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Analytics Academy Building a data driven company: Lesson 5
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Setting data-driven OKRS

Once you've set your company strategy with data, the next step is to set goals and get to work. In this lesson, we'll teach you how to set data-driven OKRs.

Once you've set your company strategy with data, it's time to start making some goals and executing on those goals. There are many different ways to set goals, but in this article we'll cover the OKR (Objectives and Key Results) process we use at Segment. We started doing this process very seriously when we had about 150 employees. This was roughly the scale that it became essential that teams were aligned and working together on their goals.

Before we dive into the nitty-gritty, I wanted to share the problems we were actually trying to solve using OKRs. The "OKR Bible" (as we lovingly refer to John Doerr's Measure What Matters) introduces the four superpowers of OKRs, which I think speak to the problems we were having and the benefits of a process like this.

  • Focus and Commit to Priorities — this was largely covered in the last section about setting your company strategy, but it's incredibly key that everyone at the company knows exactly what the priorities are (and equally importantly what you're not _focused on).

  • Align and Connect for Teamwork — as you start to hit a few hundred employees, alignment is going to be incredibly important. Without explicitly pushing different teams and departments to work on the biggest goals together, you'll end up having well-intentioned team doing heavily overlapping work (or even sometimes going in different directions!) and just simply not realize. Having (a) a single source of truth for OKRs that everyone at the company can see and (b) clear expectations for joint goal-setting is a great way to make sure teams are adding to each other.

  • Track for Accountability — this one is pretty straightforward, but important. Prior to OKRs, we didn't have a clear place and consistent way for people to report on goals. Now, we have standardized grading system and a consolidated place for people to see how we're doing against our grades.

  • Stretch for Amazing — this one is perhaps the most important and the hardest to get right. The OKR grading system encourages you to stretch for amazing — in fact, a "good job" on a task is scoring 0.7 (on a 0.0 to 1.0 scale) on the goals you've set, so all of your goals should inherently be a bit stretchy.

OKR process

Let's dive into the nitty-gritty of how our OKR process works.

A few months before our new fiscal year starts, the leadership team has an offsite and comes out with a series of focus areas and suggested annual OKRs. We then get feedback from every single people manager (and all employees who want to participate) on those focus areas and draft goals. The leadership team uses that feedback to fine-tune both the focus areas and goals. At our current scale of a few hundred employees, this takes about 2-3 weeks to finalize and we find that a leadership team offsite is great for getting the first draft of focus areas and annual OKRs.

Here is an example of what a company could put as an annual OKRs. These cover multiple parts of the business health, from revenue to new product development, to cost management.

okr1.png

After writing annual OKRS, the teams take this context to set their group OKRs that level up into how we can hit these annual OKRs. We write team OKRs every quarter. We have about a week to turn the fine-tuned annual goals or quarterly focus areas into real OKRs. A final team's quarterly OKRs might look like this:

okr2.png

We make sure that every KR has a DRI — this is the person who is accountable for the goal and will grade the goal. This is actually in the spreadsheet as well, just not pictured above. Typically one or two members of our executive team owns each annual goal and the managers or team members own the team KRs.

We also have check-in meetings to discuss how we did on OKRs. Our goal is not to have these feel like a witch-hunt because it's totally fine to miss OKRs —after all, they are meant to be stretch goals! That said, what these check-in meetings ensure is that teams are learning from their mistakes. Check-in meetings are a good way to make sure retrospectives are happening — both what's going really well and what could be better. This helps us ensure that we're getting better at setting goals and executing every single quarter!

okr3.png

Case Study: Gross Margin

We recently set an ambitious goal to improve our Gross Margin significantly over a timeline of six months. OKRs helped us immensely because it turned out that we needed an incredibly cross-functional process to make it happen. Having an ambitious company-level goal meant that Finance, Analytics, Product, Engineering, Success, and Sales had to work together incredibly closely to achieve a metric win that initially seemed impossible.

Having the entire company focusing on this as a goal brought out an incredible team effort. We suddenly realized we had a number of inefficiencies which we never would have noticed until we made this a company priority. One particularly interesting one is we were spending a lot of unnecessary money on processes to try to read from misconfigured sources and/or send data to misconfigured destinations. Instead of wasting cycles that provide no value to customers, we built a product feature that would automatically alert people when things were misconfigured.

Now, customers either fix the misconfiguration or turn the legacy connection off, but we don't idly waste cycles as we have been for years. This is just one example where a win came from a place we hadn't originally expected, but we found because the whole company was focused on moving the metric.

Scaling OKRs

As the company grows, you're likely to need to change this process pretty frequently, so make sure you don't "set and forget" this process. The OKR/goals process we suggested above may not be the perfect process for you. Whatever you do choose should help focus the company on moving big metrics, help you break down those big metrics into smaller goals, help hold teams accountable for hitting those smaller goals, and give transparency to the company about what's going on. But how you actually do this will depend heavily on your company, and you should definitely liberally adapt these concepts to make something that works for you!

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