What is OKR?
The acronym OKR stands for Objectives and Key Results, a popular goal management framework that helps companies implement and execute strategy. The benefits of the framework include a better focus on results that matter, increased transparency, and better (strategic) alignment. OKR achieves this by organizing employees and the work they do around achieving common Objectives.
An OKR consists of an Objective, which tells you where to go, and several Key Results, which are the results you need to achieve to get to your Objective. Initiatives are all the projects and tasks that will help you achieve your Key Results.
The framework includes a number of rules which help employees prioritize, align, and measure the outcome of their efforts. OKR helps companies bridge the gap between strategy and execution and move from an output- to an outcome-based approach to work.
What is an Objective?
An Objective is a description of something that you’d like to achieve in the future. An Objective sets the direction — like a destination on a map. Objectives shouldn’t be technical and shouldn’t contain a metric, so that everyone understands where to go.
What is a Key Result?
A Key Result is a measurable outcome required to achieve the Objective. It contains a metric with a start and target value. Key Results measure progress towards the Objective — like a signpost that shows how close you are to your Objective.
What is an Initiative?
Initiatives are all the projects and tasks that will help you achieve a Key Result. Imagine your organization is a car. The Objective is your destination, the Key Results show if you’re heading in the right direction, and the Initiatives are what you’ll do to get your car moving.
“Where do I want to go?”
An Objective describes where you want to go and sets a clear direction. Think of it as a point on a map, a destination like New York.
“How do I know if I’m getting there?”
A Key Result shows you how you’re progressing towards your Objective. Think of it as a signpost with a distance marker.
“What will I do to get there?”
An Initiative describes what you’ll do to achieve your Key Results. Think of it as a description of what you’ll do to get to your destination.
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- Crush the competition through acquisitions
- Be a top place to work in the U.S.
- Optimize the sales funnel to close more deals in less time
- Create a more goal-oriented culture
- Empower our support team to be more self-sufficient
Example Key Results
- Acquire 3 small players in our industry
- Reach top 10 in Fortune 100 best places to work
- Increase opportunity win rate from 12% to 20%
- 100% of employees are contributing to an OKR
- Reduce ticket escalation by 15%
- Secure budget approval from shareholders
- Hire a People & Culture Manager
- Launch a new discounting model
- Invite all employees to our Perdoo account
- Create Q&A document for top 20 escalated issues
A brief history of OKR
OKR has a long history that can be traced back to 1954 when Peter Drucker invented MBO or Management by Objectives. In 1968, Andrew Grove co-founded Intel and — while CEO at Intel — he further developed MBO into the OKR framework as we know it today. In 1974, John Doerr joined Intel and learned OKR during his time there. Doerr went on to join Kleiner Perkins Caufield & Byers — one of the first major investors in Google — and became an adviser to Google in its very early days. Doer introduced OKR to Google’s founders, Larry Page and Sergey Brin, who then implemented OKR at Google (which still uses it today).
The Benefits of OKR
Current research shows that when comparing groups of employees who used OKR against those that don’t, those that used it proved much more effective at their jobs, resulting in better performance and increased sales. In fact, the group who didn’t use OKR actively asked to be involved in the process in future cycles. A full rundown of the ROI of Goal Management can be found here.
The biggest impact of using OKR in most organizations without goal management already in place, is a cultural shift from output to outcomes. OKR creates focus, accountability, transparency, and alignment within an organization. The results of all this is an increase in performance and employee engagement.
OKR helps managers and employees align all their efforts, making sure that everyone in the organization is moving in the same direction.
OKR helps focus only on what’s most important by prioritizing only the work that has the biggest business impact.
People achieve remarkable results when they’re engaged with a purpose. OKR helps communicate the bigger picture in a way everyone understands.
Preparing for OKR
Before you start using OKR it’s important to have a clear understanding of the challenge you want it to solve, and the benefits you expect it to bring.
For most organizations, OKR solves the challenge of implementing and executing strategy in a way that’s clear to all employees, transparent and measurable. For it to be successful, the implementation and management of OKR should have an owner within the organization. This person is usually called the “Ambassador”. The Ambassador’s role is to ensure that everyone who will be using OKR, is properly trained, engaged, and has ongoing help and guidance when they need it.
OKR is a framework, but it’s also a learning process that often involves a fundamental shift in how people think about and measure the work they do, moving away from a focus on output and towards a focus on outcomes.
Finding the right OKR cadence
OKRs are usually created on 2 cadences: annual and quarterly. Company Objectives are typically set annually whereas individuals and teams set their OKRs quarterly.
Company OKRs are purely directional and therefore a longer time span makes sense. Team OKRs are tactical and therefore quarterly makes more sense: the corresponding shorter review cycles enable organizations to change direction if tactics are not driving progress towards the Company OKRs for the year. More info on how to find the right OKR cadence can be found in here. If you’re working at a fast-moving company with shifting goals, this post explains how OKR can keep you on track when your business goals are shifting.
Creating your ultimate goal
Most organizations have a mission and vision, but often these are difficult to understand and can be confused with one and other. We recommend turning your mission and vision into an ultimate goal. Your ultimate goal defines what it’s “ultimately” all about for your organization. It’s your North Star to which all other goals align.
Your ultimate goal should aim for a point at a considerable distance in the future; 10, 15 even 25 years is reasonable. A good example of an ultimate goal is when John F Kennedy decided that America should put a man on the moon, and coined the term “Moonshot Goal”.
Having a single ultimate goal gives you the focus that your entire organization needs. For example, in 1958 NASA had 8 top-level goals including “The establishment of long-range studies of the potential benefits to be gained from, the opportunities for, and the problems involved in the utilization of aeronautical and space activities for peaceful and scientific purposes.”. By 1961, thanks to Kennedy, NASA had only one ultimate goal; “Before the decade is out, land a man on the moon and return him safely to earth”. This video explains how to turn mission and vision into your ultimate goal.
Example of an ultimate goal
- Make humankind interplanetary (SpaceX)
- Become be biggest airline of Europe by offering the lowest fare possible (RyanAir)
- Build the most customer-centric store that sells everything (Amazon)
- Help ambitious organizations grow faster (Perdoo)
Setting company OKRs
Company OKRs set the direction for the entire organization. Because company OKRs are directional, they usually have a time span of 1 to 3 years. Your company OKRs reflect the 3 or 4 things your organization decides it must achieve in the next 12 months.
It’s important that everyone in your organization has a chance to give their input when you’re deciding what you want to achieve in the next 12 months. We recommend starting with an OKR workshop where all key stakeholders responsible for company strategy first ask for and then gather, input from employees on what they think top priorities should be. This input can then be discussed in relation to existing company strategy and broken down into 3 to 5 OKRs. This can be done using post-it notes, collaborative documents, or even a whiteboard. The objective of the exercise is to come to an agreement on what the organization should have achieved by the beginning of the following year.
Setting team and individual OKRs
Team and individual OKRs express what tactics the teams and individuals will deploy, and what results they will need to achieve in order to help the organization realize its long-term Objectives. Everyone has a busy schedule and urgent things will constantly pop up, but whatever is reflected in your OKRs deserves priority over everything else. This is also why it’s crucial to update OKRs regularly to see how you’re progressing on what you’ve agreed is most important. That’s why it’s so important to always bring up your team OKRs in your weekly or bi-weekly team meetings.
OKRs give every team and individual a sense of direction and accomplishment. But they are also a reason to say “No” to things that fall outside of the scope of the OKRs. If every team creates their OKRs as if these were the only things they will be working on that quarter, it will ensure a successful OKR program whilst helping the organization realize its strategy.
Key characteristics of Objectives
Group Objectives should always align to the Company Objectives and support your organization’s Ultimate Goal. Group Objectives should always be created once Company OKRs have been agreed upon.
Group Objectives should always be the things that, if you achieve them, will have a huge positive effect on your entire organization. Achieving Group Objectives, just like Company Objectives, should be cause for a celebration!
Keeping Group Objectives within a short and strict time frame, encourages focus and allows you to review them in cycles. This not only helps you quickly identify what’s working and what isn’t, it also allows you to change course in a new cycle if your Group Objectives are not contributing to your Company OKRs.
Key characteristics of Key Results
Group Key Results should reflect a big change, something that, if you achieve 70% to 80% of your target, the rest of your organization will notice. Make them tough. If they’re easy to achieve they’re not challenging enough.
Group Key Results should be focused and have a clearly defined scope. While Company Key Results cover broad metrics, Group Key Results should measure more granular progress, like sales of a specific product.
Group Key Results should always be things you measure that you don’t do, but you can influence. Writing 10 blog posts is a bad Key Result, it’s something you do. Achieving 1000 views on a blog post you wrote is a good Key Result, as it’s something you can’t control but you can influence.
Key characteristics of Initiatives
An Initiative must always be specific. Its scope must be clearly defined, and the owner of the Initiative must know what to do. It cannot be vague like an Objective can be. An Initiative must, therefore, contain verbs which are unambiguous, such as establish, write, launch, visit, release, etc. Objectives can contain less specific verbs, such as improve, increase, and so on.
You should have full control over your Initiatives, which means that it will be in your power to complete them. This means there should be no dependencies on something or someone else. It also means that you can be held accountable for not completing your Initiatives; it will be more difficult to hold someone accountable for not achieving his or her OKRs (as they will not have full control over the latter).
- Develop a lighter engine
- Make search more responsive
- Increase sales of non-fiction books
Example Key Results
- Reduce fuel pump weight by 10%
- Reduce page load speed to 1 second
- Sell $1 million worth of educational books
- Build fuel pump prototype
- Run a regular performance report
- Add 10,000 books to our online store
What are Initiatives?
Initiatives describe the work required to move the needle for your Key Results. In contrast to Key Results, which clearly measure progress toward an Objective, Initiatives are just hypotheses for what work might deliver the biggest impact.
Initiatives are tasks, projects, or similar activities related to an OKR without impacting the Objective’s progress. Regularly checking in with your Key Results will help you decide whether your Initiatives have delivered the desired results or not. If they haven’t, you should think about changing your Initiatives.
The benefit of setting OKRs and Initiatives is that there is a clear separation between outcomes (Key Results: what did we achieve?) and outputs (Initiatives: what did we do?). You can commit to the same OKR while staying agile on an operational level by using Initiatives.
More OKR examples
We’ve spent time gathering together some common examples of how OKR can be used for different departments within an organization. These examples represent our experience internally as well as the experience of our customers. These guides can be used by anyone looking to introduce OKR to their teams or even their entire organization. The guides can be found in our resources section.
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At Perdoo, we believe in truly democratizing the concept of OKR and want to liberate companies from the hassle of tracking OKRs in spreadsheets. We already offer most of our content for free. Now we’ve decided to go even a step further and offer our software for free as well.
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What’s the difference between OKRs and KPIs?
OKRs and KPIs are different types of goals. Imagine your organization is a car and you’re driving that car towards a destination (your ultimate goal). Your KPIs are what you’ll find on your car’s dashboard, like the fuel gauge and engine temperature gauge. They prevent the engine from overheating and make sure you won’t run out of gas, which are all things that you’ll constantly need to watch. OKRs are like your roadmap, they’ll guide you to your destination. OKRs are temporary, they’ll change from time to time. Once you’ve passed a landmark towards your destination, you’ll focus on the next one.
For more information, please this article.
How do I create OKRs for something that’s not measurable?
Almost anything can be measured. If you’re struggling to find Key Results for an Objective, ask yourself “How will I know when my Objective has been achieved?”. Make sure to choose Key Results that are outcome- instead of output-based. See also this article.
What’s the difference between OKR and MBO?
OKR and MBO are both goal-setting frameworks. OKR can be seen as an extension of MBO with a focus on measuring the outcomes of the Objectives using Key Results. This makes OKR more specific than MBO.
What’s the difference between OKR and SMART goals?
OKR and SMART are both goal-setting frameworks that have their roots in MBO. The difference between OKR and SMART lies in the definition of how a goal is constructed. With SMART all goals must be, Specific, Measurable, Achievable, Relevant and Time-Bound. The downside to SMART is that “achievability” is difficult to gauge.
How long will it take to successfully implement OKR?
This depends on several factors. For example, how goal-oriented is your organization today (eg, do you already work with KPIs)? How data-driven are your teams? Do you have a good OKR software and proper support?
On average, the implementation will take 1 to 2 quarters. These 2 quarters are needed to help you find an approach that works well for your organization.
Contact us via email@example.com so we can properly advise you.
Who should be in charge of my OKR program?
We always recommend appointing an Ambassador. The Ambassador will be responsible for program management and acts as a single point of contact for the organization for all matters related to OKR. More info here.
What percentage of progress makes an OKR a success?
This depends on whether your organization is working with stretch goals or not.
If you do work with stretch goals, 70% progress is the sweet spot, and if you’re consistently reaching 100% on your OKRs they’re not challenging enough.
If you don’t work with stretch goals, you should always hit 100% progress on your OKRs. More info in this article.
How do I tie bonuses to OKRs?
We don’t recommend tying bonuses to OKRs. Not achieving OKRs is just as important as achieving them. We see underperformance as an opportunity for discussion and a change of direction rather than a way to penalize individuals for what they failed to achieve.
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