Analyst Insight: Trackable metrics are helpful in business goal-setting. But far too many companies are tying themselves in knots — and falling short of their goals — due to an overreliance on OKRs, or “Objectives and Key Results.”

OKRs have been all the rage since 2017, when John Doerr released his business management book, Measure What Matters: How Google, Bono, and the Gates Foundation Rock the World with OKRs. The book’s message, while powerful, is regularly misconstrued, leading OKR-obsessed businesses to effectively create dysfunctional silos.

OKRs are a chance to have metrics for everyone. As the saying goes, “you can’t manage what you don’t measure.” If you’ve ever worked on yearly performance reviews for work, you probably have heard of SMART metrics:

• Specific

• Measurable

• Achievable

• Relevant

• Time-bound

Companies often try to assign everyone their own SMART metrics and goals — the workers focus on meeting their own individual goals in spite of the group, and they avoid work that falls outside of the scope of their personal metrics.

Unfortunately, overzealous implementation of OKRs often leads to departments fighting against each other without realizing it. The procurement team is tasked with decreasing costs and puts unreasonable pressure on suppliers to reduce their prices. While they are hitting their goals, the manufacturing department suffers as suppliers cut corners to keep their profits at reasonable levels. Or take the transportation function that is trying to optimize costs and is shifting more of their freight to LTL instead of small parcel deliveries. While they met their goal, the customer service team is left scrambling with increased customer complaints and calls to track shipments. 

One department is trying to attract high-paying clients, while another department offers discounts and giveaways to draw a spike in low-paying clients. The social media team tries to find its footing before the company outsources creative brand tactics to an outside firm.

As companies grow larger, it is very easy for management to get out of sync without realizing that each department is seeking to optimize its own success at the expense of company-wide results. Think about how much could go wrong in the course of that time, and how far apart these teams could find themselves. Such misalignments become more common the deeper you go within an organization, with rank-and-file workers often having no clue what upper management wants due to poor communication. The corporate world is full of examples of perverse incentives resulting from OKR overload. 

Outlook: Instead of building out extensive OKRs for each employee and department, companies need to measure what matters, typically five or fewer desired outcomes and no more than 12-15 key performance indicators. Ideally, consider cross-functional measures that eliminate functional silo thinking, which are almost always more valuable than siloed metrics.

Resource Link: www.haslam.utk.edu/people/profile/kate-vitasek