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.

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.