In this article we discuss the factors that must be taken into consideration for a company to define the length of its OKRscycle, as well as an analysis of the pros and cons of shorter and longer cycles, and the influence of factors such as the maturity of the company and its industry on the definition of its cycle.
The article is relevant regardless of the methodology your company prefers to adopt: Management by Objectives, Management by Guidelines, Objectives and Key-Results (OKRs) or any other practice.
A company's OKRs cycle is the time lapse between each goal-setting process from the organizational level through teams to, in some cases, individuals. Within a cycle, the phases of defining (the beginning of the cycle), executing, checking, and learning take place:
The size of the cycle, or the frequency of a company's OKRs process, can vary from monthly in some cases to yearly in others.
Goals and PDCA
PDCA is the continuous improvement cycle that we should all practice. In it, hypotheses are defined in the Planning phase, these hypotheses are tested in the Doing phase, their results are evaluated in Checking, and the hypotheses are calibrated to start another cycle in Acting.
If we think about the OKRs cycle, setting cycle is very similar to a PDCA cycle. In it, goals are also defined, which need to be reached based on hypotheses (action plans). This execution is verified, learning materials are developed, and the cycle repeats.
Thus, the more cycles a company develops, the more it learns and improves.
The factors that influence the definition of the cycle
Several factors impact the process of defining the ideal OKRs cycle for your company. Among them, we will discuss three of the most important: the company's market, the business maturity, and the mastery of management by OKRs practices.
It is a fact that virtually all markets have become more unstable in recent decades, due to factors such as globalization (which has opened up many markets to competitors from all over the world) and the acceleration of technological development (which has created new media, new means of communication, and many new companies that have disrupted the status quo in very old markets such as cabs, hotels, and restaurants).
However, certain markets can still be categorized as more "nervous" than others, and therefore more predictable in the way they affect the companies that participate in them. Examples: it makes sense to think that the market for the manufacture and sale of ketchup is more stable than the development and marketing of mobile applications: the manager of the condiment factory has a reasonable visibility of what should happen in their market in the next 6 to 12 months, while the manager of the application firm can hardly predict what will happen in their market next week (see the example of the Pokemon Go game that took all the electronic game companies, including Nintendo, owner of the game, by surprise).
The more "nervous" your market is, the shorter the cycles should be, because iteration and PDCA cycles will be faster, and the faster the company will need to react to what happens in its market. If a game company waits 1 year to review its goals, it will probably be bankrupt before the start of the new cycle.
Goals can be used by any person or group of people regardless of the size of the group. In other words, goal management is not just something for big companies. What makes a lot of difference is not the size of the company, but the maturity of its business model, which mainly affects the ability to clearly see scenarios considerably ahead.
Especially startups or departments that are doing something for the first time within their organization will not be able to accurately forsee their future. Everything is still very cloudy for these groups.
In these situations, it is recommended to set shorter goals and fast iteration and course correction cycles, avoiding 'predicted' goals that risk geting irrelevant quickly and demotivating the team over time if it was not a good guess.
Usually quarterly or even monthly OKRs will make more sense than half-yearly, annual, or multi-year OKRs.
Whenever you start with a new methodology, it is not good to imagine yourself being a "black belt" on day 1, wanting to use it the way other more experienced groups use it. No one learns how to ride a bike by riding down steep hills.
Therefore, if your organization does not have a goals and especially metrics culture, try to use very short cycles (monthly, bimonthly or quarterly) to iterate faster accelerating the learning of the organization with the methodology and consequently the learning of the methodology and subsequently increasing the company's abilities in more long-term planning.
Consider these three factors in defining which cycle best fits your organization
The more "nervous" your market, the shorter the cycle should be;
The more "immature" your business model, the shorter the cycle should be;
The lower your company's mastery of management tools, the shorter the cycle should be;
Avoid implementing ready-made models, especially "blind" benchmarks of companies like Google, Netflix, etc. Each company has its own reality and needs.