This is an excerpt from my ebook How To Write Your Strategy.
For the rest of my guide on how to write a comprehensive and effective Business Strategy for your startup head to my shop to buy the full book, which includes all the worksheets to help you work through your own Business Strategy.
Chapter 4: What are the Objectives and Key Results and how do they contribute to your Strategy?
First, the Objectives.
In this excerpt we'll use an example company called 'Strategy Ltd' that I introduce in a previous chapter of my book "How To Write Your Strategy". The example company is in the technology industry and is focussed on innovation and sustainability, find the full example in my book.
I touched briefly in the introduction on the term ‘OKRs’. You may well have heard the term before; the full name is Objectives and Key Results and it’s a goal-setting Framework with roots going back to the 1950s to the Management Consultant and author Peter Drucker.
Properly popularised as MBO (Management By Objectives) at Intel in the 1960s by Andrew Grove (Intel’s first COO), and then with its current name at Google in the 1990s by John Doerr (an investor in Google), Objectives and Key Results is one of the earliest attempts to organise an organisation’s work around objective (the adjective version, lower-case ‘o’) measures of success.
Objectives are quantitative
In the Pay As You GO COO 6-Point Strategy Framework, Objectives are always quantitative in nature. I see lots of companies with OKRs that open with a subjective - they have an Objective that doesn’t have a clear numerical value against it (e.g. “Expand Market Presence”). My experience has shown us that this isn’t a great starting point for success.
Here’s why.
Successful businesses are built on clear communication and quantitatives are the building blocks of clear business communication.
A quantitative and objective measure of success is one that has only one clear definition, there’s no ambiguity. The clue here is in the name - your Objectives should be objective.
Think ‘you need to achieve a score of at least 8 out of 10’ versus ‘you need to achieve a good score’. The first is quantitative and clear, you can be certain whether or not you’ve achieved an ‘8’. The second is qualitative and open to interpretation, with one person’s ‘good’ being an ‘8’ and another person’s being, say, a ‘6’.
If you want to efficiently achieve results in your company, you need to be clear with everyone involved what good looks like or you’ll end up wasting resources because people are chasing the wrong goals.
There should be a maximum of two Objectives
I also believe that there should only be two Objectives in your Framework, especially at the earlier stages of your business’s journey.
You can only do one thing at once and, when you’re first starting out, you’re very likely working either alone or with a very small team. By setting yourself fewer Objectives and having all of your work point towards them, you’re forcing yourself to focus only on the most important Tasks for right now and stopping yourself getting distracted by shiny new ones.
There’s an analogy I can make to illustrate this using a law from the world of Physics - the Second Law of Thermodynamics - and the concept of ‘entropy’.
In a very simplified sense, entropy is a measure of how much disorder there is in a system. More entropy is more disorder. Disorder gets in the way of output from a system and in a business (your system) you want to be maximising output.
The law states that the more elements there are to a system, the more likely it is to descend into entropy, or disorder. And entropy cannot be reversed.
In business terms, if you load yourself up with too many Objectives at the start, you’re building a system with more elements, which will lead to more disorder that you cannot reverse and a subsequently reduced output.
Basically, aim to do less and you’ll actually achieve more. Thus, I recommend two Objectives at most.
How to structure your Objectives
To continue on the path of simplicity, those two Objectives should take a set form.
One is your revenue or profit goal - the amount of money that you’ve calculated in your Financial Plan that you need to bring in to cover the operational costs and generate the required profits.
The other is where the Mission Statement really comes into play. It’s a measure against that revenue that’s driven by the Mission of the business. Let’s explore that further.
You can make revenue in lots of different ways but only some of those ways will be in concert with the values of your business and with the Mission Statement that lays out those values.
Perhaps you’re running a very customer-centric business and your Objective 2 is a measure of customer satisfaction, clarifying that you’re making revenue in a customer-centric way.
Perhaps you, like Strategy Ltd (an example company that’s in the technology industry and is focussed on innovation and sustainability, find the full example in my book), are focussed on sustainability and your Objective 2 is a sustainability goal to ensure that you’re bringing in revenue from products that have benefits for the planet.
By setting an Objective that sits alongside your monetary one, you prevent yourself from making decisions that will jeopardise the Mission of the business. It will take some planning to make sure you’re living up to both Objectives at once (which I‘ll cover in the coming chapters), but it’s absolutely achievable and necessary if you want to achieve what you’re setting out in your Mission Statement.
We’re going to set two Objectives for Strategy Ltd (an example company that’s in the technology industry and is focussed on innovation and sustainability, find the full example in my book), one that’s related to monetary aims and one that ensures the money is being secured in a way that’s true to the Mission Statement.
In the table below, I’ve broken out Strategy Ltd’s Mission Statement into two Objectives, one monetary and one mission-led. I've visualised it as a table, rather than in the vertical flow so you’re not straining your eyes trying to read it sideways.
Mission Statement | “At Strategy Ltd. our mission is to lead the way in sustainable technology solutions that empower businesses and communities to thrive while preserving our planet. Through relentless innovation and unwavering commitment to environmental stewardship, we aim to create a greener, cleaner, and brighter future for generations to come." |
Objective 1 Monetary | “Achieve revenue of £100k before the end of the year.” |
Objective 2 Mission-led | “Ensure that at least 50% of all revenue is coming from eco-friendly products.” |
How To Set Your Own Objectives
To set your own Objectives, you need three things.
1. Your Mission Statement.
2. Your Financial Plan.
3. The SMART framework.
Your Financial Plan will tell you how much revenue or profit you need to bring in to satisfy Objective 1 (the monetary one).
Your Mission Statement will tell you which values you need to live up to in Objective 2 (the mission-led one).
And the SMART framework will help you set Objectives that you can actually hit and that are actually right for your business.
Let’s break it down.
You may well have heard of SMART goals before picking up this ebook, but I'm going to go into the full details so that the playing field is levelled for everyone.
SMART is an acronym that expands to: Specific, Measurable, Achievable, Relevant, and Time-Bound and it helps you set Objectives that work for what you need. The SMART framework was created by George T Doran, a business consultant and thought-leader, in a 1981 article called “There’s A S.M.A.R.T. Way To Write Management Goals And Objectives”. Let’s explain each step.
Specific | A specific Objective is precisely defined and clearly states what needs to be accomplished. It avoids vague language and provides a clear direction, leaving no room for ambiguity. For example, instead of a general Objective like "increase sales," a specific one would be "increase online sales by 20% in the next quarter." |
Measurable | A measurable Objective is one that can be quantified and tracked, allowing you to assess your progress and determine when it has been achieved. It involves attaching a numerical value to your Objective. For instance, transforming an Objective from "improve customer satisfaction" to "increase customer satisfaction ratings to 90% or above." |
Achievable | ‘Achievable’ means setting Objectives that you’re actually likely to hit, based on the resources, time, and capabilities you have available. You need to be realistic with what you can achieve in a certain timeframe with the resources that you have. Your Financial Plan will help you understand the limits of what you can achieve in your monetary Objective 1 based on the resources you have available and the price of and demand for your product or service. Your mission-led Objective 2 is a little more trial and error and you’ll learn as you go, but it’s worth remembering that it’s better to under-promise and over-deliver than the other way round. To set an achievable Objective 2, pull the sentiments out of your Mission Statement and line them up against your monetary goals. Find the value that can most easily be applied to the monetary goal and to what degree it can be applied without collapsing the whole system. e.g. Strategy Ltd’s Mission is to ‘lead the way in sustainable technology solutions’ and we’ve calculated that ‘at least 50% of all revenue [would need to be] coming from eco-friendly products’ (their Objective 2) to achieve that. In a real-world situation, we would research Strategy Ltd’s competitors and understand how much of their focus is on sustainable technology solutions - if we want to ‘lead the way’ we need to know what we’re trying to beat. |
Relevant | ‘Relevant’ means that you’re focussed on the Objectives that are actually going to drive your business forward. This is why I advise no more than two Objectives at the earlier stages of a business’s development. You have to have a monetary goal in order to keep the business operational and you’re setting out to achieve a specific mission. Thus your Objective 1 and Objective 2 will be relevant to both what you want to achieve and how you’re going to achieve it, but you’re also not trying to tackle everything that’s potentially relevant to your business at once and creating a whole lot of disorder. |
Time-Bound | ‘Time-Bound’ means that you’re giving yourself a deadline. It’s impossible to run an efficient business if you’re not setting yourself deadlines for your Objectives. The work that it takes to get you from nothing to a fully-functioning business is going to be hard - often very, very hard. And lonely. And stressful. It’s so easy to procrastinate instead of tackling the hard Tasks. We live in a world that’s full of distractions that want your time, attention, and money, and that have been very carefully crafted to get those things. You will succumb to some of these distractions because you are human and these distractions are very well-designed to toy with your dopamine receptors, even with deadlines in place. With no deadlines at all, you’re going to set yourself up for failure from day one. |
In this chapter we looked at the second element of the goal-setting side of our 6-Point Strategy Framework: the Objectives.
We discussed the fact that they should be quantitative in nature, that you should start out with a maximum of two Objectives (one monetary and one mission-led) to avoid introducing chaos into your business, and that you should write your Objectives according to the SMART framework - make them Specific, Measurable, Achievable, Relevant, and Time-Bound.
In the next chapter, we’ll look at the final element in the goal-setting side of the 6-Point Framework: the Key Results. First, on the next page, you can find a checklist to help you write your own impactful Objectives.
Keep reading for Chapter 5 or buy the full book now.
Chapter 5: The Key Results
In the last chapter I introduced the Objectives, the second element of the goal-setting side of my 6-Point Strategy Framework. In this chapter, we’re going to look at Key Results - the final element of the goal-setting side. I’ll show how Key Results take a specific form and that they help break your Objectives down into more manageable chunks to help drive progress in your organisation.
What are the Key Results and how do they contribute to your Strategy?
After the Objectives, we have the second half of the OKRs, the Key Results.
Key Results are the final part of the goal-setting half of your Strategy. Where Objectives are big goals that stretch out across both time and space to achieve something big, Key Results are the Objectives broken down into more manageable, more immediate chunks.
For example, if Strategy Ltd wants to ‘Achieve revenue of £100k before the end of the year’ (their Objective 1, the monetary one), we can break that down into Key Results that deliver smaller achievements sooner or that split the weight of the Objective across regions or product lines.
These Key Results will be the mile-markers that let us know that Strategy Ltd is on the way to achieving the Objective. They keep the business on track by giving it smaller, more manageable and immediate goals.
Key Results are always objective and quantitative and should always take the form of
“Take figure ‘a’ from ‘x’ value to ‘y’ value by ‘z’ date”.
Let’s illustrate that with an example.
For Strategy Ltd, imagine that the company is aiming to achieve £100k in revenue in the next year and wants to set up in two geographical regions. For the sake of the illustration, let’s say that they’ve calculated that it’s possible to achieve £50k from region A and £50k from region B. Because the business is new, the ‘x’ value will be £0.
Mission Statement | “At Strategy Ltd. our mission is to lead the way in sustainable technology solutions that empower businesses and communities to thrive while preserving our planet. Through relentless innovation and unwavering commitment to environmental stewardship, we aim to create a greener, cleaner, and brighter future for generations to come." |
Objective 1 Monetary | “Achieve revenue of £100k before the end of the year.” |
Key result 1a | “Take revenue from £0k to £50k in region A by the end of the year.” |
Key Result 1b | “Take revenue from £0k to £50k in region B by the end of the year.” |
As you can see, the Key Results follow the format of “Take figure ‘a’ from ‘x’ value to ‘y’ value by ‘z’ date”.
We’re taking figure ‘a’ (revenue in the region) from ‘x’ value (£0k) to ‘y’ value (50k) by ‘z’ date (the end of the year). Using this format means that everyone in the team is clear on the starting point, the end point, and when they need to do it.
It’s specific, it’s measurable, it’s achievable, it’s relevant, and it’s time-bound.
Since the second Objective is to ensure that a specific percentage of revenue is coming from eco friendly products, let’s imagine that the company has 4 products that each could bring in £25k per year but only two are eco-friendly (product 1 and product 2), this could look like:
Mission Statement | “At Strategy Ltd. our mission is to lead the way in sustainable technology solutions that empower businesses and communities to thrive while preserving our planet. Through relentless innovation and unwavering commitment to environmental stewardship, we aim to create a greener, cleaner, and brighter future for generations to come." |
Objective 2 Mission-led | “Ensure that at least 50% of all revenue is coming from eco-friendly products.” |
Key result 2a | “Take revenue from £0k to £25k from product 1 by the end of the year” |
Key Result 2b | “Take revenue from £0k to £25k from product 2 by the end of the year” |
How to Set Your Own Key Results
How do you set your own Key Results? And what do you do if these two sets of Key Results (the monetary and the mission-led) seem to conflict with each other? What if, for example, market demand is such that you can only bring in £100k of revenue if you sell more of products 3 and 4, which are not eco-friendly?
Here’s how to avoid that situation entirely: it’s often the case in building a successful business that it’s not just what you do, it’s when you do it. If you follow the right steps in the right order, you can avoid this problem before it arises.
There’s a set process you should follow if you want to properly set your business up for success from day one. It’s like a recipe. You could throw the ingredients in in whatever order you like and you’d still sort of be able to make your way to a meal but the results are much, much better, if you follow them as laid out in the recipe because they each contribute to the one that comes after.
This is the recipe I’ve built for your business to have the best chances of succeeding:
If you’ve pulled together your Problem Statement and your Target Market Map properly, before working on your Strategy, you will have already identified the key problem that you’re solving for customers and how much they care about finding a solution.
You subsequently will only be launching products that properly fit that need, rather than introducing solutions that customers aren’t interested in buying and hoping for the best. It’s the same for your Target Market Map - you need to do this work before you set your Strategy so that you’ve clearly identified the opportunity and understand where each product or service fits.
Objectives and Key Results are then just a verbalisation of what you already know you can achieve.
If you haven’t gone through either of those processes before you’re here working on your Strategy, I strongly recommend taking a step back and heading to my website to read the two eBooks focussed on those issues:
“How To Find Product-Market Fit” (which will take you, step-by-step, through the process of building your Problem Statement and confirming that there’s a market need for your product or service).
“How To Find Your Customers” (which will take you, step-by-step, through the process of building a Target Market Map so that you can quantitatively know the size of the market that needs your product or service).
If you want help on either of these key areas, I also offer Pay As You Go COO services through which we can work together with you to get you the answers you need.
Book a free Discovery Call now to find out more.
Now that the goal-setting part of the Framework is done, it’s time to look at the plan-setting part.
I often hear about companies ‘setting their OKRs’ and then moving on as if OKRs are the start and the end of a strategic planning process. This is a classic error, and one you can easily avoid by following the rest of the steps in my 6-Point Framework. OKRs may be the most commonly-known part of strategic planning but they are far from the end of the process. Key Results are smaller, more manageable goals than the Objectives, but they’re still goals. And without a plan, those goals are just a wish.
To find out how to build a plan so that your business can actually achieve its goals, head to my shop now for your copy of "How To Write Your Strategy".
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