Value-Focused Versus Alternative-Focused OKRs
The longer I’ve worked with OKRs, the more I’ve felt the need to apply the distinction of “value-focused thinking” and “alternative-focused thinking” to the process of drafting OKRs. But before we talk about how to apply those principles to OKRs, here’s an example of alternative and value-focused thinking in a setting we’re all familiar with: eating in a restaurant.
When you order salad, do you think about what you really want in a salad dressing or do you need to know the choices first? If you ask for the choices first, you’re taking an alternative-focused approach to decision making. Here’s what a typical conversation looked like back when I took an alternative-focused approach to salad dressing choices:
Waiter: “What kind of dressing would you like?”
Me: “What are the options?”
Waiter: “Blue Cheese, Thousand Island, Ranch, or Balsamic”
Me: “OK, Balsamic.”
While this may not seem like a major life decision, as I gained weight and started realizing how important it was for me to be alive and healthy when my kids got older, I started taking a value-focused thinking approach. Now the conversation tends to go like this:
Waiter: “What kind of dressing would you like?”
Me: “Actually, I don’t need dressing, but can please bring some balsamic vinegar on the side?”
In this case I came to the table knowing my values and used them as the basis for my decision making. Now let’s look at how we can apply the distinction of “alternative-focused” versus “value-focused” thinking to OKRs.
Alternative-Focused Approaches to Drafting OKRs
When I reflect on my first OKRs project, I realize now that I made some major mistakes. The good news is that I am sharing a key learning here so we can all do better! During my first OKRs coaching session with various teams at a mid-size software company, I began by showing the industry-standard Key Performance Indicators (KPIs) for their functional area. For example, I showed the Head of HR a list of KPIs from the APQC Process Classification Framework like “Time to fill open positions” and “% of Executives with a succession plan” before asking the client to describe their OKRs. I was like the waiter providing standard choices. I forced my client into an alternative-thinking approach, limiting their creativity and nullifying the knowledge they have of their own business. It was as if they were ordering a salad! Here are two signs that indicate your OKRs drafting process is a broken, alternative-focused exercise:
- You are searching Quora for a list of “standard KPIs or OKRs” for your functional area to use as the basis for drafting OKRs.
- Your boss provides a list of potential OKRs and asks your team to determine the best based on the list provided.
Value-Focused Approaches to Drafting OKRs
As a more experienced OKRs coach (yes, I am now getting gray hair… at least the hair that’s left!), I now look back at this experience and critique myself for taking such an approach. Better to simply ask open questions like:
- What is the single most important objective for the next quarter? Why?
- What are the key objectives you need to focus on to move toward your long-term vision?
Drafting OKRs should begin with you, and your team’s vision, not a list of industry-standard KPIs published by a third party firm. The process of creating OKRs should be creative. It should reflect your VALUES, and those of everyone on your team.
This coaching excerpt from a recent OKRs coaching engagement with a marketing team illustrates how we broke free from a purely alternative-focused mindset to a more value-focused approach. As is often the case, we concluded that we needed to create a baseline key result. Here is an excerpt from our conversation:
Part 1: Alternative-Focused
Me: What is the most important area to focus on improving this next quarter?
Marketing Director: Improve the ROI of our marketing events and campaigns.
Me: How will we know at the end of the quarter that we’ve improved the ROI of our events and email campaigns?
Marketing Director: Oh, we’ve got a ton of metrics to measure improvement. For example: click through rate, bounce-back rates, #unsubscribes, email open rate, time on page…
Me: OK, but we don’t need a list of all the things we’re currently tracking, we just need a few key results that reflect the near-term improvement.
Marketing Director: We could go with improve email open rate.
Me: What’s the current open rate?
Marketing: We’re at 4%.
Me: What would that need to be to really represent improvement?
Marketing: Are you kidding me, 4% is amazing – we just want to maintain it at 4%.
Me: OK, then this is a health metric, not a Key Results as OKRs are about improvement not maintenance.
Part 2: Value-Focused
Marketing: Makes sense. What we really need to improve is the ROI of marketing events, not just the emails we send out.
Me: How can we know if we’ve improved the ROI of these events?
Marketing: We don’t really have metrics for that right now, it’s complicated to measure.
Me: Can we come up with a way to measure the ROI for one event?
Marketing: Sure, but we’d need to have the ROI for 5-10 events to really get value. We don’t even have a definition of ROI for an event.
Me: If it’s really important, shall we establish a baseline to reflect the ROI of marketing events?
Marketing: Yes, but we don’t need to measure ROI for all events, just the major events.
Me: How would we define a major event?
Marketing: That could be $50k total cost.
Me: Would that include the time your team dedicates to the event?
Marketing: Well, let’s call it $100k+ fully-loaded cost.
Me: OK, how many major marketing events do you think you can report the ROI for over the next quarter?
Marketing: 5 easily, but 10 would be amazing.
Me: OK, what about a Key Result like this one: “Report ROI for the first time to establish a baseline of the ROI of marketing events for 10 major marketing events. Major event = $100k+ fully loaded cost.”
Marketing: Yes, we should have that one.
The alternative-focused approach limited our thinking to the metrics we already had on our dashboard. When we took a more value-based approach, we realized the thing that really mattered was not already captured in a metric. Therefore, based on our values, we set a key result to get a baseline for the ROI of high-priced marketing events. We went on to modify the Objective to reflect the focus on marketing events, not email campaigns. We also added another key result: “Sign contracts for 3 marketing events that show a positive ROI as validated by prior analysis.”
For more on value-focused thinking, please see Ralph Keeney’s site.