A CEO would succeed at aligning everyone in the company’s environment and driving them in a linear course when company goals are made public and accessible to every team and individual to work towards. This is the base concept of the popular tool known as Objectives and Key Results, or simply OKRs.
OKRs help organizations and individuals to focus on results and arrange them in an itinerary in order to arrive at the desired goal.
Today, its use is very popular with most successful companies including Google, LinkedIn, Twitter, Airbnb, and others adopting this goal management tool. However, this concept was not recently founded. Its history goes down to decades ago when early founders sought a way to set and drive all teams towards precise objectives.
A brief history of OKRs
The OKR framework was originally developed by Andrew Grove who was the co-founder of Intel in 1968.((Perdoo. The Ultimate OKR guide. Perdoo Retrieved 18 September 2021. https://www.perdoo.com/okr-guide/)) At the time, Andrew was regarded as one of the greatest managers of his era. He had originally glimpsed his new method of management from an earlier framework that was developed by Peter Drucker in 1954. Peter’s framework, which was called Management by Objectives or “MBO”, was the runway that gave ground for Andrew’s new concept to fly.
At a classic Andrew Grove’s presentation of his invention, he had explained that “objectives are the direction and key results were measurable checklists so that at the end of the day, you can assess and see if you achieved your objectives or not.”((TED. Why the secret to success is setting the right goals. Youtube. https://www.youtube.com/watch?v=L4N1q4RNi9I&t=501s))
In 1975, computer engineer John Doerr was working for Andrew at Intel under whose tutelage he learned the implementation of objectives and key results. It was John who eventually mastered and coined the term Objectives and Key Results. John later introduced OKRs to Google co-founders, Larry Page and Sergey Brin in 1999. The young founders adopted the system, and since then, Google has utilized OKRs in creating its objectives and driving the company to become the tech giant we can all see today.
What Are OKRs?
OKR is an acronym for Objective and Key Results. It is a collaborative management tool that is used to strategize by aiming at objectives measured with key results.((Ryan Panchadsaram, Sam Prince. What is an OKR? Definition and examples. What Matters. Retrieved 18 September 2021 https://www.whatmatters.com/faqs/okr-meaning-definition-example/)) OKRs visualize a company’s goals and make them public, using measurable declarations to set a mark for the company to meet. They are often ambitious, specific, transparent, measurable, and aligned to ensure that all team members are driven in the same direction.
The Objectives and Key Results framework can also be adapted to individual goals as well. It would help individuals figure out their priorities and embark on creative ways to achieve them and measure up at the end of the day.
However, for both companies and individuals, OKRs come about from a very precise process. It is a framework that is made up of three components namely: Objectives, Key Results, and Initiatives.
Objectives speak about “what” you want to achieve, while Key Results are the answers to “how” you can achieve your objectives. The third component, Initiatives are exactly “what” you need to do to attain those key results. An in-depth look into all three components will define their structure, characteristics and give examples of how they can be represented to drive the point home.
Objectives
Objectives are likened to a destination on the map. It is where the company visualizes itself and decides to gather all of its resources, ready-to-go, and it is the statement that points the direction that the company has decided to follow.
Characteristics of Objectives
- An objective at its rawest form is usually a desire. It is what the company wishes to achieve. However, they should be devoid of any metric or technical language to ensure clarity across the board.
- Objectives should have a high impact. Team members will be able to glean a sense of the value from the objectives and see it as something of which success would lead to a shared achievement.
- Objectives are inspirational.
The popular practice is for teams to set objectives every quarter and re-evaluate at the end of each quarter.((Felipe Castro. 3 August 2016. How to find the right OKR cadence. Perdoo. Retrieved on 18 September 2021. https://www.perdoo.com/resources/okr-cadence/)) Setting OKRs within this time frame sustains focus in a team and at the same time, encourages regular evaluations of OKRs. With regular evaluations, teams can see which initiatives are working and which aren’t, and set new OKRs in that respect.((Perdoo. The Ultimate OKR guide. Perdoo Retrieved 18 September 2021. https://www.perdoo.com/okr-guide/))
Examples of Objectives
- Create the largest educational resource tool
- Optimize user experience to the easiest adaptability across all devices
- Create a user-oriented web client to be used all around the world
Key Results
Key results are the dotted lines on the map that measures progress towards the destination. It is a signpost that tells all team members how much further they are from the company’s goal. In fact, set objectives would be no more than “fuzzy wishes” if there are no proper key results attached to them.
It is advisable to have 2-5 key results per objective as they may be difficult for team members to remember if they are any more than 5.((Felipe Castro. What is OKR? OKR. Retrieved on 18 September 2021. https://felipecastro.com/en/okr/what-is-okr/))
Characteristics of Key Results
- Key results are always specific and clear in terms of how an objective will be met.
- They reflect a measurable value that signifies progress.
- They are time-bound.
- Key results should also be ambitious and should drive productivity to reach levels that even surpass rationale. Even if they are not reached, or they are impossible to reach, at least some progress would have been made and key results are there to attest to that.
Examples of Key Results
- Get 2 million daily users
- Translate product into 6 different languages
- Reduce user-flows to 6 frames
Initiatives
Initiatives are the steps taken to every signpost along the way to the destination. In other words, they are the actual tasks and projects done to attain key results.
Purposefully or otherwise, all OKR frameworks will include Initiatives. However, they do not all necessarily set initiatives as part of their goal management because they probably do not see the importance of doing so.
Initiatives are basically hypotheses of tasks that might bring the company closer to its set key results. Their success or failure do not directly add to that of the Objectives and Key Results. For prime optimization, initiatives should be monitored and any that doesn’t seem to be working to meet the key results should be altered and changed accordingly.
Characteristics of Initiatives
- An initiative must be critically specific. The task must be critically defined without leaving out any details, and it must be totally understood by the team member who is to undertake it. There is no room for ambiguous terms, like; improve, develop, increase. Tasks should be assigned with more instructions like; write, launch, edit, design, fix, e.t.c.
Examples of Initiatives
- Shoot a video promotion ad
- Merge two UI frames into a single frame
- Employ a native German-speaking developer who can translate from English to German.
The Differences Between OKR and KPI
Measuring performances are important in identifying what gears are running smoothly, and areas that need extra attention. With several metrics needing to be calculated, it is possible to confuse or forgo one for the other when they are very distinct systems.
As it has been stated earlier, OKR is a management tool that helps to create transparent objectives. KPI, on the other hand, is an acronym for Key Performance Indicator. It is a system that sets targets to meet and monitors how a task, company, team, or individual is performing towards meeting those goals.((Weekdone. OKR vs KPI: What is the difference? Weekdone. Retrieved on 18 September 2021. https://weekdone.com/okr-comparison/okr-vs-kpi))
While Objective and Key Result is a collaborative system that improves performance, Key Performance Indicators are set by executives and are metrics used to reflect performance. KPIs measure performances periodically, but do not include information about how to improve those performances. OKRs on the other hand can help make clear objectives and strategies that target the improvement of performance.
There are other structural and functional differences between these two.((Weekdone. OKR vs KPI: What is the difference? Weekdone. Retrieved on 18 September 2021. https://weekdone.com/okr-comparison/okr-vs-kpi)) However, what is important is that they can be merged to help executives better run their businesses.
Benefits of OKR
Good team culture
OKR is a collaborative system, and the success of its strategies depends on the orientation of the team. By driving the idea of a collectively achieved success, OKR helps create a mutual understanding among employees and team members.
Alignment with company objectives
Company executives can create an idea of the company’s direction and have teams collaborate and come up with OKRs to improve the company.
Reducing waste
Group OKRs allow for regular evaluations that help to identify parts of the process that are needless or wasteful. For example, with the collaboration of ideas and input, a redundant step in the user flow can be identified and resolved.
Identifying priorities
With OKRs executives can identify initiatives that drive the company towards better results. When such an initiative is identified, making it a priority for all members of the team to work on may lead to surpassing the key result that has been set, and attaining set goals.
Return on investment
A recent study shows that employees that have adopted OKRs have found more success at their jobs than employees who didn’t.((Henrik-Jan van der Pol. 17 July 2017. The ROI of goal management. Perdoo. Retrieved on 18 September 2021. https://www.perdoo.com/resources/roi-goal-management/)) What this means for companies that adopt OKRs is an assured return on their investments. Successful and satisfied employees will always mean better results for the company as a whole.
Implementing OKR in Your Organization
When deciding to implement OKR in your organization, it is important for executives to first have a clear idea of the issues you are trying to tackle. A proper understanding of the problems would lead to the correct conclusion of goals to improve them.
OKR is a collaborative tool, and it would naturally take collective input to arrive at the best results. Many of its benefits are subjective and broad, and they require proper implementation. For example, transparency and accountability might mean different things to different team members.
Also, some initiatives may be too experimental, and it would be difficult to find an expert who can undertake the task fully.
There are several practices, however, that should be in place when implementing OKRs in order to reduce the risks of failure.
Establish an ultimate goal
An ultimate goal could represent where you see your company 20 years from now. It is a long-term goal that visualizes the future from the present and guides all planning and execution that would follow. OKRs would thrive and be consistent under an ultimate goal because all decisions would be kept under its scope.
Select the right cadence
There are two types of OKR cadences: Annual and quarterly cadences.
Companies usually set and re-evaluate their objectives annually, while teams, groups, and individuals set quarterly objectives to be re-evaluated at the start of new quarters.
Company OKRs
Company OKRs are described as directional. That is, they set a directional objective for the company.
They are to be re-evaluated annually but could last for up to 3 years, depending on the pace of the company.
When setting company OKRs, it is important to obtain the input of all individuals in the company. An OKR workshop is usually organized, where every employee has the chance to suggest inputs to improve company strategy. These inputs can thereafter be sorted and considered by top company executives. At the end of the day, the workshop should be able to arrive at 5 OKRs that would drive the company for the next year.
Note that all OKRs concluded during the workshop should be made public to every individual in the company, to create a structural alignment on the goals that the company has set to achieve.
Team, Group, or Individual OKRs
Team, group, or individual OKRs are known as tactical OKRs and reflect the strategies that would be used to reach the company’s long-term objectives. The scope of the team and individual OKRs allows them to focus strictly on their OKRs. And in the event that other tasks need to be done, items on the team OKR remain a priority.
Team OKRs should be re-evaluated quarterly, as they contain more short-term strategies than company OKRs.
