What’s better than a high-performing team? A team that makes an impact. But how?
Objectives and Key Results (OKR) is lightweight goal setting framework which gives teams a clear measure of how they make an impact. It moves teams from busy work and fighting fires, to focus on what really matters. In this article I'm going to teach you what is OKR and how to get started with OKR today! The framework propelled Google, Facebook, LinkedIn, AfterPay, and many others into the stratosphere. It can do the same for your business.
Before we get to how it works, a quick history lesson!
A brief history of OKR
Although this may sound like a brand new thing for a lot of people, they’ve actually been around since the 1960s! Here’s a brief history:
- OKR was created by Andy Grove, Intel Chairman in 1968. It was a new iteration of the MBO (Management By Objective) Framework.
- In 1974, John Doerr joins Intel and learns about OKR.
- John Doerr moves into venture capital in 1980. He’d give the young companies he invested in much-needed focus and structure with OKR.
- In 1999, John Doer advised Google during an early-stage investment round. He proposed the OKR framework which propelled Google’s growth. They still use the framework to this day!
- Finally, in 2017, John Doerr wrote the book “Measure what matters”. This created a surge in awareness and adoption.
Today we see businesses all over the world embedding OKR within their business. Its popularity has only increased thanks to the rapid value it creates. In fact, in our State of OKR 2020 Report, we found that 100% of businesses using OKR were satisfied with how they help create valuable outcomes.
What are OKRs?
Objectives and Key Results (OKR) is a management framework that focuses a company’s efforts on their greatest priority using a measurable and aligned structure. It takes a valuable slice out of the strategy and connects teams to their purpose.
They connect teams with their purpose and the “why” behind their work. It draws them into a bigger picture.
Let’s say our purpose and mission is to get to Mars. Our flight plan there is going to be our strategy. The very first step (getting into the stratosphere), that’s our OKR. It’s the very first outcome we need to achieve on our way to Mars.
An OKR is broken into the following 2 elements:
- Objective – A simple and inspiring statement of what we need to achieve to create a valuable business outcome. What’s important to note, is that the outcome is not what’s created or delivered, it’s the value that is derived by way of a happier customer or a better business.
- Key Results – Having 2-5 measures indicating how we know we’re making progress on delivering the Objective. We know we’re making valuable progress as they are results-based, rather than activity-based. We use leading indicators for our metrics so that we know we're making progress throughout the quarter.
You can see the structure is pretty simple. Now you have that down pat, it's important to remember they are distinct from KPIs. That's because OKRs are solely about creating change and outcomes. By design, they focus teams on critical priorities and cut the noise that might not be most pressing right now. More on that later!
What’s the benefit of OKR?
OKR is your unfair advantage. The pace of change is an ever-increasing reality of business. Continuous changes in customer needs and shifts in the regulatory environment mean it’s more important than ever to adapt to these challenges in an aligned and focused manner.
1. GROW BY TURNING YOUR STRATEGY INTO ACTION
Create the structure and focus for teams to link their current priorities to business strategy. Teams are empowered to change the game through directional autonomy and a clear measure of progress.
2. CREATE OUTCOMES WITH LASER-LIKE FOCUS & ALIGNMENT
Create RADICAL momentum with cross-functional teams aligning on organisational priorities. OKR brings transparency and collaboration which enables teams to collectively focus. This is how you create an unstoppable wave of outcomes.
3. SEE & FEEL PROGRESS
OKR enables you to see how you’re progressing and validate your decisions as you go. They act as a north star that directs you down the right path. Even better is they tell you when you’re off course. Your OKR gives you the blueprint to make an impact.
What’s an example of an OKR?
In short, OKRs can be framed as I will achieve this (objective) as measured by (this set of key results). Here’s an example of what a good OKR might look like, we have loads more in our Best OKR examples article.
Objective: Create high impact leaders across the business
- Key Result 1: Leaders believe they have the tools and practices needed to effectively lead from 50% to 100%
- Key Result 2: Team members believe managers help set performance goals from a median of 2 to 4
- Key Result 3: Team members believe their leaders communicates an inspiring vision from 52% currently to 75%
Most important of all, Key Results are measurable and verifiable, therefore we aspire for them to be a metric we’re moving the needle on, rather than an activity or plan. Where we are today, this may not always be possible, but it’s where we need to be. Key Results which show the current measure and the desired target create clarity. It helps the team understand where we currently are, and moves doubt around what the measure actually is.
OKR vs KPI: How is it better / different?
The biggest question is how do OKRs differ from other goal-setting methods?
At its core, OKR is about the focus on change. We like to ask the question, “If nothing were to change except one thing, what would it be?” This is the essence of OKR.
Going a little deeper, we aim to have an objective that links to our purpose. However, it must be time-bound and generally achievable within the OKR cycle. The measures reflected by the Key Results are leading indicators.
With a clear connection to purpose with leading indicators, we now have a powerful tool for focus across the business. It connects and aligns everyone on what matters most.
This is the closest thing you can get to a crystal ball. Leading indicators predict a given outcome or result. This is where a lot of thought goes into understanding what we’re focusing on, and how this will act as a measure of success throughout the OKR cycle.
KPIs on the other hand generally focus on maintaining the business. As long as our indicator stays within a certain range, then we are happy. While some businesses use KPIs to measure strategic execution, the measure tends to get lost in the noise. It fails to align and connect teams, meaning it’s a weak strategic execution tool.
That's why it's best to use KPIs as health metrics. They tell you that your BAU (Business as Usual) activities are functioning well. Presuming all is well, you don't want to do anything to change them. Common examples include call centre response times, available cash flow, website availability / uptime. You can read more about the differences in our blog and video exploring OKRs vs KPIs.
Remember, KPIs complement OKRs. It ensures that while we are executing our strategic activities, we are not compromising the underlying business. Don't throw the baby out with the bath water!
How do I get started?
Let's talk about how you introduce Objectives and Key Results to your team! You'll want to start with a 6-week OKR experiment. Don’t overthink it. The best thing to do is just get started with your team!
Since you're doing a short experiment, give yourself plenty of time. You therefore want to allow 3 hours for rich discussion to flow. If you’re looking for something more in-depth, check out our guide on running an OKR workshop.
My advice is only to create one objective, to begin with. You’ll read a lot out there about OKRs with 5 Objectives each with 5 Key Results. That’s insanity! It’s 25 different data points! Keep it simple.
Perform the following activities with your team. Remember, OKR is a team sport so do not do it in isolation.
1. Before the session
As your teammates come in with Objective ideas for the next 6 weeks. Keep it fast and informal.
2. Write down the objective
- Have an open discussion of what would be different if we have a successful quarter.
- Ask the team “If we were to move the needle on nothing this quarter except one thing, what would it be?” Hopefully the objectives they prepared earlier will make this activity snappy.
- Discuss until you can frame it as an objective: What we will achieve?
3. Write down the Key Results
- Ask the team for Rey Result ideas (stress less about the actual measures)
- Vote on the best candidates which will measure progress.
- For any output / activity-based Key Results, ask questions to get to the outcome.
4. Write down the Tasks and Initiatives
Before wrapping up, ask the team to write down the work we think we’ll need to do to deliver on the work. These may be small activities or major projects. Whatever it is, write it down.
Leave the wordsmithing to one person after the meeting.
5. Make it happen!
Now that you have your OKR, it’s time to get to work! Remember to move fast and think about what experiments you can run to prove the work you have planned will help you achieve your OKR. You need to embed this within your weekly operating rhythm to keep that focus. Ensure every week you’re tracking your progress on each Key Result, and setting mini-goals for the week ahead.
OKR Operating rhythm: How to make it stick
OKR has another huge advantage over other goal-setting frameworks. It’s quarterly. This ensures it’s never too far out of focus. Want to really make it stick? Embed it into your team’s operating rhythm.
Here’s a high-level breakdown of what you need to do to make OKR really work for you.
- Create clarity on your Mission and Purpose – Make sure it connects with and helps you achieve your company’s purpose. The big picture is so often forgotten when we get busy, so OKR can enable your team to live it. If it’s not clear for your team, it’s unlikely you’ll make meaningful progress.
- Set a clear strategy – Ensure your OKR takes a valuable slice out of your strategy one quarter at a time. Your strategy is your unique path to solve customer problems while outmanoeuvring your competitors. In simple terms, you do this by building capabilities to solve these problems with products and services. To do this, you need to be clear on the market you play in, the customers you serve, the problem you solve, and the unique advantage which will allow you to win. Without this anchor point, your OKRs feel inconsistent over time.
- Survey the business on priorities – We want to gain inputs from everyone in the business on what the goals should be for the cycle ahead. Engage all relevant stakeholders to take their view on what the OKR should be. This includes employees, board members, and even customers.
- Draft the OKR as an Executive Team – Consider what is absolutely most critical this quarter and draft an OKR for it. Aim to limit yourself to one OKR.
- Share and iterate – Share this with the rest of the business for feedback. Action the feedback and include it in the OKR.
- Teams set their OKR to align – By this stage, teams have a company-wide OKR to align to. Each team considers how they can best contribute by setting their own OKR. This will include anything they see as critical for the quarter.
- Teams share and align – Each team shares their OKR with the other teams, actively reaching out for support where they have a dependency. Teams may even share a Key Result when they’re working on the same outcome.
- Execute the OKR! – Get to work and start making progress on your OKR! The art is keeping it front of mind with the weekly check-in.
- Weekly OKR check-in (this will supercharge your OKR!) – Every week, get together with your team to discuss your OKR. Have each team member give a confidence score on how likely they think we are to achieve each Key Result. Discuss what is needed to be done to lift the score. For some, you’ll only need 15 minutes. For executives, you’ll want more time. We call this the Weekly Impact Meeting, it’s a real game-changer to maintaining focus on your goals.
- Mid-quarter review – This is optional, but I’ve seen a lot of teams benefit from this. Midway through, run a deep pressure test on how we are actually going. Back it up with loads of data. Discuss in the session what’s needed to be done to course correct.
- Score and retrospective – A key benefit of OKR is its ability to create a learning feedback loop. At the end of the quarter, firstly score each Key Result on a scale of 0 to 1. The sweet spot is .7 as it means we’ve had to push ourselves but not set the bar too low. We also run a Continuous Improvement activity called a retrospective. This is where we reflect on what went well and what didn’t go so well. In this session, we capture actions for how we want to work better next time.
Timeline for setting OKR
Some of the vision and strategy activities in the breakdown above only happen as needed. Of course, goal-setting happens on a regular basis. Quarterly for most. Follow a timeline that works for you, setting aiming to draft the OKRs about two weeks before the end of the quarter. Everyone’s OKR should be relatively finalised within two weeks of starting the quarter.
The following timeline gives you an idea of what activities you should be doing when. As you can see, you really should start talking about OKRs about half way through the quarter starting with your mid-cycle review.
7 Tips to make your OKR journey a success
I'm proud to say that introduced OKR to hundreds of businesses and thousands of people! This does mean however that we've made just about every mistake in the book to getting it absolutely right.
Save yourself the pain and learn form our mistakes. Here's the top things we’ve learnt about introducing OKR:
- Nail the change management. Be clear on why OKR and why now? What problem are you hoping it will solve?
- Talk and survey team members to understand their views on priorities before the OKR workshop.
- Ensure each team has an OKR Champion to support the introduction of OKR.
- Introduce OKR only if you have leadership wanting to shift to an outcome mindset.
- Make sure the team has enough control over their work to set the OKR and execute it.
- Aim to achieve about 70% to 80% of your Key Results. This is critical as it helps you learn how far you can push yourself and allows you to succeed even if you don’t nail everything. It’s all down to improving and learning.
- Keep it in focus: Run a weekly OKR check-in and confidence score.
Where can I learn OKR?
The best place to start may not be so obvious. A lot of people start by introducing OKRs to their team. This usually involves education and influence which comes with experience. This can be challenging when you’re new to it
If you’d like to start a little slower, why not try experimenting with OKRs yourself? It could be your personal goals for the quarter or could be simple as creating an OKR for an upcoming birthday party.
Keen to go all in and get started with your team? We have some training which will help:
- Free Introduction to Facilitating OKR for Teams – Basic training to get you started on your OKR journey.
- Leading OKR for Teams – In-depth training with a live support community for introducing OKR and leading the change journey.
There is also have a heap of free research, templates, and quick guides to get you started on our Resources page. Check it out and let us know what you think!
Where can I find out more?
We’re incredibly passionate about OKR and the benefits can bring. We want to make this as accessible as possible! If you have any questions relating to OKR, simply reach out:
Our most popular OKR Resources
- KPIs vs OKRs: What are they and how do they create business growth?
- Are individual OKRs a good idea?
- Building alignment with an OKR marketplace
- OKR alignment: Winning is easy when you’re aligned
- Complement your OKRs with Powerful Health Metrics
- State of OKR 2020 Report
- Training: Leading OKR for Teams
- OKR Cheat Sheet, Alignment Checklist, and other tools
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