What are OKRs?

Objectives and Key Results (OKRs) is a critical thinking framework and ongoing discipline that seeks to ensure employees work together, focusing their efforts to make measurable contributions that drive the company forward.

What is an Objective?

An objective is a concise statement outlining a broad qualitative goal designed to propel the organization forward in a desired direction. Basically, it asks, “What do we want to do?” A well-worded objective is time-bound (doable in a quarter) and should inspire and capture the shared imagination of your team.

 

For example: Drive better attendance at our annual user conference to boost the member experience.
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What is a Key Result?

A key result is a quantitative statement that measures the achievement of a given objective. If the objective asks, “What do we want to do?” the key result asks, “How will we know if we’ve met our objective?”

 

For the objective above (Drive better attendance at our annual user conference to boost the member experience) a key result could be: Increase the number of attendees from 350 to 600.

What are benefits to OKRs?

The very act of instituting and utilizing a formal measurement and monitoring practice is beneficial, as evidenced by a recent study of 30,000 U.S. businesses conducted by the U.S. Census Bureau’s Center for Economic Studies. According to the authors, companies that had structured management practices focused on performance monitoring and targets had significantly better financial results than those that didn’t use such measures. So simply putting an OKRs program in place is upping your odds of fiscal success. The rewards to your bottom line will justifiably please you, the board, and your bean counters, but outlined next are a number of additional, also critical, benefits you can expect from a well-constructed OKRs implementation.

OKRs Are Easy to Understand—Increasing Buy-in and Use

In California, there is a very popular burger restaurant called In-N-Out. If you’ve ever had the pleasure of savoring their offerings, which are absolutely a cut above most fast food, your mouth is probably watering as you read this. One of the many reasons In-N-Out has captured such a frenzied base of raving fans is the simplicity of the menu, which consists of burgers, fries, shakes, and beverages. That’s it. Not like many restaurants, whose menu boards are so crammed with items you need 20/15 vision just to read them.

 

Consider OKRs the “In-N-Out of managing your performance.” One of the biggest benefits the framework features is its sheer simplicity, and that begins with the taxonomy. Basically just three words: objectives and key results. Other approaches to managing performance and executing strategy are awash in jargon, which has the potential to confuse employees already under siege from missions, visions, core values, and KPIs, as we noted when discussing execution myth three (Communication equals understanding).

 

Here’s how Rick Klau of Google Ventures describes it: When OKRs are working well in your company, it’s as if everyone has acquired fluency in a new language. Every employee is familiar with a common vocabulary, and understands how this vocabulary describes what’s most important to the company (and what’s not). After just a couple of quarters relying on OKRs to set and manage goals, people inside a company develop three distinct superpowers: the ability to predict the future, the ability for the company’s founders or CEO to be a part of every important discussion, even (especially) when they’re not there, and the ability to say no.
IN-N-OUT

A Shorter Cadence Fosters Agility and Change-Readiness

While there is room for customization with every implementation, most OKRs practitioners will set goals quarterly. This frequent establishment of priorities is vital. As the pace of change within, and outside, businesses accelerates, it’s essential that new information be captured, analyzed, and transformed into knowledge that can be used to innovate and potentially alter the strategy or business plan. Doing so is immensely difficult if you’re setting just annual goals—There is such a lag between the inciting incident that may have the potential to rock your business to the core, and your reaction to that event, that you’re left completely flat-footed and unprepared.

 

Frequent goal setting also establishes a discipline within the organization that may be lacking. Learning, and making proactive decisions, is incumbent upon regular, focused reviews of what is taking place in your company and its surrounding environmental milieu. By updating your OKRs each quarter, you’re building an organizational muscle that will become stronger with use, allowing you to be ready for the inevitable forces of change and disruption.

OKRs Demand Focus on What Matters Most

Perhaps the scarcest resource in any company is employee mindshare. Think of the intense competition vying for a chunk of that real estate in today’s 24/7 world: Company goals, unit goals, individual achievement goals, the meeting you’re late and unprepared for, industry trends, career concerns, family issues, social media, the score from last night’s game, etc., etc. No doubt we live in a world of excess access, to everything. But one thing that must rise above the cacophony of competing voices is knowledge and understanding of what’s most important for the company (and each employee’s contribution to that) right now. OKRs demand that you isolate just the most fundamental priorities and dedicate your focus to that limited subset of potential variables involved in running any company.

 

When Dick Costolo, former CEO of Twitter, was asked what he learned from Google that he applied to Twitter he answered: “The thing I saw at Google that I definitely have applied at Twitter are OKRs—objectives and key results. Those are a great way to help everyone in the company understand what’s important and how you’re going to measure what’s important. It’s essentially a great way to communicate strategy and how you’re going to measure strategy.”
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Transparency Promotes Cross-Functional Alignment

Regardless of the business problem a team is trying to solve, it’s a virtual guarantee that a potential solution does not reside with just one team, but does in fact depend on the cooperation of another group (or groups) within the firm. Therefore, in our networked world it’s imperative that teams have visibility into other teams’ performance goals. OKRs encourage this transparency throughout the organization. An effective OKR program works on several levels: There are corporate-level objectives and key results in place. Departments or business units (your structure or nomenclature may differ) have OKRs, and individuals may have OKRs.

OKRs Facilitate Focused Conversation and Drive Engagement

There is an oft-quoted career adage that says people don’t leave companies, they leave managers. This has been accepted human resources wisdom for quite some time, and companies have, naturally, attempted to remedy the situation by crafting leadership development programs, offering sensitivity training, and engaging in 360-degree feedback. These and other interventions have been designed to improve the employee-manager relationship and mitigate the risk of talent heading out the door. There’s just one problem. The old adage isn’t true; at least not according to a survey of over 7,000 LinkedIn members across five countries.

 

According to the respondents, the primary reason for playing the free agent card is lack of advancement opportunities. Three times as many people cited that rationale over a poor relationship with their supervisor as cause for leaving. The good news for OKRs users is that whether people are tempted to start circulating resumes because of a sour relationship with a supervisor or because they see no upward mobility in the company, using OKRs can reduce the likelihood of either.

OKRs Promote Visionary Thinking

Carol Dweck is a Stanford professor known for her work on motivation, and more specifically, mindset. She posits that people can be divided into two camps. Some individuals believe their success is a result of innate ability, and are said to have a fixed” mindset. Others feel success is a result of hard work, tenacity, and determination. They are said to possess a “growth” mindset. Fixed mindset individuals fear failure because they feel it’s an assault on their basic abilities, while those with a growth mindset embrace failure, recognizing it as a simple data point, and an opportunity for learning and improvement.

 

In our experience working with clients around the globe, and being somewhat liberal in our use of the concept, organizations may be similarly classified using this distinction. Those who “suffer” from a fixed mindset will often forgo opportunities that involve risk, motivated primarily by a fear of failure. Whereas, other organizations, embodying the growth paradigm, relish failure, embracing a spirit of fail fast and learn quickly. We believe that in order to compete in today’s global economy it is incumbent upon all companies to adopt a growth mindset, and doing so means stepping out of any predefined comfort zone and creating audacious goals. Any OKRs that simply mimic the status quo are not only going to be ineffective, but will likely alienate talented employees looking for meaning and purpose in their work. Objectives and key results are meant to stretch the organization, challenging your teams to fundamentally rethink the way work gets done.

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