OKR is a goal management framework, and stands for Objectives and Key Results. An objective tells you where to go, key results tell you how to get there. Imagine for instance you sell barbecues online, one of your objectives could be to grow revenue to $1 million this quarter. And a key result that will help you achieve the objective could be to generate 100.000 leads through a Google Adwords campaign.
From Google it spread to many other tech companies, like Twitter, LinkedIn and Zynga. When Google employees left Google to join other companies, they often brought OKR with them. Today organizations from 5 to 50.000 employees and across all industries have embraced the methodology.
But why do all these organizations all of a sudden have OKRs? What are OKRs really? What do they do?
If you have goals, you can work with OKR. As said, OKR is nothing else as a label applied to a wide range of best practices in goal management. And the truth is: every organization has goals, whether they realize it or not. The most well-known goals are the financial ones and the related sales targets. But there are many others. In fact, every project in your organization will benefit it is driven by a clear goal, or OKR.
OKRs let companies think about how they can break out of the status quo and at the same time provide guidance to achieve a new future. It is the missing link between strategy and results. In short: they take your organization from A to B. If you have a big dream, a vision for your company, you need OKRs that take you there.
KPIs on the other hand are to measure the status quo. If your company keeps on doing what it already does, all you need is a KPI dashboard to keep track. If you want your Support team for instance to answer every ticket within 30 minutes, you create a KPI for that. OKR and KPI work perfectly together.
Let’s summarize that in a chart.
Your organization will have, or should have, an ultimate goal. A big dream, what it wants to be 5 or 10 years in the future.
The great thing about an ultimate goal, is that it inspires. It makes sure you’ve got all your ducks in a row. The downside is that it isn’t actionable. So you need objectives, smaller steps, that take you there.
Together, the ultimate goal and objectives will tell you where to go. The key results, initiatives and related tasks will tell you how to get there.
As said, the most important characteristic of OKR is that they take you out of the status quo. If you need to grow. Need to innovate, or take optimum use of an opportunity. If you have a big dream you need to realize. If you want to make things happen. You’ll need OKRs.
But you’ll also need people working AND collaborating on these OKRs.
Let’s start with people first. People are the key resource of any organization. Performance management — which has become a more wide-used term in HR in the last couple of months — is a difficult term when it comes to people. The problem with the word “management” is that it implies control- or governability.
People cannot and should not be controlled and therefore, performance management does not exist. At least not for people. People are not robots.
People’s performance can however be influenced. It can be influenced by keeping your team engaged and motivated. This is emphasized in a recent publication of Ipson/Edenred: “As an unpredictable economy changes the rules, employee engagement is at the heart of sustainable performance.”
Let’s zoom in on employee engagement.
According to a Gallup study from 2013, 70% of employees are disengaged and dissatisfied at work. The truth is even worse, only 13% of employees say they are engaged at work.
Apparently senior leaders are aware of this problem. The Financial Times executes an annual survey amongst a 1.000 presidents and CEOs worldwide, asking them what their biggest challenges are for the coming 5 years. Employee engagement has been ranking as a top #5 challenge for already multiple years.
In the US alone, this costs companies over $370 billion in lost productivity, each year.
Engagement makes employees become part of of something bigger than themselves, a common advice from happiness gurus for living happier, healthier lives. Engagement thus is a double-edged sword. Employees are happier, more productive, less likely to leave the organization and so on. That this is as beneficial for the employee as for the employer should be clear.
Let’s have a closer look at what employees want and how to engage them.
- 70% of employees want more clarity on goals & strategy
- 67% of employees will be more engaged when their individual goals are aligned with corporate goals
- Transparency is the #1 factor contributing to employee happiness
- 70% of employees want to see how their job contributes to the company strategy
- 50% wants to know better what is expected of them at work
Some of it might be obvious or already known to you. What’s more important is that OKR satisfies all the requests above.
OKR is for the employee, not the manager. Surely the manager and executives will like OKR. But the real benefit for the organization is that it offers tremendous value to the employee.
Now let’s look at what OKR will bring to your organization.
OKR brings 3 key things to your company: Focus, Alignment and Engagement. All 3 are crucial, as big goals are almost never achieved by an individual. You need an entire organization to make it happen.
To foster collaboration in the team you need to bring in focus, so that everyone knows what they key priorities are. And of course you need to make these priorities (top-level objectives) transparent. Once everyone know what is most important, they can make sure that what they will be working on contributes to that. Alignment ensures all activities in the organization contribute to the strategy, something almost every organization that is not using OKR struggles with.
But alignment also allows people to see how they fit into the bigger picture, and why they are working on certain things. This is a natural way of increasing engagement. You give employees a voice, and show they have an impact. Alignment is a very, very powerful thing.
Of course there are also hard facts about what OKR can do for your team, although not many case studies have been made public yet.
Sears Holdings, a US-based leading retailer focused on seamlessly connecting the digital and physical shopping experiences, performed an OKR case study amongst 20.000 (!) associates. They found that hourly sales increased by 8.5% after the introduction of OKR.
Now you know what OKR is and what value it can bring to your organization, you can check the full article and learn how it works.
Originally published at www.perdoo.com on June 9, 2016.