Leveling Up EOS With OKRs
Over the years we have received numerous questions about the differences, similarities, and potential to integrate the EOS (Entrepreneurs Operating System) framework with OKRs (Objectives & Key Results). This article provides insights and guidance about the two frameworks and how they work together to achieve significant advantages for organizations.
What is the EOS framework?
The EOS framework is a business operating system , based on the book Traction by Gino Whitman. A business operating system is a business leadership framework and language that helps companies organize its people and other resources in a comprehensive and consistent manner by all employees. In his book, What the heck is EOS, by Gino Wickman & Tom Bouwer, they describe that a business operating system, “serves as a guide to inform how people in an organization meet, solve problems, plan, prioritize, follow processes, communicate, measure, structure, clarify roles, lead and manage”.
EOS is one of a very few comprehensive business operating systems. Others include Scaling Up, by Verne Harnish, and Elevate by R. Joe Ottinger. EOS targets organizations of about 10 to 250 employees, although some larger organizations continue to use it as well. (By contrast, The Scaling Up framework is built primarily for small and middle market companies that are growing, and the Elevate framework focuses on value creation in companies of all sizes and in particular those backed by professional Private Equity and Venture Capital investors.)
There are six main components of the EOS framework: vision, people, data, processes, traction, and issues.
Vision: Identifying values, goals, and purpose to get everyone on the same page about the plan for where the organization is going.
People: Hiring the right people and putting them in the right positions to make the vision work.
Data: Defining certain standards and key performance indicators to maintain a pulse on the company’s overall health.
Process: Being consistent and systematic about how to do things in the most efficient and effective manner.
Traction: Holding recurring meetings and encouraging discipline and accountability for effective execution of goals.
Issues: Identifying, prioritizing, and addressing obstacles as they come instead of ignoring them.
What is the OKR framework?
The OKR framework is a goal-setting framework. EOS and OKRs are not at all the same, although they cover a few similar elements. The OKR framework was developed initially by Andy Grove, Co-Founder and CEO of Intel, and popularized by John Doerr, one of the most successful venture capitalists of all time in Silicon Valley. The OKR methodology has expanded from technology companies to the mainstream as a result of John Doerr’s book, Measure What Matters, and through the website What Matters.
“OKR” stands for Objectives & Key Results. Simply put, Objectives are what you’re trying to accomplish, and Key Results are how you’ll measure whether you are on track to achieve the Objectives. Doerr describes the “superpowers” of OKRs as creating focus, alignment, commitment, tracking, and stretch:
Focus: OKRs ensures prioritization on a small set of carefully chosen priorities with the greatest impact.
Alignment: OKRs provide a method for an entire organization to align its goals at every layer with its focused set of priorities and purpose.
Commitment: OKRs demand a level of collective commitment from the parties involved to choose, focus, and finish agreed-upon priorities.
Tracking: OKRs allow a team or organization to track their progress towards goals creating an early warning system to pivot as required.
Stretch: OKRs empower teams to set goals that stretch beyond “business as usual” - and make significant, meaningful change.
When implementing OKRs, there are a number of key elements a company must effectively master to achieve its desired outcomes including:
Writing Quality OKRs for objectively measurable “Outcomes First”: Unlike most methodologies, OKRs start with measurable outcomes first, then project plans are developed to support their achievement. This is the essence for writing effective OKRs. In addition, OKRs are designed to be inspirational, directional, and most importantly objectively measurable. This ensures goals are aligned to the strategy of the company, and there is accountability at all levels.
Mastering The OKR Cycle: OKRs fit into the rhythm of a business and its critical meetings. Annual OKRs are set following strategic planning and support the achievement of the select few strategic initiatives that will create the most company value. Quarterly and monthly, OKRs support the most important company priorities during execution, and are incorporated as part of quarterly and monthly business reviews. Weekly they are tracked and reviewed by teams within existing meetings to quickly identify and overcome barriers to goal achievement.
Cascading and Localizing OKRs For Alignment And Agility: When OKRs are set, typically quarterly, the whole organization aligns around them through a top-down, bottoms-up, and side-to-side approach. The process of aligning the company around the most important priorities and goals each month ensures coordination, alignment, and the agility to pivot as required.
Tracking OKRs for Rapid Learning: OKRs are typically tracked weekly or monthly by teams for accountability and rapid learning that can lead to quick course corrections. In addition, OKRs are reviewed typically quarterly to understand the barriers to their achievement, and to level up the organization's capabilities to more effectively achieve them in the future.
How OKRs Level Up EOS
It is not necessary for organizations to choose between the OKRs and EOS. In fact, OKRs can level up EOS in a few essential ways, and especially where goal-setting and metrics and measures are involved.
Alignment To V/TO: OKRs supplement EOS’ V/TO. Imagine another section to the V/TO that includes the annual set of no more than 3 to 5 strategic initiatives that when accomplished will create the most value for the organization. Each strategic initiative has a “from-to” measure that identifies the desired outcome at the end of the year versus the previous year. In addition, each strategic initiative has an owner and typically a cross-functional team focused on it as well. Outcome measures for each initiative are set monthly or quarterly for the year, and progress towards the annual goals are tracked monthly and/or quarterly as well.
Rock Replacement: In his blog post, The 3 Biggest Problems I've Encountered Using Rocks for Goal Setting, Chris Carey describes the problem he perceives with EOS’ Rocks. 1. Rocks are not to be updated, started, or stopped during the quarter; 2. Rocks are to be SMART, and thus “Done” and “Not Done” are the only possible outcomes; 3. Rocks can be created without any connection to our vision and/or strategy. OKRs effectively overcome all of these challenges, and have the additional benefits described above.
Outcome v. Activity Based Scorecards: EOS scorecards focus on activities with the assumption that the right activities will lead to the desired outcomes. OKRs reverse this logic by establishing the desired outcomes prior to designing the project plans and dashboard-like scorecards. Let’s say we want to grow revenue from $4 million to $5 million over the year. This is the desired outcome. In addition, let’s assume that our EOS scorecard assumes that the number of sales calls per day will lead to the revenue goal. What if the number of sales calls doesn’t lead to the desired outcome? What if revenue is more driven by having the right partners supporting the sales effort, or cost justifying your product or service in customer meetings where the decision-maker is present? What if none of the meetings has a decision-maker present? In other words, the number of sales calls is a measure of activity, which may or may not lead to achieving the desired outcomes.
Meeting Pulse v. Crucial Meeting Conversations: EOS provides a structure and focus for meetings, which creates a great deal of value. At the same time, EOS emphasizes completing a checklist of items, (Segue, Scorecard, Rocks, People, Issues, Conclude), within 90-minute team meetings while OKRs focus meeting time on problem solving This is an important distinction. High quality meetings are less about getting a level 10 score for the meeting, and more about elevating the effectiveness of the team to achieve its goals. In addition, OKRs emphasize the importance of effective monthly and quarterly business reviews for business units or organizations as a whole, which is not easy to do. Here is an insightful article about how to structure effective quarterly and monthly business reviews with OKRs that move the entire business forward.
In conclusion, EOS is designed as a small business operating system that covers the basics of running an effective business extremely well. At some point, however, a more sophisticated business operating system, such as Scaling Up or Elevate, is needed for most companies as they grow. An interim step to improve EOS effectiveness, is to supplement EOS with OKRs. The result is greater accountability, improved business outcomes, and a host of other benefits.
About The Author
R. Joe Ottinger is a strategic advisor to highly successful global 1000 and rapidly scaling middle market companies most of whom are backed by professional PE or growth VC investors. The focus throughout his career has been on “creating value at higher levels” with an integrated approach. He is a Co-Founder of Kotter International with Harvard Business School Professor John Kotter, and his own firm, OKR Advisors. You can reach R. Joe at joe@OKRadvisors.com.