In business, it is critical to set quality goals to ensure success. However, if these goals do not balance being too general and overly specific, they can become a waste of time and effort. When it comes to personal goals, we usually have relaxed timelines for ourselves as we need the flexibility to decide.
However, you cannot do the same for organizational goals. If you have ambiguous OKR timelines, they will derail the objectives and impact the bottom line. The OKR framework (Objectives and Key Results) comes in as a great resource to plan your company objectives. You can have quarterly OKRs and annual OKRs. But, which one should you choose?
We bring you this guide to help you understand the differences and decide accordingly for your business.
Importance of goal-setting in an organization
When you set goals for your organization, they need to be inspirational and realistic. At the time of framing quarterly goals, ensure they are well-aligned with the annual goals. Else, it can become a waste of time and effort because your quarterly goals will not add value to meeting the annual goals.
When quarterly goals align with the company’s strategy and annual ones, they can be an excellent benchmark for progress that helps prioritize what you need to work on within a quarter. Quarterly OKRs ensure that all efforts are on track towards achieving the company’s and individual’s long-term objectives by providing focus and direction over one quarter at a time.
Goals should be general enough so as not to discourage managers from using their discretion. However, they should also be specific enough to ensure that there are clear performance standards. You should also state goals with identified timeframes. Your team can complete tasks within a timeframe, and requests for additional resources can get accommodated if needed.
Division of work and allocation of resources among goals is a crucial step in the goal-setting process. Managers learn to balance short-term results with a long-term vision, making trade-offs between competing interests and prioritizing important work.
Quarterly OKRs should align with the company’s strategy and support each quarter’s unique business imperatives, which often shift as business priorities do. Companies that have done a reasonable job of setting clear goals for employees have been more profitable than those that haven’t. They are also better at avoiding waste from allocating resources on low-priority projects because of guidance through well-defined quarterly goals.
Why do annual OKRs look attractive?
The pros of annual OKRs are that they allow companies to plan for larger goals ahead of time. They can also help create a common ground for communication between managers and employees since communication flows in one direction in most companies.
Key results are measurable and should be easily graded with numbers.
Google uses a scale between 0 & 1
Annual OKRs have a long-term vision that keeps everyone on the same page during the year. Those who use quarterly goals may not always know the steps taken towards their annual target. With only quarterly goals, it is easy to lose focus without ever knowing what the objective is.
Annual OKRs do come with certain disadvantages, though. For example, if companies set their yearly goals too high or too low, they may struggle to make any significant progress towards them throughout the year. Annual OKRs also tend to be difficult and time-consuming to manage than quarterly OKRs.
A company that has a target of $100 million in revenue for the year would have to put quite a bit of effort into ensuring every quarter’s performance was on track to meet its target. With quarterly goals, it takes less time since there are fewer steps and milestones involved.
How can an organization achieve more with quarterly OKRs?
The benefit of quarterly OKRs is that they can help keep everyone on track for the year ahead. It is especially essential if the organization has larger, long-term goals. Quarterly OKRs are also helpful with sub-goals throughout the year that make achieving the annual goal easier.
For example, you can use quarterly OKRs of an engineering team to set developing milestones and other objectives that build momentum toward achieving an annual goal of releasing a new product by December 31st. However, quarterly OKRs do have their downsides. They may not be as effective as evaluating progress or decision making because they might be too general to measure compared to an annual goal.
Also, if quarterly OKRs do not align well with the company’s strategy and annual goals, they may only contribute to meeting the yearly goal rather than adding value. For best results, companies should set their quarterly OKRs to ensure that they remain aligned with their overall strategy and their primary focus for achieving their annual goals.
Why annual goals aren’t ideal for OKRs?
The most common criticism of annual OKRs is that they do not provide enough focus every quarter. To meet annual goals, teams may start sacrificing their quarterly goals. For example, there may be a yearly goal of increasing revenue by 50%. It will require a lot of work and effort from the organization. Teams may choose to neglect other longer-term initiatives for the sake of meeting that aggressive revenue-increasing target.
Another reason companies switch away from annual OKRs is it takes a massive amount of time and energy to put together an entire year’s worth of OKRs at one time. It can often lead to vague quarterly objectives because people are rushing to get them done on time. Teams will often treat the quarterly OKRs like checkpoints.
If they are not on track for achieving annual goals, teams begin to make rash decisions without considering the entire organization’s objectives. Instead, they prioritize the critical parts of yearly objectives. For example, if a company has a lot of projects in the pipeline, there may be some that would require large amounts of resources to complete in time for an annual goal.
However, teams avoid taking on new initiatives unless necessary because it could push other things off the calendar and affect their year-end goal. Another critique is that it takes too long to do all this work once per quarter and then set everything again at the next checkpoint. Teams often feel like they are just waiting until it is time to start all over again with another year of OKRs.
What are the advantages of quarterly OKRs?
Quarterly OKRs ensure that efforts are on track to meet the organization’s annual targets while allowing employees to focus on the quarter to contribute to those goals. Organizations can also use quarterly OKRs to define their strategy and align individual contributors with top-level plans.
A business needs to define strategies at a high level and have employees understand how their efforts support these strategies. By aligning every member’s work with business objectives over time, you may notice that accountability increases its value. It allows employees to see where their day-to-day activities ultimately fit into driving the company forward towards specific long-term objectives.
Quarterly OKRs require weekly check-ins
Creating an OKR timeline affects the type of feedback you give to your team. If they do not remain engaged in reviewing their progress and setting future goals, no one will likely be living up to expectations. To make sure this doesn’t happen, take time each week for reflection on these questions. “What did we do well? What could have gone better?” It creates stability both internally as well externally.
Over a year, quarterly goals can become burdensome as there is no new information available. Changes can also happen infrequently. It becomes difficult to form good habits over such short timeframes with regular check-ins. It prevents your organization from reaching its potential in terms of success or failure based on OKRs.
One way around these drawbacks is to switch annual target dates for shorter periods like three months instead. It gives teams the flexibility to make decisions without getting shackled by long timelines, which don’t allow enough room for input whatsoever.
Best practices to keep in mind when writing OKRs
Here are some tips to help you write beneficial OKRs for your organization.
- Have ambitious goalsYour OKRs need to make you strive for the sky. They should be ambitious and cause some tension. However, it should not be too much because these are goals are not designed only for OKR evaluation purposes or promotion chances. They are a test to see how far can a team go. If your work style permits it, include more conservative targets like adding 1% more revenue per week than last year while maintaining customer satisfaction index scores over 95%.
- Make key results measurableQuarterly OKRs are a great way to understand progress within a quarter. However, they cannot be too loose as there is a risk they do not lead anywhere. An example of a bad quarterly goal would be “get better at making decisions” because it does not have enough clarity, nor is it measurable.
- Keep goals publicOKRs should be visible to the entire company for it to have accountability and collaboration. When everyone knows what other departments are working on, there is an incentive for team members to work closely. Teams will understand how their progress can affect them individually.
The OKR system promotes visibility among all employees by giving managers visibility about the goals of other teams. However, this also leaves the room where individual performances may get overlooked if they do not make themselves known outside of their group.
In today’s dynamic business environment, it is imperative for organisations to be agile and resilient. Agility requires short-term focus and resilience requires long-term focus. Quarterly OKRs help build agility and Annual OKRs help build resilience.
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huminos is a comprehensive performance conversations platform that helps your employees to achieve impactful outcomes, even if they are working remotely. Features like OKRs, 1:1 conversations, feedbacks, reflections, and pulse allow you to plan and measure work that really matters to your company.