What is OKR?OKR is a goal management framework that helps leaders lead their teams from A to B. Some of the benefits of OKR include, improved focus, increased transparency, and better alignment between teams. Invented by Andrew Grove at Intel and later popularized by Google, OKR has become well known amongst Silicon Valley tech companies and is being adopted by many organizations across the world. OKR provides a simple structure and criteria for creating business goals as well as a number of rules and best practices organizations can adopt. You can find a full definition of OKR here.
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How do OKRs work?A good OKR consists of two elements: an Objective and one or more Key Results. At Perdoo, we introduced a third element: Initiatives. Objectives represent a destination. They answer the question “Where do I need to go?”
- Objectives set a clear direction and are inspiring
- Objectives DO NOT contain a number.
- Key Results are metrics that measure the success of an Objective, like the number of sales (Get examples for Sales OKRs) or website traffic (Get examples for Marketing OKRs). They are things you influence.
- Key Results are not things you do, like completed projects or launched products.
- Initiatives are projects or other activities that you believe will influence your Key Results.
- Initiatives do not indicate success; success is dependant on progress of Key Results.
What are SMART goals?SMART is a set of criteria for creating goals, attributed to the work of Peter Drucker and his framework Management By Objectives (MBO). Unlike other frameworks which cover strategy creation, organizational hierarchy, and performance management, SMART is a simple structure that describes how to create and measure progress towards goals. In this sense, the SMART criteria and an OKR can be compared as two alternate ways to structure a goal. The SMART criteria list five things that a goal must fulfill:
How SMART goals work
SpecificA SMART goal must be specific by providing a clear description of what needs to be achieved. It should be understandable for everyone contributing to it. For example: We close more enterprise customers in North America. This goal has a clear scope (North America enterprise customers) provides a description of what needs to be accomplished (close more of them). However, it doesn’t tell you anything about how success is measured, why it matters, and when it needs to be achieved.
MeasurableTo know when a goal is achieved it must be measurable. A metric should be included, with a target to reach that indicates success. For example: We close 10,000 enterprise customers in North America. This goal has a target you can measure progress against. Once 10,000 enterprise customers in North America are closed, the goal will be considered successfully achieved.
AchievableA goal is achievable when it is within the realms of possibility, given the available resources and constraints within your control. This doesn’t imply that it should be easy. Taking our previous example, since closing 10,000 customers represents an unrealistic target the sales team decides to amend it. For example: We close 750 enterprise customers in North America. This goal might be difficult but it is possible to achieve. However, it’s still not yet clear why achieving this goal matters.
RelevantA goal is relevant when it’s consistent with, and leads to, an outcome that contributes toward other organizational goals. For example: We close 750 enterprise customers in North America to expand our market share. This goal is now connected to the company’s larger goal to “expand our market share”. The only thing that’s still missing is a deadline.
Time-boundA time-bound goal has a start and end date. An end date is important, since this is when the goal will be reviewed, to see whether or not it’s considered a success. For example: In 2018, we close 750 enterprise customers in North America to extend our global footprint. The goal now has a scope and duration and meets all SMART criteria.
What OKRs and SMART goals have in commonThe first thing OKRs and SMART goals have in common is their history. Both goal setting approaches date back to Peter Drucker’s theory of Management by Objectives (MBO). OKRs and SMART goals are a development of MBO and support the belief that goals are key to achieving organizational success. OKRs and SMART goals both contain a number of criteria that describe their structure. While OKR might look simpler than a SMART goal, OKR’s three letters cover the same criteria that SMART does. Here’s a direct comparison between OKR criteria and SMART criteria.
|Objectives have a clear scope and set direction, while Key Results further specify what achieving the Objective means.
|Key Results always contain metrics that measure progress toward the Objective.
|OKRs should be achievable with the time and resources you have available. However, the targets you set for your Key Results should be ambitious, 70% completion is already considered a good result.
|All OKRs are aligned to higher-level OKRs, ensuring all teams are working along the organization’s path to success.
|Each OKR has a start and end date. Company OKRs usually last one year, and Group OKRs last one quarter.
The difference between OKR and SMART goalsOn the surface, SMART goals and OKRs look similar. They both offer a structure, and they both have rules that help set scope, time frames, and alignment. However, the similarities end here, and where SMART ends, OKR takes over. SMART views goals in isolation and provides a simple, yet memorable acronym and criteria to describe their structure. OKR also provides a structure but draws a distinct line between the Objective of the goal (what you want to achieve) and how to measure progress towards it using Key Results. This an area where the “M” in SMART can cause confusion since there are several variations of what the acronym SMART means. For example, the M can stand for measurable, meaningful, or motivational. Swapping out measurable for meaningful or motivational has the potential to alter the structure and focus of a SMART goal, de-emphasizing the importance of the measurement of progress, something OKR highlights. By contrast, there’s no room for interpretation with OKR. A goal always contains an Objective and Key Results.
OKR doesn’t treat goals in isolationOKR further differs from SMART because OKRs are created within a framework that describes their relationship to organizational hierarchy and their relationship to organizational timeframes. The Ultimate OKR is at the very top of the OKR hierarchy and runs for 5, 10, or even more years. It is a goal that combines the company’s vision (where do we want to be in the long-term future?) and its mission (what is our purpose?). Company OKRs form the second level of the OKR framework and run for one year. They represent company strategy translated into 3 to 5 goals that the entire organization works toward. Company OKRs play an essential part in aligning work across an entire organization, setting a clear focus for all employees and providing a point of reference for Group OKRs. Group OKRs form the third level of the OKR framework. They run on a quarterly timescale and represent the tactics that teams or departments execute to drive progress toward Company OKRs. Compared to SMART, OKR provides an additional level of organizational structure and context that goals work within. SMART, in comparison, only considers the formation of goals in isolation, with OKR the relationship between goals across an entire organization is clear.
OKRs vs. SMART Goals – Which of the two should you use?The SMART criteria are easy to remember, easy to use and work great for personal goal setting. However SMART simply describes a goal in isolation. OKR provides an extra level of organizational context and turns goal setting into a company-wide exercise. With OKR, an entire organization can achieve clarity and focus. To learn all the basics of setting great OKRs in your team or organization, download our free OKR eBook.
- What is an OKR?
OKR stands for Objectives and Key Results. The Objective is a clearly defined goal, and the Key Results are specific measures used to track the achievement of that goal. OKRs are typically used at an organizational, team, and individual level.
- What is a SMART goal?
A SMART goal is a goal that meets five criteria: it’s Specific, Measurable, Achievable, Relevant, and Time-bound. SMART goals are a tool for individuals and teams to set realistic and clearly defined goals.
- How are OKRs different from SMART goals?
While both OKRs and SMART goals are tools for goal setting, they have different focuses. OKRs are often used for broader, ambitious goals and encourage “stretch” thinking, while SMART goals are usually more specific and realistic.
- Are OKRs better than SMART goals?
Neither is inherently better than the other, but they serve different purposes. OKRs are useful for setting strategic direction and encouraging ambitious thinking, while SMART goals can be more practical for setting tactical, short-term targets.
- Can you give an example of an OKR versus a SMART goal?
Sure. An OKR could be: Objective – “Improve customer satisfaction.” Key Results – “Decrease support ticket response time to under 2 hours,” “Increase customer survey rating to 4.5/5,” and “Decrease churn rate by 10%.” A SMART goal could be: “Increase the number of positive customer reviews on our website by 20% by the end of Q2.”
- Can I use OKRs and SMART goals together?
Absolutely. Many organizations find that the two can complement each other well. OKRs can be used for strategic planning and setting direction, while SMART goals can be used for operational tasks and individual performance objectives that support the broader OKRs.
- How often should I review OKRs and SMART goals?
OKRs are typically set and reviewed on a quarterly basis, although this can vary depending on the organization. SMART goals should be reviewed regularly to ensure they remain relevant, and the timeline for review will typically be defined by the ‘Time-bound’ element of the SMART goal.
- Who should be involved in setting OKRs and SMART goals?
For OKRs, it’s typically a collaborative process involving executives, managers, and individual team members. For SMART goals, while they can be set by individuals, they are often more effective when set collaboratively by the individuals who will be working towards them and their managers.
- How do OKRs and SMART goals affect team dynamics?
Both OKRs and SMART goals can improve team dynamics by providing clear direction and a shared understanding of what needs to be achieved. However, it’s important to manage them properly to ensure they do not lead to excessive pressure or competition.
- Can OKRs and SMART goals change during a set period?
Ideally, OKRs should remain stable throughout a quarter to maintain focus, but they can be adjusted if necessary due to significant changes. SMART goals are typically set for a specific period, but they can be revised if circumstances change significantly.