OKR (Objectives and Key Results) is a flexible approach to goal setting and achievement that stands out from traditional management methods. It suits companies that need an adaptive, transparent, and motivating system for managing their strategic initiatives.
Initially developed at Intel by Andy Grove and popularized by John Doerr in Google, the OKR approach has spread globally, becoming a cornerstone of success for dynamic and innovative companies, such as Amazon, LinkedIn, and Netflix.
Key Differences of OKR
Flexibility and Adaptability
- OKR: Allows for rapid adaptation of goals based on changes in business, market, or strategy. Companies can review their OKRs quarterly or even more frequently to stay relevant and aligned with the current situation.
- Traditional Methods (KPI): Typically more rigid and based on annual plans, making them less flexible when conditions change.
Focus on Measurable Results
- OKR: Each Objective is accompanied by specific, measurable Key Results, which clearly define how the goal will be achieved.
- Traditional Methods: Often use general, non-specific goals, making it difficult to measure progress and success.
Transparency and Engagement
- OKR: Transparent at all company levels. All employees can see the goals and key results of their colleagues, fostering greater synergy and mutual support.
- Traditional Methods: Goals and tasks are usually top-down and may be known only to certain groups, reducing overall engagement and understanding.
Ambition
- OKR: Encourages setting ambitious goals that should inspire and motivate, even if they are achieved at 60-70%.
- Traditional Methods: Often focus on achieving 100% of set goals, which can limit innovation and bold approaches.
Short-Term Cycles
- OKR: Operates on short-term cycles, usually quarterly, allowing for more regular assessment and adjustment of goals.
- Traditional Methods: Oriented towards long-term cycles, such as annual plans, which may be less effective in a rapidly changing environment.
The OKR Process
The OKR process includes three key components:
- Drafting OKRs
- Alignment
- Monitoring
Let’s delve into each stage:
1. Drafring OKRs
The process starts with defining clear objectives - well-defined tasks or goals and identifying one or more key results - specific metrics used to track the achievement of the objective. The essence of OKR is to outline how to achieve goals through specific, measurable actions. Key results can be quantified on a scale of 0-100% or in any numeric unit (e.g., dollars, percentages, units, etc.). Objectives should also be supported by initiatives - plans and activities that help achieve the objectives and advance key results.
2. Alignment
Alignment can be vertical or horizontal:
Vertical Alignment ensures the integration of OKRs across different organizational levels so that individual employee goals align with team objectives, and team goals align with company objectives.
Vertical alignment occurs in two forms:
Vertical Alignment ensures the integration of OKRs across different organizational levels so that individual employee goals align with team objectives, and team goals align with company objectives.
Vertical alignment occurs in two forms:
- W-shaped “Top-down”: Company-level OKRs are initially set, then cascaded to team levels. Teams align their OKRs with corporate objectives, after which all objectives are reviewed and adjusted if necessary, and work begins.
- M-shaped “Bottom-up”: OKRs are initially set at the team level and then reviewed at the corporate level to align with its objectives. Corporate OKRs are then established and cascaded back to the team level for final alignment before work commences.
Horizontal Alignment ensures the coordination of OKRs across different teams and/or departments within the company to synchronize efforts and avoid conflicts of interest.
3. Monitoring
OKR Cadence refers to the period during which goals and key results are established, tracked, and evaluated to synchronize efforts within a team or company.
OKRs can be annual or quarterly. Typically, OKRs follow a three-month cycle—each quarter. Progress is reviewed weekly, allowing for a concentrated focus on achieving objectives.
Criteria for OKR Setting
Objective Criteria:
Key Result Criteria:
Doerr’s Formula for setting OKRs is:
"We will achieve [Objective] measured by [Key Results]."
OKRs can be annual or quarterly. Typically, OKRs follow a three-month cycle—each quarter. Progress is reviewed weekly, allowing for a concentrated focus on achieving objectives.
Criteria for OKR Setting
Objective Criteria:
- Clear, ambitious, and motivating
- Unambiguous and easy to understand
- Limit to 3-5 objectives per unit (department, team)
Key Result Criteria:
- Action-based Key Results measure the completion of tasks, stages, or project outcomes. Typically start with verbs like: launch, create, develop, deliver, compile, define, release, test, prepare, plan.
- Value-based Key Results measure outcomes of successful actions quantitatively. Typically start with verbs like: achieve (value)/ increase (range).
- Limit to 5 Key Results per objective.
Doerr’s Formula for setting OKRs is:
"We will achieve [Objective] measured by [Key Results]."
OKR Example
Improve the Efficiency of Training New Support Engineers:
- Reduce the training period for interns to two months.
- Decrease financial costs of training by 30%.
- Achieve a trainee satisfaction score of 4.5 out of 5.
- Maintain customer satisfaction at a level of 4.8 out of 5.
Secrets to OKR Effectiveness
- No correlation between the level of OKR achievement and financial compensation: linking Rewards to OKRs via KPIs can lead to the setting of initially lower benchmarks. Achieving 70% of ambitious OKRs yields better results than exceeding lowered KPIs.
- Weekly Monitoring: Integrates goal tracking into the operational rhythm, keeping the team focused on their OKRs and motivated through regular check-ins.
Working with OKRs makes the organization more transparent, flexible, and adaptable to changes. Consequently, employees with these qualities are more engaged in achieving organizational goals. It becomes easier to cascade objectives from overall company goals to departmental, team, and personal goals, eliminate barriers, provide feedback, and motivate the team to achieve their objectives.
Principles of Working with OKRs
Focus:
Ambition:
Transparency and Openness:
Flexibility and Adaptability:
- Limit the number of OKRs.
- Ensure alignment of company and unit/team OKRs.
- Emphasize achieving outcomes rather than completing tasks.
Ambition:
- Set goals that are "beyond possible": achieving 60-70% is already a success.
- Encourage new ideas and approaches, stimulate innovation.
- No penalties for unmet goals.
Transparency and Openness:
- Involve employees in setting OKRs at different levels.
- Use a public platform for OKR placement and monitoring.
- Regularly measure progress and discuss results together.
Flexibility and Adaptability:
- Short OKR cycles.
- Reallocate resources based on OKR priorities.
- Conduct experiments and adjust to environmental changes.
- Allow for OKR modifications.