Startup failure. It cannot be eradicated. It is part of the startup ecosystem. Getting out-competed, no market need, team disharmony and running out of cash are just...
So you’re an early stage start-up or preparing to scale. Awesome.
Your team is growing fast. Amazing.
You feel it is time to take a more structured approach with your company objectives. Great.
You have heard about OKRs. Excellent.
You think your first set of objectives should be all about profit, customer acquisition and funding. Ah. Okay. Hmm.
You think your teams are collaborating well…
You think your teams are highly engaged…
You think no-one is at risk of burnout…
You might need to think again…
An objective key result (OKR) is a process that a company can use to set business or strategic objectives, including the criteria and key results that will be required to achieve each objective. For an early stage start-up or a start-up preparing to scale, deciding upon the right objectives from the myriad of feasible objectives can be overwhelming. In its simplest form, company level objectives in the OKR process are intended to filter down through the entire organisation creating alignment through an overarching framework for mini goals, key results and individual actions that will ultimately contribute to the OKR process.
This theory is neither new nor groundbreaking, but we see it consistently presenting major challenges for Start-ups by curtailing their ‘culture and agility’ when arguably they need it most.
A rigid OKR process can have a crippling impact by narrowing Start-up vision and changing employee behaviors. This can ultimately prevent your start-up from being nimble and fast-moving, instead leaving you hamstrung by objectives which creates disharmony.
These examples are just a glimpse of the potential problems that OKRs can cause for Start-ups, these can be further compounded by not having a solid data led decision making foundation and the ‘treadmill syndrome’. The ‘treadmill syndrome’ suggests ‘you cannot out-exercise a bad diet’, this rings true for OKRs - ‘you cannot positively achieve a bad objective’.
Not only is Start-up culture, agility and innovation threatened by OKRs, but we see the OKR process failing to deliver any positive impact on employee engagement, collaboration or productivity.
“OKRs can be harmful for Start-ups trying to launch or scale, they can cause teams to chase a rigid objective without checking whether it is even the right one to start with.”
When you combine an over-engineered process with the potential impact on culture, agility and employee collaboration, a situation evolves rapidly that will prevent your Start-up from even hitting one of your objectives, let alone hitting the minimum requirements of all your objectives required for the OKR process to be successful.
Every search engine will return hundreds of thousands page results on the reasons ‘Why Start-ups Fail’. The elephant in the room however is ‘Premature Scaling’. I have seen OKRs forced on Start-ups as part of a funding cycle when preparing to scale, even though the funding partner has a very loose grasp on the culture of the Start-up, what really makes it tick and what core factors amplify employee engagement, collaboration and productivity. Think of it like going ten pin bowling, if an ‘Objective Key Result’ mindset is not already part of the fundamental culture of your Start-up, then the first time your Start-up implements an Objective based process it will be like bowling without the lane barriers, you chances of throwing a gutterball increase exponentially.
Through years of experience of working with successful Start-ups, we would like to share some valuable considerations that will help you turn a potential gutter ball into a strike.
Setting your Objective direction
Personally, Individual OKRs are not a good objective to begin with, especially for an early stage company or a Start-up preparing to scale, they are more often than not outright harmful. At an early stage Start-up, individuality should be encouraged and should be expressed through the actions each member is best positioned to take, but individualised actions must align to a single or small set of strategic company objectives. If each individual is accountable for a different strategic objective, you create dilution and empower individuals to work in silos.
- Setting your strategic objectives. Less is most definitely more.
- Define your key results. Being measurable is essential.
- What are your viable measurable metrics? Truly understand your mission critical objectives.
- Review period. Revisiting your objectives doesn’t mean always revising your objectives. But if your Start-up culture is agile, then consider weekly or bi-weekly objective reviews rather than traditional quarterly viewpoints.
- Key result indicators. At what point does it become clear you are on track with your objective or does re-framing your objective become a reality.
- Objective momentum. For early stage Start-ups, strategic objectives can be positively influenced by aligning ‘quick’ bite size milestones which support the key results.
- Stop. Collaborate. Align. – Before implanting any OKR program in an early stage Start-up, stop and breathe, take time to reflect on the potential impact. Your entire team collaboration should be focused on a small number of objectives, ensuring that each individual, action or mini milestone is fully aligned to a key result, and in turn, a strategic objective.
Avoiding the startup failure and premature scaling trap
- The customer: Start-ups often allocate large sums of money to their overall budget in an effort to acquire more customers. This is appropriate if the product market fit has been established. If you haven’t set an objective to gain feedback and market advice from your current customer, maybe consider it as a more valuable objective right now, rather than setting an objective for new customer acquisition.
- The product: Another sure-fire way to fail is selling a product that does not provide any value to customers. Too often the target audience sees the start-ups product as ‘nice to have’ rather than a ‘business critical solution’. At some point early in your journey you have to sell an idea to prospects — but be very clear about what value your product will bring to clients. Objectives for your product shouldn’t include developing additional unnecessary features and investing heavily in the product before the market is ready.
- The team: The first thing many start-ups do when they launch or scale is hire more staff. Sometimes they hire specialists and managers when there isn’t even a need for those specific roles. Hiring in a rush can often lead to lower-quality talent as well. Bad hires can also be cemented by not having a clear employee collaboration, engagement and productivity strategy, goal or objective. Before you ‘hire to scale’ set objectives to really get under the skin of your current team and what talent they feel adds value to the business.
- The business model: Start-ups often focus heavily on profit, creating their entire business model with the singular objective of maximising profit. Profit can be a solid objective at the right time, but too often, early stage Start-ups ignore other success leavers in search of profit. Although this alone will not kill a start-up, it can prevent a team from recognising ‘long-term value potential’ that is hidden by the immediate opportunity for gain. This can prevent a start up from ever reaching lifetime maturity value with customers.
- The funding: Too much, too early, too little, too late. An influx of cash can spell out trouble for many start-ups. Raising capital may be necessary for a business, but it can come with the temptation to spend unwisely or not being able to spend enough in the right places — the funding factor typically amplifies the negative impacts of the previous four aspects of premature scaling. Throwing money at problems rarely solves them long-term. Don’t expect problems to magically disappear once you have an investment — the added pressure of reporting to investors can negatively push founders further from their core value proposition, especially if you have introduced an OKR process which is not set in the correct direction, doesn’t have stable foundations and is impacting employee engagement, collaboration and productivity.
If you are an early stage start-up or preparing to scale your start-up, take a moment before implementing an Objective Key Result process. Your start-ups agility is one of your most powerful weapons for success…
Use shorter cycles. Don’t cookie cut an OKR process from another business, don’t be too rigid when reviewing your objectives. OKRs typically follow a quarterly cycle, but this is your start-up and your rule book. Start-up priorities by their very nature indeed change fast. But you need at least some level of certainty before setting off down an objective path.
Terminating the cycle and current strategic objectives. If you gather new information based on target audience feedback or a market condition or a competitor and you want to pivot immediately or make a change to your product for value based reasons — that's ok for Start-ups to do. But proceed with caution, pivoting or product changes is likely something you won't want to do often. Arguably it would still be best for your team to finish the current objectives and measure the results. If you are considering terminating your current objectives then focus on data-informed decisions and empower your team to collaborate on situations or solutions that may occur.
If you decide not to finish your current objectives and measure the results, you might end up repeating the same activities albeit under a new set of objectives, so it is critical that everyone involved in an OKR process agrees that terminating current objectives is the best course of action.
Focus on learning and validating your start-up ideas. For early-stage and Start-up preparing to scale, the best set OKRs you can implement are objectives and key results that would allow you to learn from your customers quickly, validate this feedback as fast as possible and implement through team collaboration. If a key result doesn’t say ‘talk to x customers’ within an objective, your objective direction and foundation could be set up to fail.
Don’t underestimate cross-team collaboration power. Really getting under the skin of how your team collaborates, but more importantly, understanding how better collaboration can amplify the positive results of your start-ups objectives is potentially the single most critical success factor.
Before setting out any Objective Key Result structure within your start-up, ask yourself these questions:
Do objectives and key results enhance my start-up culture?
Will my employee engagement and employee productivity be positively enhanced through an objective key result structure?
Do we have the right tools to do the right job and maximise the power of cross-team collaboration to achieve all our objectives and key results?
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