Black Friday Sale: New subscriptions 50% off one year when purchased by 12/1
Activate Now
Best Practices

Run Your Business Better with Financial OKRs

January 11, 2023
7
min
Learn more about how Telemetry can help your business.
Schedule a Demo
Start using Telemetry with your Free trial today.
Sign up
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

For as long as people have traded goods and services for money, they have been setting goals.  Goals track progress and motivate teams.  They are the backbone of good corporate management.

There are of course many ways to set and track progress versus goals.  One of the most effective ways has been to use OKRs. OKRs are one of the newer and most popular flavors of goal-setting, but many organizations struggle attaching specific financial goals to these OKRs for their individual teams.  Telemetry can help you identify and push specific financial OKRs into your organization, setting your company up for greater profitability and success.

What is an OKR?

OKR stands for Objectives and Key Results.  It is a simple collaborative process for setting goals for companies at the top level, and then cascading the goals down to the team and individual employee level.

The idea behind OKRs is to focus the entirety of a company’s efforts on a small set of critical issues selected to further its business goals.  Objectives are simply what the company is looking to achieve.  Key Results track how a company gets to each Objective.  Critically, Key Results need to be measurable and verifiable, and they are typically numerical in nature.  When looking back after you set OKRs, usually at the end of a quarter, you should always be able to objectively say whether or not you hit the Key Results.

Surge in Popularity of OKRs

In his influential 2018 book on OKRs, “Measure What Matters,” legendary venture capitalist John Doerr talks about implementing OKRs while at Intel in the 1970s.  However, OKRs remained largely outside of popular consciousness until he introduced the OKR process to Google in 1999.  As Google became one of the most successful commercial enterprises in history, word got out and OKRs were implemented more broadly when other companies sought to mimic Google’s management and operational techniques.

Here is a chart from Google Trends showing the search volume OKRs going back almost 20 years.  Notice the acceleration in their interest when Doerr’s book was published in 2018.  Why has this trend kept growing?  Because OKRs work!

Bill Gates rightly calls out why they work: “companies can’t improve what they don’t measure.”

Setting then Cascading OKRs into the Organization

A key piece of OKRs effectiveness is that overarching goals are set at the company level by the C-level leadership team.  Then, each of the Key Results for the top level Objective becomes an Objective for a specific department or team, and so on further down the org chart.  

An example would be a corporate Objective of growing market share by 10% with Key Results of increasing accounts by 12% and reducing churn by 15%.  The Sales & Marketing team then picks up the top level 12% account growth Key Result and makes it their Objective.  Its Key Results then may be to grow outbound calls by 20% and increase close rate by 100 basis points, which are handed further down the chain to teams focusing on each.

There are several reasons for this cascading structure.

  1. The collective corporate actions of each of its efforts, even down to each individual contributor, are in support of the overall top level corporate objectives. Doerr writes, “They channel efforts and coordination.  They link diverse operations, lending purpose and unity to the entire organization.”
  2. Because they are refactored for each level of the org, every OKR is “personalized” and relevant to each particular team inside the org.  This means the corporate objective is translated into something tangible and manipulatable by each person inside the organization.
  3. Subject Matter Experts, or SMEs, who know their area of expertise better than anyone else inside the company, are now empowered to accomplish their goal in the most efficient manner.

Financial OKRs 

Given that OKRs must be measurable and are most often numerical, it should be no surprise that many OKRs are financial, i.e. they come from a line in a company’s P&L.  These could be revenue goals tackled by sales, spend goals handled by engineering, or profit goals tracked by finance.  At the top corporate level, it’s quite easy to measure against financial OKRs – after all, your accounting software will reliably output a full corporate P&L.  

But what about financial goals for individual teams?  Here’s where things get trickier.

Cascading Financial OKRs into the Organization with Segment P&Ls

When a team at any level under the top corporate one is assigned a financial goal, they need to be able to track their progress against that goal.  This means that each team in the organization needs its own P&L.  

So how do you efficiently tackle this additional complexity?  Telemetry allows sophisticated FP&A teams to build Segment P&Ls by taking the top level financials, identifying sub-components of key line items, and assigning them to specific teams.  This is most often done at the department level, so that each corporate VP receives their own P&L.  However, the complexity increases dramatically when you want to build a P&L for a specific team, project, or product.  Furthermore, finance teams need to not only report on the segment P&Ls that can be generated by your accounting software, but also build segment P&L forecasts and targets in Microsoft Excel or Google Sheets.  FP&A groups can spend half their time or more building and maintaining these various segment P&Ls, or worse, they forgo the process entirely.

To give time back to finance and to supplement efforts of companies without a large FP&A team, what is needed is a fast, simple, affordable way to generate segment P&Ls at any level of the company against which teams can track financial OKRs.  Telemetry was purpose-built for this.  It starts by combining data from the key financial systems you use to run your company —  your ERP for historical data, your HRIS for employee data, and your spreadsheet business model for projections and targets — so that you have one holistic view of your company’s past, present, and future.  It then allows you to easily segment your P&Ls using common sense approaches so that each group in your company can receive its own segment P&L.  Telemetry provides a simple mechanism for computing segment P&Ls at not only the department level, but also to each team below.  Best of all, Telemetry works with the tools you use today, with no change in workflow or migration to a new tool.  And Telemetry is one of the most affordable tools around.  Try it for free today at telemetry.fi.