This blog is a full, slightly edited transcript of an Objectives and Key Results Crash Course video we published on YouTube. To watch the video, scroll down!
A while ago, we published an OKR Crash Course, and it was exciting to see how it helped other organizations get started with OKR. Since then, we’ve implemented Objectives and Key Results in a lot more organizations ourselves and learned a lot, so we decided to update this Crash Course and share our latest learnings with you. If you’re new to OKR or just getting started, this article will cover everything you need to know.
OKRs vs. Goals
OKR is two different things. On the one hand it’s a way to structure your goals, and on the other hand, it’s a framework that contains rules and best practices to help you manage these goals your organization.
Let’s first have a look at how you’re used to managing goals.
Imagine you want to accelerate revenue growth in your organization. You would then set yourself another goal to generate 1,000,000 in revenue from new businesses. Then you would go on to say yourself even more goals such as to attend 10 conferences and have 50 sales calls per week.
You end up with this list of goals that all feel equally important, but the only thing that truly matters is to accelerate revenue growth.
If you would structure these goals as an OKR, you would have much more clarity about what really is important to you. Your Objective would be to accelerate revenue growth. Your Key Result would be to generate 1,000,000 in new business revenue. Together they form the outcome that you want to achieve. Your Initiatives are the things that you’ll be doing, and that would be to attend 10 conferences and to have 50 sales calls per week.
You’ll probably find that it takes more effort to structure goals as OKRs. However, this is time well spent since you all have a lot more clarity about what really is important. That clarity is key if you’re collaborating with dozens, if not hundreds, of people throughout your organization.
Download our eBook to dive deeper into how to write great Objectives and Key Results.
The History of Goal Management
Now that we’ve seen that OKR is essentially just a way to structure your goals and why it’s so important to structure your goals as Objectives and Key Results, let’s have a look at the framework and where it’s coming from.
It all started with Management by Objectives, a concept first introduced by Peter Drucker in his book, The Practice of Management, which was first published in the early 1950s. Ever since then, Objectives became a critical part of running a business.
Now that organization started using Objectives more and more, they learned a lot about what makes a good Objective. This was neatly summarized by George Doran’s SMART criteria. Based on his SMART criteria, every Objective had to be specific, measurable, achievable, relevant, and time-bound.
Kaplan and Norton developed a framework called the Balanced Scorecard in 1992. The Balanced Scorecard is a great methodology to set the strategic agenda for the organization, but its limitations are that is not really driving the execution.
All these three concepts come together in the framework OKR, which really became popular ever since Google implemented in 1999. It contains all the learnings of Management by Objectives, it has criteria for how best to structure your Objectives, and it bridges the gap between strategy and execution. OKR really is a strategy execution tool.
The History of Objectives and Key Results
The true father of OKR is Andy Grove, who co-founded Intel together with Gordon Moore. He published the book High Output Management in 1983 in which he first coined the term Objectives and Key Results. Andy Grove took Peter Drucker’s Management by Objectives and further developed it by adding Key Results to it.
John Doerr, who worked at Intel, learned about OKR directly from Andy Grove. Later on, he left Intel to join KPCB, a well-known investment firm. When KPCB invested in Google, Doerr presented the concept of OKR to Larry Page and Sergey Brin. They were really excited about it and decided to start using Objectives and Key Results when they were only 40 people. They still use it today with 60,000 people.
From Google, OKR spread to a lot of other organizations, also outside of Silicon Valley and outside of the technology industry. This is why today companies like Perdoo are on the rise that help organizations become successful through Objectives and Key Results.
How OKR fixes the Strategy Execution problem
Why should this matter to you? Time and time again, studies find how difficult strategy execution really is.
- Kaplan and Norton found in 2005 that 9 out of 10 organizations fail to execute their strategy.
- Donald Sull found in his research from 2015 that 45% of middle managers could not name even one of their organization’s top priorities. These middle managers are essentially responsible for executing that strategy, but apparently, they have no clue what that strategy is.
- 95% of employees don’t know or don’t understand their organization’s strategy. How can they make sure that whatever they are doing is actually helping to realize that strategy?
Objectives and Key Results help your organization become a great place to work and have a clear path to success, and they help teams consistently hit their goals.
It helps you become a great place to work by granting more autonomy to teams. You make them responsible for Objectives without dictating to them how they need to realize those Objectives. Furthermore, you let everybody in the organization see where the organization wants to go and how their work contributes.
It will help you have a clear path to success by having more clarity on what your strategic priorities are and by making them transparent to the entire organization. That will help everybody focus on what truly matters.
Teams will be able to consistently hit their goals by following a simple structure. This structure is informed by real data so that teams can ensure they are actually pushing the company forward.
The anatomy of an OKR
Now that we’ve seen where the OKR framework is coming from and the value it will bring to your organization, let’s have a closer look at the anatomy of an OKR.
The Objective tells you where to go. Objectives are statements that aspire and set direction.
Key Results answer the question, “how do I know I’m getting there?” They help you specify what you mean by the Objective, and they help you measure progress toward it.
Initiatives answer the question, “what will I do to get there?” Initiatives are all the work that you put in to drive progress on your Key Results.
OKRs and Initiatives help you differentiate between outcomes and outputs. Organizations usually buzz with activity, but which outcomes are all activity intended to achieve?
Imagine you’re a surgeon, and you perform a technically flawless surgery. That would be an output. If the outcome still was that the patient died, would you consider yourself successful?
Your Objectives and Key Results are your outcomes, and your Initiatives are your outputs.
Examples of OKRs and Initiatives
Now let’s have a look at a few examples of OKRs and Initiatives.
A good Objective could be to conquer the U.S. market or to become an awesome place to work. Another good Objective could be to make our customers love our support team.
If we zoom in on that latter example, examples of Key Results could be a customer satisfaction score of 97%, an average first response time of 1 hour, and an average solution time of 12 hours.
Initiatives that you could have to realize that OKR could be to interview 10 support representative candidates to help you bring down your average response time, to publish an FAQ to make sure that you get in fewer tickets and people can find answers to their most popular questions themselves, as well as to launch an in-app live chat, which will make it a lot easier for people to connect with your support team.
Example of a bad OKR
A bad Objective would be to triple or valuation price. An Objective should not be measurable. You often read that an Objective should not contain a number, and then people try to hide a number in the word triple, which obviously means nothing else but times 3. Better than focusing on not adding a number to your Objective will be to make sure that your Objective is simply not measurable.
A bad Key Result would be to close tons of new accounts because Key Results have to be measurable and “tons of” isn’t. People will have different definitions of what “tons of” really means, which means that you have no clarity of expectations. Capture 100% market share is also a bad Key Result. Key Results can be ambitious, but they should not be impossible. 100% market share for most organizations is definitely impossible and can, therefore, be de-motivating.
Example of a good OKR
A good Objective would be to make so much revenue that we wildly increase our valuation. Now the Objective isn’t measurable, but it is inspiring.
A good Key Result would be to close 85 new accounts because now you can actually measure progress toward it. Capture 30% market share would also be a good Key Results because this is probably ambitious, but hopefully not impossible.
Implementing OKR: Start with your Ultimate Objective
Now that you know how to structure an OKR and what a good OKR looks like, let’s have a look at how OKR works when you roll it out in your organization.
We recommend you to always start with your Ultimate Objective. That Ultimate Objective will serve as the northern star for your entire organization. You can look at your mission and vision to construct your Ultimate Objective.
For instance, Walmart’s vision is to become the worldwide leader in retail. Their mission is to help people save money so that they can live better. Together they would form the Ultimate Objective to become the worldwide leader in retailing by saving people money so they can live better.
Executional Heartbeat: The OKR process
That Ultimate OKR appears at the very top of your OKR hierarchy. An Ultimate OKR usually lasts for decades and forms the inspiration for your annual Company OKRs. Your annual Company OKRs are executed through the Group OKRs that are usually quarterly. The Group OKRs are being realized through the Initiatives that you create.
The process that most organizations follow to manage their Objectives and Key Results is what we call the Executional Heartbeat.
Leadership defines Company OKRs for the upcoming year, usually in December. It’s highly valuable to survey every employee in your organization and ask them to suggest one OKR for the next year. This is a great way to get a feeling of what all the employees believe should be a priority.
Once these Company OKRs are known, teams and departments create their quarterly Objectives and Key Results, and they usually do so at the beginning of a quarter. Once they are finalized, they can start working on their Initiatives.
We strongly recommend you to sit together with your team at least once every two weeks to review progress and stay on top of your OKRs. This is to ensure that you will consistently hit your goals. When the quarter is ending, sit together with your team to reflect on your Objectives and Key Results of the past quarter by closing them and capturing your learnings. Once that is done, you can create your OKRs for the new quarter. This is a process that you continue to follow throughout the year.
6 essential rule for Objectives and Key Results
The OKR process itself is quite simple, but there’s also a set of rules and best practices in the OKR framework that will help you get the most out of strategy execution and OKR. However, especially if your organization is new to Objectives and Key Results, these rules can be a bit overwhelming. Introducing OKR is essentially change management, and we recommend you to introduce change gradually.
So here are our recommendations for the best practices that you should get started with:
- First of all, you need to set OKRs frequently. Company OKRs are usually set annually, and teams and department OKRs are usually set quarterly.
- You should not have too many Objectives and Key Results. OKR will help you focus on what’s most important right now, and focus also means that you have to say no to things. Try to avoid putting everything that you’re doing in your OKRs. Your Objectives and Key Results should be focused on everything that you want to build, to change, or to innovate.
- Make sure that your OKRs are transparent. You want to involve everyone in your organization. That means that everybody should be able to see what the priorities for the company are as well as for all the different teams in departments.
- This transparency is also a requirement for alignment. The Company OKRs should be visible to everybody so that all teams or departments can make sure that whatever they are focusing on is indeed helping push the company in the right direction.
- Progress on Key Results needs to be updated regularly, we recommend at least once every two weeks, but better would even be once every week. Seeing progress taps into a deep human need, and professor Amabile from Harvard found that there’s a direct correlation between the frequency with which you update progress and the likelihood that you’ll attain that goal.
- Lastly, you should appoint an OKR Ambassador. The OKR Ambassador will be responsible for implementing and managing your OKR program.
Now that you’ve heard what makes Objectives and Key Results such a powerful tool for strategy execution, we hope you have enough input to decide whether OKR is a fit for your organization. Download our eBook “How to write great OKRs” to learn everything you need to know to get started with Objectives and Key Results.