The disconnect between strategy and execution is a common headache for leaders across all industries and company sizes. As the complexity of an organization increases, projects and ideas that don’t align with the overall vision often begin to pull attention and funding away from what matters most. Even well-established organizations can get off-track chasing the wrong things.
Objectives and Key Results (OKRs) were created in part as a response to this misalignment, and they power the high-performing, results-driven agile cultures of today’s most successful companies.
So, what are OKRs? Get an overview, a brief history lesson, and learn the difference between OKRs and other common goal-setting approaches. Then, learn how to write OKRs that build Business Agility and help your company thrive during uncertain times.
What Are OKRs?
According to John Doerr, author of Measure What Matters and a “founding father” of OKRs who crafted their name, OKRs are a collaborative goal-setting methodology used by teams and individuals to set challenging, ambitious goals with measurable results. OKRs are how you track progress, create alignment, and encourage engagement around measurable goals.
The History of OKRs
In the late 1970s, Andy Grove was the CEO of Intel, and he developed the OKR framework as a way to improve upon Peter Drucker’s Management By Objectives (MBO). Grove believed that MBO lacked a focus on outcomes and did not provide clear guidance on how individuals could contribute to achieving organizational goals.
Grove’s original name for OKRs was “iMBOs,” for Intel Management by Objectives, and he created some key differences between the two, which he passed along to his close colleague John Doerr. Grove rarely mentioned Objectives without tying them to “Key Results,” a term he seems to have coined himself. Other key differences between MBOs and OKRs are that the latter are quarterly, not annual, and they are divorced from compensation.
Doerr was the one who crafted the name “OKRs.” He introduced the philosophy to Google’s founders in 1999, and it remains a core part of their culture to this day. Since then, OKRs have been adopted by countless top companies around the world. Despite the proliferation of OKRs, many still struggle to understand how they differ from KPIs and SMART goals.
OKRs vs. KPIs
The familiar KPI (or Key Performance Indicator) is a metric, or numerically-based measure of a company’s performance. In the retail space, for example, a common KPI is foot traffic: How many people enter the store in a day. This number is often compared to the daily sales figures to understand the average purchase amount per customer. This is useful data, but it’s not directional. In other words, these indicators demonstrate where you are as a business, but they don’t tell you where you should be going.
OKRs establish the goal (ex: Expand our customer base) and the measure of success (ex: Increase foot traffic in stores by 30%), and can use metrics like KPIs to show whether the Key Result is achieved.
OKRs vs. Smart Goals
Another common tool for traditional organizations is the SMART goal. While both OKRs and SMART goals developed out of the work of Peter Drucker, OKRs differ considerably from SMART goals in both their scope and ambition.
SMART goals tend to focus on a single measure or outcome, while OKRs bring together several measures to achieve an outcome that’s less tangible, yet more important to the overall health of the business. SMART goals also tend to be used to motivate individuals, rather than whole organizations.
The power of OKRs is in their ability to create organizational alignment and clarity. By aligning vision and strategy with execution, OKRs focus on what matters most to an organization, and all goal-setting flows from there.
How to Write OKRs That Win
OKRs are comprised of two parts: The Objective, and the Key Results.
Objectives are the overall goal, stated in simple terms. The objective does not describe the how of the goal, merely the what.
Some powerful, clear and compelling Objectives at the company level can include:
- Delight our customers
- Increase employee retention rates
- Increase revenue in our European division
These Objectives should be slightly daunting from the outset. There are many ways to achieve goals such as these, and every division in the company will be able to contribute their skills to the effort. The Key Results begin to describe the how, while still leaving room for multiple roads to success. They also will always include a measure of success that is clear and quantifiable.
Some Key Results to support these objectives might include:
Delight our customers
- Launch three new concept stores in key markets
- Decrease time-to-resolution at contact centers by 20%
- Increase new merchandise releases to three per quarter
Increase employee retention rates
- Conduct exit interviews with every outgoing employee
- Hold individual and team interviews on Quality of Life for six key divisions
- Plan and implement leadership development training for existing and potential people leaders
Increase revenue in our European division
- Increase headcount in key locations by 30%
- Identify and attend five new events in target cities
- Target contract sizes of no less than $5 million per engagement
So taken together, the formula for an OKR is as simple as this: We will [Objective] as measured by [Key Results].
It’s easy to see that the Key Results may become the specific domain of certain teams or divisions, but they should not be seen as strictly living in one department if collaboration across teams can help to achieve the goal. Because the OKR process is about alignment, when it’s done effectively, it can create real community and team spirit in your organization.
How to Write OKRs That Are Actionable, Time-Bound, and Ambitious
In order for OKRs to be successful, they should follow these three simple tenets: 1) They have a specific timeline, 2) They can be actioned, 3) They’re a little scary (and the teams might fail to realize them). Making OKRs time-bound and actionable makes them realistic and gives teams the impetus they need to act. Making them a little too ambitious gives leeway for blue-sky thinking, and drives innovation that may lead to major wins for the company. Let’s explore the reason behind these tenets in more detail:
1. Choose a goal that’s appropriate for the timeline
While company-level Objectives may cover a year or more, the team-level or individual level OKRs may more likely be quarterly, or yearly goals broken down into quarterly KRs. Right-sizing the Objective and KRs are important at this stage. Ambitious is good, but unreasonable is not. What can the team realistically do in the three-month or twelve-month timeframe? This is an excellent opportunity to examine work-in-process and look for ways to streamline and refocus on the OKR strategy. Many companies implement OKRs without allowing teams to cut down on existing work and projects in order to redirect effort to achieving the goals. This makes OKRs seem impossible, unimportant, or both. To commit to the process, companies must commit time to achieving the Objectives, at every level of the organization.
A timeline-focused OKR could be:
Objective: Close $10 million in contracts by the end of Q4 2023
- Key Result 1: Increase sales outreach touchpoints by 30% in Q2
- Key Result 2: Ensure all sales employees attend no less than three conferences per quarter
- Key Result 3: Increase the number of newsletter subscribers by 50% from Q1 to Q3
2. Action is Cumulative, Not One-and-Done
Good Key Results are outcome-focused, not task-based. If teams are writing KRs that have a “checkbox” feel to them, reexamine the goals to ensure they’re the right actions to prioritize.
Because OKRs are designed to be ambitious, achieving them should be a process. Many experts on OKRs feel that achieving a 70% complete score per goal at the end of the timeframe is an excellent outcome. It tells the team that the goal was doable, but just a little too ambitious for the timeframe or the current capabilities of the team. The 70% score and the reasons for it should be good, actionable feedback for the leadership team to understand where to add resources.
In OKRs, cumulative action is the thing. Teams should be able to chip away at the goal over the timeline given, with a series of big or small wins that contribute to the completion of the KR.
A cumulative OKR for a marketing team might be:
Objective: Increase site conversions by 20%
- Key Result 1: Obtain a base of 50 social media influencers to market product in Q1
- Key Result 2: Increase social media followers by 40% across all platforms by end of Q2
- Key Result 3: Optimize social media ad spend to $4 or less per click in Q3
3. Be Ambitious!
OKRs should be a tool for motivating teams to experiment with new ideas, not punishing them for underachieving on results. When implemented well, they allow for a new operating rhythm in the company. They bring teams together and create transparency that’s unequaled in a siloed, traditional organization. OKRs are at the heart of Agile companies for this reason. Their ability to create a clear vision for stunning success keeps high-performing teams motivated to delight customers and produce innovative products. Great OKRs bridge the gap between what’s possible now and a brighter future.
OKRs are an Agile Transformation Catalyst
Companies scaling Agile usually start by adopting processes to build their products “right,” and at some point need to ensure they’re building the “right” thing. When implemented correctly, OKRs create clarity and transparency, and align strategy and execution to get everyone pulling in the same direction. They serve as the catalyst for a successful Agile Transformation.
Unlock the power of OKRs in your organization with comprehensive OKR training programs now offered by Hyperdrive. Our expert-led OKR training will equip you with the knowledge and skills needed to get your organization strategically aligned and outcome-focused. When implemented correctly, OKRs establish strategic alignment from top to bottom in the organization to ensure funded initiatives help achieve enterprise goals.
How can you make sure you’re funding the “right” things? Once you’ve ignited your Business Agility efforts with OKR training, fuel them with our Lean Portfolio Management (LPM) certification course. LPM isn’t just for Portfolio Managers; it will give anyone the tools to build Business Agility. Learn to fund the right things and create a system that flows.
Watch our past Lunch & Learn Five Things You Must Know About OKRs and get the secrets to success with OKRs. In this presentation, OKRs expert Larry LaSalle shows you how OKRs can create alignment like few other processes, how to avoid common pitfalls, and how to create OKRs that drive successful Business Agility and Change Management efforts. Share the video with your colleagues and learn to create an environment of common goals and shared commitments that will help your company win in today’s competitive market! And if you decide you can’t do it alone, Hyperdrive is ready to provide consulting to strengthen your Agile transformation or Agile staffing options to help build your team.
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