What are OKRs and the history of OKRs?
OKR is a robust goal-setting and management framework used by companies, businesses, organizations, and individuals in various fields of industry. It is an acronym that stands for Objectives and Key Results. Objectives are goals or missions that align with your organization’s vision, while the key results indicate your progress toward achieving stated objectives.
Key results are not tasks but measurable milestones when accomplishing your goals.
However, to achieve such results, you need aligned projects or tasks called initiatives.
One would correctly assume that OKR is based on outcome and not output. The methodology is used to set and track goals, improve efficiency and productivity, achieve total alignment, and more.
The Objective, Key results methodology was first developed by Andrew Grove, after which he introduced it to Intel in the 1970s. Intel achieved great success using the framework. John Doerr, a former member of Intel’s management team, introduced it to Google in 1999, where they achieved outstanding success. Google further modified the framework and fully incorporated it into its ethos.
In this article, you will learn more about the OKR methodology, its benefits, how to set them, and much more.
Benefits of OKRs to the employees and company
OKR is elegantly simple: The OKR methodology is simple but very powerful. The system breaks down objectives into small, achievable goals. OKR ensures that workers are not overwhelmed with responsibility and can achieve success at a sustainable pace.
Improves productivity and efficiency: Workers using the OKR methodology have clearly defined metrics for success, and they align their efforts to achieve results- This enhances efficiency and productivity in the company. A byproduct of this effect is that it reduces managerial or supervisory pressure on managers, team leads, etc.
Improved alignment and focus across the board: Although all departments work on different projects at once, they all work synergistically to achieve the company’s vision and objectives.
Improved accountability: OKRs can be used on all levels, from the management to the individual level- making every party fully accountable for their actions and responsibilities.
OKR fosters ingenuity: Enhancing creativity is one of the principles of the Objectives-Key results methodology- and this can provide the cutting-edge needed for companies to exceed in a highly competitive environment.
High adaptability to changes in the market: Companies that adopt OKR are highly adaptable and more resilient to perturbations thanks to its long and short-term effectiveness.
Types of OKRs
You can categorize OKRs based on the nature of the objectives and the time frame. In terms of the time frame, you have long-term and short-term OKRs. Long-term OKRs are typically set annually, compared to quarterly, as with short-term OKRs.
While long-term and short-term objectives differ in completion time, they may represent the same philosophy and require the same effort, especially when not done right.
The most reliable basis for classifying OKRs are:
Aspirational OKRs: If you aim for the stars and fail, you will land on the moon- this is the driving force behind aspirational OKRs. Aspirational goals, or moonshots, are designed to be impossible or very challenging to achieve, meaning there might not be a clear path to success, or it is outside the financial/economic scope of the organization or market.
The goal here is not to give your employees a wild goose chase but to foster out-of-the-box thinking and creativity. This further improves all company processes and operations.
Committed OKRs: Committed OKRs are also known as roof shots. As the name suggests, they are more down to earth- meaning they have a lower ceiling for goal setting. They are easier to achieve and demand a score of 100%, compared to 60-70% for aspirational OKRS.
However, committed OKRs still push all stakeholders to go beyond the norm (as doing otherwise goes against the concept of OKR).
What is OKR cadence?
In simple terms, OKR cadence refers to the timeframe for updating key results and objectives. This could be weekly, monthly, quarterly, etc.
How to choose the right cadence?
OKR is a highly flexible methodology that can be tweaked according to your unique managerial and financial needs. The most commonly adopted cadence for OKR is quarterly. Companies such as Google adopt annual and quarterly OKRs (showing their long and short-term effectiveness.)
In your case, some of the deciding factors that may affect the cadence are the size and type of your business and the market environment. For instance, if your industry is characterized by frequent perturbations, setting short-term OKRs may be advantageous.
What is an OKR cycle?
An OKR cycle consists of three phases in which you set goals, align your company and teams, and achieve said goals.
How to set OKRs? Some tips to get started with OKRs.
When setting OKRs, it is best to follow the SMART system, i.e., they must be specific, measurable, achievable, relevant, and time-bound.
Start with a clear and simple objective in line with your organization’s vision- this may include all major stakeholders, depending on the level. The next step is to develop well-informed results that will guide you to success.
After setting an overarching objective and key results (which could be long or short-term), communicate and cascade your OKRS to other departments in your company/business.
To improve collaboration and team contribution, you may take a bottom-up approach for OKRs at managerial levels. This entails prioritizing team input when creating goals or mission statements to drive the team forward. Using this strategy among staff imbibes a sense of purpose and contribution to the greater good of the company or organization.
Another tip for young companies or organizations newly adopting OKRs is to start with committed and not aspirational OKRs. Setting moonshots can discourage workers or staff not accustomed to the rhythm and challenges they present. After the employees have gotten a full grasp of the concept, they can advance to more challenging and lofty goals.
Regularly review and update the objectives and results when needed.
Examples of OKRs
OKRs consist of an objective and several key results. The marketing department for a mattress production company may set its OKR as thus:
Objectives: Improve social media engagement.
Increase followership by 200% on all platforms.
Increase CTR from 3% to 6%.
Post 30 SEO-optimized articles on our blog for the next quarter.
Average 400 comments a day.
As expected, other departments will require different OKRs to align with the company vision. Below are some additional examples of OKRs.
The chief finance officer for your company may set OKRs as such:
Objectives: Improve the financial health of the company.
Reduce Days Sales Outstanding from 35 to 25.
Reduce company expenses by 2%.
Increase net profit by 5%.
A frontend engineer developing your company site may set the following OKRs.
Objectives: Make the company site more user-friendly.
Hire a UI/UX designer.
Improve loading time by 20%.
Hire an SEO specialist to deliver optimized content.
How do OKRs help with alignment?
OKR provides overarching objectives and key results, providing a clear direction for all stakeholders involved. Departments, teams, and individuals further work together to achieve said goals by setting relevant objectives and key results, either following the top-down or bottom-up approach.
What is the right approach to OKRs?
When setting objectives and key results, organizations can take either of two approaches:
Top-down approach: As the name suggests, the top-down approach starts with the highest levels of management. With this approach, the CEOs or managers set the objectives and key results for the companies, and other departments or lower levels on the managerial hierarchy set theirs accordingly.
Bottom-up approach: This approach takes a different direction from the top-down approach. Here, teams and departments set their OKRs based on the company or organization’s visions and long-term objectives, e.g., annual OKRs. However, teams and other employees must fully understand the vision or objectives of the company to set the right OKRs.
Both approaches have pros and cons, and leaders must be fully aware of them, their company’s strengths, culture, mode of business, and goals before making a decision.
How to identify if OKRs are good or bad?
As mentioned above, a company will need OKRs at various levels to work in alignment to achieve its objectives. Therefore, all departments must be on board and write effective OKRs.
One of the key ways to identify whether your OKR is good or bad is to start with the objective(s). Objectives must be clearly stated and not use vague language, and the same rule applies to the key results. As mentioned and stated in the example above, your objectives must be measurable and realistic.
Another factor that may indicate that you are using bad OKRs is when objectives or goals are not challenging enough. One of the core tenets of the methodology is to challenge individuals to push themselves and foster creativity. In the first example stated above, a top-performing leader in the industry should have a click-through rate (CTR) of 6-7%. In the case of a new company, this metric is achievable but very challenging.
Teams should not overwhelm members with different OKRSs as this can cause them to lose focus and reduce productivity. The methodology isn’t meant to track initiatives or activities but focus on things that matter.
When setting OKRs, it is crucial to avoid the common pitfalls listed below.
What are the common mistakes you must avoid?
- Using vague statements to define goals and objectives: Using obfuscating or vague statements can be confusing and gives no clear sense of direction. This implies that the rest of your team or other departments will have misaligned OKRs. While objectives may be more aspirational, key results have to be highly specific and measurable.
- Taking only the top-down approach: While taking a top-down approach seems like a natural approach, companies should not be quick to disregard the bottom-up approach, especially when setting quarterly OKRs, or with a company that has well-adopted the framework.
- Not tracking weekly progress: As a methodology that prioritizes what matters the most to your organization, tracking your progress is a key aspect of achieving results.
For guaranteed sustainability and success, managers should review OKRs weekly or biweekly when constrained.
- Not setting a directly responsible individual: Having OKR champions and ambassadors is crucial for achieving success with the methodology.
- Having too many key results: Too many key results and objectives can distract and cause employees to lose sight of vital outcomes that are paramount to achieving vital goals for your business.
Output VS outcome
Treating results as tasks and not outcomes is a common mistake. Key results are the desired outcomes that your objectives demand. They supersede daily tasks, and cannot and should not be treated as such. For instance, many key results cannot be achieved with a single task. They require several initiatives, time and effort, and teamwork from other individuals.
This means that teams and organizations that adopt OKR must be focused on changes or the outcome of their efforts rather than the number of activities carried out, as performing different tasks doesn’t equate to progress or growth if you cannot reach pertinent milestones.
What are OKR tools?
OKR tools are dedicated software packages, tools, and solutions used to implement your organization’s goal management system. All companies need a capable framework for setting, tracking, reporting, and reviewing goals, objectives, key results, initiatives, etc. The simplest of these tools are spreadsheets and other shared software.
Why should you use dedicated OKR software?
Companies and organizations that use OKR enhance their effectiveness by adopting robust software tools. As expected, OKR software provides a centralized virtual platform for setting, tracking, and managing your goals, results, and initiatives.
Traditional methods for OKR such as excel and Google spreadsheets (P.S. Even Google doesn’t use spreadsheets for its OKR) present many challenges.
Spreadsheets offer a manual and archaic method for tracking and updating progress and cascading responsibilities that is ineffective for large or well-established organizations. The manual process is also cumbersome, slow, and error-prone. OKR software offers the following advantages over conventional tools.
- Better alignment of goals and tasks.
- Enhanced collaboration.
- Improved transparency and accountability.
- Better progress tracking and reporting systems.
- Improved analytics.
How to determine the success or effectiveness of your OKR?
To measure progress and success, you need a grading and tracking system. You can grade your OKRs using any suitable metric. For instance, you may use a 0-1, 0-100%, or A-F system. A simple way to measure performance is by dividing the actual outcomes (measurable) by the key results.
For instance, if your marketing team intended to increase followership on all social media platforms by 200% and, you add an actual increase of 140% in the last quarter, you have an OKR score of 0.7 for that key result, which falls within the acceptable range of 0.6-0.7.
OKR tracking entails reviewing your objectives and results to monitor performance and ensure everyone is on track on your journey to progress- this involves regular review meetings and an end-of-cycle meeting to review the past quarter or year. During these meetings, employees, supervisors, and leaders evaluate performance, highlight blockers, tweak OKRs and ensure alignment.
OKR is a simple yet powerful goal management methodology adopted by top companies, organizations, and businesses globally. The framework has revolutionized how businesses set and achieve goals and objectives.
The benefits it offers cut across all levels of management. It enhances alignment and focus, fosters ingenuity and adaptability, improves accountability, and bolsters productivity. All these factors make it an indispensable framework for organizations that want to shift to a modern, efficient, and agile system for achieving short and long-term goals.