Hey happy Monday.
Those who approach OKRs immediately hear this way of saying “you have to have an outcome-drivenmindset” or “you don’t have to think about the output, you have to think about the outcome you want to achieve” buzzing through the air…
Am I wrong?
It is a bit bewildering at first, especially when the coach-not certified- berates the class each time explaining like a printed book what outcome and output means.
In an oversimplified way, one could put it this way:
- Theoutcome is the effect to be achieved
- Theoutput is the product of the activities
For example.
- The outcome is campaign optimization
- The output is either the report that needs to be produced or the amount of creativity to be tested
Basic, but as I said, too simple to be of any effectiveness so much so that you run the risk of undesirable effects, two out of all:
- seek outcomes in areas of the business that are unnecessary and disconnected from strategy;
- Inability to influence the outcome while not seriously considering the outputs to be improved.
Being snobbish with outcomes and outputs, in addition to being useless, is also dangerous because it does not allow one to frame the most direct path to achieve strategic goals.
Goal setting and philosophy
The O in OKR stands for objective but could just as well stand for outcome. It describes qualitatively-that is, without numbers-the area of business to be improved to ensure proper execution of the strategy.
The K and R stand for key results, that is, they are nothing more than KPIs on steroids. They do not simply represent metrics to be tracked, but the quantitative, measurable improvement needed to have irrefutable proof that the goal has been achieved.
You should know that-in business and in life-you can measure anything, even intangibles. In my book I devote a couple of paragraphs to explaining in detail how to measure seemingly unmeasurable results.
If a phenomenon exists it is always possible to measure its effect. Conversely, if this is not possible it cannot be said to have actually happened, otherwise we would be talking about magic!
That said, the most beautiful and timely explanation, of what is an outcome of what is an output gives us Hegel. Yes just the philosopher he says:
“When a phenomenon grows from a quantitative point of view, there is not only an increase in order of quantity, but also a radical qualitative change.”
Explained plain and simple.
If something happens on a small scale, it goes unnoticed. If something happens in much larger size, the effect is noticeable because it changes the scenery.
Let’s take an example.
Hegel says, if I lose a hair, no one notices. But if I lose them all, I remain bald! The quantity of the phenomenon increases so much that the aesthetic quality of the person also changes.
Another example.
If a drop falls, nothing happens. But if a flood comes, the landscape will be radically different!
We apply Hegel to business to write good OKRs
Here is a commonplace yet very frequent OKR.
Goal: to become a market leader.
Key Result: to increase sales by 10 percent
What is the problem?
Increasing sales by 10 percent will not make you the market leader, unless you are in second place separated from the leader by just that 10 percent.
That small increase will be like the single drop falling. No one will notice!
If you want to become a market leader, you have to increase sales by 1000%. Then yes, the market landscape would be significantly different and everyone would have evidence of that.
And what else is the number of sales butan increase in the organization’s output?
Let’s press pause, give another example.
Goal: Organic traffic will be our first source of customers.
Key Result: # of articles published per month > 300
Is this key result correct? The answer is: it depends.
Let’s start with a general rule: a goal is never written with only one KR otherwise it would be a KPI with a title.
Theperfect OKR is written with a minimum of 2 KR, and in the programs at STRTGY -and in the book-I invest a considerable amount of time in explaining the techniques for doing this accurately and effectively.
Two good KRs might be:
KR 1: # of articles published per month > (30) 300
KR 2: # SQL from organic visitors per month > (6) 30
Publishing 300 articles per month is certainly an output because it represents the measurement of production, but increasing article production by an order of magnitude-from 30 to 300-could lead to a significant change in Google’s first page such that organic traffic could really become the primary acquisition channel .
The second KR-it is a lagging metric of the acquisition process-will let us know that we have chosen the correct keywords and thus have increased the output of producing articles that our potential customers find useful and that we have not simply written articles for the sheer need to increase the number.
A good OKR always provides guidance on the direction and volume of results.
What does this teach us?
That the best way to achieve a goal is to disproportionately increase output because it allows us to materialize the scenario to which we aspire.
Why is it important?
If teams are unable to identify what is the output on which to focus their energies, they will run the risk of dissipating them from achieving the goal.
Going back to the previous example: it is very rare that by publishing just one article we will be able to channel that amount of traffic to achieve the desired outcome. Just as selling only 10 percent more will not make any company a leader in any industry!
The very important role of middle-management
Those who really move companies are, yes, people, but among them there are some who move them the most and are often underestimated: middle management.
I am referring to all those below the management level and above the juniors. It is because of them that activities are carried out in the right volume and quantity.
Andy Grove also said this in his book High Output Management: “the manager is responsible for increasing the output of the part of the organization under his control,” that is, his team and suppliers.
To achieve strategic goals-i.e., OKRs-it is important for managers to work to increase the volumes of output to be produced by several orders of magnitude. Whether these are boxes to be shipped rather than consultancies to be executed or yet installations to be activated changes little.
By working on systems, optimizing processes, coordinating people and technologies, their task is not just a momentary increase, but a sustainable increase in production superiority.
Let’s go back to Hegel who says “in the future (i.e. our present) wealth will no longer be determined by goods, but by tools, because goods are consumed, while tools are able to build new goods.”
In fact, wealth in the company is not represented by finance, which is an end and not a means, but by the ability to produce it through its tools i.e. its business model, its assets including data, algorithms machinery, patents, production processes, everything that enables it to transform input into output.
We need not only visionary leaders but managers who are able to understand the strategy of translating change into the increased outputs that are needed to materialize the future.
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