EP 85: Beyond Objectives and Key Results, with Wendy Nguyen
On this episode of THRIVE—sponsored by Workamajig—Kelly and profitability coach, Wendy Nguyen talk about a holistic view of financial health for service-based firms. This is especially important for agency owners that want to do work that contributes to the equity of their teams, clients and even the planet—all while turning a profit.
Episode 85 Links
TNC CPAs: tnccpa.com
OKR Resource: What Matters
iTunes / Apple Podcasts: itunes.apple.com/us/podcast/thrive-the-agency-scaler-podcast/id1370205729
YouTube Channel: youtube.com/channel/UCboltXvff1KfeCHpQbY_8PA/
Vimeo Channel: vimeo.com/agencyscaler
TRANSCRIPT
EP 85:Beyond Objectives & Key Results
Duration: 29:24
Kelly: Welcome back to this week’s episode of Thrive, your agency resource. Today, I’m joined by Wendy Nguyen to talk about Objectives and Key Results or OKR. Some of you might be familiar with it. Some of you might not be and that’s okay. Wendy is a profitability business coach and founder of TNC CPAs in Houston, Texas. We both had the opportunity to go through the Goldman Sachs 10,000 Small Businesses program. And honestly, I just had to bring her on to the show because I rarely hear financial folks talk about passion and purpose on the same level as profit. So she speaks my love language. And Wendy, thank you so much for joining me today.
Wendy: Well, Kelly, thank you very much for inviting me to the show. And I am super excited to be here and to share more with all of you about OKR and other topics, especially profitability.
Kelly: Yeah. And that’s a big one. Everyone in the audience wants to know about profitability. So let’s start. For the members of the audience who aren’t familiar with the OKR book, what do we mean by objectives and key results?
Wendy: So there’s a book called Measure What Matters, and in there he talks about that every single business or even anything that we do would have objectives and clearly the key result to it. So going back really quick, in the book, the OKR methodology actually has been adopted by many of the tech companies including Google and it was the first very first method that Google has used to grow them into a multimillion dollar company. The venture capitalist John Doerr is the one who introduced this methodology to Google, and he just published the book in 2017 to really talk about his stories, his involvement with Google, and how other organizations including the Gates Foundation using OKR and many other companies using OKR. So for small business owners, it depends on the path that you cross. Sometimes, you hear this and you just think, well, it’s gonna be more applicable to bigger organizations and it’s not really applicable to me, even a startup. As a matter of fact, it is so crucial and so important because the objective is almost like a goal; you want to accomplish something. And that is an objective that you put out there. So what are the objectives? How do you know that you actually attain the goals? And so that is telling you the key result, that you achieved the goal. So let’s say if a business is saying that right now I am only at $300,000 and I want to grow my company to be a $3 million company in revenue. That is an objective. Well, first, you’re going to have to very clearly identify your objectives. It is like, well, I want my company to hit a $3 million in revenue in order for what? So it’s truly also when you talk about that, it is how to have a purpose.
It’s just not only about the money part. But going back to the example, you can say, I want to have $3 million in revenue in order to really hit all of the services that I can provide to my customer to be a one-stop shop. So that’s where the money part and the purpose part is coming in together. But again, that is just a goal. Right? So the key result is telling you whether you achieve the goal or not. I mean, a lot of the time people think, well, that’s the 3 million right there. Right there is already a key result. Actually, it’s not. The reason is that the key result is you also have to have sort of how do you measure it? Yes, 3 million as money is measurable. But the key result is going to be like, why do I want to attain this revenue by 2022? Is it by 2025? So that’s the key result, which means you have to put a specific timeline in there. And a healthy set up of an OKR is to have three elements into it. What’s the timeline? And if I say okay, it’s a $3 million revenue, which means you have to get how many customers in order for you to attain that 3 million. You can say that I need 100 customers in order for me to get to the $3 million in revenue. So again, 100 customers is another key result. And then the last key result can be, I need to have a team of 20 or 30 people. So that’s another key result; that you can say, okay, now, you can actually have a company with revenue of $3 million providing the service a one-stop shop service to your customer. So, yeah.
Kelly: So it’s basically like identifying what you want from a financial perspective, but then putting in all of the pieces that are going to be necessary from a resource standpoint, from an income standpoint, from the customers. There’s also part of this framework that you talk about, which I love. You talk about in the context of the 3 Ps, and you kind of alluded to that. My framework is the 5 P’s. So we have some synergy there. But you also talk about these pieces of passion and purpose. Is there a social impact component to that? Like, can you talk a little bit about your holistic view when it comes to the financial health of these service based firms?
Wendy: Definitely, it has to have. Every single business has to have the 3 Ps formula. It means passion, meaning you love your business so much that’s why you are starting this business in the first place. And then the next thing is profitability. Your business has to be profitable in order for you to stay in business. But now you’re going to ask the question, why am I working so hard? So you have to have a purpose and the purpose has to be very clearly defined. And so, the first purpose for all of us is going to be what is going to be in it for me. When I create this business, what is in it for me? That’s the purpose. I’d have to generate enough money profitability so that I can support my family. But then, once you are at the level that yes, you can support your family, it also has to have the next purpose, how are you interacting with the community? If you go out of business tomorrow, who will miss you? And why is that important? And so that’s part of the social impact. It is there because no matter what, we are really interrelated, one way or another. I have an accounting firm. But again, I would need a marketing agency in order to get the word out there, that this is Wendy’s accounting firm. But why is it people need to engage Wendy versus another accounting firm next door. And that’s because let’s say my specialty is very different from the person that is next door, and there are many people that want to know more about OKR, for example. So they can come to Wendy’s firm to get a defined OKR. So it depends on people’s preference. And, again, that is the community aspect of that. Another way that you are also looking at is that sometimes, as a service-based company, the customers are not responsible for knowing how to solve the problems. We are the one that will come up with solutions to solve people’s problems and come up with the creativity side of us to help them solve the problems. That’s why the social impact, community is so important. You have to look at every single angle of your business and how you are intertwined with other people.
Kelly: Right.
Wendy: Did that answer your question Kelly?
Kelly: Yeah, absolutely. So you talked a little bit about OKR or the book that really brought that into the spotlight for a lot of us. The author of Profit First actually transformed OKR into what we might call a more expanded view that incorporates more of the passion and purpose that we’re talking about. So can you talk a little bit more about that, that OMEN acronym that that author talks about?
Wendy: Yes. So Mike Michalowicz is the author of Profit First and this year, beginning I think maybe March or April, he has another book called Fix This Next where is lining up what businesses should fix. Do they need to fix their sales? Do they need to fix their profitability? Do they need to fix their processes? Because business owners often go in multiple directions. And one thing that I really loved when I was reading that book is that Mike actually referred to OKR. So when I was following and adopting OKR, I liked it but it is still somewhat not a complete picture for me. Mike expanded it. He created a new acronym for it called Objective Measurement Evaluation and Nurture. So the objective that he has is very similar with the objective that we mentioned in the OKR acronym. He’s put measurements instead of key results. So the measurement is going even more in depth. How do you measure? It has to be something that is measurable because objectives can be very abstract. And he went on to say, evaluations, because a lot of times people put objectives and key results out there, but what if you didn’t really hit all the key results, what if you’re only 90%, 80% or even 50% of that? So you have to really go back and evaluate that. So he put the evaluation piece into the OKR. And I think that is important because sometimes we just run, run, run, and then we forget to look back at what we’ve done so well, and what we need to improve. And he went on, saying that there’s another component called nurture. So, if a company is setting out OKR, and that OKR is doing really, really well and the company has accomplished that, then you need to also nurture that OKR and you don’t have to really create another OKR. You may be just gonna be changing the key result of the measurement to another quarter or another year. So that’s the nurturing piece that is important. Because at the same time with evaluation, what if you didn’t hit the goal? The key result. Then how do you evaluate and then you nurture it. That way you can actually go back and hit that mark. People just set goals. They don’t meet it and then they just run off. Right?
Kelly: Yeah, you know what’s interesting? What this brings up for me, I didn’t think about this before, it just kind of like came to my mind now. This is very similar to performance reviews of team members, right? So we have these objectives that we set for our team members with their input, with their assistance, then we measure them, then we evaluate them, and if they don’t hit those, or even if they do, we up level, we nurture, like, okay, so you’ve hit these, now what do you want to work on improving next year, or you haven’t hit these, how are we going to nurture you and support you further so that you can hit these goals. So it’s interesting. You’re talking about it from the entirety of the business sense. You could also, in a way, say that this is very possible to use when you’re thinking about employee performance, or you can at least draw a correlation.
Wendy: Yeah, actually the OKR methodology or OMEN is used for all aspects of the business. Not just only businesses, but actually you can use it personally. I mean, you can really say I have my own objective that I set out for 2020. Like a lot of people are doing vision boards. So when you think about vision boards, it is really objective. And then they put the picture in there, that’s the key result that I actually went and hit that place this year on the vision board that I put. So you can really apply it into every aspect of your life. And even when you talk to your child or your spouse that this is how we know if we are doing well together, like we spend this number of days and times and hours. You can tell that I’m a number person.
Kelly: So let’s go back for one second and talk a little bit more about the social impact because I think that, speaking of 2020 vision boards, there are more and more especially agency owners, agency leaders realizing that they want to do work that contributes to the equity of their teams, the consumers, the world at large, maybe even the planet, if they’re working with sustainable brands. But they also want to turn a profit, right? Like we’re not just doing this to run charities. We’re wanting to run profitable businesses. So from that lens, why is this holistic picture so important for those types of agency owners?
Wendy: There is a notion out there, especially with the pandemic, if a business comes out saying, well, I am actually more profitable than ever in my previous years. People may not really say that because they felt like, if I say that, then I don’t empathize with the rest of other people who are struggling. But what if people turn around and say, hey, what do you actually do in the pandemic that backed your company to be profitable. And you have to think of it this way in terms of social impact. When you want to change the world, first, you need to go home and take care of your family. So marketing agencies really want to believe in the social impact aspect. They also have to look back into, am I really first taking care of my employees? Are there days when they are onboard me or I have to let them go? And then going to take all of the work by myself. So profitability and sustainability are so important. But sometimes people marry the two aspects of it. They feel guilty about it. They feel guilty about the fact that I am profitable and the rest are not doing well. But if you think you’re profitable, which means you can hire more people and you can save one family from losing their house. So if you think of it that way, then first, start with your employees with the people that are next to you. And then now you can really set the footprint to the next level of how to go about it. So when business owners go out and just want to give like, okay, I want to give this free resource to so and so. But then at the end, if you’re suffering financially, then you shouldn’t do that. Because you actually stop yourself from hiring another employee that can come in and help you.
You’re actually overextending yourself, helping the other business to stay afloat, to get the word out, but then at the same time, you don’t have the money to really bring back employees. So you have to think very carefully about the social impact that you make. The thing is that when I become profitable, especially with my CPA firm doing the PPP. So I would apply for payroll protections, loan first for my business, and at the same time, I assure my employees that you guys have a job because I’m going to get this loan. And at the same time, my employees now can help all of the other businesses; that we have to secure this loan so that they can get the employees. So really, you have to think internally first. But of course, you also have to really take care of yourself first. It’s self-care. We hear a lot about this concept when we’re flying. It is always like hey, put the mask on your face first before you put the mask on your child because if you’re out, then everybody’s gonna be out. I hope that really there is holding on to people and there is no notion of feeling guilty about being profitable.
Kelly: Yeah.
Wendy: But actually, it’s important for you to be profitable so you can help other people to be profitable.
Kelly: Yeah. No, I think it’s a great point. And, obviously, the audience who’s listening or watching, I talked about the oxygen mask theory pretty often, or there’s a quote by Rumi that I really love, which is like, give from your overflow, not from the depths of your well. I mean, really, self-care is a big thing that most people just are not talking about enough. So I’m really glad that you brought that up organically. I think this fear or this guilt that you talked about, in terms of being profitable or being successful during the pandemic, that’s actually a really interesting point. So thank you for bringing that up as well. It’s really, really important for people to not feel that way because look at the impact that you’re having, if you are in that situation with your business.
Wendy: Yeah. And then the other thing is when you hear people that have that kind of profitability, you would just put your head down, and say, you know what? My business has been struggling. What did you do to get your business to be profitable? Can you show it to me? So really help people open up to learn from other people.
Kelly: Right. Well, that’s where the vulnerability aspect comes in. And that’s one of the hallmarks of a great leader. It is actually a vulnerability.
Wendy: Yes, but it takes a lot of courage too.
Kelly: 100%. So I know that you have a couple of free master classes and video series and things like that, that can really help people, can you talk a little bit about where people can find, maybe not where they can find it, because I can put that in the show notes, but just talk a little bit about what those master classes and video series are all about.
Wendy: Sure. So, because again, with the whole pandemic, I actually post on LinkedIn every day about little tips here and there for leadership and profitability. And during the whole pandemic, I also came up with this 3 Ps formula called Passion, Profit, and Purpose. I want to help people on how to align your visions into your profitability, that’s going to give you the purpose that you want, at the end of the day. So let’s say that your vision is going to have a really big marketing agency that can really provide help to many business owners, then now, you also have to ask yourself first, what do you really love about your business? Is it digital marketing? What exactly do you love doing so much? Because sometimes you will say, well, I want to provide the service from A to Z, but then really, you only like F, D, or E, then that is where your passion and maybe that is where you really have to pick your niche and stay in that part. Because when you love something so much, you’re going to have curiosity, you want to learn, you want to innovate, you’re passionate to go into it. And so when that passion of yours is going to translate into creating of values for your customers, not just only solving a problem, but you can say for example, if you are really good with social media, and you say well, I can write this post or like you Kelly, when you do this thing, you can have a reach of 30,000 potential leads. So that’s because you’re so good at that, and you’re passionate about it. And so what kind of profitability that can bring out this number of leads and outreach there. So then you’re going to sit there and you’re going to calculate, okay, what does it cost for me to get to 30,000 potential customers? And then the next thing is that, how do I turn that 30,000 into a customer, and what that cost will look like, right? And then now you can say, okay, if I’m spending an hour and I’m reaching 30,000 potential customers, and then I will be able to turn maybe three of them into customers, and that three will pay me $10,000 a month, something like that. So really, now that you can have an hour of your time invested and they’re actually generating $10,000 so now business owners are going to be focused on the hours that they spend on what they really love to do into $10,000 more revenue for the business.
Kelly: So that’s what the masterclass is about.
Wendy: Yes. So what the masterclass is really helping you do is connect the dot from your passion to your profit, and then also from the profit going to the purpose. So now that you have a $10,000 customer that you need to serve, you need to have a good system in place, or if you want to spend less time in your business, then how do you do that? And so you have to build a team to carry out the task. So now you go back to calculate the cost. So really the 3 Ps are just dangling back and forth. There’s no specific order. Any you also have to really wake up every day and say, will I be working on the passion piece today? Will I be working on my profitability today? Will I be working on my purpose today?
Kelly: And what about the video series?
Wendy: And then on top of that, I am also coming up with seven steps on how to restructure your business to be profitable. So the main seven steps are really helping business owners read their financial statements in a way that it can really tell what cost it can contribute to your business. What cost should you not spend any more or what part you should invest your money in. So I broke it down into a seven key cost component that every single business owner has to do, like a mini dashboard. And that’s all you’re gonna monitor for your business. So like if a business owner comes to me and says, well, I want to grow my revenue to $3 million. The next question I ask is, how much money have you spent in your R&D? How much money you actually spend in thinking about innovation. And they say, I don’t know. My accountant maybe knows it. And even your accountant doesn’t know it, because this is the money that you spend for innovation or not. So it’s just like, for example, as a CPA, I always have to go training. And so if I go into a training and learn more about accounting stuff, then that’s really holding on the core of my business being a good CPA, up to date with the rules and regulations. But if I go and I spend my time, like, for example, we put up 10K Kelly. So if we go and spend our time with 10K. It is learning. But not only that, not only the time but also the cost, the core innovations that we invest in our business to innovate. So we can get more ideas out to the people.
Kelly: Absolutely.
Wendy: So you have to really know the time that you spend. Is it an investment in your business, or should that be ripped apart? Because during the pandemic, people talk about essential business. So to be open. At the same time, in a business, you need to know what is essential. And, interestingly enough, I’m sure a lot of marketing agencies faced this. The minute when the pandemic came, the first spend people cut is what?
Kelly: The money in advertising.
Wendy: Right. So that’s the first spend people cut. In fact, that’s the worst thing that they can do. What they really have to look back into is, if I invest $1 in marketing, what is the result that I’m getting? So you have to be able to measure it. And sometimes people are not able to really measure it. They just cut it up and say, okay, I don’t need it. I’m just gonna be really doing everything, just let everybody go. So that is really the case. As a CPA and business owner, I have 5 companies that I’m running right now. And so I don’t have time to look at that lengthy profit and loss, news and entertainment, everything; it doesn’t mean anything to me. So I have to really break it down. Is that the cost of my marketing? Is that the cost of my operating company? Is that the cost I’m keeping my company organized? Your legal expenses. Your accounting expenses. So you really have to know and say, okay, I need to cut this cost. I need to actually increase the spending here.
Kelly: Right. So that’s basically what these seven videos cover.
Wendy: Yes.
Kelly: So important. So I will post links to each of those, as well as a link to your CPA firm in the show notes and just want to say thank you so much Wendy for joining me today. It was an honor to talk to you.
Wendy: You’re very welcome and I’m really glad. If there is anything I can do anything to help all of the business owners out there, I would do everything that I can.
Kelly: Thank you.