A quick explanation of the Objectives and Key Results management tool.
If you care about setting team or company goals, you’ve likely heard about the Objectives and Key Results concept.
It is also known as OKRs and businesses that strive to succeed in Agile at scale, use this goal-setting methodology to set measurable goals.
In practice, using OKRs is different from other goal-setting methods because of the aim to set very ambitious goals. You should also try OKRs to increase employee engagement in goal setting and help your teams to establish and achieve ambitious goals.
In this post, we define what the OKRs framework is, how to deal with the OKR goals and key objectives, and how to succeed in OKRs management in general. Let’s move on!
What is OKR?
OKR stands for Objectives and Key Results, a popular goal management methodology that helps to implement and execute strategy.
An OKR consists of an Objective that tells you where to go and several Key Results that you need to achieve to get to your Objective. Initiatives are all tasks and projects that will help you to achieve your Key Results.
- Objective is to satisfy customers.
- Key Results: site visits – active users make on average 5 visits per week; to get a net promoter score of 85%; non-paid traffic of 80%; involvement: 75% of users create a full profile.
The OKR method deals in quarterly (or monthly) goal cycles, providing an agile, iterative approach to goal definition instead of applying a static plan with fixed yearly goals.
The benefits of the OKR framework include increased transparency; focus on results that matter, and strategic alignment. The framework achieves this by organizing the work and employees around achieving common Objectives.
Objectives and Key Results include a number of rules that are aimed to help individuals align, prioritize, and measure the outcome of their efforts. The method helps businesses to bridge the gap between strategy and execution, moving from an output- to an outcome-based work approach.
What is the history of the OKRs framework? Who created OKRs? To understand the roots of the concept, we need to travel back to the 1970s.
Andrew Grove, the president of Intel, was the first who developed and implemented OKRs in his company. He documented the key principles in the book “High Output Management.” Then John Doerr (later – an adviser in Google) joined Intel and was introduced to OKRs. In 1999, he introduced OKRs to Google’s founders.
In the last few years, it has been the explosive growth of OKR users and the technology to implement them. Successful leaders are now working on OKR software, so it has become an established sector.
More details about the components of OKRs
John Doerr presented the formula for setting goals:
I will ______ as measured by _________.
An effective goal should describe both what you will reach and how you are going to measure it. In fact, measurement is what makes a goal a goal. If you have no it, you don’t have a goal, all you have is a desire.
This formula is the best way to explain the OKR structure:
I will (Objective) as measured by (this set of Key Results).
Objectives as memorable qualitative descriptions of what you want to achieve should be short, engaging, and inspirational. They should motivate and challenge your team.
Key Results measure the progress towards the Objective. They have to be quantitative and measurable. For every Objective, you should have 2-5 Key Results.
What about an example?
“Creating a successful customer experience” is an example of an Objective. How should we know if the experience is successful?
Here we should recollect that without measurement we don’t have a goal. Therefore, we need Key Results. Now we need to understand how we can measure if we are providing an awesome customer experience.
For example, Repurchase Rate and Net Promoter Score are good options. Do our clients feel so good about dealing with us that they would recommend us and purchase again?
However, measuring repeat purchases and NPS alone can encourage us to make the client happy at any cost. Therefore, Customer Acquisition Cost can be included. So our aim is to make clients happy while keeping the costs under control.
So, it will look like this:
- Objective – to create a successful customer experience
- Key Results – to increase Repurchase Rate from N to NN, to improve Net Promoter Score from N to NN, and to maintain Customer Acquisition cost under N.
Objectives vs goals
The line between objectives and goals is thin. Both represent a desired result or achievement.
Many admit that objectives are more specific, actionable, and set short-term while goals are usually more long-term and cover the big picture. Separating objectives from goals may be relevant to some goal-setting methods. However, it’s definitely not needed while using OKRs.
What are goals?
In a business, goals are something that you plan to achieve in the future. Any goal is the result you want to obtain. It provides a business direction and helps you focus on what’s important.
Goals can be directional or overarching; they focus on the largest aims of the company or on function-specific team-level priorities.
Goals can fill specific niches based on development needs depending on the level. They should be known by everybody in the company and should help a team to move towards them.
What are the benefits of using OKR goals?
- Aligning the company. The OKR goals inform and align everyone in the organization to the top corporate Objectives.
- Connecting employees to the company’s mission. This affects the employees’ performance and the company’s results.
- Providing focus and clarity. Everyone understands his or her clearly defined goals. The company focuses on the things that matter most.
- Providing accountability. Measuring the Key Results and KPIs improves accountability and execution.
- Improving continuous learning. OKRs offer faster learning and improvement that drive better Results.
- Creating transparency. Everyone in the team sees what others are working on. This drives collaboration and better performance.
Personal goal OKR
During one of the interviews, John Doerr was asked about his personal OKR. He answered:
“My daughters have both left home, but I had read and I believe that having family dinners together was a good thing. So, I set an OKR, shared it with my team to be home for dinner by 6:00 p.m. 20 nights a month, and be present, turning off the phone. I put a switch on the router. We shut down the internet to the whole house. It’s not only the quantity but the quality”.
That was a transparent answer and he shared it with his colleagues and family.
Unique Moments About OKR
Each team and company can adapt and tweak OKR, creating different versions of it as there is not a single way to use the framework.
However, there are some key concepts:
The OKRs are easy to understand and the framework is straightforward. Businesses that adopt OKR nowadays reduce the time spent setting goals from months to days. They invest their resources in achieving the goals and not in setting them.
The main goal of the Objectives and Key Results framework is to create alignment in the company. To do so, OKRs are public to all company levels and everyone has access to everyone else’s OKRs.
OKR takes an Agile approach instead of using annual static planning. Shorter goal cycles help companies to adapt and respond to change.
OKR assumes that strategy and tactics have different natural tempos, as the latter tends to change much faster.
In order to deal with this, the framework adopts various rhythms:
- A strategic cadence with high-level, longer-term OKRs for the company (annually)
- A tactical cadence with shorter-term OKRs for the teams (quarterly)
- An operational cadence for OKR tracking results and initiatives (weekly)
Bidirectional goal setting
To implement the traditional top-down cascading model, you will need too much time and this will not add value.
OKRs do not cascade, it uses a market-based approach that is simultaneously bottom-up and top-down. Businesses establish the strategic OKRs that teams should use to draft their tactical OKRs. Tactical OKRs should align the company strategy to the other teams.
The Objectives and Key Results approach targets bold and ambitious goals. Additionally, it believes in enabling the team to establish challenging goals that will make the team rethink the way they work to reach peak performance.
To reach ambitious goals, it’s important to separate OKRs from compensation and promotions. Workers need to know they will not lose money if they set ambitious goals.
Organizations should reward employees based on their impact on the business. Remember that OKR is a management tool, but not an employee evaluation solution.
Finding the right cadence of OKRs
OKRs have no hard rules. This is an open-source framework, unlike Generally Acceptable Accounting Principles (GAAP) in financial accounting.
It provides companies with a great deal of latitude in how they adapt the program to their unique business situations and culture. One of the OKRs’ areas of flexibility is the frequency in setting OKRs.
Perhaps, the best OKR cadence is that fits the context and culture of your business.
There are companies that set OKRs monthly, however, it may quickly become overwhelming as the key to OKRs is planning, and as we know, effective planning takes time.
It’s better to set OKRs quarterly and ensure that everyone follows the rhythm of checking in. Check-ins will give a chance to provide thorough reviews and course-correction. Some companies practice a “dual cadence” of quarterly and annual Objectives.
Preparations for OKR
Before implementing OKR, it’s important to understand the exact challenge you want to solve, and the benefits you expect from it.
For most businesses, Objectives and Key Results solve the challenge of implementing and executing strategy in a clear and transparent way to all employees way.
For it to be efficient, the implementation and management of Objectives and Key Results should have an owner within the company, who is usually called the “ambassador”. His/her role is to ensure that everyone who wants to use OKR, is trained and engaged, and has guidance when they need it.
How to set Key Results?
Key Results measure and demonstrate how close you are getting to achieving the quarterly Objectives. After analyzing priorities and deciding the Objective to be focused on, you will need to decide on your Key Results.
Key Results should be specific, achievable, measurable, actionable, and objectively graded. They should be numeric and be updated throughout the quarter.
Key Results are measurable business outcomes and should be treated, while plans and projects are important in supporting your Objectives.
How to Get Started with OKR?
The structure of Objectives and Key Results is rather simple. You may define OKRs in a simple spreadsheet or special software. Here are 5 steps you may follow to get started:
1. Set Objectives
Start by defining one Objective for your company and explain it to your functional teams (product development, sales, marketing, etc.). Then ask them to set their contributing Objectives to be aligned with the company’s Objective. They should think about how to help move forward the company goals.
2. Define the Key Results
For every team Objective, set three or four Key Results. They should be measurable (to measure how close you’re getting to reach your Team Objective). The company’s Objectives don’t need Key Results as those goals will be moved forward by team OKRs.
3. Update OKRs
It is crucial to go over your OKRs every week even though you set team OKRs quarterly. You will be sure that you stay on track with your goals as well as give and provide feedback to team members.
4. Plan activities
Incorporating OKRs into your weekly activities is also an essential step. Every week try to define what projects and plans you should focus on to get the Objectives and write them out.
5. Review OKRs
Every team should look back at the accomplishment of their OKRs at the end of each quarter. It is worth seeing what you did well and what you can improve. From there you will be able to start planning your team’s next OKRs.
What is the process of OKR review?
The OKR review process helps people to learn and get new knowledge to improve. Without reviews, it is hard to know if you are on track or off track.
To be able to make the right decisions about the team and the company’s future, we need to review what we have done before. OKR reviews can be run in a different cadence and at different levels:
- Weekly. These OKR check-ins demonstrate the progress and what was done, what will be done next, and if any problems have occurred.
- Monthly. They show where the teams are with their progress. They also make sure that everyone is moving towards high-level goals.
- End of the quarter. These reviews take place on a team level first and then all together with the whole company.
What Are the Common OKR Mistakes?
1. OKR as a task list
You should use Objectives and Key Results to measure if you are adding value, not if you are delivering tasks.
2. Too many OKRs
OKR lists your top priorities, it is not a laundry list of every single thing you do. This is actually the definition of what is most important during that quarter.
3. Not aligning OKRs
OKR is an alignment tool. Never set your OKRs in isolation. Try to always talk to the other teams.
4. Setting it and forgetting about it
OKRs require regular follow-through, otherwise, you will never achieve them.
Essential tips for writing good OKRs
- Objectives should be simple. Make them short and easy to memorize.
- They should not be boring. Objectives can fit the organizational culture and be informal and fun. You may use jokes or slang, whatever fits your culture.
For Key Results:
- Separate metrics from initiatives
- Set a few of them. Typically, 2- 5 per Objective.
Objectives and Key Results have become one of the most reliable frameworks for teams looking to plan and measure their success. With this method, leaders at each company’s level start by defining high-level, qualitative, inspirational goals, called “Objectives.”
As with any management system, it might not be perfectly executed the first time you try it. Give your business time to become proficient with the OKR process. Its strength explicitly lies in de-emphasizing specific tasks, and instead emphasizing the value that the tasks deliver.