Devised by Andy Grove at Intel, OKR is a framework for strategy execution and alignment. It provides an approach to setting, measuring and re-evaluating your goals as an organisation, as a business unit and as a team. As Christina Wodtke says in Radical Focus, OKRs “reframe goals from a device to assess performance to one that inspires and amplifies it.”
In simplest terms OKRs are made up of two portions:
Objectives – the qualitative aspect
Key Results – the quantitative aspect.
Objectives communicate an aspirational goal that benefits your organisation, or better still your customer. They should be memorable and inspirational. An example objective:
Provide user support that our customers love
Key Results are the quantitative detail of OKR. Your achievement of an objective is measured by your key results. Key results are the heart of the framework. They should be challenging, as Google founder Larry Page says , OKRs should make people “uncomfortably excited”.
Two example key results that could go with our example objective:
Increase customer queries resolved at first contact from 73% to 90%
Increase customer satisfaction of helpdesk callers from 7.8 to 9.2
Why use OKRs?
- It helps build a stronger link between strategy and execution. Speaking as someone who has worked in both strategy and execution, that link is rarely as strong as it should be. Strategy should be the guiding light, but often it’s divorced from day to day activity. OKR can help fix that.
- They can drive alignment. This is a huge challenge for organisations of all sizes, particularly when you consider different functions. Measurable, iterative goals provide a feedback loop that aligns action to outcomes.
- Reduce unfocused work. Asking the question, “will this activity help move the needle?” helps identify unnecessary work. Don’t confuse this with work that never makes production, a failed experiment isn’t waste, it’s learning.
- Increase accountability. When teams commit to outcomes and publish OKRs it can help you build accountability, but it comes with a word of caution. If teams are measured by their attempt to achieve outcomes, some teams will sandbag. They’ll set goals which are too easy to attain. You should also keep in mind that while OKRs help inform annual reviews, by no means should they be the only input.
- Highlight the need for lead measures of success. Identifying good lead measures of success is one of the biggest challenges in business planning. It’s a truth across a range of industries, cultures and organisations. Finding the metrics that presage our desired outcome is rarely easy. It takes collective skill and collective will. OKRs help teams understand why they are so important. The regular check ins and periodic setting of the key results depends on defining lead measures.
- They build engagement. A Deloitte study found that having “clearly defined goals that are written down and shared freely” is the number one factor in engagement.
OKRs will not fix cultural or systemic organisational problems, which is why I caveated the benefits above. What it can do is help identify them.
Some basic principles of setting OKRs
- Be ambitious. Setting challenging goals is fundamental to OKR. As John Doerr, who introduced OKR to Google, says “OKRs are big, not incremental—we don’t expect to hit all of them”
- Typically you should create between 2 and 5 key results for each objective.
- Key results must be measurable and are ideally articulated as from x (baseline) to y (target).
- Objectives should be succinct and memorable. An example I enjoyed, “Protect the Crown Jewels” referring to reducing privacy of key intellectual property.
- Publish them and share within the organisation. This drives accountability and engagement.
- Check them regularly, the highest performing teams do it weekly or even more frequently.
- Involve the cross-functional teams in setting the goals
- Don’t cascade them. Teams need freedom to set their own OKRs and although they must align with corporate goals, they should not simply reflect the layer above. Cascading also slows things down, a lot! Painstakingly aligning goals through organisational layers takes too long. Of course, senior management will need to agree that the OKRs are appropriate and ambitious enough
A note about cadence
Cadence may differ from organisation to organisation, or even department to department. The critical thing is that you are getting frequent feedback and learning from it. You may set them quarterly and still check in weekly. I describe the OKR cycle as a continuous iteration of Plan, Act, Observe.
Plan your OKRs and the hypotheses for achieving them.
Act on the plans and test your hypotheses.
Observe the results of the actions and tests and feed that back into the planning cycle.
What mistakes will you make?
- The classic mistake I’ve seen is the confusion between outcomes and outputs. OKRs are all about planning outcomes and a lot of traditional planning is based around outputs. It’s a difficult change for many teams to make. This usually manifests itself as key results that are either tasks, features or releases. Classic output Key Results; Release the data integration tool; Engage beta testers; Test 4 designs.
- You won’t invite the cross-functional team, which will mean that key contributors are not committed to your goals.
- You won’t check them regularly and at the end of the period you’ll be scrabbling to find out what you’ve achieved.
- Use OKRs as the main input to performance discussions. This limits experimentation and leads to ‘soft’ goals.
The OKR framework can help organisations achieve better outcomes, through making more conscious prioritisation decisions and helping drive cross-functional alignment.
OKRs are not a silver bullet that will resolve other system or cultural challenges your organisation faces. However, it can help highlight some of them.
Get in touch if you’d like to know more.