To thrive and survive in today’s dynamic and ever-changing business world, companies have to be able to quickly adapt to every market shift and find the answer to new challenges. At the same time, while making those adjustments, it’s essential to keep a clear vision and maintain focus on what’s really important for the organisation.
Of course, none of this is possible unless there’s an understanding on all levels of the organisation of the nature of common goals and clear communication throughout the company on how those goals should be achieved.
Keeping all teams aligned and working towards a common objective to achieve the desired result is rather challenging. Particularly in the current climate where remote working is more and more becoming a standard. However, achieving this is often the difference between success and failure.
As always, it’s a good idea to look into how the most successful companies overcome these challenges to keep all their moving parts in sync and capable of performing tasks properly and on time.
It’s no secret that a lot of the world’s biggest companies deal with these issues using the same goal-setting framework. Google, Amazon, Spotify, Twitter, Netflix, just to mention a few, all use OKRs as an instrument to set and align their goals and define the desired results.
Obviously, just by looking at the names on this list and their success, the OKR system is working. Below, we’ll explain what OKRs are, how they work, and how they can benefit the organisation.
Table of Contents
What are OKRs?
In its essence, OKR, which stands for Objectives Key Results, is a powerful goal-setting collaborative framework used by organisations to plan, implement, and execute their strategy
. This way, they can achieve growth and create a cultural shift in their operation.
The OKR methodology helps them set challenging and ambitious goals and determine measurable results. Through OKRs, organisations can create top-down alignment around the set goals, track progress, and stimulate engagement of everyone involved.
It’s important to note that the OKR framework works in the same way for setting the goals on all levels of the organisation. It can even be used for setting personal goals and helping individuals achieve results. The crucial factor is that all goals and results align to a wider vision, commonly from the top down.
This connection to the overall strategy is what makes OKRs so powerful and effective. When done right, they provide clarity and understanding, as the team on every level can recognise their priorities and understand how their work aligns to the greater goal of the whole organisation.
Key Components of an OKR
In its essence, the OKR methodology is fairly simple and features a couple of key components. They’re usually created with one Objective at the top and a few (commonly 3-5) Key Results below, following a simple template:
I will [OBJECTIVE] as measured by [KEY RESULT].
Although simple, this template is very flexible and can be bent and adjusted to fit almost any purpose within an organisation of any type and size.
Objective
The Objective simply represents a description of what the organisation wants to achieve. It sets the direction and determines the destination where the company wants to be. Objectives commonly come in form of short inspirational statements. They should be precise, concrete, action-oriented, and tied to the overall strategy. However, they shouldn’t be too technical or involve metrics, so that everyone can understand them, no matter their position within the organisation. A properly designed objective prevents straying off the course and ineffective execution.
Key Results
Key Results serve as a benchmark and help monitor the progress towards the Objective. Basically, they’re success criteria that tell you how close you’re to achieving the Objective. A properly designed Key Result is measurable, verifiable, very specific, and usually time-bound. Good KR is aggressive and ambitious, but still realistic. It should contain a metric that determines a start and target value. This eliminates the grey area and room for doubt. The KR requirement is either met or not, there’s no middle ground. Once all the Key Results are completed, the Objective is achieved.
Another essential component of OKR methodology is a set of initiatives . They sit below each Key Result in the OKR framework and define tasks and projects that help achieve a certain KR. Every Initiative describes the day-to-day work that goes into completing a Key Result and eventually achieving the Objective.
Who Created the OKR Methodology?
The term “OKR” was coined by investor and venture capitalist John Doerr. He’s also the person most responsible for the popularisation of the OKR methodology as he was to one who introduced the idea to Google’s founders. Back in 1999.
Doerr presented the idea to the team of, then-young, Google founders, including Sergey Brin, Larry Page, Susan Wojcicki, and Marissa Mayer. The Google leadership decided to align their company’s strategy with the OKR framework and the rest is history. Doerr is also credited with designing a basic OKR formula: I will [OBJECTIVE] as measured by [KEY RESULT].
However, the concept of OKR was created by Andy Grove in the 1970s. Grove, who was the president of Intel at the time, based the OKR methodology on another management framework – MBO (Management by Objectives), developed by Peter Drucker. He used Drucker’s ideas as the basis for his OKR methodology and further build on them by introducing the idea of Key Results and tying them to the Objectives.
The methodology was quite revolutionary at the time, as it shifted the focus from the procedure to the outcome, allowing teams to devise their own ways of achieving a certain objective. Later on, Grove introduced the concept to John Doerr who worked under him at Intel at the time. In 1983, Andy Grove documented the OKR methodology in the book High Output Management.
OKR Examples
The best way to understand how OKR methodology works is through some real-life objective key results OKR examples.
OKR Example 1
Allibirds is a footwear manufacturer, best known for its sustainable and environment-friendly products. In line with their brand, they wanted to make their products carbon-neutral, so they devised the following OKR framework:
Objective:
- Create the lowest carbon footprint in the industry
Key Results:
- KR1: Supply chain and shipping infrastructure is 100% zero waste.
- KR2: Pay 100% carbon offset for calculated carbon dioxide emissions.
- KR3: 25% of used material is compostable.
- KR4: 75% of used material is biodegradable.
OKR Example 2
Zume Pizza is a start-up that used OKR methodology to help them attract customers and compete against the industry giants. One of their OKR frameworks looked like this:
Objective:
- Delight customers and make sure that they’re so satisfied with the product and service that they keep coming back and recommend Zume Pizza to all their friends.
Key Results:
- KR 1: Net Promoter Score (NPS) of 42 or better.
- KR 2: Achieve the Order Rating of 4.6/5.0 or better.
- KR 3: In a blind test, 75% of customers prefer Zume to the competitors.
OKR Example 3
OKR methodology can be employed beyond the world of business. Here’s how the City of Syracuse, New York used the OKR framework to achieve fiscal sustainability.
Objective:
- Achieve fiscal sustainability.
Key Results:
- KR 1: The variance of the general budget reduced from 11 to 5 percent.
- KR 2: 95% of authorised capital project dollars is spent by the end of the fiscal year.
- KR 3: 95% of grant dollars for grants from prior fiscal years is spent by the end of the current fiscal year.
What are the Benefits of OKR?
OKR methodology provides numerous benefits to the organisation implementing it. Here are some of the most important ones:
- Improved focus: OKR allows the team to focus on what’s most important and prioritise the work that will have the most impact on the organisational success. Rather than wasting time on non-urgent matters, they can rally around the smaller set of carefully chosen priorities.
- Employee Engagement: An effective OKR gives the employees a sense of purpose. In many cases, the company leadership only sets the Objectives, while the smaller teams or individuals are responsible for determining Key Results that will contribute to those objectives. This keeps the employees engaged, accountable, motivated, and makes them more likely to stay with the company.
- Strategic Alignment: Through OKR, the whole organisation, both employees and executives, can align their goals so they work towards the same purpose. Everyone can easily connect their daily work with the overall company objectives and business goals.
- Monitoring and Stretching: With OKR in place, the team can easily monitor and evaluate its progress towards the objective. This allows the organisation to, if needed, change the tactic and adjust the goals. Just as they’re easily set, the goals within the OKR frameworks are easily stretched or adjusted based on the performance in achieving Key Results. This methodology empowers teams to create goals that go beyond “business as usual” and produce a significant impact and change.
- Cultural Benefits: All of the benefits listed above bring accountability, focus, transparency, and alignment to the organisation. And, those contribute to a productive and enjoyable work environment. With the cultural shift from output to outcomes, employees feel more empowered, have a sense of purpose, and more easily commit to a common, big picture goal.
What is the Difference Between OKR and KPI ? OKR vs KPI
KPI (Key Performance Indicators) and OKR seemingly have a lot in common. Both methodologies support performance reviews and measurable goals. However, the intention behind setting those goals is different. In most cases, the goals within the KPI framework are obtainable and are usually a result of a process that is already in place. On the other hand, OKR goals are more ambitious and aggressive. Still, OKR goals are not unattainable, and they often serve to push the team to perform better exactly because of the ambition behind those objectives.
Additionally, we can say that with KPI, the focus is more on performance management and tracking, down to the single employee. The OKR methodology, however, puts emphasis on setting the goals and the alignment throughout the whole organisation. Being more straightforward, KPIs are more suitable for improving or scaling a project that’s already ongoing or has been done before. OKRs are likely the better option for executing a larger vision or changing the overall direction of a business.
What are the Common OKR Mistakes?
While the OKR framework seems fairly simple, writing it still requires a certain degree of skill and practice. Mistakes can happen, especially when implementing OKR for the first time. Below are some of the most common mistakes when creating and implementing an OKR.
- Setting unachievable Objectives.
- Creating non-measurable Key Results.
- Creating too many OKR’s or OKR’s with too many Key Results.
- Setting tasks as Key Results.
- Using vague language in creating the OKR.
- Not trusting your teams and creating only top-down OKRs.
- Creating OKRs in silos.
- Failing to track the progress of an OKR.
- Incorporating OKRs in the employee compensation formula.
- Using template OKR without attention to your organisation’s particular needs.
- Creating OKRs just to maintain the status quo.
What OKR Software Tools are Available?
Depending on the organisational need, you can use a variety of tools to help you create a working OKR framework. For projects of smaller scope and for smaller organisations, you’ll find that some free and easily available tools are more than enough.
Free OKR Tools
- Google Docs or Google Sheets – these Google tools are free and simple, but still powerful tools to create and track your OKRs. They’re particularly useful for smaller teams and allow you to freely design and adjust OKR to fit your company’s needs.
- Measure What Matters OKR Starter Kit By John Doerr
– this is an OKR template in for of a Coda doc based on the book Measure What Matters by the man himself – John Doerr. The starter kit provides a step-by-step guide to creating and tracking an OKR. It’s easy to use and combines the flexibility of Coda doc with a depth of a spreadsheet. - Pen And Paper – Of course, OKRs can also be created the old-fashioned way- using just a pen and paper.
Paid OKR Software Tools
The larger organisation with numerous and more complex OKRs may need the help of professional and specifically designed software to create OKRs and track the teams’ performance.
- Betterworks – this software comes with John Doerr’s recommendation and provides, more or less, everything you need to design, track, and manage OKRs. It can also be fully integrated with other software products your company may use such as Outlook, Gmail, Slack, Jira, or Salesforce. Plus, it supports another management tool – CFRs (Conversation, Feedback, and Recognition).
- Asana – designed as a work management platform, Asana is a powerful tool whose value to the company goes beyond just OKR implementation. Still, it will answer all your OKR requirements and the company even offers an OKR template to help you tailor the platform to your needs.
- Gtmhub – through Gtmhub, organisations can transparently link and cascade their OKRs in a way that allows everyone involved to see how their work contributes to the overall objective. The platform also provides a unique means of motivation for employees through Gtmhub badges.
- Lattice – this platform features a foundational toolkit that allows you to create clear and understandable OKRs, track the work of team members, and motivate them with a public Praise Wall. It also comes with an Engagement Surveys tool for employees you can use to better understand their needs.
- Ally.io – the Ally.io software allows you to seamlessly integrate OKRs into the everyday workflow. The dashboard looks a lot like a social network helping you keep the team members engaged and easily track the activities on the project. Whenever a goal is met, Ally.io alerts everyone and cascades it to the top of the organisation. Besides, it features a “time machine” tool allowing team members to compare their current performance to historic results further contributing to the OKR transparency.
- Mooncamp – this OKR software solution is perfect for large-scale projects and large companies. It provides a clear visual picture of the progress and alignment within the organisation. Mooncamp features a possibility of breaking down high-level frameworks into team-based and individual OKRs where each one can be aligned to one or multiple objectives.
- PatPat360 – developed in Italy, this software is extremely useful for various everyday work applications but excels as a tool for OKR projects. PatPat360 design is very similar to Facebook, with each team member having their own avatar and the “wall” where everyone can track the updates. It’s especially useful for setting up bottom-up OKRs. The leadership can provide only the goal-setting parameters, allowing individual teams to create their own OKRs that fit the set criteria.
- Just3Things – this software helps enables organisations to set a vision, strategic aims and top level OKRs for teams to align too. Prioritise company OKRs and inform everyone when these change for complete clarity.
Google OKR Presentation
The following video covers Google Ventures Startup Lab | GV partner Rick Klau and key results (OKRs) and how this has been done at Google since 1999 – understand the key attributes of effective OKRs and how to apply them in your own organisation.
OKRs for Marketing
OKRs can also help marketing teams which are typically supported by tracking metrics. With OKRs, marketing teams can focus on the metrics that wheel and change direction to what’s effective.
Having OKRs ensures that your marketing goals are in line with the company’s strategy and that you will see consistent results.
You can achieve your business goals sooner by starting with reverse engineering and activity-based selling metrics when you set OKRs for marketing.
The majority of novice OKR-setters start at the bottom. They look at existing activity-based measures (for example, weekly outbound sales calls or cold calls) and work their way up to higher goals.
This, on the other hand, leads to misaligned OKRs that don’t correspond to high-level corporate goals. They pay attention to improving performance in specific fields, but they neglect to link it with the broader company goal.
By taking a top-down approach to OKR setting, you can be confident that your actions will help achieve the goals set by leadership and make measurable progress towards key results.
Conclusion – OKR
Objective key results (OKRs) is a collaborative goal-setting methodology used by teams and individuals to set challenging, ambitious goals with measurable results. OKRs are how you track progress, create alignment, and encourage engagement around measurable goals.