A Fast-Changing World Requires Sharp, Data-Driven Decisions
Markets, customers, and competitors move faster than ever, and are far less forgiving than in the past. Relevant (and accurate) measurement has become essential to support critical decision-making. Measurement combined with its necessary complement, accountability, can mean the difference between driving a straight line to revenue acceleration or drifting toward uncertain outcomes.
Of course, measurement and accountability alone are not sufficient to achieve growth. Altus Alliance, in conjunction with the Stanford University’s Center for Entrepreneurial Excellence have identified 20 other key elements. These elements comprise the Altus 21 High-Performance Revenue Assessment™—an integral component to every Altus client engagement. Here we will focus on measurement and accountability.
In John Doerr’s book “Measure What Matters”, he points out that although many companies set metrics to accelerate growth, they often set the wrong ones. Let’s begin with common pitfalls.
Loose Measurement and Accountability Sinks Ships
Yes, a terrible twist on a well-known World War II slogan. We’ve all seen the downside – let’s list a few Sales and Marketing experiences before we dive into Doerr’s view of properly driven OKRs.
- Irrelevant metrics. Back to “not everything that can be counted, counts,” it’s easy to measure how many outbound calls enterprise sales reps attempt and complete in a given time period, but is it a reliable predictor of sales success in the changing world of prospect-driven sales cycles? It’s alright to have a few “process” metrics, but make sure you are tracking metrics that can predict results.
- Siloed objectives and metrics. It’s surprisingly common to find that Marketing and Sales objectives, plans, and KPIs are not well aligned. The typical outcome is revenue underperformance and a lot of finger-pointing.
- Misdirected accountability. How often have you seen Sales or Marketing leadership fired for missing targets, without a clear understanding of the causes (market forces, new competitive pressure, poor processes, under-resourced plans, product problems, etc, OR, were the targets just plain wrong?). Or the occasional scapegoating when targets are missed, to avoid senior management accountability.
- Accountability limited to penalizing for missed targets while missing the opportunity to understand and address the root causes, as above. And don’t forget to reward for the successful achievement of targets.
So how to make sure objectives grow your revenue? Following parameters of setting successful ones.
OKRs: Measuring What Matters (and Holding Your Team Accountable)
Similar to “not everything that can be counted, counts,” the salient points from John Doerr’s book are not his own. He learned them at the feet of a Master of Metrics, Intel’s Andy Grove (and rightfully gives credit). Nevertheless, Doerr masterfully brings out the OKR gems, also known as Objectives and Key Results.
Designing successful OKRs can be boiled down to:
- determining what Objectives must be met to move the business forward, and then
- driving the execution, or Key Results that need to be delivered to achieve the objectives.
In short, once organizations know the objectives, everything is about execution. Getting the objectives right is the starting point. Objectives must be:
- limited in number (3-5 is about right for most organizations)
Drilling Down: The Four Rules
- Limit the number of objectives. Success is best achieved through sharp focus on a few objectives. Too many dilute effort, distracts, fatigues, and opens the door to excuses. “He who pursues two rabbits catches none.”Quality counts. They must truly tie to the strategic direction of the company, have clearly defined timeframes (quarterly works well – linking objectives to normal business reporting cadence), be based on proven/realistic linkage to customer acquisition and growth, and factor in available resources. Further, they need to drill down to specific execution plans, with owners and resources.
- Be flexible with execution metrics. Change is a constant, and the blind spots will get you. Accommodate learning. Even the best execution plans and execution, encounters unanticipated roadblocks, sudden changes to market dynamics, and unforeseen new opportunities. So conduct regular reviews to measure progress, identify hurdles, evaluate alternative execution paths, or possibly kill the plan (fail fast) to increase the odds of success.
- Set reachable, realistic metrics. The score to “Mission: Impossible” should not be playing in the background as organizations codify the metrics tied to objectives. At the same time, it’s worthwhile to add “stretch goals,” goals paired with incentives, to encourage overachievement. Distinguish between stretch goals and non-stretch and assure the non-stretch goals are committed, measured, and enforced. The stretch goals offer the potential to become a hero!
- Make objectives, metrics, and outcomes transparent. OKRs need to be communicated from the top down and reinforced with continuous reference from the Leadership Team as appropriate. Once, a client management team poured hours into writing chapters of OKRs, and then filed away in binders. It was no surprise that the few objectives met at the end of the reporting year almost felt like accidents.
Transparency and continual communication are important drivers of buy-in throughout the organization. Together they convey the importance of execution, can drive a sense of urgency if realistic targets are at risk of being missed, and facilitate cross-functional cooperation.
Most successful organizations we’ve worked with couple top-down OKRs with bottom-up autonomy when it comes to how to execute against the objectives. Doerr reports the same, using Google as an example: engineers were encouraged to spend 20% of their time on projects they believed would further OKR achievement, but were not initially part of the plan.
Beyond short-term revenue, the process of setting, measuring, and holding teams accountable for their outcomes brings to focus the key factors affecting business performance, setting the foundation for the business to meet changes in the market.
A final point from Doerr’s book: OKRs and accountability is an opportunity to drive motivation and ultimately revenue growth. A strong sense of purpose can be driven by the transparency and interconnectivity of everyone’s OKRs.
In his words: “A lot of organizations set their goals and meet them. They ship their sales, they introduce their new products, they make their numbers. But they lack a sense of purpose to inspire their teams.”
Implement true measurement and accountability in your organization, starting with visible OKRs. Setting Objectives and Key Results will enable every member of the team to know their part, understand how their part enables their team to succeed.