Goal setting and tracking are integral parts of every business venture. It guides and oversees how different teams in an organization set and track goals that can help achieve their overall business goals and objective.
Objectives and key results are a form of goal management framework used to define measurable and track their results. Every organization must have a goal that they must achieve to take the organization forwards – all of which is what the OKR (objectives and key results) defines and how the goal will be achieved by what results.
In a world where it is increasingly becoming more and more important for businesses to outperform their competitors and continuously stop on top of their customer’s minds.
It is not enough to just set goals, there have to be productive measures in place to ensure the goals are achieved by some key results that all point to the overall business goals.
Under business management, there is usually a central goal that an organization wishes to achieve, in order to do this, this major goal has to be broken down into smaller goals that can be managed by teams with clearly defined key results that can help hasten the process.
This complete guide will help you learn everything you need to know about OKR (objectives and key results) methodology and how setting OKRs can help achieve impressive business success.
Table of Content
- What is an OKR?
- What are the components of an OKR?
- What is the story behind OKRs?
- What are the examples of OKRs?
- What are the business benefits of OKRs?
- Who uses OKR?
- What is the difference between OKRs and KPIs?
- Common OKR mistakes to avoid
- What is the OKR process?
- Best Practices for setting OKRs
What is an OKR (Objectives and Key Results)?
OKR stands for objectives and key results. In simple terms, it refers to a goal-setting framework or methodology that can help organizational teams set and track measurable goals. Alternatively, OKRs provide a common language for defining, organizing, and driving desired results.
Essentially, OKRs help teams clarify and break down the goals and objectives they are trying to achieve within a specific quarter and identify some of the key results that they achieve their goals.
OKR framework ties a team’s day-to-day activity/work to minion steps taken to achieve their organizational goals. Following reports from a Journal of Applied Psychology on task significance and job performance, They discovered that:
Team members are more engaged in their work and more productive when they have a clear idea of what the team is trying to achieve and are aware of the significance of the task.
OKRs are reportedly a refined practice of management by objectives (MBO), which was criticized for being a top-down bureaucratic process whereas OKR is a better collaborative process.
The objectives and key results (OKR) methodology effectively combine clear objectives with small, manageable, and measurable results and a regular process of reviewing progress to measure results.
What are the components of an OKR?
An OKR mostly consists of an Objective – which identifies what must be achieved – and Key Results – which are the results that must be achieved to get to the objective – and finally the Initiatives – which are all the projects and tasks that must be completed to help you achieve your key results.
The written statement for OKR methodology is:
“I will (Objective – what you want to achieve?) as measured by (Key Results – how are you going to measure our progress?) and supported by Initiatives.”
A detailed explanation of three main components – Objectives, Key results, and Initiatives – is as follows:
Objectives
An objective is a memorable, qualitative, and straightforward description of what you want to achieve – your goals and where you want to go. They are a statement of intent that motivates and challenges the team. The major characteristics of Objectives include:
- They require multiple teams to work on them.
- They are descriptive and not measurable.
- They are there to motivate and inspire teams to reach higher goals.
- They could be short-term or long-term goals that require a single month, quatre (s), or years to achieve.
Check out the detailed guide about sales metrics.
Key Results
Key results are a set of measurable metrics that track progress towards the set objectives. For ideal situations, an objective should have more than one and less than 5 key results. The major characteristics of Key Results include:
- They are measurable
- They are designed to be completed quarterly
- For best results, teams should have 4-6 key results per objective
- They bring results that help you win
Initiatives
Initiatives are the projects and tasks that will help you achieve a key result. It answers one specific question – which is what projects, tasks or activities do you need to do to achieve your OKR? Initiatives support objectives and help you achieve your desired key results.
For example, if the objective is your destination and the key result is your map – showing you if you are in the right direction -, the initiative outlines what needs to be done to get the car from the existing point to the destination.
What is the story behind OKRs?
Before the OKR management methodology, teams have always used other goal setting and management techniques like MBO (Management by Objectives), KPI (key performance indicators), and SMART goals.
However, it wasn’t until the 1970s that Andy Grove, the CEO at Intel merged the idea of Objectives with Key Results to form what we now call OKRs. Being an extension of Peter Drucker’s Management by Objective (MBO), OKRs were developed to define, simplify and execute ambitious goals.
One of the most successful venture capitalists and Grove’s employee, John Doerr, in his book “Measure what Matters” recounted Grove’s inspiration for developing the OKR model and further explained how it works. He explained that the OKR methodology ruled that organizational teams perform better by focusing on the outcomes rather than the procedure. He further stated that
Instead of telling Intel’s employees precisely what to do, Grove would set them a goal and let them work out how to achieve them.
While Andy Grove developed the idea behind OKRs, existing data suggest that the name -OKR – was officially coined by John Doerr. He presented the philosophy of objectives and key results (OKRs) to the founders of Google – Larry Page and Sergey Brin – in 1999.
Reported to have helped google move from a small-scale business to a large-scale company with well over 150,000 employees, OKRs have now been widely adopted by numerous big firms like Netflix, Allbirds, Adobe, Amazon, Asana, Baidu, Box, BMAT, etc.
What are the examples of OKRs?
OKRs are effective at guiding the large, long-term goals of big organizations. It specifically guides how teams set goals and how they plan to achieve the goals. Below are some of the OKR examples that will help you better understand the idea of OKR across various levels – Company-wide OKRs, team OKRs, and Personal OKRs.
Examples of Company-wide OKRs
These OKRs work for an entire organization. They include:
Google – OKR Example
Objective – Create an awesome customer experience
- Key Result: Maintain customer acquisition costs under $1000
- Key Result: Increase repurchase from 1000 to 3000
- Key Result: Improve net promote score from 100 to 1000
Allbirds – OKR Example
Objective – Create the lowest carbon footprint in our industry
- Key Result: Supply chain and shipping infrastructure 100% zero waste.
- Key Result: Pay 100% carbon offset for calculated carbon dioxide emissions.
- Key Result: 25% of material is compostable.
Zume Pizza – OKR Example
Objective – Delight customers – make sure customers are happy with the service and can proudly promote the business.
- Key Result: Get75% of customers to prefer Zume to the competitors
- Key Result: Improve service rating from 4.0 to 4.7
- Key Result: Get an NPS (net promoter score) of 42 and above.
Examples of Team OKRs
These OKRs work for teams. They include:
Customer Success OKRs
Objective – Improve the performance and training of customer success team members.
- Key Result: Recommend 6-10 training and coaching opportunities
- Key Result: Improve team task success rate from 70% to 90%
- Key Result: Build personal plans with all team members.
Marketing OKRs
Objective – Improve customer retention and customer lifetime value (CLV)
- Key Result: Increase email newsletter rates from 30% to 50%
- Key Result: Increase positive comments and mentions from 60 to 100
- Key Result: Share 15 customer case studies per week.
Sales OKRs
Objective – Personalize sales strategy and nurture potential customers better
- Key Result: Increase follow-up email open rate from 15% to 40%
- Key Result: Improve conversion rate from 20% to 50%
- Key Result: Increase score on the customer satisfaction survey
Examples of Personal OKRs
These OKRs work for individuals. They include:
Objective: Improve fitness
- Key Result: Go to the Gym twice a day
- Key Result: Run 4 races
- Key Result: Cycle 500k
What are the benefits of OKRs?
Rather than being control and output-focused, OKRs make management result-oriented and data-driven. OKRs give teams the freedom to take on tasks and engage in problem-solving sessions, to decide on the outcomes they can deliver instead of assigning deadlines.
Below are more reasons why should use OKRs to solve your goal management solutions;
OKRs help you set goals that drive organizational growth
OKRs generally foster continuous organizational growth. There are two types of goals – Committed goals (goals that your teams are fully aware of and can realistically achieve within a specific period ) and aspirational goals (goals that are important for organization growth but can be slightly difficult for your team to achieve).
Working with OKRs help you identify your company’s top-level objective that can be used to develop measurable key results that can effectively help teams set goals that will drive the organization’s growth. Check out the detailed guide to know about customer acquisition costs.
OKRs help you set actionable goals a lot faster
OKR framework has a structured system that enables teams to easily and quickly set actionable goals that can drive key results.
Compared to other existing goal management techniques, OKRs enable teams to set goals from a company’s wide objectives that will help determine their success through key results – i.e. teams can effectively draw out goals from an objective and measure the progress of such goals from the listed key results.
By using Andy Grove’s methodology, you don’t have to spend a lot of time thinking of how to express your goals, instead, you can be direct by saying:
I will [objective] as measured by [key result].
OKRs help you easily set stretch goals
Stretch goals are deliberately challenging goals that you are fully aware can be difficult for your team to achieve 100% but you are doing it to stretch the capabilities of your team – motivate them to aim higher.
OKRs make it possible for you set such goals to challenge your team and improve their work performance.
Considering the nature of OKRs – an objective can have many key results under it – setting company OKRs requires functional teams to work together to create OKRs that work for everyone – organization and teams.
To enhance employee engagement, many companies adopt the hybrid top-down/bottom-up approach, where company leaders and executives set the objectives while individuals and teams set the key results that contribute to the success of that same objective.
OKRs enhance cross-functional team collaboration
To successfully implement OKR, different teams within an organization have to collaborate to achieve the objective. For instance, to achieve most sales objectives, the sales, marketing, customer success, and development teams have to work together and share knowledge to make it work.
OKRs connect day-to-day work to the team and company’s objective
One of the biggest benefits of OKRs is that they can help connect your day-to-day work to team objectives – i.e. your daily work/activities can be directly linked to the key results that will help you achieve your overall company and team objectives.
OKRs help you create and prioritize your weekly plans
The good thing about OKRs is that they help you clearly define your objectives and expected results that you can use to measure progress. By understanding what you need and the goals you have to achieve, you can create tasks and prioritize weekly plans to hit your target.
Who uses OKR?
OKRs are a goal management technique that a lot of big companies use nowadays to set and track the progress of their goals. There is no limitation to who can use an OKR, it can be used by top-level executives, team managers, team members, and virtually every individual within an organization.
Concerning teams, every team within an organization can use OKRs from marketing to sales, engineering, product support, customer services, HR, tech, Public relations, corporate communications, finance and so much more.
Understanding company strategy and how different teams work is critical to working with OKRs. Compared to other goal management techniques that impose goals and objectives on a team, OKRs allow teams to set their own objectives as long as it still contributes to achieving the organization’s strategic goals and priorities.
What is the difference between OKRs and KPIs?
Objectives and Key Results (OKRs) and Key Performance Indicators (KPIs) are both performance management methods but provide values in different ways.
KPIs are operating metrics that are used to evaluate performance for an organization, individual program, project, action, etc., over time. They are used to track, measure, and communicate the progress of an activity.
While OKRs are strategy execution frameworks that use specific metrics to track the achievement of a goal. Unlike KPIs that only track the progress of an activity, OKRs communicate a company of team’s topmost priorities and determine how many teams must work to achieve those priorities.
OKRs and KPIs differ in the following ways:
- OKR is a goal-setting method that improves performance while KPI is a business metric that tracks and measures performance.
- OKRs are for goal alignment, engagement, and focus while KPIs are for performance measurement and management.
- OKRs are time bound – usually quarterly – while KPIs are ongoing.
- OKRs are outcome-focused (focus more on the results/outcome) while KPIs are activity-focused (focus more on the activities).
- OKRs follow the bottom-up and top-down – 50-50 approach while KPIs are leadership-oriented – top-down.
- OKRs develop leading and lagging measures while KPIs only develop lagging measures.
- OKRs have 3-5 objectives with 4-6 key results each while KPIs have numerous measures (can be up to 100).
- OKRs can be changed frequently while KPIs can’t be changed on regular basis.
- OKRs identify a specific area of improvement to focus on while KPIs identify the desired level of performance.
- OKRs focus on the “what” and “why” of the work while KPIs focus on the measurement of activities.
Common OKR mistakes to avoid
Mastering the art of writing OKRs requires a lot of practice and time to build the right skills. Depending on how many OKRs you would be needing, each set of OKRs must go through multiple revisions and checks from different members of an organization and should take their feedback into account.
To help you write the best OKRs, the following are some of the common OKR mistakes to avoid when writing it
Having too many Objectives or Key Results
The overall idea behind writing out objectives and key results are not just to list tasks as you would do with your to-do list but to help identify areas that need more attention for better results. Avoid listing out too many objectives or key results, so your OKRs can be achievable and not overwhelming.
Expecting quick results
OKR process can be a long one filled with so much back and forth. It takes time to get used to the OKRs, and implement and refine them. Try not to rush the process and calmly go through the process to avoid demotivation.
Including too many challenging objectives
There are two types of objectives under OKRs – Moonshots and Rooftops. Moontops are the objectives that are not only difficult but can also be unattainable – the best you can achieve is 60 – 70%. While Rooftops are also slightly challenging but are attainable – you can achieve a 100% success rate.
If you are just using the OKR model, avoid moonshot objectives in the early OKR cycle so as not to demotivate your team. Instead, only work with rooftop objectives within the first 2- 3 OKR cycles to gain better results and help your team to fully adjust to the process before switching back to moonshot objectives.
Not regularly checking and communicating OKR progress
It is not just enough to set OKRs and forget about the, you have to set up a tracking plan to ensure that you regularly check and keep track of the progress of OKRs. Based on the result or improvements you notice while tracking, ensure that you effectively communicate this with the team so as to resolve any issue found.
Setting OKRS top-down only
OKRs function in a top-down and bottom-up approach assigning 50-50 responsibilities to teams and executives. It would be. counterproductive of your set OKRs behind closed without involving teams and individuals. Hence, to enhance collaboration and employee engagement, OKRs should be developed by company leaders and team members so that everyone is duly accounted for.
What is the OKR process?
An OKR framework is a highly efficient goal management technique used by a lot of companies. However, without following the right process, it can be challenging to achieve your goals with OKRs. The OKR process identifies ways you can accomplish the listed objectives and key results.
Key results and Objectives must be actionable, and to achieve this, you need to set up a simple OKR plan with the following steps:
- At the start of the business year, top-level executives should set high-level strategic OKRs with all their team’s input.
- The executive team should gather and compile feedback from all their employees on the OKR.
- Teams use the bi-directional approach to develop their own OKRs.
- The team should identify the points where the OKRs overlap with other team objectives and effectively align them with the teams and initiates.
- The teams track and measure their results and actions through weekly check-ins.
- Companies that use quarterly OKRs should evaluate them halfway through the quarter.
- At the end of the OKR plan cycle, you should hold a meeting with every team to identify the activities that should be stopped, continued, and improved.
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Best Practices for setting OKRs
OKRs are effective goal-setting techniques that organizations and teams use to track, measure, and manage objectives. To use OKRs, it is advisable that you define your company strategy to determine where and where not to allocate your team’s energy and resources.
To get the best results from using OKRs, consider adhering to the following guidelines when setting your OKRs:
Timeline
OKRs should be set by the end of the first week of the quarter and must not be later than three weeks into the quarter to give teams enough time to execute all their key results.
Think short-term
OKRs are usually time bound and usually run on a monthly or quarterly basis. Hence when you are creating your OKRs, consider objectives and results that you can achieve within the short timeframe – a month or quarter.
Get the support of your executives for your OKRs
OKRs outline the plans and measures that your company will take to achieve its goals, and so it’s important that you buy in your executives and leaders on the OKRs, so they are on the same page as you.
Start with OKRs that are easier to implement
OKRs can be a bit challenging to work with if you are just starting out. To make the process a bit simpler and easier to work with, choose simple OKRs that are easier to work with and implement.
Final Thoughts
OKR framework bridge the gap between goal setting and execution and helps business leaders and teams to prioritize, align and measure the outcome of their effort.
Consider linking your company and team objectives to the key results to help your team members understand how the day-to-day work and activities contribute to the main objectives and help them identify areas they should focus on to drive improvements.
Using good OKR software makes the OKR adoption process a lot easier and enables teams to align their goals for success.