The Ultimate Guide to OKR
The Ultimate Guide to OKR
OKR (Objectives and Key Results) is a popular goal management framework that helps communicate company strategy, improve focus, increase transparency and foster alignment by organizing employees and the work they do around achieving common goals.
An OKR consists of an Objective, which defines a goal to be achieved, and up to 5 Key Results, which measure progress towards the Objective. Each OKR should have Initiatives, which describe the work required to drive progress on your Key Results.
The OKR framework includes a number of rules which help employees prioritize, align, focus and measure the outcome of the work they do.
OKR helps entire companies communicate company strategy to employees in an actionable, measurable way. It also helps companies to move from an output to an outcome based approach to work.
An Objective is a sentence that clearly describes a goal to be achieved in the future. An Objective sets a clear direction and provides motivation. An Objective can be thought of like a destination on a map.
Key Results are metrics with a starting point and a target that measures progress towards an Objective. While Objectives are like a destination on a map, Key Results are like the signposts that take you there.
Initiatives describe the work required to drive progress on your Key Results (e.g. projects). If an Objectives is your destination and Key Results are the signposts, Initiatives are the means of transportation you choose (car, boat, etc.).
“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 sign post pointing towards your destination.
“What will I do to get there?”
An Initiative is what you’re doing to drive progress on your Key Results. Think of it as means of transportation you choose to get to your destination.
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OKR has a long history that can be traced back to 1954, when Peter Drucker invented MBO or Management by Objectives. In 1968 Andy Grove founded Intel and while at Intel he developed MBO into the model of OKR which we use 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 implemented OKR at Google, which still uses it today.
Current research shows that when comparing groups of employees who used OKR against those that don’t, those that used OKR proved much more effective in their jobs. In fact, the group who didn’t use OKR actively asked to be involved in the OKR process in future cycles.
A full run down 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, or those who focus purely on metrics and KPIs, is a cultural shift from output to outcomes.
OKR helps focus only on what’s most important by prioritizing only the work that has the biggest business impact.
OKR helps answer the question “why are we doing the work we’re doing”?
OKR connects strategy with execution ensuring everyone is moving the company forwards.
Before you start using OKR it’s important to have a clear understanding of the challenge you want OKR to solve, or to put it another way, the Objective you’re hoping OKR will achieve.
For OKR to work well someone will need to own the OKR program, ensure that it’s communicated to everyone who will start using OKR, and provide help and guidance along the way. OKR is a framework but it’s also a journey and may involve a fundamental shift in the way your organization thinks and works, moving away from a focus on output and towards a focus on outcomes.
The structure of an OKR program can be broken down into 4 levels; 2 which cover strategy and 2 which cover execution.
OKR follows 2 timeframes or cadences. Strategic OKRs run in yearly cycles which coincide with most companies yearly strategic review cadence. This makes it simple to take organizational strategy and translate it into top level OKRs.
Tactical OKRs owned by teams and departments follow a quarterly cadence. This allows review on a shorter cycle and allows organizations to change direction if tactics are not driving progress towards the strategic goals for the year.
More info about how to find the right OKR cadence can be found in here.
Even if you’re a fast moving company with shifting goals, this post explains OKR can keep you on track when your business goals are shifting.
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 or when using Perdoo, an Ultimate OKR. Your Ultimate Goal defines your organization’s reason for existing and what it wants to become.
An Ultimate Goal should aim for a point at a considerable distance in the future; 10, 15 even 25 years is reasonable. A good example is when John F Kennedy decided that America should put a man on the moon, and coined the term “Moonshot Goal”.
This video explains how to turn mission and vision into your Ultimate Goal, or Ultimate OKR.
Company level OKRs represent your strategy. These are the 3 or 4 things your organization decides it must achieve in the next 12 months. Most organizations review their strategy yearly and this sets the timeframe for Company OKRs.
It’s important when you decide what you want to achieve in the next 12 months that everyone in your organization has the chance to give their input. 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 then discussed in combinations with any existing company strategy and broken down into between 3 and 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 where the company should be at the beginning of the following year.
A Company Objective should clearly describe a state in the future, different to the state you’re starting from, and indicate a direction you’ll take to get there.
Company Objectives should elicit an emotional response. It’s fine for an Objective to be scary, to feel intimidating, to be exciting, incredible, even funny or outrageous! Objectives should inspire your entire company to action.
The language you use to describe your Company Objectives should be clear enough that anyone, not only employees, should be able to understand them.
Company Key Results should always contain a numerical value with a start and an end point. They can be numbers, percentages, currency values or even boolean, true or false.
When setting a Company Key Result it’s tempting to just extrapolate a target from a trend over time. Think bigger. What would be a 5x improvement, a 10x improvement? Aim high, but stay realistic.
Company Key Results should not be confused with actions or tasks. They should measure something you can influence by taking action, but never something you control.
Group OKRs are the things your teams or departments need to achieve to execute on your company strategy and make your Company OKRs a reality. We recommend running OKR workshops with your teams only once your Company OKRs have been created. This will give teams clear guidance on what their Group OKRs should be contributing towards and allow them to align their work with Company Objectives.
When setting Group OKRs it’s important that your teams or departments have the autonomy to come up with their own suggestions and agree on them together. Creating Group OKRs should be a collaborative effort.
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 alway 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.
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.
Initiatives describe the work required to drive progress on your Key Results. In contrast to Key Results, which clearly measure success, Initiatives are just hypothesis for what might deliver the biggest impact. Initiatives are tasks, projects, or similar activities tied to an OKR without having a mathematical impact on the Objective’s progress. Regularly checking in with your OKRs will help you decide whether your Initiatives delivered the desired results or not. If they don’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.
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).
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.
There are several ways to manage OKRs: you can use an OKR spreadsheet, a dedicated software tool like Perdoo, or even pen and paper. We’ve built a basic template that allows you to create your first OKRs. It’s free, simple to use, and great for small teams with less than 25 employees.
OKrs and KPI’s are similar but there are small but important differences.
OKRs provide the missing link between ambition and reality. They help you break out of the status quo and take you into new, often unknown, territory. If you have a big dream – an inspiring vision – for your company, you need OKRs that take you there. OKRs symbolize ambition.
A KPI, on the other hand, measures the success, the output, quantity or quality of an ongoing process or activity. They measure processes or activities already in place.
Read more on our blog: OKR vs KPI
Most organizations are better off without individual OKRs. Usually, they over-complicate the OKR program and make it less likely to be a full success.
Read more on our blog: The Pros and Cons of Individual OKRs
The difference is between a Strategic and Tactical OKR is simple.
A strategic OKR is something with a 1-year timescale and is always owned by the entire organization. A strategic OKR is something the organization as a whole has decided to work towards.
A tactical OKR has a shorter timescale of usually 1 quarter and is owned by a team or department. Tactical OKRs are created after strategic OKRs and contribute to them.
O: Reduce company costs
O: Increase Marketing cost efficiency
Don’t worry! This is a common challenge faced by small teams especially. In these cases we’d recommend changing your cadence, how often you OKRs last.
Read more on our blog here: How your OKRs Keep you on Track when your Business Goals are Shifting
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 based, look for metrics you don’t directly own or control, but that you can influence.
The main difference between an Objective and goal is that goal often contain metrics, Objectives never do. For example, “Grow revenue by 15% in 1 year” is a goal.
In OKR this would be split into an Objective which answers “why” and a Key Result “Grow revenue by 15% in 1 year” which always contains a metric.
Read more about the difference between goals and OKRs here.
OKR and MBO are both goal setting frameworks. OKR is an extension of MBO with a focus on measuring the outcomes of the Objectives using Key Results. This makes OKR more specific than MBO.
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.
OKR is a goal setting framework, BSC or Balanced Scorecards is a framework for creating company strategy. While BSC has been adopted by many organizations its complexity and scalability are both areas where many have found OKR to be a better alternative.
A typical OKR program can take time to implement and get right. OKR is a continuous learning process and what works for one company might not work for another. Typically the first 3 months are the most difficult as this represents the first cycle for Group OKRs. Once the first three months are over OKRs can be reviewed and the program adjusted.
We recommend a minimum of 25 people. OKR works best when a company grows beyond a certain size and the executive team begins to rely on management to ensure the execution of company strategy.
We always recommend that someone on the senior leadership or a Champion team drives the uptake of OKR in an organization. Once an OKR program has been rolled out, this can be handed off to an Ambassador, who then becomes responsible for program management and acts as a single point of contact for all matters related to OKR.
70% to 80% is the sweet spot. If you’re consistently reaching 100% on your OKRs, they’re not challenging enough.
We don’t recommend tying bonuses to OKRs in the same way we don’t recommend individual OKRs. OKR is a framework for achieving company success. 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 reward individuals for the work they do.
A company should have one Ultimate OKR, set on a long timescale of 5 to 7 years. 3 to 5 Company OKRs should be set yearly that cover strategy. Groups like teams or departments should set 3 to 5 OKRs per quarter, aligned to the company OKRs.
Each OKR, whether Ultimate, Company or Group should have no more than 5 Key Results.