OKRs Library: Accounts Receivable OKR
As I noted in my last post, examples of OKRs are in demand. Although we don’t need more examples from Sales and Marketing, we do need examples from technical, creative, and internal support teams like IT, Engineering/DevOps, and HR/Finance. I’m pleased to share another real-world OKR example. I already put out one sample OKRs Library entry for a Legal team, but that’s not fair to our pals in Finance. So, my fellow finance friends, this OKRs for you! Let’s look at an Accounts Receivable OKR.
Mission: Ensure our customers pay in a timely fashion
Objective: Strategically reduce dollars not yet paid, stuck in accounts receivable
- Reduce total dollars that we have invoiced in the 60 or more days past due category by 50% (Note: we were at $24 million as of March 31 and we want it to be down to $12 million by August 30)
An IT team brought me in to help expand the use of OKRs outside of the IT and into the “business teams.” The head of Accounts Receivable (let’s call her Mary) was asked to attend an OKRs drafting session. At first, Mary was resistant to the idea of setting more goals since her team already tracked tons of metrics. When I asked for introductions, she expressed her skepticism about setting OKRs given we “already have so much data to track and adding another system is probably the last thing we should do.” The CIO as well as several IT managers and other business teams from Finance participated in the workshop.
After a short presentation on OKRs, I asked each team to take 45 minutes to draft their OKRs. Mary showed me about 25 metrics with nice charts on a dashboard and had a puzzled look on her face. Here’s an abbreviated version of our OKRs coaching dialog.
OKRs Coaching Excerpt
Ben: Wow, I see you’re tracking a lot of metrics. That’s great you have lots of data at your fingertips. But, what is the most important thing your team would like to improve over the next three months? (This simple question, really got her thinking)
Mary: I want our team to be more strategic about how we handle AR.
Ben: How would we know your team was more strategic about handling AR by the end of the Quarter?
Mary: The problem is that once AR gets aged 90 days, it’s harder to collect. The big opportunity right now is to reduce the AR that is aged over 60 days.
Ben: What would be the most amazing reduction for AR aged 60 days that you could imagine this coming Quarter?
Mary: I know we can cut it by 10% since we have a few key accounts in there that are going to pay soon, but 50% would be really amazing.
Workshop Excerpt Part 1
This Accounts Receivable team decided to create just this one Objective with just one Key Result. When Mary shared her draft Key Result with IT, it read:
- KR: Reduce AR>60 days by 50%
Enter Sumit, a database administrator. Sumit raised his hand and started a short dialog to help clarify the KR in front of the entire workshop audience of about 30 people.
Sumit: Do you mean reduce the number of customers that have invoices due past 60 days or the total dollars that are past 60 days due?” (The question seemed silly to someone who works in a Finance. After all, everyone in Finance knows, it’s all about the total dollars not the number of accounts that are past due)
Mary: OK, let’s adjust the KR to Reduce the total dollars from our invoices that are 60 days or more past due by 50%
The energy in the room changed.
Workshop Excerpt Part 2
Sumit: Would you like me to help with this KR?
Mary: Yes! I asked for help with this last year and I got this great dashboard, but I don’t understand how you can help me reduce the AR by 50%.
Sumit: I can provide a report that lists the top 10 accounts by dollar amount that are aged 30-45 days, 46-60 days, and 60-90. Then, we can proactively reach out to the big customers who are possibly headed into this AR bucket as well as the big ticket items that are already in the bucket right now.”
Mary: OK, really? This is just like the report I asked for about a year ago!
Sumit: Well, you probably ask for a lot of reports, but now you’re only asking for one.
- X-team alignment. AR measured lots of stuff but that does not mean they had the equivalent of OKRs in place. As an OKRs project lead, you may use this example to show how the OKRs process can improve cross team alignment.
- Specific KRs. Mary took time to define her KR in such a way that Sumit could understand. Be sure to present KRs outside your team and get feedback before finalizing.
- Less is more. From what I’ve seen, communication with OKRs is negatively correlated to the number of OKRs. So, the fewer OKRs you have, the better the communication. And, people are more likely to pay attention when they know there is less content to absorb. As an OKRs project lead, you’ll want to share this example to illustrate the power of limiting your OKRs set to the most critical stuff to drive focus. In this case, Sumit listened deeply. Mary got the data she needed to manage AR more strategically. They reduced AR and made a nice positive impact on cash flow. Christina’s book, Radical Focus, talks about setting ONE Objective with THREE or so Key Results. This example is Hyper Radical Focus – a single objective with a single Key Result!
Please share a comment or post a sample OKR as a comment… I’d like to hear from you, especially if you’re not in Sales or Marketing
Thanks for sharing.
Your tips have inspired us a lot since we started a pivot at our HR Department. My partner and I, as OD managers, are sort of OKR experimenters and internal coachers, at the same time. We had a long discussion when we tried to come up with a good team-level OKR, especially KRs, cuz we wanted to make sure that they were measurable, and more importantly, challenging.
One of our biggest objectives during last quarter was to organize our employee promotion process smoothly using our newly-built promotion management module in our EHR system. So obviously, one necessary KR was to run a system training session for BPs from each business unit.
Our first KR draft was like: Conduct a system training session for all BP leaders by the end of May.
Then we asked each other why we should measure this by time limit. Was that the earlier we run the session the more challenging? Was there better way to evaluate our training? Below is our conversation:
A: I think the quality of our training is the thing we should really care.
B: Yes, but how to measure the quality?
A: At least, we should make sure that each single BP leader from each business unit will attend our training session.
B: Do you mean the coverage rate? I don’t think 100% coverage is enough to say this is quality.
A: Obviously not…so what do you think is the ultimate goal of this training session?
B: To help BPs to learn how to use the system so that our entire promotion management can be switched from offline to online successfully, and our management efficiency can be improved a lot.
A: Right, so quality training needs to enable each BP to use our system independently during the coming promotion management period. Our training has to cover all necessary information and be easily understood.
B: How about this, if more than one BP still keep asking us the same question about the use our system, then our training is not good enough.
So we rewrite the KR: Conduct a system training session by the end of May with 100% coverage of BP leaders, and all of them can operate the system independently afterwards without questioning about the same aspect of system use.
Surely the later one is just a better one, not perfect. Any comments and suggestions are welcome. It would be great if we could continue to share our cases over the platform 🙂
Thanks for the comment!
Here are some reactions:
1-The Objective sounds like “Organize our employee promotion process smoothly using our newly-built promotion management module in our EHR system.”
2-This is probably a very good objective as it is qualitative and seems important. Tip: Consider adding in an objective description that answers the question why this is an important priority right now in 1-3 sentences…
3-I like that the “conduct training” is a draft KR. Clearly we want to ask: “What is the intended outcome of the training?” to convert a task to a KR
4-I agree that the rewritten KR “Conduct a system training session by the end of May with 100% coverage of BP leaders, and all of them can operate the system independently afterwards without questioning about the same aspect of system use” is WAY BETTER!
5-To make it even better, continue to ask questions like:
“How do we know that the system is making an impact?”
Tip: Specify the name and function of “the system” – it is implied that it is a promotional process system of some kind, but I’m not totally sure that I’m right in that assumption.
Comment: I’m thinking it might actually be good if people ask questions about how to use it since that means they are engaged in using the system.
Tip: Do we have a baseline for the level of satisfaction with the current system (even if it is manual?) — if so, we can try to improve the baseline satisfaction with current system to a higher level of satisfaction perhaps?
I hope this is useful feedback!
Thanks for your feedback. I think it actually would be a great idea to add a brief explanation of “WHY IT IS A PRIORITY” to each objective. It’s important to make clear my team’s objective, but it’s just as important to let cross-functional personnel understand the rationale behind it.
O: Organize our employee promotion process smoothly using our newly-built promotion management module in our EHR system.
Notes: This promotional process system is expected to improve efficiency, increase accuracy, and reduce errors in manual process. It’s the first-time application of this system in real life, and the entire promotional process needs to be done in 1 month without big mistakes, so we make it our priority.
KR1-Finish system user manual with “0” mistake, and distribute it to potential candidates, all BPs and promotional review committee members before mid-May.
KR2-Conduct a system training session by the end of May with 100% coverage of BP leaders, and all of them can operate the system independently afterwards without repeated questioning about the same aspect of system use.(we assume that if people continue to ask the same questions, there must be some parts of system use we have failed to pay attention to)
KR3-Collect, analyze and act upon user feedback in time; make sure that no suspensions of promotional process occur due to the lack of functionality.
I agree that to start to a user satisfaction survey is necessary, so it will be clear that whether we’re making progress each time or not.