Business Terms 101: How to Get Your Business to the Moon
After years of OKR coaching and a couple of organizational-related degrees in university, I have learned about so many different methodologies, frameworks, and principles that could be used in business. I completely understand that as a starting business or even with a more mature company it’s easy to get lost in all that. Here’s a set of business frameworks, which in my experience work well to maintain and grow a business.
Those methods either help you run the business or measure its health and success of it. The more different terms there are, the more confusing it gets around what is exactly what. Mixing the definitions and the purposes of those methodologies or frameworks brings no benefits. In many cases, it leads to more confusion and it fails to bring clarity and focus that companies need to succeed.
One business concept or process doesn’t replace the other, and all of them fit together and serve their own purposes. They all have their own benefits, principles, and cadence. Most of them are used at the same time.
Let’s get some important definitions straight. Here’s how it all fits together:
Business terms to define who you are and where you are going as a company
Mission is a company’s purpose, a reason why the company exists. It’s a short sentence that is rather broad but inspiring and clear to all stakeholders. It is usually not time-bound and only tells what kind of value the company is contributing to the world in no specific terms. Normally, a mission statement sounds like this: we want to (solve a problem) for (the people who will benefit from it) by (the main means of operation or a very general “how”).
For example, we want to make managers’ lives less stressful by helping them align their remote teams.
Vision is a long-term (2–5 years) directional statement that explains what a company needs to become in order to fulfill its mission. It’s a faraway destination that provides a clearer understanding of the future.
For example, our digital product should offer a status reporting and check-in tool that is easy to use and time-saving for middle managers.
Strategy (annual or multi-year Objectives) are bigger directions for the company: where the company wants to be in about a year. What is the first big step towards our vision? Are you planning to grow, or focus on generating more profit? Maybe you need to change the current direction? Or choose new markets to expand to? An annual Objective is a goal that could only be achieved through setting smaller and more focused quarterly Objectives.
An example of an annual Objective could be, Expand to new markets in Europe.
KPIs/Metrics & targets — Key Performance Indicators (KPIs) and Metrics are the same thing; some companies also call them health metrics, indicators, etc. KPIs show you how your company is performing in different areas. Usually, KPIs have specific targets which reflect a level of performance that a company (or a team) hopes to achieve. Off-track KPI targets draw your attention to the areas that are not performing well. Even though KPIs are really good for understanding where you are, KPIs & targets don’t tell you what the teams need to improve to move forward.
There can be a lot of different metrics you can keep an eye on but it would be best to choose 4–6 key ones that are most important for each team and the company in general.
Examples of KPIs:
Amount of marketing leads, etc.
Business terms that guide you to the moon
If we want to get somewhere, we need to set a goal. KPIs (mentioned above) help us monitor how we are doing and whether we are okay, but they don’t tell us where we want to go. Actionable goals put into a forward-looking and inspirational statement are called Objectives.
Company Quarterly Objectives are high-level overarching focus areas that need improvement. Company Objectives set the direction for the whole organization for the next three months. Achieving them will take the company closer to the strategic annual objectives. Company objectives need to be more specific than just “Increase revenue” and they should answer the question “how are we going to improve?”.
For example, a company wants to increase its revenue (KPI) but its customers are unhappy with the quality of its product. In this case, improving a certain aspect of the product quality could be a good quarterly Objective to focus on.
Based on the context provided and explained by leaders, functional teams/departments write their team-specific Objectives and Key Results to contribute to one or several of the overarching Objectives. While Objective is what we want to achieve then Key Results are the measurable outcomes we need to achieve to call our Objective a success. You can think about them like success measurements.
Team OKR is a collaborative improvement goal with a particular structure.
The objective is a focus area for a quarter: what problem are you solving or which opportunity you are going to explore as a team? Key Results define success or failure of that Objective in measurable terms: have you achieved the Objective?
Team OKRs should align with a high-level company overarching Objective and contribute to it. OKR structure looks like this:
Objective: Improve the way we nurture relationships with potential customers at an early stage
KR1: Increase the number of second meetings booked from 10% to 40% on average
KR2: Improve the email response rate from 5% to 10%
KR3: At least 50% of lost deals reply to the “why not us” survey
Here are more OKR examples for different teams.
Performance management goals are used to set clear expectations regarding business-as-usual work performance for each team and employee. Meeting personal performance targets should be possible with clearly defined business processes and regular day-to-day work. Performance management is often used to see if a person is really up for the job, to calculate bonuses, or to know which areas the organization could help the employees to grow.
Personal development goals are for personal development and career growth. Although the professional development of employees is an extremely important addition to a company’s skill set, the only real direct beneficiary of achieving these goals is the person who will be working on them. Of course, it helps the company if the person contributes with his/her new knowledge but if the person leaves the knowledge mostly goes as well.
Different methodologies can be used to set personal goals, and OKR principles can be followed as well. The bottom line is that these goals are for personal development and do not reflect or guide the success and improvement of a company.
That doesn’t mean personal goals are not important because they are, especially for people who want to have career growth and for companies that want to support their employees’ development. Personal goals focus on the individual and team, and company goals focus on the company.
Final terms to ensure everyone lands safely
Projects/Initiatives are activities and ideas the teams will work on to achieve progress on their OKRs. Goals can be great but if you don’t have any ideas on how to achieve them, they become useless. Initiatives are set at the beginning of the quarter and if nothing works, they should be changed based on the learnings.
Usually, initiatives are set on a team level and later, while planning on a weekly basis, divided into smaller individual plans. When agreeing on the priorities (most impactful initiatives), the team should critically think if this helps them with their Objectives or if they are drifting away from the main focus.
Weekly plans & Reporting help co-workers and team members stay up to date with each other’s priorities and weekly achievements. With the right software, managers can easily see what the team has been doing and achieving with no need to micromanage day-to-day work. This way problems can be spotted and solved faster and there’s a continuous flow of communication which helps to avoid blindspots and confusion.
Team OKR Check-ins are weekly Team meetings where the team discusses: the progress of their OKRs, what kind of learnings they get from last week’s progress and what they are planning to do next. It’s a quick 15–20 minute check that can be a part of a team’s regular weekly meeting. Apart from the regular progress update and staying in sync, the point of these meetings is to ensure regular exchange of information that will improve mutual understanding, and build trust.
Of course, depending on the nature of the company, the exact “sub-methods” can vary. For example, for project management, you can use Scrum, kanban, agile, etc. This is something that I think teams need to try and choose based on their workflow and preferences. The methods/terms mentioned above give you a rather higher-level framework for running a successful business.
Originally published at https://weekdone.com.