Leveraging OKRs in CRE to Improve Your Team’s Performance and the Bottom Line
Key performance indicators, or KPIs, have long been the reigning standard among real estate companies to measure individual employees’ contributions to the organization’s growth.
KPIs are intended to outline a company’s goals, their importance, who will be in charge of their implementation, and the timeframe for their execution. The challenge, however, is that most firms adopt almost identical KPIs even though their operations are markedly divergent.
Increase assets under management by 100, close at least 50 deals, or acquire a minimum of 15 new Class C multifamily apartments are ubiquitous KPIs that appear impressive on presentations but do not translate into actionable steps. Unsurprisingly, although the indicators are clear, few results are actually achieved.
These limitations of KPIs in the context of companies’ immediate and future targets demanded we explore an alternative metric for tracking deliverables and implementing phases of a project, especially within the commercial real estate sphere. Fortunately, the concept of objectives and key results (OKRs) was developed to facilitate goal setting and attainment.
In this article, we begin by discussing what OKRs are and how they improve your bottom line. Then, we propose steps for creating a set of OKRs that are aligned with your investment and entrepreneurial ambitions.
The concept that works: What are OKRs?
OKRs are a metric system for establishing goals on a micro level for a team, department, or individual to communicate and evaluate success in more meaningful ways.
The main difference between KPIs and OKRs is that the former are often standalone metrics that track how well an activity is being done, while the latter provides a framework to set and track activities that reflect the desired outcomes and key results that the company would like to achieve.
For example, a commercial real estate firm may aspire to become the leading owner of Class A assets in Charlotte. A key performance indicator could be a 10% increase in cash flow year over year, while the objective when setting an OKR could be to gain ownership of 10% of all Class A office buildings within a specific zip code.
Crucial milestones would then be organized into:
- Daily meetings with the acquisition team to review deals in the area.
- Increasing the numbers of letters of intent sent out each week.
- Making an offer on every Class A office building to bring the firm closer to its objective.
Overall, OKRs such as these offer a more tailored action plan than a generic KPI would.
Invigorating the bottom line: OKRs boost outputs
Firms can improve their brand, financial, and operational results with OKRs because the goals of this system are more aspirational and encourage creative plans to achieve them.
This collaborative tool for goal-setting challenges teams in a commercial real estate firm to reach their big picture objectives but permits flexibility in the actions oriented toward their execution. Additionally, the simplicity and clarity of OKRs’ milestones keep the team focused and committed.
More importantly, a company that embraces OKRs tends to charge individual personnel with their own OKRs and empower them to make efficient decisions and accomplish more.
To illustrate, consider the story of Peer Street, a real estate platform that offers investments in debt. After the founders began implementing OKRs across their team of 25 people in February 2016, they attracted over $100 million in new investments within a few months and were awarded Innovator of the Year in Lending thereafter.
Everything considered, as the owner or operator of a commercial real estate firm, adopting OKRs provides a cohesive direction for your team and supports a positive impact on your bottom line.
How to set the right OKRs
It is crucial that you adopt these best practices to enhance the efficiency of your OKRs:
Calibrate short-term objective to match overall vision
Align your objectives with the company’s greater vision. The objectives must match your overarching business goals to motivate employees and deliver results that more efficiently advance, or at least unify, the firm’s position in the market.
Ignore OKR overload or insufficiency
Avoid setting too many OKRs. A disproportionate number of simultaneous objectives often overwhelm the team, undermining morale and lowering performance. At the same time, too few OKRs can delay the timeframes for accomplishing goals. For optimal OKRs, experts recommend a maximum of five concurrent OKRs.
Contain procrastination and soft-pedaling
Maintain awareness of OKRs. It is the usual practice for managers to set OKRs only to leave them unattended until close to the deadlines. To mitigate this, draft and share regular reminders of the objectives and desired results in your company’s public space — perhaps the old-fashion notice board or online project management platform. Make them an essential agenda in your weekly meetings. The greater the focus management places on OKRs, the greater priority teams assign them.
Streamline the metric
Simplify OKRs and resist the urge to condense them into glorified task lists. While important milestones in OKRs need to be specific, they must still allow a certain level of flexibility in how they are reached.
Synergizing the criteria: Accountability and clarity beget results
Ultimately, clarity and accountability often breed quality results. And results guarantee success. A commercial real estate firm that incubates a system of metrics that fosters tangible actions will better position itself to achieve its goals, whether raising capital, acquiring new assets, or expanding its footprint within the community and industry. Moving forward, consider what OKRs you could adopt that have the potential to transform your company’s fortunes.