The Psychology Behind How OKRs Work

Objectives and Key Results (OKRs) are a great technique for managing teams at scale. However, if you are just starting to learn how OKRs work, their benefits might not be immediately apparent.

Unlike traditional approaches to management, OKRs force companies to explicitly connect their wider mission to the activities employees pursue on a daily basis. Objectives define where you want to go, and Key Results tell you how you’ll get there. Key Results are measurable, which keeps people accountable and success measurable.

There’s another reason why OKRs are so often successful, and it goes back to human psychology. The way that we think about goals in the OKR framework taps into some subtle yet powerful psychological effects that truly make them the most productive management framework out there.

OKRs Tap Into Trust

Lack of trust is one of the true silent killers of workplace productivity.

A staggering 70% of employees report feeling disengaged from their work, costing companies on the order of $370 billion in lost productivity. At the same time, only 40% of workers say they even know what the top 3 goals of their company are.

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Economist and psychologist Paul J. Zak has found that lack of trust is one of the leading factors in this type of workplace stress and demoralization.

Companies where employees are not trusted to make decisions on their own, don’t understand the goals of the company, and can’t help push those goals forward, exhibit higher rates of chronic stress. Stress then inhibits the production of oxytocin—a brain chemical responsible for the feeling of happiness.

Companies with high trust scores fare much better and have much higher employee happiness. Interestingly, it’s not just trust that makes people want to stay at their jobs. It’s purpose, which is actually psychologically intertwined with workplace trust:

Experiments show that having a sense of higher purpose stimulates oxytocin production, as does trust. Trust and purpose then mutually reinforce each other, providing a mechanism for extended oxytocin release, which produces happiness. So, joy on the job comes from doing purpose-driven work with a trusted team.

OKRs can help produce a culture of trust by making goals explicit and giving each team member the resources they need to drive those goals forward. They help you create an environment in which everyone has their say in setting company goals, knows what the organization is striving towards, and has the freedom to choose how to work to achieve those goals.

The result? Happier, healthier employees who stay on your team longer.

OKRs Create Focus for Your Team

Rhetoric is one of the main tools in a manager’s arsenal to communicate the vision of the organization and get their teams to work toward common goals. It’s impossible to have a highly performing team without instilling focus around a set of shared goals.

In a study published in the Academy of Management Journal, professors Andrew Carton, Chad Murphy, and Jonathan Clark analyzed how people respond to two kinds of rhetoric:

  • Concrete, or image-driven
  • Conceptual

They’d seen plenty of leaders try to inspire their teams with conceptual language like “We want to become the world’s leading seller of luxury goods.”

To get real alignment towards the really important goals, however, Carton, Murphy, and Clark found that a heavier reliance on “image-based words” was needed. Rather than try to get your employees to feel inspired by the goal of being a leading seller, get them to chase after the goal of “seeing customers smiling as they leave our stores.”

Image-driven rhetoric creates what they call a stronger feeling of shared cognition, which defines how “different individuals achieve the same understanding of concrete reality and abstract concepts.” In other words, how they get aligned.

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OKRs can help managers in creating focus by providing a backbone that the whole team can easily understand and work toward.

They make it simple for every team member to understand what it takes to achieve the shared goal, because they connect the overall mission and vision of the company with the specific measurable steps it takes to achieve them.

OKRs Give Employees Safety to Express Ideas and Experiment

Teams depend on free exchange of information and ideas in order to be productive. A study with 51 work teams in manufacturing companies found that creating that kind of freedom relied upon creating a workplace where team members felt safe to express their ideas.

While the feeling of safety—defined as “a shared belief held by members of a team that the team is safe for interpersonal risk taking”—has no direct effect on productivity, it enables learning behavior in teams. This ability to develop new capabilities as a group in turn make teams more effective and productive.

This idea of psychological safety isn’t new—it’s also part of the secret sauce behind Google’s management practices, where a study found that team meetings with equal amounts of participation from all parties were better predictors of success than pedigree or experience. By ensuring that everyone felt comfortable speaking their minds, Google was able to create more high-performing teams.

OKRs can help create such an environment of psychological safety, if they’re set up correctly. They allow managers to set common goals for everyone, yet give employees the freedom to find the best way to achieve these goals.

OKRs are not a tool to assess the performance of employees. Applying them to measure performance means that managers always have to set realistic—perhaps even conservative—goals.

With OKRs, you push the limit on what’s achievable for the company. You empower employees to think outside the box and take calculated risks in order to fulfill those ambitious—yet, achievable—goals. You don’t tie them down to a quota or force them to do work they can’t get behind in a purpose-driven and meaningful way.

OKRs Work Because They’re Rooted in the Human Psyche

The key to the success of OKRs is that they take the underlying principles that motivate human behavior and organize goals that make us more productive.

The three main psychological traits that drive the success of OKRs are:

  • Instilling a culture of trust
  • Creating a laser-sharp focus on what the goals are and why they matter
  • Encouraging experimentation by creating psychological safety

Now that you understand what makes OKRs work, it’s time to look at the first steps you need to take in order to start using them in your organization. Start with our crash course in setting OKRs.

Download the OKR eBook
Author
Maresch Bär

Head of Communications at Perdoo. Besides studying Public Relations in Hanover (DE) he worked for the SaaS startup mediaTest digital, Rocket Internet's in-house agency RCKT, and the advertising agency Dievision. In 2016, he joined Perdoo.

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