Objectives and Key Results (OKR)

I will ________ as measured by __________.

The brief statement devises a formula that helps fathom an important goal-setting strategy that engages and aligns the teams around measurable goals. Objectives and Key Results (OKR) is a popular goal system assisting organizations and employees to set and execute their goals and strategies. It is a simple and swift management framework that keeps the teams in a constant rhythm ensuring everyone is traversing along a similar path and reaching the desired organizational goal.

Background

The concept of OKR finds its roots in Management by Objectives (MBO) devised by Peter Drucker in 1954. Andrew Grove, the co-founder and then CEO at Intel, refined and translated MBO to a new framework known as OKR. John Doerr joined Intel in 1974 and grasped the concept. While he was an adviser at Google, Doerr implemented the concept that is known to be present-day OKR. It is still used at Google and also reaches other Silicon Valley Companies. The goal management framework gets favorable reception by various digital companies such as Twitter, LinkedIn, Spotify, etc. as well as others including Walmart, Bradstreet, The Guardian, ING Bank, etc.

Components

Doerr’s Goal Formula, “I will _objective_ as measured by _key result_” consists of two basic elements: Objectives and Key Results. Both the components need to be well defined for an effective OKR goal strategy. An objective without carefully curated key results is mere desire but not a goal.

Objective: The qualitative statement elaborating what a company or team desires to achieve is termed an Objective. The objective should not contain quantities or metrics to make it simple and easily understandable by everyone. Objective can also be viewed as a destination on a map that sets the direction for your next travel i.e. goal. Some of the characteristics of an exceptional Objective are:

  • Simple, Sort, and Understandable
  • Brief and Comprehensive
  • Inspirational and Engaging
  • Motivating and Challenging
  • High Impact and Aligned
  • Time Bound
  • Adhere to Organizational Culture
  • Element of Fun

Key Result: A set of quantitative metrics that ensure the progress of a company or team towards the Objective is known as Key Result. The metrics are usually an initial/current value and a final/target value. A range of 2 – 5 measurable key results is utilized to obtain the desired goal. As the number goes beyond this range they become hard to manage and easily forgotten. Key Results can be perceived as mileage indicators on the map that show how close is the destination i.e. Objective. Certain characteristics of fine Key Results are as follows:

  • Quantitative and Measurable
  • Progressive and High Impact
  • Specific and Within Influence
  • Separate from Initiatives
  • At Most 5 Metrics per Objective

Examples

Some examples of Objectives and Key Results will elaborate on the OKR implementation.

Objective

Key Results

A Remarkable Customer Experience

  • Net Promoter Score Increase from N1 to N2 (happy customers recommend more)
  • Repurchase Rate Increase from R1 to R2 (customers frequent visits)
  • Customer Acquisition Cost Maintained below C0 (not an effective result if the above two factors are met at increased cost)

Enhance Sales of Non-Fiction Books

  • Rearrange Non-Fiction Books to Prominent Locations/Shelves, say S0
  • Limit Number of Fiction Books in Next Purchase from F2 to F1
  • Increase sale of Educational Books to M0

Crush Market Competition

  • Crush through Acquisitions
  • Acquire 2 – 3 Small Market Players
  • Get Budget Approval from Stakeholders

Doerr’s Goal Formula also describes the objectives ‘measured by’ key results hence the key results should be defined in terms of some measurable entities. Former Google Vice President, Marissa Mayer states, “If it does not have a number, it is not a Key Result.”

The aforementioned examples manifest this rule, as key results are defined as quantitative and measurable parameters such as N1, N2, R1, R2, C0, S0, etc.

Features and Uniqueness

In comparison to conventional goal systems, the OKR framework is fast-cadence, frequently evaluated, engaging, and creative. It keeps all the team members engaged and aligned with clearly defined priorities. Some of the prominent features of OKR are elaborated as follows:

Simplicity: OKR does not involve complex procedures. It is simple to implement and requires days instead of months. This gives more room for the achievement of objectives. Its non-technical implementation helps all the team members understand and contribute with ease.

Transparency: Transparency allows the OKR of everyone, whether individual or organization, to be shared and visible across the company. In this way, teams understand each other’s goals better and contribute effectively to the overall team’s success.

Agility: Instead of conventional annual goal plans, OKR defines objectives over a shorter cadence. This ensures agility by responding to any changes, adjusting, and optimizing accordingly. Agility enables innovation, adaptation, and risk management.

Rhythmic Cadence: Based on the type of OKR, they are usually categorized into 3 cadences: annual, quarterly, and weekly. The organization’s OKRs are purely directional and strategic so they are annual. The teams’ OKRs are tactical so usually short-term and accessed quarterly. The OKRs to monitor results and initiatives i.e. operational OKRs are usually crafted on weekly basis. This makes sense as the company’s OKRs can be adjusted if tactical and operational OKRs are not progressing well.

Bidirectional: The traditional frameworks utilize a command & control mindset spanning a one-way top-down approach. This cascading costs time and resources and lacks agility and alignment. Laszlo Bock, former Google Vice President expresses, “Having goals improves performance. Spending hours cascading goals up and down the company, however, does not”. Hence OKRs are non-cascading and bidirectional utilizing top-down and bottom-up approaches simultaneously with 60% of companies preferring the bottom-up approach.

Alignment and Cross-functional Cooperation: The two-way flow process and accessibility of OKRs to each team member lead to alignment in the team or company. This also emerges the cooperation and collaboration among individuals and teams leading to better understanding and execution of goals.

Autonomy and Accountability: All individuals have the autonomy to set their objectives and devise their unique key results to reach them. The OKRs are aligned with the company’s goals but teams are free to choose their way to achieve them. Consequently, the teams and individuals develop a keen sense of responsibility towards their mutual obligations.

Decoupling Rewards: Companies should be vigilant in considering OKR a management tool, not an employee evaluation tool. Decoupling OKR from compensations is vital to promote bolder, ambitious, and challenging goals. Fear of losing money or promotions should not discourage employees from setting striking goals. Andy Grove, Intel’s former CEO believes that “It is not a legal document upon which to base a performance review, but should be just one input used to determine how well an individual is doing.”

Moonshot Goal

In 1961, the sole goal of NASA was, “Before the decade is out, land a man on the moon and return him safely to earth”. The goal termed Moonshot is coined by John F Kennedy’s statement, “America should put a man on the moon.” Setting the ultimate goal acts as a North Star for an organization, aligning all their goals to a single yet ambitious ultimate goal. Such goals are termed moonshots or stretch goals. Google throws light on stretch goals as, “We set ourselves goals we know we can’t reach yet, because we know that by stretching to meet them we can get further than we expected”. If a company meets 100% of its goals it is not setting ambitious goals as the success rate of moonshots is 60% – 70% according to Rick Klau, Google Ventures Startup Lab partner. Whereas there should be other predictable goals known as roofshots with a 100% success rate. Some of the examples of ultimate goals are,

  • SpaceX: Make humankind interplanetary
  • Amazon: Build the most customer-centric store that sells everything

Adoption

A company’s dynamics do not change over time. It takes some time for any organization to implement OKR. Adoption of OKR is a slow process but reaps benefits if implemented properly over time. Mostly beginners make the mistake of imitating OKRs of fully operational setups and fail massively at it. OKRs are formulated and managed according to organizations’ needs as a small setup’s goals cannot be compared to established firms. Everyone should implement customized OKRs that change over time. The change should also be incremental not abrupt. Regular meetings and discussions need to be conducted to make the best choices given the present circumstances of the company. Implement new decisions and innovations as the OKR model matures. Do not begin with moonshots in the first place but go for roofshots. Take time to understand and implement the model effectively and let it mature then target for moonshots. The promotions and compensations should not be impacted by OKRs unless it is mature and understood by every employee.

Common Flaws

Certain flaws and mistakes while curating the OKRs reduce the credibility:

  • OKR should contain measurable value-based key results, not just activity-based tasks.
  • OKRs should be accessed regularly and not forgotten like new year resolutions.
  • Setting too many OKRs like daily tasks whereas they should be the most important ones in a quarter.
  • Setting individual OKRs that are not aligned with team or company’s OKRs.