Wow…OKRs are really heating up in Europe. Last week, my team and I went on a whirlwind five-city tour through Stockholm, Berlin, Amsterdam, London and Paris. We had the great fortune to meet with a variety of companies in a variety of industries. Here are a few stories from the trip—some exciting, some inspiring and some showing that we have work to do in the region!
Meeting with a 100,000-Person Company in Northern Europe
This extremely hospitable company had excellent people and a great vision for driving change and continued innovation in their market. They’ve realized that with 100,000 people, it is close to impossible to get everyone to be on the same process. Divisions work differently, teams work differently and even leaders have different styles in their company.
Yet, they also know that they would like to have one system that accommodates all the different work styles within the company, versus having too many systems that fragment and silo the organization. Instead of their people bending to the technology, why not have the technology bend to the people?
After healthy discussion and debate, they came to the conclusion that an ideal solution would be able to support the workflows below. I think this is great for mega-scale, and is more respectful of the realities of a global, complex organization with a variety of needs and approaches (a smaller company—10,000 to 20,000 employees, for instance—would likely opt to drive a standardized and specific point of view):
- Goal Setting
- Some groups want to do traditional cascaded, top-down goal setting (public or private may be optional too)
- Some groups want to do self-initiated goals, more innovative goals (with a preference for public)
- Some groups want to do cross-functional goals, these teams work very dynamically and across departmental lines (public must typically be supported here, to connect people around common goals)
- Some groups may not want to do goals, or may not want to write them down just yet
- Ongoing manager/employee conversations and peer feedback:
- Some groups want to do scheduled monthly or quarterly conversations between the manager and the employee, and handle these via reminders/alerts/web-based inputs/reporting
- Some groups want to do on-demand conversations, when the manager or even the employee initiates the conversation (still tracked via reporting, and automated when possible via technology)
- Some groups may not want to do conversations in a facilitated manner
It’s extremely exciting to see such progressive thinking from such a large global enterprise!
Meeting with a 1,000-Person Company in Mainland Europe
This company has a great leadership team and is very motivated and capable. It’s experiencing great growth while still remaining quite disciplined. Their leadership has a background in management consulting, so they understand the process of driving operational execution. They’re already trying OKRs but getting push back across the company.
- What’s working:
- Accountability to goals and targets
- Adding key results to their objectives has made things more measurable and specific
- What’s not working:
- Cross-functional work needs to be better captured, most work today happens in silos
- Most departments and teams are setting goals quarterly but it isn’t perfectly consistent.
- What we discovered during our highly engaging conversation:
- Compensation is tied directly to goals—too directly, in fact
- Payouts occur at 100% goal achievement, yet they message aspirational goal setting, so employees often get confused
- Most employees are not making 100% goal achievement and being underpaid, so they do not feel good about the situation
- Lots of administrative burden on the company connecting goals with compensation, tracking payouts, %’s, etc.
- No automation or tooling in place: they use Excel with 1,000 Excel documents for 1,000 people
Interestingly, at the start of the meeting, they believed they were doing OKRs at the company. However, as I listened to their current practices, I realized I would characterize their approach more as MBOs (or MBOs plus)—not OKRs. Here are some of the charts I drew during our meeting:
Chart 1 (below): The differences between MBO’s and OKR’s.
MBOs are annual, private or semi-private (to a team, for example), top-down and tied to compensation. OKRs are quarterly, public, bottoms-up/sideways (and top-down when needed) and not tied to compensation.
When we reviewed Chart 1, I suggested they each draw a point on the line in Chart 2 (below), depicting where they truly are today. This is what their response looked like:
Chart 3 (below): I further explained that the old way of managing performance was based on goals/evaluation/compensation all being closely tied together. The new model of performance is realizing that connected/related goals are separate from evaluation, which are also separate from compensation processes. Each must be thought about distinctly, without ignoring the other two.
Chart 4 (below): This was the most interesting. They were really wedded to their compensation practice of reserving 10% of an employee’s annual compensation and tying it to goals. This is very symptomatic of an MBO-driven approach, and prior to BetterWorks, even I have managed this way in the past. Read my prior blog post on my thoughts on this. Now keep in mind they spend a lot of time managing the details of compensation and connecting that with goals and work. However, when I asked them for the distribution of the payouts, 90% of the population falls within the 90% payout, or 9%. The non-performers are about 5% of the population, and they are getting 5-8% of the payout. And the highest performers (the Michael Jordans, as we called them, and the remaining 5% of the population) are getting 9-11% of the payout. They did mention that no one had ever earned the 125% payout (12.5%) even though there were several amazing performances. They said they dealt with those by doing salary adjustments and spot bonuses (this part I am supportive of).
What this means is that the vast majority of the company is being penalized for their goals, and it’s the reason why they are getting backlash on this so called OKR program (which is really an MBO program in disguise, with Key Results added). The top performers are actually getting rewarded outside of the process, and you could argue that the bottom performers are getting overly compensated based on this model. In fact, they should probably be managed out, rather than even paying 5-8% vs the 9% (typical good performer payout).
If something is demotivating for the largest segment of the population, how can you fix this?
- Maintain quarterly goals and align everyone to this cadence
- Make goals public in the company, so everyone can see what everyone is working on (a few goals here and there can be private when it makes sense, but default to public)
- Encourage some top down goal setting, but also strongly encourage bottom-up goals (self-initiated vs assigned), and when possible, emphasize cross-functional goals that span teams (this requires public goals to work, since people have to see what others are working on to connect their work)
- Decouple compensation from goals. In their case, they would be better served to simply payout everyone at 10% for 2017 and create a focus on goal culture, independent of people’s compensation. Continue doing special rewards for the top performers and continue managing out or into different roles for the bottom performers.
They were hugely impressed with the discussion and I believe we will start working with them soon!
Meeting with a 170,000-Person Company in Mainland Europe
It was great meeting with some of the HR leadership in this company. They want to simplify their performance processes, which are really quite arcane and all powered by PeopleSoft. They want to move to a model of more transparency and enable more management engagement with employees through more frequent feedback and conversations. My immediate reaction: perfect! Here is a video we shared for the work we are doing at Schneider Electric, a similar sized/aged firm.
Some interesting connections that were made in the meeting:
- They believe that driving more connectedness as an organization through better alignment is critical
- They loved the idea of making goals public, to encourage more connections and discovery of what people are working on
- They also loved leveraging “Conversations” to reinforce goal adoption, without needing a heavy hand to drive usage
- We agreed to start with a business unit that could get going quickly, to prove out the model for the whole organization
It was great to visit these companies and gain insights on the current state of OKRs in Europe. We had many other meetings and briefings—sometimes 3-4 meetings in a day!—but these conversations were the ones that really stood out to me. Overall, we are super excited to be bringing OKRs to Europe and working with such an exciting variety of traditional and progressive companies! Go BetterWorks!