External vs Internal Objectives
The more I work more with organizations to draft, refine, and reflect on OKRs, the more I find myself recommending teams set fewer OKRs. After all, OKRs are intended to increase focus. Christina Wodtke, my friend and super-cool OKRs colleague, advocates teams align on just one objective. I find that setting two objectives, an internal objective and an external objective, may be a viable model as well.
The Magic of Two Objectives
When I first started with OKRs coaching in 2011, I found most organizations set 3-5 Objectives. In 2016, while writing the OKRs book with a Balanced Scorecard (BSC) expert, I was working with many organizations that appeared to simpy translate the four perspectives from their BSC models into four objectives in an OKRs framework. However, I am now finding it very unusual for an organization to set four objectives. In fact, I’m pleased to announce my latest thinking on how many OKRs to set… drum roll… As of 2018, I am now recommending all organizations just starting with OKRs aim for 1-2 objectives with at most 3.
For now, I find Two is the Magic Number. But given the trend toward fewer and fewer objectives, maybe some day I will see the light that Christina already saw and admit that a single objective is the optimal way to work with OKRs!
However, I’d like to defend the case for two. Several of my clients in 2017 claimed to have a single objective, but when I dug into their OKRs, I noticed that they actually set up two OKRs. An internal OKR and a separate external OKR. These clients claimed that it was a critical reflection of their corporate culture to always be focused on improving impact on the outside world as well as the impact we make on our internal team.
The notion of an internal objective reminded me of what our BSC friends refer to as the “Innovation and Learning” perspective. In a sense, organizations that set a single Internal and a single External OKR are taking the 4-perspective BSC model down to a 2-perspective model.
- Internal objectives are about improving how we work as a team. Is our team highly engaged? Do we feel like we have good development plans? Are we continually learning and growing? Do we believe in our team’s mission and know how we contribute?
- External objectives are aimed at making an impact outside our team. These outsiders can be other employees at our company who reside outside our team or external stakeholders such as end-user consumers or partners.
In my experience, most organizations think of objectives as “external” by default. You are likely familiar with external objectives. Here are a few examples loosely based on my recent client engagements:
Examples of External Objectives
- Grow our customer base of product X
- Win the Belgium market
- Successfully launch new product X at the annual comic book festival
While customer-facing teams often focus on external objectives, G&A teams like HR and Finance as well as teams that enable other teams such as a Platform team will often have internal objectives. Since internal objectives are the focus of this blog post, I’m including brief descriptions that explain why the objective is so important right now.
Examples of Internal Objectives
- Improve our onboarding process with a focus on Engineers
- Description: We are now onboarding over 50 engineers each month. While our onboarding process worked well a few years ago when we were growing slowly, feedback from last two quarters is that we need to make this process more efficient and consistent. While some engineers report it is amazing, nearly 40% report it did not meet expectations. Given we expect to be at a run rate of 100 engineers per month by end of 2018, the time is now to optimize the onboarding process.
- Create a culture of cybersecurity readiness
- Description: We are a small team and we are totally dependent on “Bob” in several critical security areas. If we lose Bob, we’re in deep trouble. And it’s not just Bob, we need to have at least two team members able to resolve security issues in all critical areas. Now is the time to create more redundant skill sets to minimize potential impact of losing key staff given the upcoming merger.
- Figure out where the money we make is coming from
- Description: Accounting can close the books each month and produce accurate financial reports. However, we currently have limited ability to see the breakout of revenue by channel with 40% of our revenue classified as “OTHER” last year. CEO joked that if we could we just increase “OTHER” by 10%, we’d hit our financial goals. We believe that we can determine the source of revenue for at least half of the “OTHER” bucket.
Questions for you to consider
- Are you focusing on internal or external OKRs or both?
- If you could only set one objective, would it be internal or external?
- Would it be useful to require each team tries to develop an internal and an external objective?
- Is it OK if your company-level OKRs are only external, but your team has only internal objectives?
- For those of you already defining OKRs at various levels in your organization, what percentage are internal? Is that percentage acceptable or would it be better to focus more on external OKRs?
For question 1, I suggest you focus on whatever’s most important. However, be explicit about why you are focused on internal and/or external objectives.
For question 4, I say yes since alignment is based on a conversation rather than a mathematical/logical relationship.
Please do post a comment here and let’s get a discussion going about the potential utility of distinguishing between internal and external OKRs.