OKR (Objectives and Key Results) is a goal system. It is a simple tool to create alignment and engagement around measurable goals. OKRs are frequently set, tracked, and re-evaluated — usually quarterly. OKR is a simple, fast-cadence process that engages each team’s perspective and creativity.
OKR’s original concept came from Intel and spread to other Silicon Valley companies. Google adopted OKR in 1999, during its first year. It supported Google’s growth from 40 employees to more than 60,000 today.
Besides Google, other companies use OKR, including Spotify, Twitter, LinkedIn, and Airbnb.
No matter what size the company, one of the looming pain points is always limited resources to accomplish all objectives they have in mind. That’s why it’s so important to be able to focus these resources on the right priorities and ensure maximized impact. OKRs provide the benefit of a performance management framework that allows the alignment of company-driven core values and objectives; all of which are delivered with transparency — driving employee engagement.
With OKRs, you don’t have to wait until things aren’t working well to jumpstart change. Transparency breaks the assumption that performance needs to be “managed,” moving focus on sharing the organizational vision. With a deeper understanding of what their efforts are working to achieve, employees become equals, not slots in a hierarchical tree. Everyone is able to see how priorities are progressing at an individual level, all the way up to if the organization is on track as a whole. This creates a visual where teams can reflect on roadblocks, assess current actions and easily document next steps. OKRs take the guesswork out of how each role impacts the next person. As a result of increased visibility, each team can create clear expectations for all interactions. This inspires cross-functional team growth.
Managers can spend less time crunching numbers and more time coaching employees. Everyone on the team works towards value-driven goals; everyone is accountable. OKRs create an internal platform for ongoing dialog in real-time where employees can engage in meaningful-to-them conversations tied directly to their role within the team.
In using OKRs, transparency is inherent. Teams are positioned to know what is important to the organization at all times, meaning they can become agiler. Effective adaptability means a frequent assessment on priorities and replaces a static, annual review of strategy. This makes it easy to adjust priorities throughout the year without having to get caught up in any potential backlogs.
OKRs reflects current business priorities. They are:
- Time-based (Due date)
- Non-numeric (Qualitative)
- Aspirational (Saying this with confidence sounds hard)
- Answers: “What am I working towards without focusing on the tasks that get me there?”
- Empowers and promotes collaboration and cross-functionality
- Has a clear subject, object, and journey that the subject goes through
The components of OKRs
John Doerr is one of the most successful venture capitalists of all time. He started his career at Intel and went on to invest in companies such as Google and Amazon. Doerr, who introduced Google to OKR, has a formula for setting goals:
I will ________ as measured by ____________.
A proper goal has to describe both what you will achieve and how you are going to measure its achievement. The key words here are “as measured by,” since measurement is what makes a goal a goal. Without it, you do not have a goal, all you have is a desire.
Doerr’s formula is the best way to explain the structure of an OKR:
I will (Objective) as measured by (this set of Key Results).
So, as the name implies, OKR has two components, the Objective and the Key Results:
Objectives are memorable qualitative descriptions of what you want to achieve. Objectives should be short, inspirational and engaging. An Objective should motivate and challenge the team
Key Results are a set of metrics that measure your progress towards the Objective. For each Objective, you should have a set of 2 to 5 Key Results. More than that and no one will remember them.
All Key Results have to be quantitative and measurable.
Example. Now consider a team that wants to increase the engagement with a digital service:
Objective: Delight our customers
- Reduce revenue churn (cancellation) from X% to Y%.
- Increase Net Promoter Score from X to Y.
- Improve average weekly visits per active user from X to Y.
- Increase non-paid (organic) traffic to from X to Y.
- Improve engagement (users that complete a full profile) from X to Y.
Once more having a set of Key Results helps create a healthy, sustainable OKR. We want to increase the weekly visits, but we want it to be organic, not through an expansion of marketing spend.
Key Results are crucial. Most of all, they define what we mean by “Delight our customers.” A second team or company could use the same Objective with different Key Results.
The main OKR benefits are:
- Agility: Shorter goal cycles enable faster adjustments and better adaptation to change, increasing innovation and reducing risks and waste.
- Alignment and cross-functional cooperation: The use of shared OKRs improves collaboration among different teams, solving interdependencies and unifying competing initiatives.
- Reduced time for setting goals: OKR simplicity makes the goal setting process faster and easier, drastically reducing the time and resources spent on setting goals.
- Clear communication: Transparency and simplicity enable the team to understand the goals and priorities of the organization as well as how each individual can contribute.
- Employee engagement: OKR bi-directional approach for goal setting connects the employees with the company’s objectives, increasing engagement.
- Autonomy and accountability: Teams receive a clear direction and are free to choose how to achieve their OKRs. They become responsible for their objectives, with clear success criteria known to the whole company, creating mutual obligations.
- Focus and discipline: The reduced number of goals creates focus in the organization and disciplines efforts and initiatives.
- Bolder goals: Decoupling OKRs from compensation and using stretch goals, even partially, enable the team to set bolder, challenging goals.