What is an OKR?
OKR (Objectives and Key Results) is a goal system used by Google and others. It is a simple tool to create alignment and engagement around measurable goals. The big difference from traditional planning methods? OKRs are frequently set, tracked, and re-evaluated – usually quarterly. OKR is a simple, fast-cadence process that engages each team’s perspective and creativity.
Creating alignment in the organization is one of the main OKR benefits. The goal is to ensure everyone is going in the same direction, with clear priorities, in a constant rhythm.
A proper goal has to describe both what you will achieve and how you are going to measure its achievement. The key words here are “as measured by,” since measurement is what makes a goal a goal. Without it, you do not have a goal, all you have is a desire.
I will (Objective) as measured by (this set of Key Results).
Objectives are memorable qualitative descriptions of what you want to achieve. Objectives should be short, inspirational and engaging. An Objective should motivate and challenge the team
Key Results are a set of metrics that measure your progress towards the Objective. For each Objective, you should have a set of 2 to 5 Key Results. More than that and no one will remember them. All Key Results have to be quantitative and measurable.
Ex: An Objective might be “Create an Awesome Customer Experience.” This sounds great, but how would you know? Remember, without measurement you don’t have a goal.
How can we measure if we are providing an awesome customer experience? Net Promoter Score and Repurchase Rate would be two good options. Do our customers feel so good about dealing with us that they would recommend us and buy again? Measuring NPS and repeat purchases alone can send the wrong message. It might encourage us to make the customer happy at any cost. We can include a countermeasure like Customer Acquisition Cost. We want to make our customers happy and keep costs under control.
Objective: Create an Awesome Customer Experience
- Improve Net Promoter Score from X to Y.
- Increase Repurchase Rate from X to Y.
- Maintain Customer Acquisition cost under Y.
Agile Goals: Instead of using annual static planning, OKR takes an agile approach. By using shorter goal cycles, companies can adapt and respond to change.
Simplicity: Using OKR is straightforward, and the OKRs themselves are easy to understand. Intel’s original model set goals monthly, which required a lightweight process.
Transparency: The primary purpose of OKR is to create alignment in the organization. OKRs are public to all— everyone has access to everyone else’s OKRs – even the CEO’s.
Nested Cadences: OKR understands that strategy and tactics have different natural tempos since the latter tends to change much faster. To solve this, OKR adopts different rhythms:
- A strategic cadence with high-level, longer term OKRs for the company (usually annual).
- A tactical cadence with shorter term OKRs for the teams (usually quarterly).
- An operational cadence for OKR tracking results and initiatives (usually weekly).
Bidirectional Goal Setting: The traditional top-down cascading model takes too much time and does not add value. That is why OKRs do not cascade. OKR uses a market-based approach that is simultaneously bottom-up and top-down. The company sets the strategic OKRs that each team should use to draft their tactical OKRs. This model improves engagement while creating a better understanding of the strategy. It also makes the process simpler and faster.
Ambitious Goals: The philosophy behind OKR is that if the company is always reaching 100% of the goals, they are too easy. OKR targets bold, ambitious goals. Besides aspirational objectives, OKR believes in enabling the team to set challenging goals. Goals that make the team rethink the way they work to reach peak performance.
OKR’s ambitious goals are known as moonshots or stretch goals. The recommendation is you should achieve only 60-70% of them. But that does not apply to all OKRs, as some goals should be predictable. That is why is important to understand the difference between moonshots and roofshots.
Decoupling Rewards: Separating OKRs from compensation and promotions is crucial to enable ambitious goals. Employees need to know they will not lose money if they set ambitious goals. It is hard to set moonshots when you need the bonus to pay for your kids’ college. OKR is a management tool, not an employee evaluation tool.
Adopting OKR is a journey, not an event. As in any cultural transformation, change does not happen overnight. But it is possible to modify the company’s dynamics in a few months, aligning and engaging the team. Furthermore, you should customize OKR to your organization, as this framework explains.
Common OKR mistakes
- Using OKR as a task list. Use OKR to measure if you are adding value, not if you are delivering tasks. Therefore, you need to understand the difference between Value-based and Activity-based Key Results.
- Setting too many OKRs. This mistake is a common consequence of the first one. Rather than being a laundry list of every single thing you do, OKR lists your top priorities. OKR is your definition of what most important during that quarter. Even if you are using Value-based Key Results, you need focus, or your team will not remember their OKRs.
- Not aligning your OKRs. OKR is an alignment tool, so you should never set your OKRs in isolation. You have to talk to the other teams.
- “Set it and Forget it.” OKRs are not New Year Resolutions. Without regular follow-through, you will never achieve them.
Tips for writing good OKRs
For Objectives: Objectives should be simple, short and easy to memorize. If you have to stop to breathe while reading your Objective, you are doing it wrong. And Objectives shouldn’t be boring. They fit the organizational culture and can be informal and fun. You can use slangs, internal jokes and even profanity – whatever fits your culture.
For Key Results: Separate metrics from initiatives. Set few of them – between 2 and 5 per objective.
There are a few best practices all organizations can follow to begin using OKRs successfully. Here’s how.
Adopt Your Own OKR Method: Ultimately, it’s essential that you familiarize yourself with the general concepts of OKR goal setting, and then make adjustments to fit your company culture and business needs accordingly. At the most basic level, OKRs are meant to be simple, so don’t feel compelled to force any aspect of the approach. They’re highly agile and adaptable.
Start Small – Many companies make the mistake of trying to roll out OKRs across their entire organization all at once. It’s best to instead enforce a trial period, and begin with select groups. You might want to consider implementing OKRs at the top first, and then adding new departments, teams, and finally, individuals, over a designated period of time. Or, begin with cross-functional groups to add alignment and then expand from there.
Avoid incorporating BHAGs into your OKRs at the beginning. While teams are learning the approach, there’s no need to add the pressure associated with pursuing moonshots.
Communicate the Value of OKRs – Discuss the power of using metrics to drive results, focusing on how tying individual contributions to company goals will help teams excel. Show them both the “why” behind your decision to begin using OKRs, as well as the “how” – as in, exactly what to expect from before, during, and after implementation.
Develop a Rhythm – Lastly – but most importantly – once you’ve adopted OKRs, develop a rhythm to ensure ongoing success. Use ongoing management tactics like weekly one-on-one meetings to manage goal progress and maintain a continuous two-way feedback loop.
Throughout the quarter, management can also regularly evaluate goals to ensure they’re still supporting company priorities. Because OKR goal setting is an agile system, Objectives can be adjusted to accommodate evolving business plans as needed. As the next OKR period approaches, have managers collaborate with their teams to discuss goals from the upcoming quarter.
Forget SMART Goals – Try CLEAR Goals Instead
We’re all familiar with SMART goals–the acronym that has been used by business authors for decades to describe the key elements of effective goals.
Specific (Goals must be clear and unambiguous)
Measurable (Results must be able to be measured in some way)
Attainable (Goals must be realistic and attainable by the average employee)
Relevant (Goals must relate to your organization’s vision and mission)
Time-bound (Goals must have definite starting and ending points, and a fixed duration)
The problem with SMART goals is that they just haven’t kept up with the faster, more-agile environment that most businesses find themselves in today. New business environments require a new way of setting goals, thus CLEAR goals. CLEAR stands for:
Collaborative (Goals should encourage employees to work together collaboratively and in teams)
Limited (Goals should be limited in both scope and duration)
Emotional (Goals make an emotional connection to employees, tapping into energy and passion)
Appreciable (Large goals are broken down into smaller goals)
Refinable (Set goals with a clear objective, but have permission to refine and modify your goals)
When you set a goal, whether in business, career, or life, it must be a clear and compelling statement–one that can be built out, embraced, and acted upon by every member of the team. Use CLEAR goals to ensure your big goals unite your team instead of dividing it.