Strategic vs. Tactical OKRs: Nested Cadences
It is a common misconception that OKR only works with quarterly cycles, which was the model Google used until 2011. After retaking the CEO role at Google, Larry Page decided to adopt both annual and quarterly OKRs.
We can only speculate about what drove Page’s decision, but most companies eventually discover that using short-term OKRs can cause teams to miss the big picture and focus only on what they can accomplish in three months.
Most mature OKR implementations understand that different goals have different rhythms as tactical goals tend to change much faster than strategic goals. So OKR decouples strategy and tactics by adopting a nested model, as I mentioned in the beginning of this guide:
- A strategic cadence with high-level, longer term OKRs for the company, which are not set in stone. The organization should maintain a continuous conversation about strategy and review the company OKRs as necessary.
- A tactical cadence with shorter term OKRs for the teams.
- A follow-through cadence with regular check-ins for tracking results along the way.
Think of Strategic OKRs as high-level OKRs that would interest the board of directors – if you chose to show it to them.
A pattern I see in successful OKR adoptions is:
- Annual strategic OKRs for the company (and sometimes for very large departments and business units).
- Quarterly tactical OKRs for the teams, with a mid-quarter review.
- Weekly check-ins for tracking results.
Some organizations also set quarterly OKRs for the company, but I would not recommend that in the beginning.
Choosing your OKR Cadence
It is important to note that organizations can customize the cadences for their needs. For example, Spotify uses a strategic cycle of six months while its teams set OKRs every six weeks. It is an interesting story since they returned to OKR after trying to create its own approach.
Some companies are adopting shorter cadences for OKR, as Salim Ismail, founding executive director of Singularity University, wrote in his book, Exponential Organizations:
Many [organizations] are now implementing high-frequency OKRs – that is, a target per week, month or quarter for each individual or team
Most teams that are trying to set monthly OKRs are using OKR as a to-do list. When teams use OKR to measure value, as we will see in the following sections, the quarterly cadence makes sense since you need time to develop initiatives, measure their impact and iterate.
As a general rule, the shorter the cadence, the smaller the OKR-setting overhead needs to be. And the longer the cadence, the lower the business uncertainty needs to be.
So to adopt shorter cycles, you have to make sure you have a streamlined process for developing the OKRs in place, or you will be spending too much time setting goals.
On the other hand, if your business deals with uncertainty or your market changes too quickly, longer OKR cycles will not help you.
If you are starting with OKR, I recommend using a quarterly tactical cadence with a mid-quarter review. That will enable you to learn and adapt your model. Most organizations can work with this cadence.
Start with Unified Cadences
In Silicon Valley, some mature companies have distinct cadences for different functions. For example, some companies set annual OKRs for the sales team while using quarterly OKRs for engineering and product teams.
I recommend starting with the same cadences for everyone since it reduces complexity. The best approach is to have an incremental rollout, beginning with a simpler model and evolving it as you learn.
If you want to try to set different cadences inside your organization eventually, you should try to maximize the number of “synchronization opportunities.” For example, having one team use a 4-month cadence while the rest of the company uses three months means teams will only sync once a year which could drastically affect alignment.