4). You should be careful with setting Key Results on department level because there’s a high chance of them ending up being actually KPI/Metrics targets.
OKRs never cascade, they align:
Let’s start with the biggest mistake that many companies make: they cascade the OKRs from management to the teams. This is a red flag for many reasons.
First, when something is cascaded down from management, it’s probably a KPI target or some kind of a project and not an actual OKR. If you do not know the difference, then we would recommend to read the following sections first: Outputs vs Outcomes and OKRs vs KPIs. It’s hard to achieve OKR alignment if you are not setting proper OKRs.
You should not cascade goals or even projects. Let the teams, as the experts in their function, define the areas they need to improve and work on, in order to help to achieve Company Objectives. This is the way (maybe even the only way) how teams can achieve the best overall results.
That brings us to the second biggest mistake: management doesn’t trust the teams to set their OKRs and teams do not take responsibility. Teams know best when it comes to defining what is wrong or what they could do better in their area. They do their jobs daily and definitely have the best overview of the team situation. They should be the ones setting the Team OKRs.
If OKRs are cascaded, you are taking away their chance to put their heads together to understand what this team really needs and could bring to the table. When you cascade, you might be totally wrong about what’s important. It might also mean that teams are getting too comfortable not setting their OKRs and not taking the responsibility of their own results.
Management still plays a big role in the goal-setting process, just not by doing the team’s job. Management needs to define the focus area for all of the teams and make sure that everyone is setting their OKRs based on what the company wants to achieve. Also, management is responsible for running the process and supporting the teams with timely feedback.
The third biggest mistake when it comes to goal alignment is that companies skip setting Company Objectives or do not set good ones. How can teams align if there’s no common direction in the first place? If each team sets their OKRs separately, they might even end up working against each other. OKRs work best if there’s alignment and unity in what the teams do.