Dear Andy,
The golden rule is that OKRs should not be tied to compensation, or else it can lead to sandbagging. How do we go about this in early-stage startups, where most of the sales team’s work is trying to bring in revenue, and thus performance-based components automatically kick in? If we omit revenue targets from the sales team’s OKRs, the Objective itself loses value/importance. I’m aware that things might look differently after finding the product market fit – but even then, how should sales or business development teams go about setting OKRs?
Sincerely,
Nikola
Hi Nikola!
Thanks for writing in and for your great question.
Revenue targets make sense for sales teams and are fine to include in your OKRs. However, we suggest diversifying your KRs to ensure you’re pairing quality and quantity. OKRs that focus entirely on ‘hit the target’ numbers like revenue can lead to negative consequences.
If the sole measure of success is based on revenue, team members may advocate for higher volume – even if it doesn’t translate into profits. For example, a salesperson might prioritize securing large contracts that are lucrative in the short term – but result in long-term losses. Similarly, a sales team trying to ‘hit the target’ might opt for financial services over retail simply because financial services tend to spend more. You want to balance revenue targets while considering overall organizational benefits over time. Good OKRs provide clarity on how individual goals align with organizational ones.
Laszlo Bock, an ex-Googler, highlights the importance of diversified OKRs. Meeting the sales quota is just one Key Result. Additional goals include demonstrating positive behaviors that improve organizational culture. For instance, an Objective to build a world-class team could be linked to Key Results like enhancing team diversity by at least two percentage points within the year, or coaching and leadership results.
Bock emphasizes that this approach allows salespeople who fall short of their quotas to still receive bonuses. It recognizes that there are multiple aspects beyond hitting sales targets that require attention and contribution. So it’s okay to have some sales targets work in your KRs, but when considering raises and bonuses, look at a team member’s full performance and fit for their role – not just their numbers.
Remember, you want your OKRs to inspire the team. That’s why the best teams include purpose into their OKRs (especially the Objectives). If you secure X amount of revenue, what will that allow your team to do? What broader benefits will the team/company see if you hit those goals? Use those answers to craft your Objective. Revenue is important, but if team members feel the only thing they’re there to do is ‘hit the target,’ you’re not tapping into their full potential to create value for the company. Use OKRs to lead!
Thanks for writing in, Nikola, and best of luck to you and your team on your OKR journey.
Sincerely,
Billy from the What Matters Team