Companies devote endless time communicating strategy to their employees—but only a minority take it in, according to research by the University of Technology in Sydney. The researchers identified 20 companies with clearly articulated strategies and asked their employees to select their employer’s strategy from six possible options. Just 29% of employees answered correctly.
This goes some way to explaining why a staggering 87% of companies fail to execute on their strategy each year.
However well a company is able to articulate its vision, if it does a poor job of communicating it to its employees, how can its employees be expected to make the correct decisions in terms of aligning the work they do with the Company’s desired outcomes?
Misalignment slows down companies. It doesn’t matter how effective or performant a workforce is—if they are moving in the wrong direction, the chances are the company will fail to meet its objectives. With a clear understanding of strategic priorities, employees are more likely to move quickly and efficiently towards helping an organization achieve its goals.
As command-and-control management styles have become a relic of the past, the importance of collaboration, openness and autonomy have sky-rocketed in high performing organizations. In terms of goal setting, this translates to a shift from cascading goals from one management level down to the next, to an environment where employees have much more autonomy in setting their goals, but have clear line of sight to company objectives, enabling them to align their goals appropriately with the company’s vision.
Companies that do this well benefit in a number of ways; With all employees pulling together in the right direction, the company will move faster and be more responsive to change. But furthermore, if employees feel they have more autonomy over the work they do and also have a clear understanding of how what they do contributes to the organization’s objectives, their engagement with the company is more likely to soar, impacting company profits favourably.
Here’s where OKR Goal Setting could provide the solution. OKR stands for Objectives and Key Results and is the methodology for goal setting that high performing companies like Google and LinkedIn use to align what their employees do with the organization’s strategic objectives.
With OKR, employees are encouraged to set their own goals and are asked to try and align each goal with one of the company’s objectives.
The aim is for each employee to set 3 or 4 goals each quarter – but not goals that they know they will achieve – the idea is to set stretch goals, such that each employee should expect to achieve around 70% of the goals they set themselves. Achieving less than 70% will typically mean that the goals are too ambitious. Achieving more than 70% might suggest that the goals are too easy.
Most people are familiar with SMART objectives, where goals, amongst other things, must be specific and measurable. OKR goes one step further and includes the definition of a successful outcome for the goal. It does this through key results. Key results are essentially defined outcomes and they are nearly always associated with a quantitive element.
For instance an objective might be “Increase revenue and profit for Product A“. On its own the objective is almost meaningless as it would be nearly impossible, at the end of the period in question, to say whether or not the goal was achieved. A set of key results will help define the desired outcome. For instance the key results associated with this objective might be:
- Increase monthly recurring revenue by 5%
- Recruit at least 2 new resellers that contribute at least $1000 MRR before the end of Q2.
- Increase gross profit from 22% to 28%
Now it becomes incredibly clear to determine whether the objective was achieved at the end of the period.
Throughout the period, employees are encouraged to update their confidence level of achieving each goal. The confidence level of each goal starts at 70% at the beginning of the goal period and is adjusted up or down on a regular basis throughout the goal period, as progress is made towards each objective.
With the appropriate OKR solution in place, companies will be able to gather insights across the entire organization to help determine the progress of all goals that align with strategic objectives, making it possible to spot issues and blockers at a high level and drill down to identify the problem areas early enough in the goal period to apply the appropriate corrective action.
OKR may just be the solution for companies aspiring to become high performing organizations and for those companies that are failing to achieve their annual goals.
Simon Bates is CEO of Workteam, an HR-based Goal Management System for businesses of all sizes with a focus on growing employee engagement. Visit http://workte.am to find out how it can benefit your organization.