July 13, 2021

Significance of OKR Methodology for Startups

schedule 3 min
Significance of OKR Methodology for Startups

In the past year alone, startups have grown rapidly, many of whom doubled their employee headcount. The United States, in particular, saw an increase from 3.5 million in 2019 to 4.4 million in 2020 in startup activity—a whopping 24 percent increase. This means teams grew, responsibilities split into more specialties, and employees found themselves in new roles.

While startup culture views growing headcount as a strong sign of impending success, this high growth stage can be ironically dangerous. The risk of high growth includes broken processes and zero alignments resulting in lower productivity levels.

That’s why great CEOs approach high-growth stages with caution and, most importantly, with preparation. These leaders know for a fact they need something to keep everyone aligned and productive when dozens of new employees are being added a week.

Today, we’ll touch on the CEOs that choose to adopt the well-loved OKR methodology and the significance of the tool in startups.

Also Read: OKR Methodology for Remote Workforce: How is it Important?

Customize OKRs for your startup

It’s easy to model your startup’s OKR processes to that of Google or Intel. After all, the success of these tech giants proves just how effective the OKR methodology can be.

That said, every startup and team within your company is different, and implementing Google or Intel’s version of OKRs may not be just as effective.

Luckily, the OKR methodology is highly adaptable to the needs of startups. At its core, the OKR philosophy should always remain the same: measurable stretch goals that all employees can use to track change. Beyond this, every team in your startup can interpret the use of OKRs differently to meet their needs.

Make performance reviews easy with OKRs

Research from Edward Deci and Richard Ryan of the University of Rochester notably acknowledged, “…that the introduction of an extrinsic reward caused [employees] to think of their work differently from that point on by reducing intrinsic motivation.”

In practice, this is why leaders should not tie compensation to OKRs.

That’s because the OKR methodology is designed to motivate your employees through transparency and joint alignment. Connecting compensation to OKRs creates stress and tension rather than accountability and empowerment.

There are always exceptions to this recommendation. One exception that makes sense is tying monetary incentives to some (not all) OKRs of your sales team. So you might be wondering how OKRs will play a part in performance management if OKRs can’t be tied directly to employee compensation? The OKR methodology makes performance reviews a much more pleasant and less anxiety-inducing process for employees.

This is highly significant because, despite the well-meaning opportunity for constructive feedback, people are innately uncomfortable with being judged.

OKRs ease this harsh approach by implementing regular updates, increased informal feedback between colleagues, and delivering recognition from leadership often. In practice, spreading this over time is much more motivating and means employees will always know what to expect when performance reviews do come around.

Use OKRs to align growing teams

For startups, high growth means more people and revenue. Both of which require cross-departmental collaboration to achieve, and OKRs can be credited for making this possible.

Let’s consider the significance of OKRs to a startup CEO in the following context:

Before this product launch, your startup has relied on a solid pipeline of inbound marketing leads to build revenue. With a new product ready to launch, you want to implement an outbound marketing and sales strategy to increase net new revenue.

To make this happen, you will need both marketing and sales teams to do some heavy lifting they did not have to before. Not only will they need to build the standard product launch collateral, but they will also be responsible for attracting and engaging leads that have never interacted with the brand before.

With the OKR methodology in place, a CEO can make sure the marketing and sales teams’ priorities are aligned with this new initiative to bring in new revenue.

Without OKRs, a CEO would not cross-check across marketing and sales to ensure the new initiative is reasonable and resources are available from leadership to make it work.

Also Read: A Guide to Using OKRs for SaaS Startups

Final thoughts

As the OKR methodology becomes standard in a startup, leadership will focus on ensuring teams have the resources they need to complete OKRs.

When implemented correctly, you will find your employees speaking on their progress in the context of OKRs. That is a sure sign for a startup that your workforce feels aligned with the company’s core values and objectives.

If you’re still wondering if this is the right time for OKRs, consider the following: For CEOs of startups, there comes a time in hyper-growth when leadership can no longer weigh in on every team decision. This is when the OKR methodology will play the most significant role in supporting the decision-making alignment your startup needs to grow.

Demo Unlock:OKR today and discover how you can transform the way your workforce achieves goals, track progress, give feedback, and automate the manual practice of goal setting.