Introduction to OKRs
Large organizations such as Google, Twitter and LinkedIn introduced objectives and key results (OKRs) to help them accomplish their goals. Nowadays, OKRs have become the “de facto” methodology for companies around the world to plan and execute their strategic goals.
Discover what OKRs are and how to use them in your business.
Definition
OKRs (Objectives and Key Results) are a goal-setting technique utilized by thousands of companies globally. It is an established framework for achieving alignment, transparency and engagement around quantifiable and ambitious goals.
What’s the key difference between traditional planning methods? OKRs are set, tracked, and re-evaluated on a regular basis, usually quarterly. OKR is a straightforward, fast-paced method that taps into each team’s unique viewpoint and creativity. OKR exists to create alignment and to set the cadence for the organisation. The idea is for everyone to be moving in the same direction, with clear priorities, and at a steady pace.
History
OKR’s original concept came from Intel and spread to other Silicon Valley companies. Google adopted OKR in 1999, during its first year. It supported Google’s growth from 40 employees to more than 60,000 today.
Companies use OKRs?
Besides Google, other companies use OKR, including Spotify, Twitter, LinkedIn, and Airbnb. But OKR is not only for tech companies. Walmart, Target, The Guardian, Dun & Bradstreet, and ING Bank are also using OKRs.
Understanding the OKR Components
John Doerr is one of the most successful venture capitalists of all time. He started his career at Intel and went on to invest in companies such as Google and Amazon. Doerr, who introduced Google to OKR, has a formula for setting goals.
Doerr’s Goal Formula I will ____________________ as measured by _______________________.
A proper goal has to describe both what you will achieve and how you are going to measure its achievement. The key words here are “as measured by,” since measurement is what makes a goal a goal. Without it, you do not have a goal; all you have is a desire.
Doerr’s formula is the best way to explain the structure of an OKR:
I will be (objective) as measured by (this set of key results).
So, as the name implies, OKR has two components: the objective and the key results.
Objectives are memorable, qualitative descriptions of what you want to achieve. Objectives should be short, inspirational, and engaging. An objective should motivate and challenge the team.
Key Results are a set of metrics that measure your progress toward the objective. For each objective, you should have a set of 2 to 5 key results. More than that, no one will remember them.
Example One
First of all, we need an objective. An example might be
“Create an Awesome Customer Experience.”
This sounds great, but how would you know if the experience is awesome? Remember, without measurement, you don’t have a goal.
That is why we need key results.
How can we measure if we are providing an awesome customer experience? Net Promoter Score and Repurchase Rate would be two good options. Do our customers feel so good about dealing with us that they would recommend us and buy again?
But measuring NPS and repeat purchases alone can send the wrong message. It might encourage us to make the customer happy at any cost.
Therefore, we can include a countermeasure such as a customer acquisition cost. We want to make our customers happy while keeping the costs under control.
OBJECTIVE
Create an Awesome Customer Experience.
KEY RESULT 1
Improve the Net Promoter Score from X to Y.
KEY RESULT 2
Increase the repurchase rate from X to Y.
KEY RESULT 3
Maintain Customer Acquisition cost under Y.
KEY RESULT 4
Increase non-paid (organic) traffic from X to Y.
KEY RESULT 5
Improve engagement (users that complete a full profile) from X to Y.
Example two
Now consider a team that wants to increase engagement with a digital service:
OBJECTIVE
Delight our customers
KEY RESULT 1
Reduce revenue churn (cancellation) from X% to Y%.
KEY RESULT 2
Increase the Net Promoter Score from X to Y.
KEY RESULT 3
Improve the average weekly visits per active user from X to Y.
KEY RESULT 5
Increase non-paid (organic) traffic from X to Y.
KEY RESULT 4
Improve engagement (users that complete a full profile) from X to Y.
Once more, having a set of key results helps create a healthy, sustainable OKR. We want to increase the weekly visits, but we want it to be organic, not through an expansion of marketing spend. Key results are crucial. Most of all, they define what we mean by “delight our customers.” A second team or company could use the same objective with different key results.
There is not a single way to use OKR; each company or team can adapt and tweak it, creating different versions of it. But there are some core concepts:
What’s unique about OKR?
There is not a single way to use OKR, each company or team can adapt and tweak it, creating different versions of it. But there are some core concepts:
Agile Goals
OKR uses an agile strategy rather than annual static planning. Companies may adapt and respond to change by employing shorter goal cycles.
Simplicity
The OKRs methodology is simple to comprehend and work with. Companies that use OKR reduce the time it takes to set goals from several months to just a few days. As a result, rather than spending time setting up goals, companies devote their resources in accomplishing them.
Transparency
The main idea of OKR is to achieve organisational alignment and transparency. For this reason, OKRs are public at all levels of the organisation. This means everyone has access to everyone else's OKRs.
Nested Cadences
It is crucial to acknowledge that organizations can customize their cadences based to their needs. For example, one organization may deploy a six-month strategy cycle while its teams utilize four-week cycles. Weey uses nested cadences to solve this: - A strategic cadence for the company with high-level, longer-term OKRs (e.g. annual). - A tactical cadence with teams' shorter-term OKRs (e.g. quarterly). - An operational cadence for tracking outcomes and initiatives (e.g. weekly).
Bidirectional Goal Setting
Instead of the standard top-down cascade strategy, OKR adopts a market-based approach that is both bottom-up and top-down. This way teams can understand how they can contribute to the broader plan by reviewing the company's strategic OKRs. Approximately 60% of tactical OKRs are created by teams in accordance with corporate goals and then negotiated with management throughout this process. This methodology creates higher involvement and a deeper understanding of the strategy while simplifying and accelerating the process.
Ambitious Goals
The idea is that when organisations consistently achieve 100% of their goals, it means these goals are too simple and easy. Instead, OKR focuses on bold, ambitious goals. OKRs aim at empowering the team to establish challenging goals. Goals that motivate the team to reconsider how they operate in order to attain optimum results.
Decoupling Rewards
It is critical to separate OKR accomplishment from remuneration and promotions in order to attain ambitious goals. Employees must understand that they will not lose money or promotions if they set ambitious goals that are not met. OKR is a management tool, not a tool for employee assessment.
Guidelines for creating effective OKRs
Objectives:
First and foremost, objectives should be simple, brief, and easy to remember.
Second, goals should not be dull. They may be informal and enjoyable while yet fitting the organizational culture.
Key results:
Distinguish metrics from tasks.
Create a few of them. Typically, between 2 and 5 Key results for each objective.
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