OKR skyrocketed from a little-known acronym to a management philosophy adopted by the largest and most powerful companies in the world. Companies, like Google, Netflix, Intel, and Amazon to name a few, leveraged OKR in their daily operations to achieve great success
What is OKR and where did it originate? Let’s take a look.
OKR stands for objectives and key results. It’s a goal-setting paradigm that enables companies to define their objectives then track and measure their performance against these goals.
A goal without key results, as noted by experts, is a wish or desire. Pair a desire or wish with a set of clearly articulated, measurable key results and you do indeed have a real goal.
World renown venture capitalist John Doerr attributes his success--and that of some of the companies he’s invested in--to the successful application of OKR. His book, Measure What Matters, is all about objectives and key results, and why and how the mindset and approach work so well.
The objectives are what a company, function, or individual want to accomplish and the key results are how it or they can get it done.
According to Doerr via the Harvard Review, “One of the powerful things about this system is that at any level of an organization you’re only going to have two or three, or maybe four or five, objectives. And three or so key results.
So, it requires a kind of rigor and discipline about saying, these are the most important things that are going on in an organization. It’s not the sum total of tasks. It’s not the work order for the enterprise. It’s whatever we as a team agree deserves special attention, and it really matters.”
OKR isn't about a company or function having objectives and results. There's an inherent prioritization that's essential to its successful execution. It’s defining the most important objectives and aligning them with the most essential key results. Even global corporations should have only a handful--perhaps up to five--OKRs at a given time.
Objectives, according to Doerr, should be aspirational and bold and have a longer time horizon. While the key results should have the following characteristics:
- Small in number
What’s more, OKRs need to be monitored frequently and are most effective when examined on a quarterly or monthly basis.
Another important aspect of utilizing OKR effectively is that the objectives and key results should never be tied to compensation or bonuses. Incentives and bonus can be paid out, of course, but they should, ideally, be tied to the collective OKRs established for a given function within a company. Directly tying compensation to OKRs limits innovation and risk taking, according to most OKR proponents.
Ben Brubaker-Zehr, founder of Teal Software, as quoted in a recent CIO post, stated: “OKRs should align with business goals and enterprise initiatives, with regular check-ins to gauge progress throughout the business quarter.
When done well, OKRs can be really effective and ensure that organizational objectives cascade in clear, accountable, and measurable ways.”
OKR’s Early History
Doerr was inspired to utilize OKR by Andy Grove, an early pioneer in business management. Grove was Intel’s very first hire and became the company’s CEO in the late 1980s. He grew company’s revenues from $1.9 billion to approximately $26 billion during his tenure.
Grove famously boiled down another seminal business management publication, Peter Drucker’s Practice of Management. Grove distilled what Drucker called management by objectives or MBO into a five-page outline of what's now known as OKR.
In his book, High Output Management (1983), Grove deftly describes a key feature of successful OKR, which is its cascading alignment impact: “A manager’s objectives are supported by an appropriate set of key results. His objectives, in turn, are tied to his supervisor’s objectives, so that if the manager meets his objectives, his supervisor will meet his.”
How to Get Started with OKRs
Establishing well-constructed objectives and key results means teamwork and a certain level of discomfort and uncertainty. Asking managers and individual contributors to embrace very ambitious goals and increased pressure to own key results via a C-suite decree won't work and goes against the very nature of OKR.
Your organization’s leadership team needs to spearhead this process, which has to be a collaborative effort among leaders, managers, and individual contributors. Only through careful, open collaboration can OKRs get crafted properly and win buy-in from those that are tasked with achieving them.
What’s more, OKRs, by design, are intended to be aspirational and aggressive. This is why they shouldn't be tied to individual bonus structures. Removing the link between compensation and OKR achievement is critical to staff buy-in and openness to embracing challenging, ambitious objectives.
Collaboration crafts strong OKRs and establishes a level of ownership for objectives and key results, ensuring the language used to craft each is accurate and measurable while also creating an environment where aggressive goals and innovation are accepted.
What Are Some OKR Best Practices?
Ada Chen Rekhi, founder and COO of Notejoy, outlined what she sees as OKR’s best practices in a recent CIO story. According to Rekhi, OKRs should:
- Put the customer first
- Be ambitious
- Be tied to larger company goals
- Be limited in number
- Be measurable
- Be outcome focused, not task-centered
- Have accountable owners
If you’re an organization that’s seeking to revamp or establish its management processes, we can help. Illumine8 Marketing & PR has helped organizations of all sizes establish benchmarks and create new avenues for performance measurement and analysis that help them grow smart. Reach out to us today. We’d love to discuss your vision for the future and how you see your company getting there.