In this episode of the McKinsey on Start-ups podcast, McKinsey executive editor Daniel Eisenberg speaks with Workboard co-founder and CEO Deidre Paknad about the rapidly growing OKR software business. An edited transcript of their conversation follows.
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Daniel Eisenberg: Hello and welcome to McKinsey on Start-ups, I’m Daniel Eisenberg.
Today, we are excited to have Deidre Paknad, co-founder and CEO of Workboard, joining us on the pod. Workboard is a leading platform provider in the fast-growing space of OKR software, a subcategory of enterprise planning software focused on strategic prioritization and execution. These products generally feature dynamic dashboards and other automated tools to help customers manage and track their progress on Objectives and Key Results (OKR), the increasingly ubiquitous corporate planning method invented by Intel and popularized by Google.
Paknad is a seasoned Silicon Valley entrepreneur whose prior start-up had been acquired in 2011 by IBM, where she then oversaw a high-growth information governance business for 3 years. It was during that period, as Paknad explains in our wide-ranging conversation, that she realized how many organizations had no digital tools to provide what she describes as a “single source of truth” around a company’s strategy, alignment, execution, and outcomes, all feeding into the various regular weekly, monthly and quarterly reviews, and status reports. Instead, they have tended to rely on an unwieldy, largely manual and labor intensive process full of meetings and slide decks.
Since 2014, when Paknad and her husband Daryoush Paknad, a technologist and engineering veteran of Adobe and Netscape, co-founded Workboard, the demand for what the company calls a Digital Operating Rhythm has steadily grown. The company has roughly doubled its revenue in recent years, and it tripled its head count last year, as the pandemic-fueled growth of remote work and more frequent strategic planning has made corporations even more interested in using and tracking OKRs. Most recently, in May of last year, Workboard raised $75 million in an oversubscribed Series D round, bringing the company’s valuation to north of $800 million.
Welcome to the podcast, Deidre. Thanks so much for joining us today. Tell us about Workboard and how you came to found the company.
Deidre Paknad: Workboard is a software company that provides a digital operating rhythm for organizations, which helps them execute their strategy faster, and achieve more, with the people they have.
By operating rhythm, I mean a single, cohesive system to communicate the long-range strategy of the business. Quarterly objectives and key results show how we are executing on that strategy, while monthly business reviews and ops reviews drive accountability for progress. Weeklies, one-on-ones, reports, and executive touchpoints then help us de-risk and optimize our execution against that strategy.
I started the company with my co-founder after IBM bought my last start-up and I was suddenly trying to run a large business that was growing quickly, with the same speed and mission metric alignment that my start-up had. I found it extraordinarily difficult, in large part because I was through with having meeting after meeting, and slide upon slide communicating the strategy, driving the ops reviews, driving the business reviews, and getting status reporting. It was a highly manual and labor intensive process. I started to think of the labor that went in to trying to drive alignment and get transparency as competing with our ability to create value for the business and for its customers. This process ought to be the most reliable process in the whole business. Then the light bulbs went off, and we said, “huh, well, maybe we should start a software company that makes this the most reliable process in the business.”
Daniel Eisenberg: Some people might assume that large professional organizations already have such a system in place. But your experience was that it didn’t really exist. Was that a surprise to you?
Deidre Paknad: We went out and interviewed 60 other companies and realized there isn’t a system. When you think about it, there is the CRM system, the supply chain system, and HR systems. We know the names of all those systems. But have you ever heard of a system that is the source of truth on the strategy, current execution against it, and how we’re aligned, that flows right into ops reviews and business reviews? Nothing there. It’s 2022. It’s time to be digital.
Daniel Eisenberg: Let’s dig a little bit into OKRs. Tell us what they are and how they bring value to companies.
Deidre Paknad: OKRs, or objectives and key results, are a technique for aligning on outcomes. They were made popular quite a long time ago at Intel and then at Google. They are particularly suited to iterating on the outcomes a business is trying to drive in a quarter.
Teams set objectives and key results that align with each other and align with the company’s objectives. The objectives are a statement of intention. What is it we’re trying to accomplish? The key results cover what is success in the next 90 days? What will we have more of or less of? Typically, there are three to five objectives, each with four to five key results. Why they are so powerful is because they define and give clarity on what’s most valuable to put focus and effort on in a quarter. At the end of that 90 days, it’s a technique that is very effective at showing what we learned, what got in our way, what’s changed outside in the world, what’s changed inside in our capacity, and what are the next 90 days’ outcomes that drive the highest value to the company and its customers?
Daniel Eisenberg: And where do KPIs play into this? How do they interact with OKRs?
Deidre Paknad: The answer is that it varies a lot across different companies, but a way to think about KPIs is that they’re operating metrics. There are dashboards of them, millions of them in big companies. They tell us where we are.
The big difference with OKRs is, of the million things we could measure this quarter, on a certain five or ten measures, we want to move the needle, and this is how far we want the needle to move in the next 90 days. Moving these ten needles creates more value than the other 90 that are on the dashboard. It’s about deciding what matters most, being very specific about how far you want to go in the period.
KPIs can be a bit more about the overall status. They don’t always tell you how much we were trying to gain, and they rarely tell you which are the most important now. That inability to know what matters most right now is a huge drain for organizations. Energy, effort, brain power all goes to stuff that doesn’t matter all that much, because people can’t tell the difference between where we want to put energy and where we don’t really care at this time.
OKRs are a way of aligning on what matters most right now and then iterating on that, because it’s not constant. Start-ups by their birth right are constantly calibrating a huge ambition with very little resource. Their capacity relative to their ambition is wildly mismatched, which is both the exciting and the horrifying part of being in a start-up. They don’t have unlimited time, money, and resources. So, if we had to make trade-offs of what mattered most, what would we trade in, what would we trade out? OKRs are a technique for larger companies to operate with the same notion of constraint, and that constraint helps drive choices.
The other thing that’s powerful and very different to what preceded them is that OKRs put an emphasis on what awesome looks like, as opposed to what would be safe and have the most predictable result. It flips it to saying, “Okay, in the next 90 days, what is the best possible outcomes we could achieve?”
It’s not about trying to look good in your KPIs. It’s about trying to be amazing. I love that combination of bringing the ambition fully forward, and then given constrained capacity, what are we going to do first? What do we think moves the needles, and which needles matter most?
Daniel Eisenberg: What is driving the move of the OKR culture out of core tech into other sectors? Is there a difference in the nature, intensity, and operating rhythm for OKRs depending on the sector?
Deidre Paknad: A couple of things are driving the use of OKRs as a technique, and the acceleration of the operating rhythm overall in large enterprise. First is the pandemic. Each quarter the world changed, from Q1 to 2 in 2020, from Q2 to 3, each of those quarters were dramatically different with new things that the organization had to face, encounter, thrive, or drive through. Start-ups were no longer the only companies that had to do that iteration. Every company had to iterate.
The second part is that it’s not enough for the leadership team to iterate on what it thinks is important. If it doesn’t bring the organization along, mobilize people on the iteration, it didn’t really iterate. It’s standing still, telling itself it’s moving. So, this technique, where we align on the objectives and results at the leadership team level, as well as across every team, is how we both iterate and mobilize quarter over quarter as the world changes and moves. That dynamic is now universal.
Right along with that is transformation in literally every industry sector. Automotive, healthcare, energy, everywhere you look. Transformation in the business model, and in the structure of the organization.
When we’re doing transformation, when we go in new directions, we need to bring people down a new path, one that maybe they can’t imagine, or where they don’t really know what to do next. So, alignment becomes more important. In transformation, every organization looks like a start-up, learning each quarter as it drives a new business model in new sectors, and operates in new ways. The conditions in large enterprise look very much like the conditions have always looked in a young company trying to create a segment or a category or launch a new product.
Daniel Eisenberg: So, there’s not a particular characteristic or way that OKRs are used, in terms of one sector versus another?
Deidre Paknad: The variation is in the culture of the company. It has a lot to do with how quickly a company can realize the advantage of the faster operating rhythm.
Where there’s a culture of compliance, where everybody gets paid for coming in on 100 percent of their numbers, there you have a deeply ingrained mindset that aims for safety, not for great. In this case it’s optimizing for personal income, as opposed to optimizing for the acceleration of the organization. There’s real work to overcome the mindset of everybody optimizing for their paycheck, instead of optimizing for the growth of the entity.
Where you have a one-team mindset or a bit of an entrepreneurial spirit, entities can more quickly take advantage of what OKRs can offer them to accelerate strategy execution.
Daniel Eisenberg: Services or coaching have been an important part of the growth of your business. Tell us about that.
Deidre Paknad: In the early days we were talking about new ways of iterating and leading, and aiming for best possible, instead of the most predictable, outcomes. It was something that resonated quite well with business leaders because they have a lot of ambition for achieving their strategy. They’re always aiming for great. However, they needed the rest of the organization to go there with them, and they were looking for help. They understood why, but they didn’t have the internal capacity for how to make the move forward to that digital operating rhythm.
So early on we decided to provide the help. We do that in a couple ways. One is overall change management, how to stand up and move the operating rhythm forward; make it more robust, make it digital, reliable, data-driven. And the second is helping teams have the right conversations, where they clarify what their objectives are and set their key results that reflect what their best possible is, not their safest number.
That coaching helped unlock the ambition of teams. It helped them trust that they could aim high and move forward. It also helped coach leaders on how to change some of their vocabulary from, “What the hell went wrong here,” to “Okay, what are we learning?”
The combination of those two things helped them take advantage of the technique and the systems in a faster way.
Fast forward to 2022, and many companies in every sector are either trying OKRs or have them in spreadsheets somewhere. Now we do a little less coaching and services than we used to. In the early days, as organizations didn’t have the internal competency and know-how, or the capacity, it was important for us to provide that service so our executive sponsor could get the benefits that they hoped to from the system.
Daniel Eisenberg: Software investors have often viewed services negatively, as a drain on margins. Can you talk a little bit about how you had to navigate investor skepticism, what you learned, and how you found the resolve to stick to your conviction?
Deidre Paknad: Dial back four or five years and there was a prevailing kind of mindset, which was that services are bad. Software companies don’t provide services. Partners provide services, if you need them, but if a customer needs services to adopt your software, your software must be bad. There was a fair bit of pressure from VCs that I would talk to when I was trying to raise money. Obviously, those conversations were a little bit short.
There’s a disconnect from reality there. In our case, a large automotive maker bought 20,000 seats. They weren’t already doing OKRs, and they didn’t have a lot of internal competency. It takes a little bit of services finesse to get 20,000 people to do the same new thing in the new way at a new time. It’s irrational to think that no change management is required for that sort of orchestration of a new system, a new way of operating, and at large scale.
So, I ignored people who thought that was a big problem in a software business. I fundamentally viewed it as an essential requirement for us to create the category we wanted, to drive the value that we wanted, to help our customers realize the full benefit that we wanted.
The knock-on effect, which makes these conversations with our investors much easier now, is when we deliver that coaching and help with the change management, our customers quickly move from 20,000 users to 30,000 users to 40,000 users. We expand our footprint faster when we made sure the customer realized value quickly.
Daniel Eisenberg: Whether it’s services or another aspect of a founder’s vision, do you think there are entrepreneurs who can be too easily swayed by an investor’s opinion.
Deidre Paknad: Oh, for sure. Building a business is a giant hypothesis, right? Nobody knows how the story’s going to come out. The fact that it’s all hypothetical, with imperfect information and imperfect amounts of time to execute on your imperfect information, it’s just a series of best bets you can make in the moment.
A lot of times for start-up CEOs and founders, there is very little data on what other companies are doing. You’re really operating in the dark. So, you look to your VCs, who in theory see other companies that pitch to them, as people who have pattern information that’s valuable to you. What is a little hazardous is that the pattern is sometimes not deeply understood, the causes in the pattern are missed entirely, and so the pattern by itself isn’t a conclusion. It’s correlation, not causation.
Daniel Eisenberg: While we’re on the topic of investors and funding, there’s obviously been a lot of momentum both for Workboard and other folks in the OKR software space. I think your last raise was May of 2021, a Series D. What are the biggest scaling challenges that you have encountered at Workboard? And what lessons have they provided?
Deidre Paknad: We raised $75 million and tripled our head count in 2021. For many entrepreneurs, one of the most challenging things is growing the team when you can’t see any of them and you don’t know any of them in person. We had to get intentional about onboarding. For start-ups often a big part of the culture is the feeling you get in the physical space together. The thing that was super challenging for us in 2021 was, how do we turn a Volkswagen bus into an Airbus while it was flying, while we were doing all of it on Zoom.
We spent a lot of time trying to make an onboarding experience that created connection and opportunities for people to see each other across the company. Not just have their world shrink to the seven people that are on their team that they’re on Zoom with all day but get to know the bigger pool of people and shared talent.
Daniel Eisenberg: You were not just expanding the whole organization but bringing in key hires to your executive leadership team during this unprecedented period of change and lack of a physical connection. That had to be difficult to navigate, I would imagine.
Deidre Paknad: The big takeaway in that environment was hiring to your vales becomes the first and most important thing. You have fewer levers on culture and value in a digital and distributed world. One of the most important things is, on the way in the door, be sure you have a values match. You’re more reliant on each person coming in to be an ambassador for the culture, not a detractor from the culture.
The other thing that gets at values is having a diverse panel of interviewers. Where that diversity is both age and gender, you get a decent number of tells from people who are dismissive of folks who are a different gender, different culture, or younger than them. I think you can design those things if you’re intentional about it. You can put more rigor into it than you had to in an in-person world.
Daniel Eisenberg: In the same vein, software talent and technical talent is obviously critical for any start-up, especially one like Workboard that is scaling so fast. What is your approach to that process when the talent search can be such a challenge these days?
Deidre Paknad: One key mindset is talent’s not concentrated in any one location, in any one state, or any one country. The next is it’s all accretive, so if you do a values match and you aim high from ten people to 100 people, then that’s built into the DNA when you’re aiming at 500 people. The last thing is we run panels and practices. We find those are super instructive on the person’s ability to team well, the quality of their thinking, and the quality of their work.
Even in an executive hire, we still do a panel where there’s an assignment like a thinking exercise, or real-world problem solving. When we don’t do it, or skip it for some reason, it backfires more often than any other thing we miss in the hiring process.
Daniel Eisenberg: What is your approach to retaining and engaging the best software talent?
Deidre Paknad: It’s a full-time and continuous job in a company, especially dealing with questions around what makes a place great to work, or how do you maintain or build momentum for the mission we’re on together?
We intend to execute on creating a Workboard experience that is an absolute career accelerator and joy maker. If we’re not putting head count, money, and my time on that, it’s not happening.
It’s like thinking about executing on any other strategy pillar you have. You map it out, set objectives and key results, measure to learn, measure to improve, and execute against the outcomes that you set out to achieve. You do that with the same kind of investment and focus, attention, as you would an international launch strategy or a revenue play or any other thing in the company.
For us that includes my paying attention to it, my being vested in what it’s like to work here and the impacts that we can have in the world. If I don’t care about it week to week, why should I think anybody else does?
Daniel Eisenberg: You’ve created many businesses, and you’ve also helped software categories in large organizations. Broadly speaking, how would you say your past experiences, both successes and failures, have shaped your approach to running and scaling Workboard up to now?
Deidre Paknad: Every one of those experiences is cumulative. I’m not at the early stage of my career, so the thing I think about a lot is to try and hold myself accountable to knowing what I know, but being diligent, rigorous, and authentic about asking, “Is that still relevant?” If the assumptions underneath that thing you knew have changed, then you don’t know it anymore. I make sure that I am wide open to learning what’s new, and I am untethered to what I may have learned in the past that is no longer relevant to the present, or the future that I’m trying to create.
I don’t think that’s automatic, frankly for anybody with more than 15 years’ experience, and at the current rate of change in our universe, even if you’re earlier in your career than I am.
Daniel Eisenberg: What kind of advice would you offer to aspiring entrepreneurs?
Deidre Paknad: For second-time entrepreneurs or people that have fair bit of experience, surround yourself with people who are not like you. Create diversity around you so that you have a broader perspective. That way you have more people empowered to be heretics, asking you questions that make you uncomfortable and think deeper, and frankly, make you work harder to explain the value proposition. Because when they make you work harder for those things, they make you better at those things. They increase your impact as a leader, and I think they increase your impact as a company, in driving your market or category further forward. Diversity of thinking around you, diversity of experience, is the golden thread that carries you forward.
Daniel Eisenberg: What’s your horizon looking forward on diversification, product development and scaling? Where do you see Workboard moving over the next five to ten years from now?
Deidre Paknad: There’s a couple of big animals that matter. One of those is partnerships and strategic alliances. When we talk about 20,000 people at an auto maker shifting from an output to an outcome mindset and adopting OKRs at scale, clearly partnerships are important there and will shift aggressively into our services relationships, with partners being the primary go-to-market, versus our own services. That’s super important to the broad adoption of digital operating rhythm and Workboard.
We will also deepen our investment in that operating rhythm and all the components of it. There are a couple new areas where we get to close the gaps between our understanding of the strategy and our execution of it. So, we’ll introduce a couple of new products and capabilities there that are quite important.
And then there’s going to be a wholesale shift in how we interact with software and what we expect it to do for us. I’m very excited about a set of things we’re announcing later this year that make the interaction in software, the collaborative aspects of software, more inclusive and more fulfilling for every stakeholder.
Traditionally software’s been forms you fill in. You go to put data there, and you go to get data back. The rest of the work you did, meetings, discussions, and decisions, was all offline. Now we’re online in a digital world all the time, and there’s an epic shift in how we want to interact with each other online, and how we want to interact together within the tools we use for our business. So, we’ll do some novel things with respect to the experience of working together in software. Those are oriented around the notion of inclusion and making it more fulfilling to do the work we need to do together.
Daniel Eisenberg: What innovations do you see on the horizon that you think will heavily impact Workboard and the sector over the next decade?
Deidre Paknad: I think there’s going to be a giant move out of chat. Over the past two years there’s been a big migration to having all the apps that we work with all the time right there next to all the messages coming at us. The noisy, distracted, derailing digital world is exhausting us all and I think there’s going be a shift away from noise to quiet, context-rich, contained, and productive workspaces that are less interruption-driven, less message-driven, less notifications driving our day. There’s a big shift coming and I’m quite excited for it, because I’m tired of all the messages. Somehow, we got to this place where chat messages hijack our attention a thousand times a day. There’s no way we achieve our best possible impact when we let the last message drive the next hour.
Daniel Eisenberg: I wanted to ask you about expansion internationally. How important is that to Workboard? How challenging has it been to bring the OKR approach to developing markets outside of North America?
Deidre Paknad: Global markets are super important for us. We’ve had international customers for quite a long time because our customers are often global. In 2021, we built out a team in Europe, based in Germany. We think it’s quite an important market. The dynamic we experienced in the pandemic, being able to meet online, removed a lot of the barriers to international business and international partnerships.
In the past you could never do business with a German company without getting on a plane and flying to Germany or living in Germany. As nobody was leaving home, we could all get on the same Zoom, and it didn’t really matter where in the world we were talking to each other from.
So, I think access to international markets accelerated in a work-from-home, closed world environment. We’ve staffed and built out in Europe for that reason.
Daniel Eisenberg: Do you feel that in the last few years, as you expanded into those areas, you’ve learned anything about how best to navigate that move beyond your home market?
Deidre Paknad: I have made mistakes about how and where to enter Europe, what it would really take, in other companies. And I’ve had an opportunity to be the person that launched software products in Europe for the first time as a head of product marketing.
So, a lot of those experiences serve us well at this moment, on how, and where, and at what pace, to enter. Where I expect us to have a little more to learn and a little less to rely on is thinking about Asia Pacific and those markets. We have collectively in our company less experience and capability there.
Daniel Eisenberg: Well, listen, Deidre, I want to thank you again for taking the time to speak with us today. It’s been a great conversation.
Deidre Paknad: Thank you. It was such a pleasure to talk.
Daniel Eisenberg: Thanks again to Deidre Paknad, co-founder and CEO of Workboard, for speaking with us.
I also want to say thanks, as always, to our McKinsey on Start-ups production team: Molly Karlan, Polly Noah, Sid Ramtri, Myron Shurgan, and Katie Znameroski.
And of course, thanks to you for listening. We hope you’ll return for future episodes of McKinsey on Start-ups.
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