Goal Setting: Top-Down, Bottom-Up, or a Mixture of both?
Goal setting can take many forms, they can be set top-down, bottom-up, or middle-out. Confusing right? To help ease the confusion, we explain what each method includes, and we asked the experts which method they prefer and why.
First, let's clarify what we mean by top-down and bottom-up goals.
Top-down goals - As the name suggests, top-down strategy comes from the top. What this means is that a company's C-level executives or management staff create goals for the company, communicating these down the chain of command and into each business unit to facilitate planning to reach these goals.
Bottom-up goals - In goal-setting, the parent objective can be created by the top-level management, but the team creates the Key Results, i.e. the pathway to reach these goals. This method gives each employee a voice, creating plans based on more informed decisions, creates team morale, and more room for creativity.
Now for the expert advice...
Cansel Sörgens, OKR Coach & Trainer
Developing and deploying strategy requires collaboration and conversation at all levels. While leadership decides what the future should look like, the teams figure out how to create that future. Teams can not be expected to define short-term goals (OKR) if there is no clear strategy and focus (North Star Metric). It is a game played at both levels and managing the flow between these levels is the key to success.
Allan Kelly, OKR Coach
Well, if you claim to be agile then top-down isn’t an option - how can a team be autonomous and self-organising if they have OKRs imposed on them? Even if you don’t claim to be agile top-down OKRs aren’t really that much different from MBOs so why not be honest and call them that?
Now that is not to say that other people - who you might consider “above you” - don’t have a role to play. The leadership of the organisation set the parameters within which teams operate. The leadership has a role to play as guardians of the purpose, deciding missions, allocating resources, and promoting strategy. Then they say to the teams “How can you help?” and the teams reply with OKRs.
Those leaders aren’t the only stakeholders and they lack the on-the-ground knowledge of customers, suppliers, and competitors. So it is up to every team to set OKRs which reflect those competing needs.
The leadership and central planning cannot set OKRs because they lack the detailed knowledge - and to do so would disempower the team. But equally, the teams lack information and are frequently too disparate to set larger missions and allocate resources for the whole organisation.
Christina Lange, OKR Coach & Speaker
As every organisation needs to find its own OKR way, I recommend starting in the middle with 50% top-down and 50% bottom-up. Make it transparent, why we need both to leverage the potential of OKRs. It needs to level out over time and depending on the strategy it can vary from cycle to cycle.
Nikhil Maini, Global OKR Coach, OKR International
OKRs work best when there are all 3 - Top-Down, Bottom-Up, and Sideways. This is especially true of enterprise-wide implementations. Top-down OKRs tend to be more directional, strategic, and usually at organisational levels. Bottom-up and cross-alignment become more pertinent for functions, units, or teams trying to make the organisational goals happen.
When single functions or teams decide to work on OKRs, the scenario may be different. Here it's the same logic but at a smaller scale.
Multi-directional alignment is germane with OKRs as its systemic - achieving goals with various entities involved. Uni-directional does not particularly work - which is why OKRs were birthed in the first place.
Bart Den Haak, OKR Consultant & OKR Author
Top-Down and Bottom-Up is the preferred way to use OKRs. In larger organisations, executives set top-level OKRs, and teams work together with their senior management to define team-level Objectives and agree on KRs.
Monica Batsleer, OKR Coach
After a clear top-down involvement and inspiration from the CEO, our preference is for a mixture of both approaches.
We know that the solutions to most problems can be found inside most organisations, by their own internal Teams, which is why we always stress the importance of internal communications.
When a company already has a top-down culture, even if the people are given the freedom to create their own OKRs they may find it difficult to do so as they might be mentally waiting for instructions or guidance on how to proceed, an attitude that is tied to their previous experiences.
This is why, when implementing an OKR process, we always try to get closer to the different groups at all levels of the organisations where the managers can clearly expose their priorities for the quarter and even be co-owners of their teams’ Objectives. This helps create an environment in which people will freely trade information as they become more confident and aligned to contribute to the overall strategy.
Jean-Luc Koning, OKR & Systemic Coach
Should OKRs be preferably defined in a top-down or bottom-up manner?
Well, yes and no.
Each team should define OKRs that are linked and contribute to the organisation’s OKRs. The team’s OKRs are thus aligned with the top Objectives. In this respect, one can talk about a top-down approach.
In my experience, you shouldn’t go for a cascading approach. As highlighted by Paul Niven there are two reasons for this. First, if you adopt an upper key result as your objective, probably “there is little you can do to influence or execute it, and thus the OKR you create, while technically ‘aligned’, proves irrelevant and unlikely to motivate performance.” The second reason is that “pure cascading robs people of intrinsic motivation.“
On the other hand, the team has full discretion to draft its local OKRs in accordance with the managers. The key step to help result in the right OKRs at this stage is to determine which of the top Key Results may be impacted.
In this respect, one can talk about a bottom-up approach.
Felix Handler, OKR & Sustainability Coach
Usually, I start with the 60/40 principle, where 60% of the team's OKR activities pay into company goals and 40% into being able to deliver long-term with a consistent pace. Sometimes companies think 100% of what the team does has to pay into the company goals and they create a lot of stress this way. Self-organisation means also self-care to be able to perform, like onboarding new employees, updating documentation, etc, which should not be forgotten.
Teams should also investigate and learn about their metrics, eventually becoming the experts in their domain. This way they can then determine ideas with the most potential and suggest and reason those for higher-level OKR eventually leading to bottom-up OKR. Internal OKR employee satisfaction can be done earlier this way since employees are already knowledgable about OKRs ;)
Top-down: Leadership has to give context for the domain and competition that they are dealing in and e.g. financial targets they need to reach in order to stay in business. The ideas to reach those at later stages often come from the bottom-up for smaller ideas and shared discussions on OKR or ideation days for bigger ones.
Nora Pfützenreuter, OKR Coach
What I found useful so far is a mixture. From the “top” the strategy and focus areas for the year or already for the quarter should be given to serve as a basis for the team’s OKRs. Some teams were grateful when the Product Owner brought in some first ideas for Objectives (so kind of top-down), and they would enrich/ challenge/ feedback them and of course, take care for useful key results. In any case, I think it’s very important that a conversation between teams and “top” takes place about strategic focus points or even drafted Objectives, so everyone has the context to derive good OKRs.
Richard Russell, OKR Coach
Rolling out OKRs - top-down, definitely.
Start with OKRs at the top and work down. If you can’t start at the top, start at the top of a relatively self-contained business unit, product, or group, and work down from there until you can prove the benefit, and then start on the next group. Navigate the business upwards to the most senior point where you have full buy-in and work from there. The impact of OKRs will grow dramatically the more senior the starting point.
When working down, don’t worry about completeness. OKRs work best when they help solve problems. If you introduce them as a universal policy, especially for individuals, you’re bound to fail as you drain momentum. Let people pull, don’t push.
Setting OKRs - usually I recommend objectives are set by the most senior person, and key results are generated by the team collaboratively. However, it depends on the seniority of those involved and how much context they have. If the team is junior or lacks business context, they will need more involvement even in setting the Key Results they will work to deliver. If the team is particularly senior, has a lot of context, and works well as a team, they can likely contribute a great deal to OKR-setting.
Brett Knowles, Global OKR Coach & Consultant
We are strong advocates for both a top-down and bottom-up approach. It is critical that leadership set clear expectations for the organisation (top-down). The rest of your organisation should respond in that clear direction (bottom-up). Without exception, we always see a misalignment between the top-down and the bottom-up OKRs. this can be caused by:
- Sometimes the top-down view misses critical activities which are either “ below their radar”, or they accidentally omitted them in their Direction setting.
- Sometimes the organisation is still working on things that were critical in previous times but are no longer important. These, of course, are wasteful and need to be eliminated.
The top-down/ bottom-up approach is a powerful tool to help reveal those misalignments and allow the organisation to continuously Monitor and close those gaps.
Carsten Ley, OKR Coach
On Mission, Vision, and Strategy Level top-down input is necessary, however, there should always be room for feedback or questions from anybody in the company (e.g. anonymous survey) to create a mixture, buy-in, and alignment. Bottom-up only works in highly engaged and educated environments but that needs to be created before the OKR process starts.
Sandra Pretzer, OKR Coach
One success factor of OKRs is combining a top-down and bottom-up approach. Top-down and bottom-up play their respective part in the OKR journey: The group of people whose job it is to provide orientation, focus and clarity about an organisation’s vision, strategy and midterm goals (the leadership team or C-Level respectively) do this top-down. Now teams - inspired by these goals - define their contribution (OKRs) within their circle of influence. It’s the teams who work close to the market they operate in and have more ideas and a better feeling of how to move the needle regarding their company’s vision and strategy.
It’s the combination of these two methods that makes the magic happen. I would encourage organisations willing to adopt OKRs to go for the combo approach right from the start. Especially when it’s an organisation that has been leaning heavily towards one way or the other until now (it will most likely be top-down). Gives them A LOT to learn and reflect on right in the first OKR cycle ;-)
With top-down only, there will hardly be any innovation, creative ideas, intrinsically motivated team members, aligned autonomy, accountability or the ability to learn and adapt.
With bottom-up only, teams wouldn’t know in which direction to think and go, would have no idea of the bigger picture and no guard rails for their goal definition.
Thomaz Ribas, OKR Coach
In order for an organisation to get the most out of OKRs, the mindset should always be top-down AND bottom-up. Avoid the "OR" dichotomy, and avoid thinking only about hierarchy or org charts when talking about it. By top-down AND bottom-up, I mean the company should craft a vision based on its purpose, and a strategy (which could be an emergent one, or even a prototype-strategy) for its product or service. Then craft OKR's that represent measurable outcomes of those. For a small startup, one single and small set of OKR's is enough.
For larger and fast-growing companies, work with the bottom-up by providing autonomy for product teams, value-streams (or any other criteria you use) to create their OKRs based on the company ones. Avoid "cascading". Imagine a Cascade in a forest. The water goes down, and never up. This one-way communication flow is what we DO NOT want in an agile organisation.
Ronaldo Menezes, OKR Coach
Benefits: More synergy with Strategic OKRs and company purpose can cause OKRs to be defined at a high-level (CEOs, Directors in the most cases) and this can facilitate understanding of company goals in the first few cycles.
Pitfalls: You can have trouble if the communication about OKRs and strategic Norths for your company areas are not clear or, worse, your area is not included in OKR creation. If this happens, you risk demotivating your employees as they won't feel part of the process.
Benefits: High involvement, the people are near the process, this can make it easier to create initiatives and collaborate with OKRs. In the most cases, this improves OKR adoption in smaller areas of the business.
Pitfalls: If you don't have high-level sponsorship, it can make OKRs harder for other areas, mainly because you a risk low level adoption from decision makers
Mixture of both
Benefits: Have all layers involved can make communication easier, the top down and bottom up approach together! This can bring more clearly about strategy north for tactical areas, break silos between them, and to grow the collective knowledge about how use OkRs.
Pitfalls: Don't define a cadence for check-ins between areas that will be participate directly(key users or OKR owners) can be terrible to your OKR progress because this can be bring a false sensation.
If you have favourable culture, with high sponsorship, high OKR knowledge inside departments, and a transformation agent can used in all departments ( e.g. HR BPs ), mixture of both probably will work as well.