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“OKRs can guide you to the mountaintop.” John Doerr, Why the Secret to Success is Setting the Right Goals
In a world of rapid change, complex information and endless possibility, Objectives and Key Results (or OKRs) provide much-needed clarity to what a company chooses to focus and work on over a given timeframe. Increasingly popular amid a variety of organizations, the OKR framework is easy to set up and splits goal achievement into two distinct parts: objectives and - you guessed it! - key results.
Objectives describe the direction the company wants to go in; a distinct goal that meaningfully contributes to its long-term success. Think of these as the checkered flag hovering over the finish line; the mountain peak looming in the distance.
Key Results describe the steps that need to be taken to get to each objective. Think of these as the milestones you pass on your way to the mountaintop; checkpoints that give substance to any route to success.
OKRs came about as a way to manage teams at work, but you could easily apply them to any given situation involving goals - even your personal life! For example, let’s imagine a food enthusiast called Jamie wakes up one day and realizes his dream is to change the world’s relationship with food. This is his vision; his ambition expressed as a meaningful, but broad value.
“The OKR framework cultivates the madness; the chemistry contained inside it.” Bono, ONE Campaign
Changing the world in any way is no small feat, especially if you’re just one person! They say that every journey starts with a single step - but how do you know what that step should be? What comes next?
Jamie thinks about the food industry and his role models. After some extensive research and soul searching he comes up with three objectives that he thinks will help him start realizing his dream in a tangible and focused wa
Now he needs to come up with several key results for each of those objectives, because none of these will just happen overnight. Take the second objective from the list above. Jamie might include the following as his key results for establishing a great food blog:
And there you go. By using the OKR framework, Jamie has the structure and clarity needed to turn his vision from dream into reality.
Two thirds of senior managers can't name their firms' top priorities. London Business School
The story of OKRs starts in the late 1950s, when businesses were experimenting with a strategy called MBO, or ‘Management By Objectives.’ Popularised by Peter Drucker, it was intended to prevent managers from losing sight of their company vision. By the 1960s, however, the approach was fading out of the workplace as people found it too rigid and unresponsive to be truly effective.
Fast-forward to the 1970s: enter Andy Grove. As the CEO of Intel, Grove recognized the same need for good goal setting that Drucker had. He resuscitated the concept behind MBO to create a new approach he called OKRs, or ‘Objectives & Key Results.’ Unlike MBO, OKRs would serve their purpose more dynamically. They were designed to involve and motivate employees, rather than restrict and pressurize them.
Andy Grove’s philosophy lives on in John Doerr, a former Intel employee who advocates the use of OKRs today. Doerr brought OKRs to the founders of Google in 1999, and he argues that doing so has been a primary factor in the company’s continuous success and innovation. Unsurprisingly, many firms have since taken on the same goal framework that allegedly made Google so successful, including Facebook, Netflix, Gap, Deloitte, and Adobe.
“A key result has to be measurable. At the end you can look at it and say ‘Did I do that or not? Yes? No?’ Simple!” Andy Grove, Former CEO at Intel
Curious? Read our short history of objectives and key results blog post.
Hold on a moment - if management by objectives couldn’t get a foothold in the businesses of the ‘60s, how come the OKR method is receiving so much attention now? Could it be that OKRs are just a passing fad, and is there any evidence that they work for smaller companies, not just corporate giants like Google and Intel?
In a nutshell, 21st-century organizations know that alignment and clarity are essential to effective, modern business strategy. Since the 1950s our organisations have become both faster and flatter. Gone are the five-year business plans: companies must be ready to respond to the twists and turns of the modern world as they’re happening. Under these conditions it’s neither possible, nor desirable to have team leaders micromanage every one of their direct reports. Employees have more autonomy; relationships between teams and people are more fluid.
One casualty of this change is growing incoherence between different levels of an organization. A company should look like a group of people working for the same purpose - yet an alarming two-thirds of senior managers can't name their firms' top priorities. It’s unrealistic to expect employees to commit to a firm when they’re unclear about the reasons they do the work they do.
Using even a basic OKR system led to an 8.5% increase in call center sales and 11.5% increase in performance. Sears Holding Company study
Which brings us to another valuable aspect of OKRs: the potential for employee engagement and motivation. MBO didn’t take into account the possibility that the values of a company and its employees might not automatically align. They didn’t consider the fact that the people implementing those goals were individual, changeable, and not always predictable. They assumed that setting a goal would be enough - without ever asking if those goals were right for the people carrying them out.
OKRs, on the other hand, are more responsive. When done right, OKRs encourage a malleable, holistic outlook which recognizes the importance of the individual goal as well as the company goal. There should be a healthy symbiosis between different levels of the organization, which is not just observed but also adapted as changes occur naturally over time. (Indeed, John Doerr draws attention to Google co-founder Larry Page’s “unforgettable” ability to analyze this symbiosis between goal tiers.)
As part of this symbiotic process, employees are invited to get involved in setting OKRs. How do they feel they can best contribute to a team goal? Is there even a special project they could undertake which would add value to the company OKRs? Giving employees this autonomy bosts engagement. And at the other end, failure shouldn’t be penalized, but embraced - 100% hit rates are red flags that your OKRs are too easy. By opening up the field in these ways, OKRs offer more than a framework - they become a personal stimulus, too.
“OKR expands our limits. It moves us to strive for what might seem beyond our reach.” John Doerr, When John Doerr Brought A Gift to Google’s Founders
Before getting into the specifics of setting Objectives & Key Results, let’s delve further into the intriguing relationship between employee motivation, challenge and failure within OKRs. As mentioned on the previous page, the reimagining of failure as what C. S. Lewis called “finger posts on the road to achievement” allows you to set more challenging goals. With permission to fail, the fear of setting goals that are beyond your reach disappears. You become more interested in what you can achieve than what you can’t achieve. Feeling inspired already? We thought as much.
This brings us to the idea of challenge. Most of the time we live under the assumption that people like to have it easy; that, given the opportunity, humans would much rather avoid work and effort than take on a big challenge. However, there is some surprising data on the way we perceive very difficult challenges compared to easily attainable challenges. A study by Harvard Business Review found that when faced with goals of varying difficulty, participants often “perceive higher goals as easier to attain than lower ones — and even when that’s not the case, they still can find those more challenging goals more appealing.”
That surprising result could be traced back to the instinctive assessment of the gap between current standpoint and new goal.
“Within ten years of graduation, the 3% who wrote down their goals earned ten times as much as the other 97% put together.” Harvard Business Study of MBA graduates
Because of the way participants evaluated the context and potential for failure, slight goals were often subject to a more pessimistic light (by focusing on what could go wrong) whilst stretch goals were seen with more enthusiasm. This links back to that ever-burning question of employee motivation and engagement: it’s not the amount of work that’s set so much as the way the work is laid out. And if you’re wondering about how realistic a goal is, you’re already preparing yourself for smaller wins, self-doubt and slower progress.
That’s why an essential characteristic of good OKRs is shooting for the moon. It creates a sense of investment in the task at hand, coupled with the faith that - even if it takes longer than a single OKR cycle - that goal is totally achievable. It redefines the boundaries of what lies within reach, and plants seeds of ambition into the minds of your employees: it says “hey, this is what we could achieve.”
So when you’re considering which attitude to bring to OKRs - remember that challenge and failure are no longer number one enemies. In fact, they’re driving forces that, when faced head on, can be used to shape a different landscape of motivation and action.
“Only those who dare to fail greatly can ever achieve greatly.” Robert F. Kennedy, US Senator
Some might feel uncertain about trying out OKRs - especially when they compare it to KPIs (or Key Performance Indicators), which have long played a part in most business strategies. By definition both claim to assess ‘Key’ factors relating to success. Performance and objectives; results and indicators…? Aren’t these essentially the same thing? Why can’t you just stick with good old KPIs?
There are two main qualities that differentiate OKRs and KPIs. Firstly, KPIs are numerically measurable and static, while OKRs are more dynamic, combining qualitative with quantitative goal-setting. It’s useful to note here that a KPI is closer in nature to key results within OKRs than it is to the OKR strategy as a whole. Like KPIs, key results can be measured in terms of a percentage, for example.
Secondly, each approach looks at goal strategy from opposite angles. KPIs look back at past achievements so the company’s stats can be checked and controlled, while OKRs lay out a path for future success so employees can be motivated to hit targets. Think of KPIs as the doctor doing regular health check-ups, whereas OKRs are the personal trainer driving the company to push itself above and beyond its perceived limits.
"Working on the right thing is probably more important than working hard." Caterina Fake, Co-Founder of Flickr
KPIs and OKRs are perfectly compatible with one another, so you don’t have to get rid of KPIs by adopting the OKR method. As shown by the venn diagram below, OKRs measure the same things as KPIs - but it also provides incentives for future achievement.
“It almost doesn’t matter what you know. It’s execution that matters most.” Andy Grove, Former CEO at Intel
Inspiring as they may be, OKRs need attention and commitment in order to be truly effective. Companies like Google and YouTube didn’t make incredible progress by just setting up OKRs and then forgetting about them. You’ll need to regularly track your OKRs if you want to see the needle move.
Let’s say you’ve used a quarterly framework for each OKR cycle. That gives you a two-week preparation period, after which point each week counts for 10% of the OKR’s overall progress.
Each of these 10% weeks should be book-ended by meetings: a planning session on Mondays and a bragging session on Fridays, where you can share and celebrate individual wins. Not only do these rituals enforce the OKR habit, they also create a healthy, stimulating balance between ambitious thoughts and real actions.
Use the two weeks at the start of the quarter to affirm team protocol, as well as team feeling. Let new team members get to know each other, and encourage them to share their expectations of the OKR cycle so that incongruencies and clashes of outlook can be managed. When the quarter is up, always get feedback from employees on how the cycle went so you can troubleshoot your method and keep people engaged.
“Momentum and flow are more important than micromanagement and 100% completion rates.” Roger Longden, There Be Giants Founder
Choose your objectives - the direction of your OKRs - with some consideration. You don’t want to find yourself mid-cycle only to realize that the end game isn’t worth reaching! If you follow these five pieces of advice, you should be good to go.
As already discussed, aim high in order to get the most from your OKR cycles. Objectives should be inspiring - if they sound like business as usual, go bigger. Avoid setting objectives that use words like ‘keep doing’ or ‘maintain’: there’s no point setting objectives that ask employees to just continue as they are. Break into new territory!
Next, keep it concise. Set no more than 3 to 5 objectives: any less and your focus will be too narrow - set any more and you’re spreading yourself thin. You want to offer enough variety to give employees a choice in how they contribute to the company vision - but not so much that it creates confusion or misalignment.
Now make sure your objectives are specific. Sure, they don’t have to be as numerically specific as key results but they shouldn’t have lots of unnecessary frills. The trick is to make the objectives clear and specific enough to be easily recalled.
“It is equally important not to get paralyzed by trying to set 'perfect' OKRs.” Roger Longden, There Be Giants Founder
When you have your objectives ready, clarify and communicate them with your company. Again, the objective itself goes hand in hand with its execution - and getting people on board is the first step in that execution. Understand managers’ and employees’ primary reactions; ideas; concerns. Identify ambiguities and combat misgivings - and don’t be afraid to make amendments where necessary.
Now for the best part: track your objectives and recognize success! Just because you’re no longer allergic to failure, doesn’t mean you should play down your wins. A healthy balance between the two lies somewhere around the 60-70% completion mark. At that level of achievement, you can be sure that the objective has been challenging enough to be meaningful whilst having confidence in your team’s hard work and collaboration. Check in with people at the end of each OKR cycle: what was good about the objective, and what would people really like to change in the next cycle?
If you and your employees establish a rhythm of giving feedback on past objectives, it reminds all participants that OKRs are a work in progress always open to improvement - so you don’t get stuck trying to get your objectives right the first time.
Curious? Check our tips for setting the right objectives for OKRs.
As mentioned earlier, key results are actually relatively similar to KPIs in that they are designed to measure and monitor your progress. You can think of key results as the milestones you pass on the road to success: they indicate both where you are and how far you’ve come. So what should you look out for when choosing your key results?
Well first off, in order to make something easily measurable it should always have a number. You can formulate it however you like to keep it practical. If the key result works better as a percentage or a due date, that’s fine too - as long as there are some digits involved! Using numbers means less room for interpretation when assessing your progress.
Then, as with objectives, you don’t want to set too many key results. Around three key results per objective should work best (although depending on your team size and objective, you could set up to five). You don’t want your key results to turn into an endless to-do list - they should mostly reflect the priorities linked with achieving each objective, not every single possible facet of it.
“Focus, alignment, commitment, tracking and stretching — that’s the payoff of OKR.” John Doerr, Measure What Matters
As with your objectives, make sure each key result offers a challenge for teams to really sink their teeth into. Setting up key results that are difficult to complete will test the resourcefulness and aptitude of employees. Aim for a 60-70% completion rate of each key result.
Importantly, make sure the names of your key results focus on outcome, not process. Sometimes key results make people think of actions on a to-do list, like ‘get advice; ‘help trainee’; or ‘research new software’. The problem with these is that they’re continuous - theoretically you could get one piece of advice or a thousand, and you wouldn’t be able to pinpoint exactly when you had achieved that key result. But if you use a finite outcome - like ‘hold meetings with two financial advisors’ - you can say with confidence whether you have achieved that key result or not. Note that focusing on outcome doesn’t contradict the process, either: you still have to seek advice, but now you have a clearer vision of how you’re going to do that.
Lastly, ask yourself whether the key result will leave you with evidence. Taking the above-mentioned example: following the key result ‘get advice’ might lead to spontaneous conversations that leave no paper trail. But if you hold meetings with two financial advisors, you’ll probably end up with some emails, invoices, and calendar entries to consolidate the progress of that key result.
Like everything in life, OKRs don’t always turn out as planned. Sometimes employees are discouraged by issues experienced in the first couple of OKR cycles; or the organization fails to capture the cohesion promised by the OKR framework. What are some of the problems raised by OKRs, and how can we resolve them?
To answer that question, let’s look to Christina Wodtke, an OKR expert and author of the seminal book on OKRs, Radical Focus: Achieving Your Most Important Goals with Objectives and Key Results. Her interview with Maggie Crowley touches on some common things to avoid when implementing OKRs.
“There are no longer problems that one genius can solve - everything worth working on today takes many minds.” Christina Wodtke, Radical Focus and Living Your Goals with OKRs
Want more practical advice? Read our step-by-step playbook on setting the right Objectives & Key Results.