Why we Love OKRs for goal-setting: 5 reasons to use the OKR framework
Ever since Andy Grove introduced the OKR methodology at Intel, this management framework has become a staple tool for some of the world’s biggest organisations and most successful startups, including Google, Netflix, the Bill & Melinda Gates Foundation and Bono!
At Bridge, we’ve been using and advocating OKRs for a number of years and it has seriously revolutionised the way we — and the organisations we work with — set and pursue ambitious goals.
Like these organisations, you too can learn to set and implement OKRs. Here’s an introduction to OKR along with 5 reasons why we swear by this management framework at Bridge.
What are OKRs?
OKR stands for Objectives and Key Results. It’s a relatively simple framework used by organisations, teams and individuals to set clear goals or strategies and implement them successfully.
When using the OKR framework, you define what you want to achieve (the Objective), and then set the milestones, on which to pass through, in order to measure success (Key Results) on the pathway to achieving your objective.
The best way to understand OKRs is to think of objectives as a destination and key results as the signposts to getting there.
What is an OKR? Andy Grove, OKR inventor, explains. Credit: What Matters YouTube Channel
One facet that makes the OKR approach so successful is the collaborative aspect. Every team member in an organisation participates in setting the objectives, this creates unity and shared responsibility. That is because OKRs are based on MBO (management by objectives) as opposed to MBE (management by exception), which is manager led, includes minimal team or contributor input and is focussed purely on those situations in which actual result differs significantly from planned results. In other words, MBE is not goal oriented or collaborative.
“You don’t want to try and do everything because chances are, you will achieve nothing.”
Andy Grove, CEO Intel
What’s the core methodology behind the OKR framework?
To reiterate, OKRs work on two foundations: Objectives and key results.
Objectives are the goals you set as an organisation or team. These should always be action-oriented, ambitious and ideally inspirational. When setting objectives, you do not include a metric. But this doesn’t mean that objectives need to be unrealistic or unattainable.
Quite the opposite.
Objectives are qualitative and define what you want to achieve in a specific period. Typically the period is one year for company-wide goals and 3 months for department or team specific goals.
On the other hand, key results define how you will achieve your objectives and measure progress. This makes key results quantitative and they always have a metric tied to them.
Much like traditional SMART objectives, you’ll find key results work on a virtually identical model. As Andy Grove, CEO of Intel, said, you don’t want to try and do everything because chances are, you will achieve nothing. That’s why the OKR framework advocates for specific, measurable, attainable, realistic and time-oriented key results.
Key results should also be ACE, meaning, available to everyone, credible and easily discoverable.
Below is a quick example of a sales and marketing department objective and its key results
The Objective: Increase the sales of product X by year-end.
As measured by the following …
Key results (KR):
- KR 1: Increase customer retention by 85%
- KR 2: Reduce the costs of customer acquisition by 15%
- KR3: Reduce product churn by 5%
Once all of the key results have been met, the objective has also been achieved.
The final component to the OKR framework are initiatives. Initiatives are all the projects and tasks you complete to help you attain key results. In other words, initiatives are what you do to achieve your key results (the outcomes).
Why should you use OKRs for goal-setting?
One of the main reasons we love OKRs so much is that they completely align with Bridge Interactive’s 5 cultural values of deep-collaboration, equality, accountability, transparency and agility.
However, they also provide a highly collaborative framework which fosters commitment, focus, alignment and most importantly, ambition.
Here are 5 reasons why we love OKRs for goal setting:
1. Surface an organisation’s most important goals
The biggest benefit that OKRs brings to the table is clarity of an organisation’s most important goals. With OKRs, businesses are assured that they are focusing on what matters most.
In addition, OKR armours a business with clear, actionable and easy-to-execute goals based on clarity.
When looking at goal actualisation, the OKR framework is more reliable. Since objectives are separated from the key results, you can often roll over objectives into another quarter with new key results.
And herein lies the difference between OKRs and SMART goals. OKRs allow for an objective to be achievable, even after the time frame has passed. In other words, objectives in the OKR framework are not time-bound like SMART goals.
2. Focus on Outcomes, Not Outputs
Successful businesses know that outcomes are what you should be measuring, not outputs. We can define outputs as something you do. Outcomes are consequences or impacts of your output.
Yet, one of the most common mistakes businesses make with OKRs is listing the outputs as key results. But outputs, even when completed, do not always translate value for your business.
For instance, if one of your objectives is to: “Get more sales from our website”, the traffic you drive to your website is not a key result. It’s an output but not an outcome. Conversely, “Acquire 20 new users for every 1000 visitors” is an outcome and a great key result.
When done right, OKRs ensure that you focus on tangible outcomes instead of outputs that hold no real value.
According to John Doerr, Author of Measure What Matters, How Google, Bono, and the Gates Foundation Rock the World with OKRs, ideas are easy. Execution is where the real work begins.
If you are to turn your ideas into concrete actions, you need a framework like OKRs that focuses on actual outcomes instead of outputs that hold no real value.
3. Quarterly goal setting leads to better long-term results
How often have you started the year with a 12 month plan linked to a set of annual objectives. You’ve put a lot of work into this, presented it to colleagues, external partners and gained approval from key stakeholders. Fast forward the clock to month 2, and a major organisational shift has completely derailed your plan. What do you do now?
Quarterly goal setting avoids this scenario. It condenses the time-frame and keeps everyone focussed on what truly matters over the next 3 months.
Secondly — and in the context of OKR — when a goal (or objective) is separated from a measurable key result, it means it can be continuous and often rolled over into another quarter with a new set of key results assigned. This is one of the main differentiators between SMART Objectives and OKRs. With OKRs, the goal or objective often remains in place until it has been achieved.
However, the greatest outcome associated with quarterly goal setting is that it encourages an organisation or team to think about development all year round, not just at the start of a 12 month plan.
4. OKRs break down team silos
Another top benefit of using this framework is that OKRs break down organisational silos.
Let’s set the scene. Most businesses today operate on a department level. This means that each department (or team) has its own goals, leading to various definitions of success. The result is fractured goals that do not wholly align with company-wide objectives. Neither do these siloed goals integrate as seamlessly as they should from department to department.
OKR-based-goals, on the other hand, allow for total accountability. The OKR methodology ensures transparency in goal setting, communications, and even measuring of key results. For instance, a cross-functional team can come up with cross-team OKRs to ensure that all teams have a single goal that contributes to company-wide objectives.
OKRs also align each department’s goals to the overarching organisational goals, which leads to better performance and engaged employees; linking cross-functional teams in the process.
5. Create unity and shared purpose
As John Doerr references in his book, “no one wants to be responsible for hindering progress.” It’s part of how we are wired as human beings. OKR is the biggest proponent of this intrinsic human behaviour. By using the OKR framework, organisations can focus on key objectives that have the biggest business impact.
Everyone, regardless of hierarchy, is involved in the goal formulation and implementation. In other words, everyone understands:
- Where the organisation is going
- Why it’s taking that direction
- The part one has to play, to make it happen
Wrap up on OKRs for goal-setting
When executed well, the OKR framework is an easy way to ensure successful goal setting and implementation. What’s more, this framework sets you up for more cross functional collaboration, fewer siloed objectives and — most importantly — continuous organisational development.