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quarterly issue 3

Learning curve: Use OKRs to boost your team's work

Author: ICAEW Insights

Published: 12 Sep 2020

learning curve

The role of finance professionals is changing quickly, and a different type of performance management could make that change easier, finds Cath Everett

The Objectives and Key Results (OKR) approach to setting goals for employees, which has been around for over two decades, could help finance teams change the way they work so they are better able to thrive as the profession becomes increasingly automated.

A key issue facing the profession, says Oliver Deacon, who specialises in coaching finance managers and leaders, is that about half of all finance jobs that exist today – particularly those in areas such as operations and controllership that deal predominantly with historical data – will be automated.

But roles that handle forward-looking data, such as financial and strategic planning and analysis, will become more prevalent in future. Today, they only make up about 15-20% of the entire profession. Within the next 10 years, they are expected to account for between 50% and 70%.

For this transition to take place though, finding ways to broaden employees’ skills will be essential. “The finance person of the future will have to be far more comfortable working with forward-looking key performance indicators and business drivers, as most of the process work they currently do will be automated,” says Deacon. “They’ll need the discipline and skill of turning data into meaningful metrics, which means becoming much more strategic.”

It is here that OKRs come into play by acting as “the path to help them get there”, he says. This is because OKRs focus not only on setting strategic objectives, but also on measuring associated activities to ensure such objectives are executed effectively. 

As Peter Kerr, Managing Director of consultancy AuxinOKR, which provides OKR training and coaching, points out, the approach is intended to bridge “the gap between strategic planning and execution”, which is something that all too many organisations fail to do well.

OKRs can help as “priorities are measured regularly, to ensure they happen, and also that they have the desired result”, he says. If a given goal is not achieved, frequent evaluations mean there should be enough time to shift course if necessary. 

‘It’s an agile approach to putting strategy into an organisation, so it’s about getting early sight if things are going wrong rather than having an “uh-oh moment” when it’s too late’, Kerr explains. 

OKRs really come into their own during change transformation, which includes everything from digital transformation initiatives to introducing new products and services. In this context “OKRs and Agile [a collaborative project management process] map neatly”, Deacon says, because the aim of both approaches is to enable continuous improvement.

The OKRs approach was first developed by former Intel boss Andy Grove in the 1980s and grew out of the “management by results” methodology. While it remained relatively obscure for another 20 years, venture capitalist John Doerr introduced the idea to Google when it was still in start-up mode, and as the company’s success grew so did the spread of the concept around Silicon Valley. 

It is now employed by a range of tech vendors from high-profile giants, such as Amazon and Airbnb, to innumerable digital start-ups, although it has so far made little impact in the finance space – despite the apparent compatibility of the two worlds.

Deacon says: “Putting financial rigour behind your big, ambitious, strategic goals is an important way to achieve them. The finance function sits on all of a company’s numbers and data and knows what can be measured, so it’s in a good position to drive objectives forward.” 

As a result, financial professionals can “add huge value” within the cross-functional teams that OKRs encourage by “providing an understanding of systems, where data is located and how to get insights from it”, says Kerr. This is important because “the real aim is to unleash the power of data to obtain leading, rather than lagging, indicators for the business”, he adds.

The biggest barrier to OKR adoption for many finance organisations, though, is cultural. Because teams are often understandably risk-averse, setting big so-called “stretch goals” can feel uncomfortable.

“The idea with OKRs is to set really challenging goals, which means you’re successful if you only hit 70% of them – otherwise you haven’t been ambitious enough,” Deacon points out. “But finance professionals are accustomed to being top students, and getting their balance sheets to balance, so it takes a while to get used to being rewarded for different measures of success.”

Another challenge, particularly for leaders with a command-and-control management style, is the transparent, bottom-up approach OKRs take to achieving goals.

“At the heart of it is discussion to find a solution rather than requiring things to be done in a prescribed way,” Kerr says. “But it’s also about transparency, so giving people the room to make errors and empowering them to speak up if they see something going wrong.”

Ultimately though, the real benefit of the approach is in enabling finance functions to support the organisation in becoming more forward-looking. As Deacon concludes: “I see OKRs as a bridge to the future, not least in helping professionals develop the skills they’ll need.”