November 6, 2023 – Reading time: 7 minutes
Today’s small and medium enterprises (SMEs) are confronted with increasing globalization, digitalization, and far-reaching social changes. They tend to have shorter planning horizons and operate in more dynamic markets. Agility is the answer to the increasing complexity of today’s working world. Organizational flexibility and open-mindedness are required from managers and employees to make room for agile methods. One such method is the Objectives and Key Results (OKR) performance management system.
Objectives and Key Results offer a structured approach on goal-setting to improve focus and performance within organizations. It involves formulating the desired outcomes as clear and ambitious Objectives and tracking progress towards those Objectives by defining Key Results, which are specific and measurable milestones. OKRs are created on every hierarchical level and therefore help organizations to focus on the same topics and achieve goals together. They encourage alignment, transparency, and regular evaluation in set cycles, making them a powerful tool for driving organizational success and agility.
The use of the OKR method in large companies such as Google, where it was introduced by John Doerr in 1999 and is still in use today, is well documented, but for the past few years, OKR has been gaining popularity in SMEs as well. However, little is known about how SMEs adopt this method and the challenges they face in doing so.
In today’s blog post, we dive into how SMEs unlock the full potential of the OKR method, discover the challenges they face, and the innovative solutions they need to employ to adapt OKRs to their unique needs.
Preparation before introducing OKRs to your SME
Before introducing OKRs to an SME, it is imperative to have a clear understanding of why the organization is adopting this methodology. This clarity is critical to the success of the initiative. Failure to articulate the reasons for implementation can lead to setbacks, so defining specific areas where OKRs can provide solutions is critical. Challenges arise from a lack of knowledge about the impacts of the OKR implementation. It is important to recognize that OKRs are a means to an end and not an end in themselves. Some organizations have encountered difficulties in adopting OKRs simply to follow a trend.
A critical factor in the successful implementation of OKRs is having a driving force within the organization. Whether it is an OKR Master in larger SMEs or top management in smaller ones, designating someone to oversee the process is vital. Training dedicated OKR Masters becomes increasingly important as SMEs grow. When starting with OKR, having an expert on the method by your side can prove invaluable.
While many SMEs may not have formalized vision and mission statements, having a strategic foundation is key to successful OKR implementation. Research has shown a correlation between the presence of a strategic plan and the successful adoption of organizational change. The following are recommended actions to lay the groundwork for the successful application of the methodology by establishing the strategic foundation. The timeline for implementing OKRs can vary, with some SMEs starting quickly and achieving success, while others need more time to adapt.
How to overcome challenges in the implementation process
Leadership support is essential for the successful implementation and long-term adoption of OKRs, because OKRs are a dynamic process that requires decisions, and executive support is vital.
When looking at start-ups and small companies, employees often notice a lack of structure within the company. It is especially important for these types of companies to create appropriate organizational structures before starting to use OKRs in their organization. Establishing clear communication about the progress of OKRs is essential for effective top-down cascading and bottom-up creation of OKR sets. Although it is recommended that OKRs be used at every level of the organization, down to the employee OKRs, it may be helpful to start by creating OKR sets at the executive level only. It is important to involve employees in this process and communicate your decisions clearly.
In addition, tools can support the creation, documentation, and presentation of OKRs. While there is a plethora of dedicated OKR tools, they cannot guarantee employee engagement. Many SMEs have found success by integrating OKRs into existing tool landscapes such as Teams, Notion, or Confluence, rather than using a separate, easily forgotten tool.
To be successful with OKRs, it is critical to follow methodical guidelines from the start and make incremental adjustments based on the specific needs of the organization. Employee understanding of the methodology is a prerequisite for successful implementation. Pilot testing within specific teams with trained and motivated employees can help mitigate risks.
The continuous use of OKR
Once an organization has prepared for and begun implementing OKRs, additional challenges may arise, so building acceptance and understanding of the OKR methodology is essential. It’s important to address and alleviate any fears or concerns that employees may have. Forcing the method on employees is counterproductive, as OKRs can sometimes be perceived as a control mechanism. Transparency and separation of OKR achievement from evaluation and compensation are key.
Employees may be ready for this change but often find it challenging to shift their mindset to thinking in terms of outputs and to break out of old thinking patterns. This transition can be supported through training but primarily requires time to influence company routines and meeting structures. Incorporating elements of fun into OKR development can also support this shift. An example would be creating new OKR sets in a completely new location to not only mentally break away from old thought patterns but also to physically move away from the familiar daily environment.
One of the biggest challenges SMEs face is formulating OKR sets effectively. This can be challenging and time-consuming, both in terms of content and methodology. The learning-by-doing approach is critical, and it’s common to set overly ambitious goals initially, which can lead to frustration and demotivation. Do not be discouraged – OKR is an iterative process designed to make adjustments over multiple iterations. Open communication, workshops, and learning in small groups are important. It can take over a year to finally formulate purposeful goals and feel the benefits of OKR, so don’t be discouraged if your first few cycles don’t yield the results you expected!
Integration into existing structures can be challenging, as new meetings and additional planning tasks can be perceived as an additional burden. Employees need dedicated time for these tasks, and it’s critical to separate day-to-day operations from OKR implementation – integrating OKRs into day-to-day operations has not proven effective in most SMEs. OKRs should focus on strategically important projects without becoming disconnected from day-to-day operations. OKRs should serve to focus the day-to-day work on important issues.
Reaping the benefits
In summary, there is no one-size-fits-all solution for the successful application of OKRs in SMEs. Overcoming the challenges outlined above can lead to several positive outcomes, including increased focus, alignment, transparency, and ambitious goal-setting. It can also increase bottom-up engagement, although these benefits may take time to materialize. Perseverance, consistency, engagement of all employees, and openness to improvement are critical to the long-term success of the OKR methodology.
In addition, seeking outside assistance, especially for SMEs, can help address the unique challenges of the OKR process and facilitate employee training and guidance directly within the processes.
This article was provided by Bjarne Wolff, Associate Consultant, and is a part of his master thesis. If you have any further questions about this topic, please feel free to reach out to him via email.