In summary:
- Abandon the idea of imposing goals from above. This approach only creates confusion and micromanagement.
- Actively encourage teams to contribute to the success of the strategy, using their expertise and proximity to daily work.
- Guide teams to define Key Results that are specific, measurable and directly related to their work and impact, not to generic or financial metrics that are far from their control.
- Verifies that the teams’ proposed goals clearly and logically support those of managers and leadership, creating a consistent value stream toward the end results.
- Make sure the business direction is crystal clear and well communicated to everyone before setting specific goals. This is the indispensable foundation for any alignment.
When a methodology such as OKRs spreads quickly, so do misunderstandings about certain concepts.
One of these, which has recently caught my attention, is that ofalignment in OKRs. Often called cascading, it involves getting goals down from the top down, with the leader translating downward what needs to be done.
In my book I describe three techniques of cascading, one of which is completely wrong and should be avoided. However, I do not want to dwell on this because my book is probably already on your desk or may be within 24 hours. Rather, I want to counter this misunderstanding of cascading and explain why.
OKRs are often used as opposed to top-down management, where leaders tell managers what to do and then wash their hands of it until the next update. This approach generates dysfunctions such as micromanagement, demands for more information and obsessive control of activities, and ultimately low quality and demotivation.
It is not a waterfall!
If OKRs were really a waterfall from the top down, tasks would flood the backlogs of all colleagues. When OKRs are cascaded from top to bottom, the leader would have a goal to accomplish without being directly involved, delegating the task to others. The word cascade evokes a huge flow of tasks occupying the teams’ agenda, taking time away from experimentation, personal focus and innovation.
This is what happens when OKRs fail: so much extra work is generated that they will soon be abandoned.
Connecting with strategy
There is one thing that few people notice in my diagrams and that is the direction of the arrows.
Alignment does not occur in this direction:
CEO → Leader → Manager → Team
But it occurs in exactly the opposite sense. It is the teams that make it possible for managers to achieve their goals, and the latter for corporate leadership.
CEO ← Leader ← Manager ← Team
This entails a change in mindset that is reflected in the business vocabulary: there are no longer carryovers, but supports.
Then you will ask me why don’t you write it this way: Team → Manager → Leader → CEO ?
Because you would have a series of objectives, maybe well written because ChatGPT is great with OKRs (have you ever tried?) but completely disconnected from each other!
Alignment happens from the bottom up, but goals still start from the top. The Strategy starts with those who have the resources (and I would add, the incentives) to influence it and must be communicated as unambiguously as possible to teams who can only connect if they understand it.
Like the gears of a clock
Coaches at STRTGY learn the art of strategic alignment not only between teams and time levels. Imagine the company as a perfect clock: some gears turn faster than others. Teams close to customers move quickly with a much higher volume of activity than those higher up on the organizational chart who make few high-impact decisions.
Have you ever tried to look at the movement of an automatic watch? It looks like it’s alive. The motion originates in the rapidly moving gears and is transferred through an elegant connection-the time train-to produce the only effect you can see from the outside: the hands moving [if you are passionate about this topic, I invite you to read the most wonderful interactive explanation I have ever read at this link].
Hours and minutes, they are like financial metrics: they are easy to see from the outside. But they only move if everyone is connected and aligned.
But how to do this with OKRs?
Take the case of a software development company. Cascading OKRs means translating high-level strategic goals into specific operational goals for each department down to individual teams and collaborators. The CEO might have an OKR like this (trivial but simple to understand):
| O: | Increase the overall profitability of the business |
| KR 1 | Increase annual revenue from new innovative digital services from €1M to €2M |
| KR 2 | Improve gross operating margin from 15% to 20% |
The strategy for being able to achieve these results could be to increase the speed with which projects implemented produce results for customers. The CEO’s OKR can be aligned with the CTO’s OKR in this way.
| O: | Speed up the technical delivery of digital projects to generate results for clients more quickly |
| KR 1 | Reduce the average development cycle (from coding start to deployment in production) from 8 weeks to 4 weeks |
| KR 2 | Increase the percentage of projects released without delay compared to initial estimates from 60% to 85% |
The CTO’s two key findings simply say: if we become faster and more timely in delivery it means we can manage more projects and generate better economics. Now we can connect the dev goals that might sound something like this.
| O: | Improve code quality by accelerating releases |
| KR 1 | Reduce the percentage of time spent on post-release bug fixing from 30% to 15% |
| KR 2 | Increase coverage of automated testing from 60 percent to 85 percent |
Can you see the strategic motion?
CEO ← CTO ← DEV
It is the DEVs who by achieving their goals support the CTO to create a stronger team that in turn allows them to create a more profitable company.
Why does it work?
I invite you to explore this series[№200, №201, №202] titled “The Science Inside MAKE PROGRESS”, which illustrates the neuroscientific mechanisms that make OKRs effective but the summary is that when people set goals aligned with their identity, the chances of achieving those results increase dramatically.
For this to happen cascading must occur after leadership has unambiguously clarified its goals. In fact, in the example above you can see that each team is not required to contribute to the increase in turnover or margin because the only way they would have would be to cheat on timesheets, but to increase the quality of their work in a measurable way.
You will notice that teams are asked to support leadership with what they do best and what represents the quality of their work, not just with requests for increased turnover.
The real difficulty lies in distilling the strategy in a clear and understandable way, distributing it within the organization so that it works as an interface for the work. Teams using MAKE PROGRESS® take 4 to 8 weeks to write their goals. Otherwise, they would risk trivial goals that would not improve business performance but only increase organizational entropy, leading to more work instead of a real sense of progress.
While it may seem time-consuming and everyone loves a shortcut, I can assure you that working on strategy is probably the highest return on investment an entrepreneur can make.
It means filling an invisible strategic debt: the need to make up for years of undocumented work and individual decisions, unreplicable and undocumented mechanisms that, like cholesterol in the arteries, stiffen the system and become dangerous.
