Draft OKRs

MEMORANDUM

TO: Hannah Iyer, Chief Product Officer FROM: Staff Product Manager DATE: October 24, 2023 SUBJECT: Q1 OKR Review & Planning Process Recommendations

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Part 1: Strategic Alignment of Team OKRs

The CEO’s company-level OKR is clear: Grow by keeping and expanding the customers we have.

Our current metrics show the path forward clearly. Customers without Payroll churn at 16% annually, while those with it churn at 8%. Integrations act as a powerful retention anchor (churn drops to 6% for those with $\ge 3$ integrations). Exit surveys pinpoint our vulnerabilities: 38% leave due to payroll errors/complexity, and 19% due to missing integrations.

To hit a Net Revenue Retention (NRR) of 108%, gross churn of 10%, and a Payroll attach rate of 25%, our product teams cannot operate as independent feature factories. Their proposals currently suffer from output-focus (shipping lists of features) rather than outcome-focus.

Below is my assessment of what each team must keep or change, along with revised Key Results (KRs).

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#### 1. Core HR * Current Proposal: Obj: Build the best HR platform. KRs: Ship org-chart redesign; ship custom fields v2; raise CSAT from 4.2 to 4.5. * Critique: "Build the best HR platform" is a vague umbrella. Org charts and custom fields are outputs, not outcomes. They do not directly map to NRR, churn reduction, or Payroll attach. * What to Keep: The focus on CSAT. Core HR is our baseline; low satisfaction bleeds into overall retention. * What to Change: Core HR must directly support the retention of non-Payroll customers (who churn at 16%) and lay the groundwork for Payroll discovery. * Revised OKRs: * Objective: Make Core HR indispensable to mid-market operations. * KR1: Raise Core HR CSAT from 4.2 to 4.5. * KR2: Increase 30-day post-signup feature adoption for accounts without Payroll from 40% to 65%. (Drives engagement to lower baseline churn). * KR3: Increase Payroll feature discovery interactions (clicks on Payroll upgrade prompts in Core HR) by 50%. (Supports company attach-rate goal).

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#### 2. Payroll * Current Proposal: Obj: Make payroll effortless. KRs: Cut payroll-error tickets by 40%; raise Payroll attach from 18% to 25%. * Critique: Excellent start. It directly addresses our #1 churn driver (38% leave due to payroll errors) and the company attach-rate goal. * What to Keep: Both KRs are exceptional. They tie directly to business metrics. * What to Change: The team needs a third KR focused on expansion revenue or reducing the complexity cited in exit surveys, rather than just error ticket volume. * Revised OKRs: * Objective: Make payroll effortless, reliable, and irresistible. * KR1: Cut payroll-error support tickets by 40%. * KR2: Increase Payroll attach rate from 18% to 25%. * KR3: Reduce time-to-run-payroll (median minutes per run) from 18 minutes to 10 minutes. (Directly attacks "complexity" cited in 38% of churned exit surveys).

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#### 3. Integrations * Current Proposal: Obj: Connect everything. KR: Ship 12 new integrations. * Critique: "Ship 12 integrations" is a classic output trap. We could ship 12 unused integrations and see zero impact on churn. Customers with $\ge 3$ integrations churn at just 6%; 19% leave due to missing integrations. * What to Keep: The expansion of our ecosystem footprint. * What to Change: Pivot from counting shipped integrations to measuring active connection rates and their downstream impact on customer retention. * Revised OKRs: * Objective: Embed Quarry into our customers' existing tech stacks. * KR1: Increase the percentage of customers with 3+ active integrations connected from 22% to 35%. * KR2: Drive integration adoption in the top 5 most-requested categories (Accounting, Time-Tracking) to 40% of our customer base. * KR3: Reduce churn among customers missing key integrations by 30%.

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#### 4. Growth * Current Proposal: Obj: Win more customers. KRs: New logos up 20%; trial conversion from 9% to 12%. * Critique: The company OKR explicitly shifts focus from pure acquisition to keeping and expanding what we have. A 20% increase in new logos conflicts with our need to fix retention and payroll friction. Furthermore, acquisition velocity without solved payroll/integration churn just feeds a leaky bucket. * What to Keep: Trial conversion optimization (efficient acquisition). * What to Change: Drop the new logo quota. Shift focus to acquiring the right logos (companies predisposed to adopting Payroll) and improving land-and-expand motions. * Revised OKRs: * Objective: Acquire and land high-LTV customers efficiently. * KR1: Increase free-to-paid trial conversion rate from 9% to 12%. * KR2: Increase trials starting with Payroll bundled or selected from 15% to 25%. * KR3: Reduce Day-90 logo churn for new cohorts from 5% to 3%.

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Part 2: Recommendations on Process Questions

#### 1. The CEO’s request for three objectives per team * Recommendation: Push back firmly. * Rationale: Requiring three objectives per team (across four teams = 12 objectives) creates cognitive overload and diffuses focus. It forces teams to invent tertiary goals just to fill quota, leading to the exact output-driven KRs we are trying to eliminate. One sharp, outcome-oriented objective per team—tightly wound to the company’s NRR, gross churn, and attach-rate goals—is far more effective. If the CEO insists on structural symmetry, permit sub-objectives, but ensure each team has only one primary North Star objective for the quarter.

#### 2. The CFO’s proposal to use OKR scores for PM bonuses * Recommendation: Strongly advise against this. * Rationale: Tying OKR scores directly to compensation induces the "sandbagging effect." PMs will lobby for hockey-stick inputs disguised as KRs or set artificially low baselines to guarantee a 1.0 score (as evidenced by last year's suspicious 0.95 average). Furthermore, product outcomes depend on engineering execution, market conditions, and sales—factors outside a PM's absolute control. * Alternative: Use OKRs strictly for learning, strategic alignment, and performance calibration (what habits and rigor were applied), separating them entirely from bonus calculations. If bonuses must be tied to metrics, tie them to lagging company-level outcomes (like NRR or ARR), not team-level OKR self-assessments.

#### 3. Planning timeline (last quarter took 5 of 13 weeks) * Recommendation: Institute a strict 2-week timebox for Q1 planning, utilizing a Top-Down/Bottom-Up framework. * Rationale: Spending nearly 40% of a quarter on planning is a massive waste of R&D capital. The paralysis last quarter came from teams guessing what mattered because company goals weren't translated early enough. * Proposed Rules for Next Quarter: * Week -2 (led by CPO/CEO): Company OKRs locked and communicated (done). * Week 1 (led by PMs): Draft team OKRs against company constraints in 5 days. No multi-round negotiations. * Week 2 (led by CPO/Finance): Final cross-functional review, dependency mapping, and sign-off. * Pencils down by the end of Week 2. Any missing alignment is resolved by you (the CPO) rather than endless consensus-seeking.

To: Hannah Iyer, CPO From: Staff PM Re: Q-next OKRs: making team goals add up, and the process questions

The short version

As proposed, the four teams' OKRs do not add up to the company's. Only Payroll's goals clearly support the CEO's objective. Integrations is measuring output rather than outcome. Core HR is pointed at its own roadmap. Growth is pointed at new customers, which the company OKRs deliberately leave out.

I recommend one objective per team, each tied to one or more of the three company KRs, with outcome-based key results. On process, I recommend no to three objectives per team, no to bonuses tied to OKR scores in their current form, and a two-week cap on planning.

How the company numbers can be reached

The company KRs are linked. Net revenue retention (NRR) is roughly 100% minus churned revenue plus net expansion.

• Churn. Cutting gross churn from 14% to 10% is worth about 4 points of NRR.
• Expansion. The other ~3 points have to come from expansion. Because Payroll is a paid add-on, attach (18% → 25%) is the main lever we control.
• What finance should check. Whether 7 points of attach yields ~3 points of NRR depends on Payroll's price relative to core seats. That is worth checking before we commit to the 108% target.

Where churn comes from:

• Exit reasons (212 surveys, about 364 churned customers a year): payroll errors or complexity 38%, price 24%, missing integrations 19%, moved to an all-in-one competitor 11%.
• Payroll users churn at 8%, versus 16% for customers without Payroll.
• Customers with three or more integrations churn at 6%.

Two caveats shape the recommendations:

1. Attach alone barely moves churn. Moving attach from 18% to 25% at today's segment churn rates lowers blended churn by only about half a point (from roughly 14.6% to 14% on these figures). And that assumes the relationship is causal; engaged customers may simply buy Payroll and stay. Most of the 4-point churn reduction has to come from fixing payroll errors and from integrations.
2. Payroll errors are the biggest single churn reason. They must be fixed before we push attach hard. Selling more Payroll while it still drives 38% of exits could raise churn rather than reduce it.

Team by team

Payroll: keep, with small changes - Objective: keep "Make payroll effortless". - Keep: cut payroll-error tickets by 40%, as a leading indicator. - Add: gross churn among Payroll customers from 8% to 6%. This is the outcome that matters, and tickets can fall without customers noticing. - Change ownership of attach: the 18% → 25% attach KR should be jointly owned with Growth. Payroll can make the product sellable; it does not run the cross-sell motion. - Sequencing: error fixes ship in the first half of the quarter, and the attach push ramps after.

Integrations: change the key result - Objective: change to "Make Quarry the hub customers can't unplug." - Replace "ship 12 integrations" with: share of customers with three or more integrations connected, from [baseline] to [baseline + 10 pts]. The baseline should be confirmed in week one. - Add: activation rate of new integrations within 60 days of launch. - How to choose integrations: prioritise by the systems named in exit surveys and churn-risk accounts, not by count. Four integrations customers actually connect beat twelve they don't. - Test the causal claim: run a controlled push to drive integration adoption in one cohort. The 6% churn figure may reflect selection rather than effect.

Core HR: refocus - Problem: org-chart redesign and custom fields v2 are deliverables, not results. "Build the best HR platform" has no line of sight to retention. CSAT is not a company KR. - Objective: change to "Give customers without Payroll a reason to stay." This is the 16%-churn segment, which is most of the base. - New KR 1: gross churn among non-Payroll customers from 16% to 13%. - New KR 2: a usage-based health score for at-risk accounts, with a target set once the baseline is known. - Existing projects: keep org chart and custom fields only if the team can show they address retention. For example, custom fields v2 could matter if integrations need them for data mapping. - Capacity: if the team can't show that link, I'd lend some of its engineering capacity to Payroll's error work for the quarter.

Growth: redirect - Problem: new logos and trial conversion don't count toward NRR, churn or attach. New customers are excluded from NRR by definition. - Objective: change to "Expand within our existing customers." - New KR 1: Payroll attach 18% → 25%, shared with Payroll, through in-product trials and cross-sell for existing customers. - New KR 2: conversion from Payroll trial to paid among existing customers, from [baseline] to [target]. - Your call before we tell Growth: if the CEO still wants new-logo growth, that is a fourth company KR and should be added explicitly. Otherwise Growth is working off-strategy.

A gap no product team owns

Price drives 24% of exits, and no team can own that through product work alone. Price is also often a polite stand-in for "not worth it", which the work above partly addresses. Packaging and pricing need an owner from commercial or finance. I suggest you raise this with the CEO and CFO rather than assign it to a product team.

Revised OKRs at a glance

Process recommendations

1. Three objectives per team: recommend against. - The company itself has one objective. Twelve team objectives would spread effort thin and reproduce the problem this memo fixes: goals that cover everything and add up to nothing. - Proposal for the CEO: one objective per team, two or three KRs each, all tied to company KRs. - Meeting his real concern: "everything covered" belongs in a health-metrics dashboard (uptime, support SLAs, CSAT) that each team maintains. That separates running the business from changing it, and gives him the coverage he wants without diluting focus.

2. OKR scores setting PM bonuses: recommend against as proposed. - Last year's average score of 0.95 already suggests goals were set to be hit, not stretched. A healthy stretch average is roughly 0.6–0.7. - Paying on scores will push every team to sandbag, just as the company sets genuinely hard targets like churn from 14% to 10%. It also discourages the honest scoring we need to learn what works. - Alternatives for the CFO: - Tie a portion of PM bonuses to company KR results, shared across teams, which encourages collaboration on the shared attach and churn goals. - Base the individual portion on manager assessment of the quality of the bets and the execution, with OKR scores as one input rather than a formula. - If the CFO insists on a formula: at minimum, calibrate targets centrally so teams can't set their own bar.

3. Planning took 5 of 13 weeks: cap it at two, finished before the quarter starts. - Week −3: company OKRs final. This quarter's are already set. - Week −2: teams draft one objective and two or three KRs against them. This memo can be the template. - Week −1: one joint review with you to resolve shared ownership and gaps. Then lock. - During the quarter: baselines marked [TBD] get filled in during week one. They should not reopen the plan.

Decisions I need from you

1. Agree the revised team OKRs above, especially redirecting Growth.
2. Decide whether new-logo growth is in or out. If in, it goes to the CEO as an explicit company KR.
3. Raise pricing ownership, and the process recommendations, with the CEO and CFO.

MEMO To: Hannah Iyer, CPO From: Staff PM Re: Aligning team OKRs to the company OKRs, and the process questions

Bottom line

Only Payroll's proposal is close to the company objective (keep and expand existing customers). Core HR and Integrations propose output goals (features and integrations shipped). Growth targets new logos, which move none of the CEO's three key results. I recommend one objective per team, no mechanical link between OKR scores and bonuses, and planning capped at two weeks.

The logic behind the changes

Applying the exit-survey shares to 14% annual churn gives roughly:

• Payroll errors/complexity: 5.3 points
• Price: 3.4 points
• Missing integrations: 2.7 points
• All-in-one competitor: 1.5 points
• Other: 1.1 points

Getting to 10% means removing about 4 points.

Payroll attach alone won't get there. Moving attach from 18% to 25% is about 180 more customers. Payroll customers churn at 8% against 16% for the rest, so even if the gap were entirely causal, attach is worth about 0.6 points of churn. Much of the gap is probably selection, because engaged customers adopt more. The same caution applies to the 6% churn among customers with three or more integrations.

Attach could also backfire. Payroll errors are the top exit reason, so pushing a flawed product onto more customers risks creating more of the churn we are trying to prevent.

The bulk of the churn reduction has to come from fixing Payroll quality and integration gaps. I suggest this split, as a planning assumption rather than a forecast:

Together these come to about 4 points, which is 14% to 10%.

The exit data has limits. We have 212 responses against roughly 360 annual churners, and "payroll complexity" may include non-users who left for a payroll-capable competitor. Week one should confirm the cuts by segment.

Team by team

Payroll: keep most of it, tighten it. - Objective: Make payroll reliable enough that customers stay and others add it. - KR1: Payroll-error tickets per 1,000 pay runs down 40%. Normalise the metric. A raw ticket count will rise as attach grows, and it can also be gamed by making tickets harder to file. - KR2: Payroll-error/complexity-cited exits down about 40% (about 2 points of company churn). - KR3: Payroll attach from 18% to 25%, with a guardrail that churn among Payroll customers stays at or below 8%. Sequence the attach push so it leans on the error fixes, targeting segments with clean data first.

Integrations: change the unit of success. "Ship 12" measures output, and the number is arbitrary. The 19% of exits citing missing integrations tells us which ones matter. - Objective: Make Quarry the system customers can't easily unplug. - KR1: Share of customers with three or more integrations connected, up from [baseline needed] by an agreed number of points. - KR2: Integration-cited exits down about a third (about 0.9 points of churn). - Ship the integrations ranked by exit and lost-customer demand. That list is the initiative that serves the KRs, not a KR itself.

Growth: the biggest change. Point it at existing customers. New logos and trial conversion don't affect NRR, churn or attach. A 20% rise in new logos can even worsen churn if the new customers are poorly fit. - Objective: Grow revenue from customers we already have. - KR1: NRR from 101% to 108%. Growth owns the expansion motion, and the other teams contribute. - KR2: Price-cited exits down about 15% through packaging and bundling experiments (for example Core HR plus Payroll). Don't raise list prices this quarter, since price is already the second-largest exit reason. - KR3: Share of new customers with three or more integrations connected within 90 days (baseline to be set). This is a lifecycle problem, which is a growth skill. - Trial conversion (9%) stays on the dashboard with a floor, but it is not a KR. If you want new-logo growth kept as a goal, that is a conversation with the CEO, because it contradicts his objective.

Core HR: the weakest link to the company goal. "Best HR platform" can't be scored, and two of the three KRs are ship dates. I have no evidence that the org-chart redesign or custom fields v2 affect retention. They may be worth building, but they don't earn a KR slot without that link. - Objective: Make Core HR the reason customers don't need an all-in-one competitor. - KR1: All-in-one-cited exits down about a third (about 0.5 points of churn). - KR2: Share of customers whose employee data is complete enough to switch on Payroll, up from [baseline needed]. This makes Core HR a direct contributor to attach, and Core HR and Payroll should confirm the definition. - KR3: CSAT from 4.2 to 4.5, kept as a health metric. - Org chart and custom fields stay on the roadmap only if exit or customer data shows they close the competitor gap. Core HR should make that case in week one.

Process recommendations

1. Three objectives per team: decline, with a better answer to "covered." The company has one objective with three KRs. Four teams with three objectives each would create twelve objectives pulling in different directions, which is the problem this memo is fixing. It would also lengthen planning. I recommend one objective and two or three KRs per team. To address the CEO's concern about coverage, give each team a short health-metric list with floors, such as uptime, support SLAs and CSAT. Those get monitored without being goals. A team may request a second objective if it can show a distinct customer outcome that the company objective doesn't cover.

2. OKR scores setting PM bonuses: recommend against. Last year's average score of 0.95 means the goals weren't stretching or the scoring was generous. Either way, the scores carry little information. Tying pay to them would make this worse, because teams would sandbag, avoid ambitious outcomes and game the metrics (ticket counts being the obvious example). The revised KRs are outcome-based and only partly within a team's control, which makes mechanical payouts less fair still.

Instead: - Calibrate so a typical score is around 0.7, with explicit committed and stretch levels. - Use scores as one input to performance reviews, judged by the manager in context. - Revisit a compensation link after two quarters of calibrated scoring.

If the CFO needs something concrete, tie any variable pay to the three company-level KRs, not team scores. That gives a shared incentive to cooperate.

3. Planning took five of thirteen weeks (38% of the quarter): cap it at two. - The CEO fixes company OKRs at least two weeks before the quarter starts, so teams never plan in the dark. - Teams draft on a one-page template with one objective and no more than three KRs, each with a baseline, owner and target. - One 90-minute cross-team session reconciles overlaps, using the exit-reason allocation above as the starting point. - Planning overlaps the last two weeks of the prior quarter and ends with sign-off by day 5 of the new one. - Fewer objectives per team will itself shorten the cycle.

Decisions and next steps

1. Approve the reframing in this memo, and take the Growth change to the CEO before teams redraft, since it is the one most likely to be contested.
2. Ask Data for baselines this week: share of customers with three or more integrations, exit reasons by segment, and payroll tickets per pay run. Several KRs above can't be finalised without them.
3. Ask each team to resubmit within one week.
4. Take the bonus and three-objective positions to the CEO and CFO together, so we have one conversation rather than two.