What are OKR Levels?
We can set OKRs at four levels. Typically in every company, you have multiple departments and sometimes you have cross-functional teams, working towards solving a particular problem and obviously employees working in these different departments. So, these are the 4 levels at which you set OKRs and referred to as OKR Levels.
You typically start at the company level and set up corporate OKRs, or company OKRs, which is typically for the year, sometimes longer, but typically for a year. You decide on three or four objectives for the company for the year, and you track their progress using 2 to 5 key results each.
Company Level OKRs
So let’s say, at the company level, you have an OKR to grow your business. Let’s call the objective “Grow revenue.” Fast forward a quarter or a year, how do you know that you have grown the revenue. We will create key results which will answer that question precisely. One of the key results can be, “Increase revenue by 100%” or, “Double the revenue,” or, “Increase the revenue from $100 million to $200 million this year.” A second key result may be to launch some new products. You can launch a couple of new products in the areas where your competition is stronger than you. A third key result that may be focused on entering some new geographies. You could have the key result phrased differently. For example, “Expand the number of countries in which we operate from 10 to 15 countries.” So this essentially forms one of the corporate OKRs.
There are 3 to 4 corporate OKRs, but the one OKR that we took was to grow the revenue. And then we had three key results identified for that. The key results from the corporate OKRs will be owned by a few departments – sometimes a single department owns it and some other times a few departments share the ownership.
Department Level OKRs
Obviously marketing and sales get involved here. Marketing has to generate new revenue opportunities, maybe identify new markets to enter. And then the sales team obviously has to nurture the leads from marketing and then go and execute on the sales process to get you this growth. The research and development team, obviously, will have to work on those new products, as well as improve existing products, so their products fare well in the market. And the manufacturing and other services teams may have to either create additional capacity or introduce new manufacturing lines or manufacturing plants to support these growth goals. These “things to do” that originated from the corporate OKR will essentially become the department OKRs.
So, let’s take the marketing team. Now, one of the key results at the corporate level was to increase the number of countries you operate from 10 to 15. The marketing team can say, one of our objectives is to “Penetrate Italian market.” Now, that objective will be measured by a few key results. One of the key results might be to open a sales office, and assuming you decide on the location to be Milan, the key result will be, “Open a sales office in Milan by March of this year,” or, “End of Q1 of this year,” which will give you essentially about three more quarters (Q2, Q3, Q4) to ramp up and execute well in the Italian market. The second key result could be to hire a VP of sales for Italy, based out of Milan. This may have to be done in an earlier time frame than the end of Q1, but can be defined as a Q1 key result.
Once you have the location setup and ahead hired, you can have a couple of key results to test the waters a bit. So, the 3rd key result for this quarter can be to generate 30+ leads for Italy. And finally, a 4th key result could be to have at least 3 reference customers from Italy. Now, with this setup, you can aggressively execute for the next three quarters. You’ll have a local office, local leader, you would’ve demonstrated the ability to generate leads and finally, you’ll have customers that can be quoted as happy references for newer prospects.
So, this is a department OKR of the marketing department, which essentially would align with the corporate OKR, “Grow revenue.” And specifically, it would tie back to the key result, which is, enter new geographies or increase the number of countries that we operate in from 10 to 15.
In many cases, you can actually stop with this. Basically, you’re going to have a corporate OKR, and then department OKRs, assign the individual key results of these OKRs to, let’s say, other individual people within the department, right? Say open sales office Milan key results could be assigned to a particular director of marketing or somebody who’s in charge of those types of things. Hiring a VP of sales could obviously be assigned to HR or a HR Rep, who’s not necessarily in the department, but maybe the HR department actually can create their own OKRs, which will align in turn to penetrate this particular Italian market OKR.
And then the KR for increasing new leads from zero to 30, or maybe get 30 new leads, could be given to the digital marketing team or the online marketing team, which is part of the marketing department, or the head of the team who will execute on that. So, the point being, you can basically have company-wide or corporate OKRs, and then department OKRs and then be done with it.
Cross-Functional Team Level OKRs
Now, there are other situations where you could say, “Okay, we actually need a team of people from different departments to execute this key result.” And interestingly, this penetrates Italian market OKR itself can be a candidate for that, because opening a sales office in Milan, could be the responsibility of the real estate group of the company, while the marketing department is key driver. And certainly, the business strategy department may have a part to play as well. Hiring the VP of sales could be literally spearheaded by the HR department. So, essentially, as we are seeing here, it could cross multiple departments, and in which case you can leave it like this, where it actually rests with the group that is the leading group, or the leading department, and then others can contribute to it, or maybe create a cross-functional team comprising of people from these three or four departments and then make the OKRs theirs. So that way it’s pretty clear, and everybody knows what’s going on.
And at the final level, you can actually have individual OKRs. Employees can have their own OKRs, which essentially are actions that derive from the department level or team level OKRs, down to the individual level. Let’s take this example, the department key result “acquire 30 new leads for this quarter from the Italian region,” could essentially become an objective for the digital marketing head. He could say, “Okay, I need to get 30 new leads from the Italian market in this quarter, so what do I do?” Okay, I need to run ads in certain places, let’s say, Google ads or LinkedIn ads or newspaper ads or magazine ads. And then maybe you could say, “I need to get some PR involved, like maybe announcing that this company is entering this market, do some press conference and other things to get the message out,” which all results in awareness.
So basically, once awareness increases, people start taking notice of who you are and that you’re there. And then have a good, nice website to capture more traffic and then capturing more interest. And that’s how you can go from zero to 30 leads. It could be the head of marketing’s OKR, or it could technically be a list of tasks that they go through and not necessarily tracking OKR. But it is possible to have company-wide OKRs, and then department OKRs, and then individual OKRs which lineup to either department or team OKRs. And basically all the four levels of OKRs co-exist in a particular OKR situation in the company.
Now, what is the best practice?
This question gets the most universal answer in management — it depends. Obviously, the maturity level of OKRs in your organization will be a big factor in deciding which levels you want to set OKRs at. Now, if you say that you are just starting off with OKRs, then having multiple layers or levels of OKRs is going to result in a “complex OKR environment” and can cause confusion.
- At what level do I define this OKR?
- Why is this OKR at the individual level and not at the department level?
And so on. You get the idea. So, it’s a lot better to just limit it to maybe two levels, and go from there. So, you could start with company-wide and department OKRs. And run the program for a couple of quarters, and then slowly introduce team OKRs when you see a cross-functional team initiative coming up. And again, do this for about two, three, four quarters, and everybody now starts to get the hang of it. They all understand what OKRs are, how to create objectives, how to create good key results and how to check-in and how to keep track of progress.
And more importantly, many times when you start with individual OKRs, there is some level of fear, that you’re getting measured, using a system. There is a certain level of fear, which actually ties back to the aspirational and stretch objectives that people talk about. But let’s leave that out for the discussion right now. But, there is a certain amount of fear in people’s mind when you start tracking and people think, “Oh, I’m going to be measured by this, so let me sandbag my numbers and make sure I commit to only what I can achieve.”
Now, if you start with corporate OKRs or company-wide OKRs and department OKRs, and then slowly percolate down to team OKRs and then individual OKRs, with that experience and exposure, the fear factor may go down quite a bit. And that way, when you encourage people to create their own individual OKRs, they will do justice to the OKR philosophy and create objectives and key results, which in turn would be aspirational in some cases and then stretch in some cases, and then committed in some other cases. So, that’s how you might want to play around with OKR levels in your organization.