Draft OKRs

MEMORANDUM

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

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Executive Summary

The CEO’s Q1 mandate is clear: grow through retention and expansion (NRR 101% → 108%, Gross Churn 14% → 10%, Payroll Attach 18% → 25%).

However, our product teams have largely proposed business-as-usual, output-driven goals. Most critically, Growth is running in the opposite direction (hunting new logos instead of retention/expansion), Integrations is measuring shipping volume instead of adoption, and Core HR has defaulted to feature delivery.

Below is an analysis of what each team must keep and change, their revised OKRs, and recommendations to resolve the three executive governance bottlenecks.

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Part 1: Team-by-Team OKR Revisions

#### 1. Payroll * Keep: Focus on error reduction. Exit surveys show payroll errors/complexity cause 38% of all churn. Cutting error tickets is directly tied to saving revenue. * Change: Remove pure attach rate as Payroll’s sole downstream KR. Product cannot own GTM distribution alone; Payroll must focus on the product friction that unlocks adoption and prevents churn within the first 90 days. * Revised OKR: * Objective: Deliver a zero-defect payroll experience that drives expansion and retention. * KR 1: Reduce payroll-related support tickets / error reports by 40% (churn mitigation). * KR 2: Reduce time-to-first-run for newly activated payroll accounts from X days to Y days (activation velocity). * KR 3: Maintain monthly payroll run success rate at 99.5%+ across all active payroll customers.

#### 2. Integrations * Keep: Focus on ecosystem connectivity. Customers with 3+ integrations churn at just 6% (vs. 14% company average). * Change: Kill the output metric ("Ship 12 new integrations"). Integrations have zero ROI if unadopted. The team must optimize for depth of adoption—specifically pushing accounts to the 3+ threshold—and target the specific missing integrations driving the 19% churn response. * Revised OKR: * Objective: Deepen customer stickiness by embedding Quarry into the customer’s core toolstack. * KR 1: Increase % of total customers with 3+ active integrations from X% to Y% (driving toward the 6% churn cohort). * KR 2: Deliver the top 3 requested integrations identified in churn exit surveys (accounting/time-tracking). * KR 3: Increase weekly active sync volume / data exchange by 25%.

#### 3. Growth * Keep: Growth's experimentation velocity and funnel mechanics. * Change: Completely pivot away from top-of-funnel acquisition (new logos / trials). Acquisition is GTM-heavy and contradicts the company’s explicit retention/expansion strategy. Growth must be deployed against in-app cross-sell (Payroll attach) and per-seat expansion. * Revised OKR: * Objective: Accelerate revenue expansion across the installed customer base. * KR 1: Drive self-serve/assisted Payroll attach rate from 18% to 25% (CEO target). * KR 2: Increase in-app expansion qualified leads (PQLs) for Payroll passed to Sales by 35%. * KR 3: Increase customer employee invite/seat-activation rate from X% to Y% in accounts with >100 employees.

#### 4. Core HR * Keep: Focus on platform satisfaction (CSAT). * Change: Eliminate roadmap feature-shipping milestones ("Ship org-chart", "Ship custom fields v2") as Key Results. Features are inputs; the outcome is reducing platform-switching churn (11% leave for all-in-one competitors) and protecting the base. * Revised OKR: * Objective: Establish Core HR as the indispensable daily system of record for mid-market admins. * KR 1: Increase core platform CSAT among HR Admins from 4.2 to 4.5. * KR 2: Increase WAU/MAU engagement of company admins on core workflows (org management, employee records) from X% to Y%. * KR 3: Reduce voluntary logo churn of non-payroll accounts from 16% to 12%.

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OKR Alignment Matrix

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Part 2: Governance & Process Recommendations

#### 1. CEO Request: "Three Objectives per team to cover everything" * Recommendation: Decline firmly. * Rationale: A product team with 3 objectives across 4 teams creates 12 competing product priorities for 420 staff. When everything is covered, nothing is prioritized. Objectives are strategic shifts, not operational check-lists. * Counter-Proposal: Enforce one single Objective per team with 2–3 measurable, outcome-based Key Results. Day-to-day maintenance, technical debt, and minor bugs should be managed via standard SLAs and operational run-rate dashboards, not masqueraded as quarterly OKRs.

#### 2. CFO Request: Tie OKR scores to PM bonuses (Historical avg: 0.95) * Recommendation: Reject this proposal. * Rationale: A historical average of 0.95 is an alarming indicator of extreme sandbagging. Healthy OKR frameworks target an average score of 0.70 ("stretch goals"). If bonuses are linked to OKR achievement: 1. Teams will negotiate unchallenging, output-based metrics (e.g., "Ship custom fields" or "Ship 12 integrations") to guarantee 1.0 payouts. 2. Cross-team collaboration will break; teams will refuse shared accountability for complex metrics like Attach Rate or Churn. * Counter-Proposal: Separate evaluation from OKRs. Measure OKR outcomes as a lagging input into broader performance reviews, but assess PMs on holistic impact: strategic execution, product discovery quality, and business outcome delivery. Reset the target score expectations so that achieving 0.70 is celebrated as exceptional execution against ambitious goals.

#### 3. Planning Cadence: Reducing the 5-week overhead * Diagnosis: Spending 5 out of 13 weeks (38% of the quarter) planning is an unsustainable productivity drain. It signals an overly bottom-up, consensus-driven process with insufficient top-down constraints. * Prescription (2-Week Maximum Planning Cycle): * Week -2 (Day 1–3): Top-Down Mandate. Exec team delivers locked company OKRs and operational boundaries. * Week -2 (Day 4–7): Draft Team OKRs. Product squads define 1 Objective and 3 outcome-based KRs directly mapped to executive metrics. * Week -1 (Day 8–10): Cross-Dependency & CPO Review. Hannah and tech leads conduct a single cross-functional review to resolve dependencies (e.g., Growth ↔ Payroll attach). * Week -1 (Day 11–14): Final Approval & Lock. OKRs published before the start of the quarter; zero changes permitted thereafter.

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Immediate Action Items for Hannah

1. Schedule an Executive Alignment Session with the CEO: Present the unified 1-Objective model, demonstrating how 4 hyper-focused product goals cover Gross Churn, NRR, and Attach Rate far more effectively than 12 diluted objectives.
2. Align with the CFO: Share the risk analysis regarding metric inflation (the 0.95 score reality) and present the alternative performance compensation model.
3. Issue Directive to Product Leads: Reject Growth, Core HR, and Integrations' current drafts. Instruct them to submit revised KRs based on the outcome targets above by end of week.

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.

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.