The Ultimate Guide to OKR

What is OKR?

OKR stands for "Objectives and Key Results".

OKR is actually two different things. It's a:

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

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[fs-toc-omit]OKR as a goal management framework

The OKR framework is a collection of best practices that help employees prioritize, align, and measure the outcome of their efforts.

Goal management is of course not new; in fact, it has been around for decades. Therefore, we see OKR as 75 years of best practices in goal management, bundled together in a single framework and made simple. This simplicity is a key characteristic of OKR: it’s why it became so popular compared with legacy frameworks such as 4DX, OGSM. This simplicty allows everyone in your organization to play a role.

Different organizations may use OKR for different reasons. For startups, it can be a framework for growth. For large, established enterprises it can be a framework for digital transformation or innovation.

One way or the other, 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.

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.

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[fs-toc-omit]OKR as a way to formulate goals

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.

Imagine you sell barbecue grills online. One of your Objectives could be to Expand to 3 new countries within the region. Your Key Results are measurable achievements that will tell you if you have accomplished your Objective. For example, one Key Result could be to Sell 10,000 grills in Germany. Initiatives that you think will drive progress on your Key Result could be to Run a German Google Adwords campaign or to Attend 5 food exhibitions in Germany.

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

The Objective

An Objective describes something that you’d like to achieve in the future. It sets the direction for your organization or team — think of it as a destination on a map.

It’s important that an Objective is easy to understand, memorable, and inspiring. Objectives are a great tool to communicate across the organization what everyone is working on. For that reason, Objectives shouldn’t contain technical jargon, and they also shouldn’t contain a metric.

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

The Key Results

Key Results are all the results that need to be achieved in order to get to your Objective. In reality, however, Key Results do two things:

1. ‍Key Results help specify the Objective: Qualitative Objectives can be a bit ambiguous, so you need Key Results to quantify the Objective and make them specific. Imagine your Objective is to “Be a top place to work in the U.S.”. You could measure this in terms of where you rank in Fortune’s 100 top places to work list, eNPS score, number of applicants per job post, or multiple indicators at once. Whatever you mean by “being a top place to work”, the Key Results will make it clear.
2. ‍Key Results help you measure progress toward your Objective: A Key Result must always contain a metric, including a start and target value. Think of Key Results as a signpost with a distance marker that shows how close you are to your Objective. So imagine your desired destination — your Objective, is New York. The signposts indicating distance toward your destination are your Key Results.

A good Key Result is typically an outcome, not an output. An output quite simply is something you do, such as a task or a project. For example, Make 50 Sales calls would be an output. Whereas, an outcome is a result of what you do. For example, I closed 10 new customers — that’s an outcome.

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%

The Initiatives

Initiatives are all the projects and tasks that you’ll work on in order to push progress on your Key Results. Think of it as everything you’ll do in order to get to your destination.

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

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[fs-toc-omit]A simple car analogy

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

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.

Who created OKR?

A brief history of OKR

OKR has a long history that can be traced back to 1954 when Peter Drucker invented a framework which he called MBO: Management by Objectives. Through his book The Practice of Management this framework became known to a large audience of business leaders.

When Andrew Grove founded Intel together with Gordon Moore and Robert Noyce in the late 1960s, he became a careful student of business management. After he became President and later CEO at Intel, he wrote the book High Output Management in which he first coined the term Objective and Key Results. His description is super simple and razor sharp:

“A successful MBO system needs only to answer two questions: Where do I want to go? (The answer provides the Objective.) How will I pace myself to see if I’m getting there? (The answer gives us milestones, or Key Results.)”

John Doerr joined Intel in 1974 where he learned about OKR. He later went on to join KPCB, and after their investment in Google, when Google was only 40 people, he pitched the concept of OKR to the founders Larry Page and Sergey Brin. They were quickly sold on it and still use OKR today, with 60.000 employees.

From Google, OKR spread to many other tech companies, like Twitter, LinkedIn, and Zynga. When Google employees left Google to join other companies, they often brought OKR with them. Today organizations of any size and across all industries have embraced the methodology.

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[fs-toc-h2]OKRs vs. KPIs

[fs-toc-omit]Tthe 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.

OKR and KPI work perfectly together. There’s great value in combining the two — they provide you with all the tools to manage the health of your entire organization.

Let’s say that critical business as usual for your Support team is to answer incoming support tickets as soon as possible. You agree with Support that, on average, tickets should be answered within 30 minutes. You create a KPI in Perdoo that measures the average reply time for incoming support tickets. As long as the KPI indicates an average reply time of 30 minutes or less, you know you’re all good. But what if the KPI indicates the average reply time currently is 52 minutes? You probably want to create an OKR to fix this.

Or 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.

Preparing for OKR

Getting started

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

A key reason for most organizations to implement OKR is to improve alignment across their organization. They essentially want to make sure everyone is pulling in the same direction and working toward a common goal. But in order for OKR to boost alignment, you first need to get your strategy in place.

Strategy = Ultimate goal + Strategic Pillars

The reality is that every organization has limited resources and is faced with competition. For that reason, strategy becomes critical, and (tough) choices need to be made, such as which battle(s) you want to fight and what winning looks like. The answer is your strategy.

And your strategy consists of two parts: your Ultimate Goal and Strategic Pillars. The Ultimate Goal defines your organization’s ultimate winning aspirations, making clear what the purpose of your business is, for whom your organization is fulfilling that purpose, and when you’ll consider your venture a success.

Once you know your business’ playing field and what winning looks like, the next step is to figure out how you’re going to win. Those how-to-win choices reflect what you’ll do to differentiate yourself in the market.

Those choices will be the pillars that will support your Ultimate Goal. If you decide to change your Ultimate Goal, you’ll have to revisit how to win on that new playing field. Your Ultimate Goal and Strategic Pillars are, therefore, jointly called your “strategy”.

This strategy will serve as the foundation that will inspire all the OKRs (and KPIs) that your organization will be working on. And that’s why it’s so important to track your strategy and goals in the same place: it creates transparency, enabling everyone to see the bigger picture and if what they’re doing is aligned with it.

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.

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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The OKR rhythm

An OKR program is most successful when it operates on a combination of cadences. These cadences interact with each other to create a rhythm of continuous and focused progress.

If you’re wondering what a cadence is: a cadence quite simply is the frequency with which the organization and its respective teams set and review their OKRs.

Long & short cadences

While your organization’s strategy guides you in everything you do, it needs to be made actionable through OKRs. At the company level, these OKRs are usually annual. At the department- and team level, OKRs are typically quarterly.

Toward the end of a year, executives typically start reviewing the current year’s performance as well as the organization’s strategy. They then define the organization’s key priorities for the next year. These company-level OKRs communicate the 3, 4, or sometimes even 5 bigger themes that the leadership team wants everyone to focus on throughout the next year.

Teams and departments then set shorter-term OKRs that support the higher-level, company-wide priorities.

It’s important to note though that the OKR framework is flexible and forgiving — there’s no one-size-fits-all rule on setting the right combination of cadences for your organization and its teams. Since 94% of organizations work with these annual/quarterly cadences, it offers a safe starting point. From there, you can modify your approach as you learn what works best for you.

Updating progress on your OKRs

Staying on top of OKR progress is the key to success. Our data shows that organizations that update and review their goals’ progress frequently are more likely to achieve their goals than those that don’t.

Therefore, to ensure execution succeeds, it’s important to clearly define the frequency at which people need to update progress on their goals. For quarterly OKRs, it’s a best practice to Check-in on a weekly basis.

Closing OKRs

An often overlooked part of an OKR program is the process of closing OKRs. As you approach a new quarter and are wrapping up work on the current quarter’s OKRs, it’s important to pause and reflect. It enables you to collect and share your learnings before you start focusing on something new.

And by doing so, you and your teams have enough information to make informed decisions in the future. So don’t forget to allot time at the end of the quarter to take a step back and reflect on your goals.

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 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).

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.

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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.

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.

Pitfalls & Best Practices

How to implement OKR successfully

That was a lot of information, but we’re almost at the end of it!

Before we let you go, we'd share a few common pitfalls and important best practices. They'll help you kickstart your journey with OKR.

[fs-toc-omit]Best practices

1. When it comes to OKR, less is more. OKRs help you focus on what’s most important right now. So don’t set too many OKRs, and avoid putting everything you’re doing in your OKRs. Don’t be afraid to say no to things that just don’t need to be focused on right now.  
2. Strategy first, OKR second. If your people don’t understand your organization’s purpose and the field it’s playing in, no amount of well-written OKRs can support your organization in reaching its desired destination.
3. Transparency is key. To ensure you’re moving in the right direction you want to involve everyone in your organization. Your people can’t make an impact if they don’t know what they’re working toward and what’s currently happening in the organization. So, make sure your strategy, company, and team goals are visible to everyone.
4. OKRs are not the same as KPIs. Instead, they perfectly complement each other. KPIs monitor performance and identify problems and areas for improvement. OKRs solve problems, improve processes, and drive innovation. Tracking them alongside each other not only provides the bigger picture at all times, but you’ll also have all the functioning parts in front of you that your organization, teams, and people need to deliver strategy.
5. Create a rhythm for your OKR program. Standardize the process for when you set and close, as well as how often you review and update progress. By doing so everyone knows what’s expected of them and when.

[fs-toc-omit]Pitfalls

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

[fs-toc-omit]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. Signup now.

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[fs-toc-h2]FAQ