The ultimate guide to OKR

Everything you need to know about Objectives & Key Results

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Henrik-Jan van der Pol
Henrik-Jan van der Pol
CEO, Perdoo
Edited by Henrik-Jan van der Pol
Last updated on Jul 14, 2024
[fs-toc-h2] Introduction

[fs-toc-omit]An introduction to OKR

OKR stands for Objectives and Key Results. OKR is a goal management framework designed to execute strategy and is a powerful way to formulate and communicate goals.

The OKR methodology has played a prominent role in the success of global brands like Google and Intel and is now used by businesses of all sizes, across the world.

Heard of them and looking to learn if OKR would benefit your business? In this guide you’ll learn what OKRs are, and if used, how they could help your business grow and succeed.

[fs-toc-h2]OKR meaning

[fs-toc-omit]What is OKR?

OKR (Objectives and Key Results) is two things:

  1. A goal management framework that helps organizations implement and execute their strategy.
  2. And a powerful way to formulate goals, enabling organizations, teams, and individuals to set clear and measurable outcome-driven goals that encourage collaboration.      

Using the OKR framework ensures a greater focus on results that matter, increased transparency, and better (strategic) alignment. OKR achieves this by aligning employees and the work they do around achieving a common purpose.

An OKR consists of an Objective, which tells you where to go. Several Key Results, which are the measurable results you need to achieve to get to your Objective. And Initiatives, which are all the projects and tasks that will help you achieve your Key Results.

The framework includes a number of best practices that help employees prioritize, align, and measure the outcome of their efforts.

Objective

An Objective describes an outcome you’d like to achieve in the future. An Objective sets the direction — think of it like a destination on a map.

An Objective answers the question: “Where do I want to go?”

To ensure they’re inspirational and can be understood by everyone, they shouldn’t be technical and shouldn’t contain a metric.

Key Results

A Key Result is a measurable outcome required to achieve the Objective. They help you measure progress toward the Objective — like a signpost that shows how close you are to your destination.

Key Results answer the question: “How do I know if I’m getting there?”

Key Results encourage you to be ambitious yet realistic. And they must contain a start and target value.

Initiatives

Initiatives are all the projects and tasks that will help you achieve a Key Result. They set the overall direction and describe how you’ll reach your destination.

Initiatives answer the question: “What will I do to get there?”

OKR as a metaphor

To bring it all together — imagine your organization is a car. The Objective is your destination ie. New York. Key Results are like the signposts on the way to New York, telling you if you’re headed in the right direction, and how far away you are from getting there. And the Initiatives are what you’ll do to keep your car moving in the right direction. That could include getting a good night’s sleep or stopping mid-way to refuel.

[fs-toc-h2]Characteristics of an OKR

Objective Key Result Initiative
Aligned
Ambitious
Directional
High Impact
Inspirational
Measurable
Specific
Time Bound
Understandable
Within Circle of Influence
Within Control

Example Objectives

  • 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-to-win rate from 12% to 20%
  • 90% of employees are contributing to an OKR
  • Reduce ticket escalation by 15%

Example Initiatives

  • 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

For more inspiration, head over to our OKR examples guide for a wealth of company and team-specific OKR examples.

[fs-toc-h2]OKR benefits

Why use OKRs?

Using and mastering the OKR framework can revolutionize the way you, your team(s), and your business operate. Below are some of the key benefits of working with OKR:

  • Strategic alignment and transparency
    OKR puts strategy first. Doing so forces you to identify and openly communicate your company’s strategy in a way that everyone understands. Managers and people will have all the needed context to align their efforts (including OKRs) with the bigger picture. This ensures your entire organization is moving in the same direction.
  • Clarity & focused execution
    OKR helps focus only on what’s most important by prioritizing only the work that has the biggest business impact. Teams and individuals know exactly what’s expected of them, and therefore are able to prioritize tasks and allocate resources effectively. Once priorities are set, OKRs provide clear and measurable outcomes, ensuring individuals, teams and companies stay focused on what’s most important.
  • Continuous improvement
    OKRs are not set and forgotten. Instead, the OKR framework fosters continued learning. By encouraging regular check-ins on progress, OKR ensures organizations continuously fine-tune, improve and achieve their goals by course reassessment and correcting where and when necessary.
    The process of closing OKRs at the end of a timeframe also forces teams to pause and reflect. It enables them to collect and share learnings before focusing on something new. This helps them make informed decisions on what to focus on next.
  • Employee engagement
    People achieve remarkable results when they’re engaged with a purpose. OKR provides that purpose by communicating the bigger picture in a clear and tangible way. And when employees can visibly see their contributions to the company’s development and can effectively collaborate on work that matters, they’re more likely to be engaged and motivated in their work. It’s a win-win situation.
    On the whole, the biggest impact of using OKR is a cultural shift from output to outcomes. And as a result, OKR creates focus, accountability, transparency, and alignment within an organization. The result of all this is an increase in performance and employee engagement.

[fs-toc-h2]Who created OKR?

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 joined Intel and further developed MBO into the OKR framework as we know it today. John Doerr joined Intel in 1974 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. Doerr introduced OKR to Google’s founders, Larry Page and Sergey Brin, who then implemented the OKR framework at Google (which still uses it today).

From then on, OKR has slowly grown in popularity and is now used by organizations worldwide.

History of OKR

[fs-toc-h2]OKRs vs. KPIs

What is the difference between OKRs and KPIs?

Now that you know what OKRs are all about, you’re probably wondering: what’s the difference between Objectives and Key Results (OKRs) and Key Performance Indicators (KPIs)?

They’re two different types of goals with differing purposes. Let’s take a closer look at what makes them different:

  • KPIs help you keep the lights on. They are a type of performance measurement tool that evaluates the success, output, quantity, or quality of an ongoing process or activity. These processes or activities are usually already in place within your teams and organization.
  • OKRs on the other hand provide the missing link between ambition and reality. They help you break the status quo and take you into new, often unknown, territory. If you have a big dream, something that you’d like your organization or team(s) to achieve in the future, you need OKRs that take you there.

Regardless of being different types of goals, OKRs and KPIs work well together. There’s great value in combining the two together — they provide you with all the tools to manage the health of your entire organization.

Let’s imagine your organization is a car again, and you’re driving toward your destination. Your KPIs are what you’ll find on your car’s dashboard, such as the fuel and engine temperature gauge. These are the things you’ll need to constantly watch to ensure your engine isn’t overheating and that you aren’t running out of gas. On the other hand, your OKRs are like your roadmap that guides you toward your destination. These are all temporary goals that will change from time to time. So, once you’ve passed a landmark (toward your destination), you’ll then focus on the next one.

OKRs vs. KPIs

[fs-toc-h2]Preparing for OKR

Getting started with OKR

Before you start using OKR it’s important to have a clear understanding of the challenge(s) 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 your OKR program to be successful, there are a few things to keep in mind:


1. Define your company strategy
Defining and understanding your organization’s strategy (Ultimate Goal and Strategic Pillars) is the first step to being successful with OKR — it clarifies the company’s purpose and determines its how-to-win choices in their chosen playing field. In the long run this helps teams and individuals prioritize and align the work that matters most to the company’s strategy to ensure they’re making the greatest business impact.

2. Get leadership buy-in

Change typically begins at the top. And senior leadership acts as a role model for the rest of the organization. If they don’t walk the walk and lack consistency and commitment to OKR, the rest of the organization will likely not follow. Therefore, it’s important to ensure your leadership is on board with OKR and using it consistently.

3. Define your roll-out approach

How you roll out OKR across your organization depends a lot on your organization’s characteristics, culture, and prior experience with OKR. Before you get started it’s good to familiarize yourself with the different roll-out approaches so you can decide which one is best for your organization.

  • All at once: This includes rolling out OKR to everyone in your organization in one go.
  • Top-down: Your leadership team pilots the OKR program before it’s introduced to the rest of the organization.
  • Department by department: Similar to the top-down approach, a single department pilots OKR before it is rolled out across other departments and teams.

4. Appoint an Ambassador

The implementation and management of an OKR program should be spearheaded by one or more people 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.

5. Design your OKR program

A well-designed OKR program provides clarity on what’s expected and when you expect it to happen. That means defining cadences and timeframes, as well as check-in and progress review frequency.

Typically OKR is set annually at the company level and quarterly at the team level. And to ensure you stay on top of your OKR progress, we recommend a weekly check-in frequency.

Here’s a template for you to create the perfect OKR program for your organization.

6. Educate your teams

OKR isn’t only a new way of working, but it’s also a new language. To make sure that everyone is speaking the same language, the entire organization should receive training on the framework.

Such training can be delivered through online training, as it’s more scalable and cost-effective, but some organizations also opt for workshops. We’ve seen both methods work well, and the good news is that Perdoo offers both free and paid resources to support your needs.

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[fs-toc-h2]Setting OKRs

How to write great OKRs

Writing OKRs well can be the make or break of the success of an OKR. A well-written OKR inspires and guides teams and individuals toward a desired outcome. A poorly written OKR however can be demotivating and lack direction, costing teams and individuals lost time and effort.

Here are a few things to keep in mind when writing your OKRs.

Setting OKRs

Setting Objectives:

Firstly, it’s good to note that there are 3 main types of Objectives: build, improve, and innovate. An Objective can help you create something that didn’t exist before (build), make something (ie. a process or product) that exists better (improve), or may even have to fully rethink something that already exists (innovate).

3 types of Objectives. They can help build, improve, and innovate.

While crafting your Objective, keep the outcome in mind and ensure it:

  • Is directional & inspiring: Use language that not only focuses on the goal you want to achieve but also motivates and engages your teams to work on it and get there.
  • Ambitious yet realistic: OKRs push you beyond the status quo — your Objectives should encourage you to step out of your comfort zone while keeping it realistic.
  • Is understandable: To ensure people understand the direction they’re headed in, make sure your Objective title is clear and concise. And don’t use technical jargon. You can always provide further context in the description.
  • Doesn’t include a metric: Objectives set the theme and communicate the prioritized outcome you want to achieve. Leave the measurement to your Key Results.
  • Is aligned: Objectives can serve multiple purposes — they can directly support your strategy, another OKR, or improve a KPI. It is possible that there’s no alignment as well; personal development Objectives could fall in this category.
  • Is timebound: To ensure you’re learning and pushing to achieve your desired outcome, it’s critical to set a deadline for your Objectives ie. a quarter or a year.

Setting Key Results:

Once you have your Objective set, the next step is to create Key Results that’ll define and communicate what achieving your Objective means, and whether you’re close to your Objective or not.

Your Key Results should be:

  • Outcome-focused: Key Results are the outcomes you want to achieve by the end of the timeframe. Remember: Key Results aren’t tasks or to-dos, but instead will quantify whether you achieved your Objective or not.
  • Measurable: Key Results should have a clear metric that can be measured.
  • Relevant: Your Key Results are specific and relevant to the Objective you’re trying to achieve. They should clarify what achieving the Objective means.
  • Ambitious yet realistic: Don’t be afraid to push your limits when setting Key Results to help you break the status quo, yet be cautious of it being within your circle of influence.
  • Balanced: It’s best practice not to set more than 5 Key Results per Objective. While having too few Key Results may not provide the entire picture, having too many will result in losing focus.

Setting Initiatives:

With the Objective and Key Results in place, you have the complete picture. Now it’s all about defining the Initiatives — tasks, projects, to-dos — that will help you push the needle on the Key Results.

If your Initiatives don’t have the desired effect on the respective Key Results, it might mean you need to rethink the work you’ll need to do to drive progress on the Key Results.

Your Initiatives should be:

  • Specific: The scope should be clearly defined, communicating what work is expected. It’s recommended to use unambiguous verbs like establish, write, launch, visit, release, etc.
  • Within your control: You should have full control over your Initiatives. Which means it should be in your power to complete them.
[fs-toc-h2]Getting OKR right

A good vs. bad OKR

Now that you know the basics of OKR, and have a good grasp over how to write a good OKR, let’s take a look at the difference between a good and a bad OKR.

The scenario

A Marketing team is looking to create a higher-converting website to acquire better-quality leads for Sales. Their aim is to improve branding and how the website communicates its value proposition and offering.

Example of a poorly crafted OKR

Objective: Launch a new website

Key Result 1: Find a website developer

Key Result 2: Release the new website

Initiative 1: Create a new brand design

Initiative 2: Draft new messaging landing pages

Can you already tell what’s wrong? Well, in a nutshell, the entire OKR is driven by activities (outputs). The Objective and Key Results don’t communicate or provide insight into the website's performance. The Objective is essentially a Key Result, is not inspiring nor directional, and doesn’t illustrate the outcome: a high-converting website. And, the Key Results are all outputs, things you need to do in order to launch the website.

Now let’s take a look at a well-written OKR.

Example of a well-written OKR

Objective: Our website conversions haven’t been higher in the history of Acme Inc.

KR 1: Increase visitor-to-lead conversion rate from 2.5% to 5%

KR 2: Increase sales-accepted leads from 30% to 50%

Init 1: Hire a website developer

Init 2: Launch new website

Init 3: A/B test of landing page copy, design, and layout

In this case, the OKR is results (outcome) driven. The Objective is clear, directional, and inspiring. The Key Results are specific to this Objective, measuring whether or not the website is indeed performing well. The Initiatives convey the efforts that will help push the needle on the Key Results.

[fs-toc-h2]OKR mistakes

Common OKR mistakes to avoid

OKR is a muscle that needs to be trained and getting OKR right takes practice. To make sure you maximize your OKR success, here are some of the most common mistakes to watch out for:

  • Not aligning with company strategy: Strategy clarifies what the organization's priorities and direction are. By aligning OKRs with the company strategy, you will ensure that your team is working on the areas that matter most.
  • Confusing OKRs with KPIs: OKRs and KPIs are different types of goals. KPIs help you manage ongoing processes and performance — your business as usual. , while OKRs are used to help you achieve big, transformational Objectives. It’s important to understand the distinction between them and manage your goals accordingly.
  • Prioritizing nice-to-haves: Setting too many OKRs to reflect all the work you want to do creates a lack of focus. OKR is about focus, so if it's not important and urgent, it's a “nice-to-have” and not worthy of your attention now. Resources are limited — there’s more value in engaging with and focusing on a few top-priority Objectives.
  • Focusing on outputs: OKR encourages you to shift from an output (What do I need to do?) to an outcome (What do I want to achieve?) mindset. By doing so, you establish the outcome, and while keeping the bigger picture in mind, you work your way backward to achieve it in the best possible way.

[fs-toc-h2]OKR software

Get started for free

At Perdoo, we believe in truly democratizing the concept of OKR and want to liberate companies from the hassle of tracking OKRs in spreadsheets. It’s cumbersome.

We’ve put our beliefs into action and therefore offer most of our content for free. And, we offer our OKR software for free as well. Get a full glimpse into what your Perdoo account could look like and do for you. Log into our pre-populated demo account here.

[fs-toc-h2]FAQ

OKR FAQ

OKRs (Objectives and Key Results) is a goal-setting framework that helps individuals and teams focus on the most important things, align their efforts, and track progress towards achieving their objectives. It involves setting specific, measurable, achievable, relevant, and time-bound goals (Objectives) and identifying the most important metrics or milestones (Key Results) that will indicate progress towards achieving those goals.

Some benefits of using OKRs include better alignment of efforts and focus, improved accountability and transparency, increased motivation and engagement, and better decision-making based on data-driven insights.

To write effective OKRs, it is important to follow the SMART criteria (Specific, Measurable, Achievable, Relevant, and Time-bound), align them with the company's vision and strategy, make them challenging yet achievable, and involve all relevant stakeholders in the process.

OKRs should be reviewed regularly, ideally on a quarterly basis. This allows teams to assess progress towards achieving their goals, make adjustments as necessary, and stay aligned with the company's overall strategy.

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.

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.

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.

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.

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. Request a demo to learn more.

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.

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.

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.

Initiatives describe all the work required to move the needle on 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 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?). By using Initiatives, you can commit to the same OKR while staying agile on an operational level.

Some common mistakes to avoid when using OKRs include setting too many or too few goals, not aligning them with the company's vision and strategy, not involving all relevant stakeholders in the process, and not reviewing progress regularly.

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