Introduction | Why “Measure What Matters” Matters
“We want to hit two million in sales this year, no matter what!” Sound familiar?
Revenue generation drives company growth; it feeds the rest of the organization. Planting your flag on an arbitrary set of digits is great—congrats! What is the plan to achieve such lofty expectations? How does sales, marketing, operations, admin, HR, etc. play a role in the overall goal of two million in revenue? Not sure? Well then you might as well make it two BILLION in revenue, because you’re just as likely to hit that number if you don’t have systems in place to measure progress, adjust near term goals, and even scrap objectives. In other words if you don’t measure what matters and leverage Objectives and Key Results (OKRs) then all you have is a pie-in-the-sky revenue dream.
Fear not Entrepreneur, for there is hope! It all starts with a mindset shift—a little “thinking about your thinking” before you can successfully plan, measure, and analyze, your firm’s progress.
4 Hallmarks of the “Measure What Matters” Mindset
- Understand the difference between a goal and objective | Goals are the genuine end state for a company during a given period of time. Objectives and key results break down to a shorter period of time, giving us an accurate measuring stick and set of guidelines to ensure we’re driving towards our desired end state.
- Stop measuring against the horizon | Now, I have no issues with measuring LE vs budget, as it gives us a tangible measurement to work with. The problem is that it’s myopic and provides zero “why?” behind lagging financial performance. At my company, we measure against a designated start point, such as a quarter. We can measure that tangible progress in every corner of the company, while being able to look back and analyze business trends, competitive landscape, etc.
- Empower Your Leaders | Are you empowering departmental leaders to drive their performance objectives? Or is this a “cast down from the ivory tower” type scenario? Likely the latter due to trust issues, which is a whole different subject entirely. Start involving your leaders in how they can drive departmental success, thus helping the entire company reach their overall annual goals.
- Don’t fall in love with your objectives | This is extremely common amongst businesses at every level—they establish a set of measurable goals, then are willing to ride them into the ground at the company’s detriment. COVID-19 is a prime example of an external variable that necessitates a mid-year shift to account for market changes in order to drive company success. Simply stated, be willing to scrap objectives if they no longer align with company performance goals.
Objectives and Key Results (OKRs)
Now that we’ve discussed how to think, let’s dive into the process of establishing, and driving towards, objectives and key results (OKRs). This is a modified version of John Doer’s book “Measure what Matters” which quite frankly, helped me reevaluate the way I looked at company performance goals. If you’re leading a company and haven’t added this to your reading library then for shame!
Here’s a solid guide on OKRs : CLICK HERE
These should be your “north star.” I believe too many companies make these overly quantitative. For example: “2 million in revenue in Q1.” There’s nothing inherently wrong with this approach, but I prefer more aspirational objectives weighted against quantitative/qualitative key results. Further, make sure your objectives, regardless of their time benchmarks, push beyond the bounds of daily operations.
“Become market leader in our space by end of Q1.”
“Hire 10 new software engineers by end of Q4.”
Note that these are bold, audacious desires, meant to provide a level of inspiration to a team, while binding it with a time constraint and avoiding tip 2 (walking to the horizon).
My favorite way to phrase the meaning behind a Key Result (KR) is: “as measured by.” It provides the measuring capability to, and for, your quarterly objectives. Think of it as a set of check marks that, if accomplished, while naturally cause the team to hit the objective.
Example Sales Team Objective:
Become the market leader in our space by the end of Q1
As measured by: (Key results)
$500,000 in net new revenue
33% closing percentage
$2,000,000 in new sales pipeline
If you notice, the objective was aspirational with no real number values associated. However, to accomplish the objective, we need to hit some very measurable key results. “become the market leader in our space as measured by . . .” The natural reward for ticking off those boxes are becoming the market leader at the end of Q1!
- Avoid the waterfall effect to your OKRs | As the COO, I work with the CEO to set annual goals and company quarterly OKRs. It’s assumptive that my Key Results would become the VPs Objectives; their Key Results would become their directors’ Objectives, and so on. There’s a major issue is the rigidity and lack of creative thought associated with the waterfall effect. Allow your leaders to determine how their Objectives support overall organizational Objectives—don’t dictate success! This creative cascading mindset will permeate the company and allow personnel at all levels to think outside of the box.
- Avoid an abundance of OKRs | I prefer the 3-5 rule with most anything, especially audacious goals that we use as company drivers. If objectives are meant to focus efforts, too many can create confusion, stretch resources, and decrease morale. Pick a number that pushes teams, but doesn’t deflate them due to a wholesale failure to accomplish important objectives.
- Accountability | During our quarterly executive team meetings, each executive stands up and discusses successes and failures relative to quarterly OKRs. This isn’t an exercise in shaming shortcomings; rather it allows us to understand why we missed the mark and if their was viability to the objective itself. For example, if an objective was to implement a new CRM in Q2, but priorities and budget dollars shifted, that objective is no longer valid. Additionally, failure to accomplish an Objective can provide tremendous business intelligence into current operations, competitive landscape, consumer purchasing habits, etc. Dive into the “why” heavily and allow that to shape and mold the following quarterly objectives.
Running a successful business in this contemporary operating environment is hard enough; doing so blindly is just pure madness. Don’t rush to failure with your offering and operations…slow down, take the time to find out what’s important enough to measure, then provide your team with the what, how, and why of quarterly company success. Done right, you’ll find this exercise to be catalyst to organizational and personnel growth. Basically, you can’t afford NOT to measure what matters…
Additional Resource: 5 Problems & 5 Solutions | Business Operations