Since the 1950s, business leaders have embraced a variety of management techniques designed to improve employee performance. Peter Drucker introduced Management by Objectives (MBOs), a process during which management and employees define and agree upon objectives and what they need to do to achieve them. In the early 1980s, S.M.A.R.T. goals and Key Performance Indicators (KPIs) became popular methods for organizations to set objectives.
Then in 1999, John Doerr introduced Objectives and Key Results (OKRs) to Google, revolutionizing their business and cementing OKRs as the de facto standard for aligning company and individual goals.A management methodology that helps businesses focus effort on the same important issues throughout their organization, OKRs have been cornerstones to improving operational excellence for industry leaders such as Intel, Oracle, Google and others. As employees leave these companies for start-ups and other ventures of their own, they are bringing OKRs with them as a way to drive organizational alignment.
What Is an OKR?
OKRs are a management methodology that helps companies focus efforts on the same important issues throughout their organization. When championed by management and implemented throughout a business, OKRs help organizations:
- Impose disciplined thinking so major goals surface
- Inform everyone about what’s important
- Enable more accurate communication
- Establish indicators for measuring progress
- Focus effort and ensure alignment
Because they are visible to everyone across the organization, an OKR method ensures everyone is working toward the same result.
But First… What Does OKR Stand For?
Before we get too deep into understanding OKR frameworks, OKR processes and OKR methodology, let’s be sure that you understand what these three letters mean. OKR is short for Objectives and Key Results. But that’s really just the tip of the iceberg, and there’s still plenty to learn.
What Is an Objective?
In short, it’s what you want to accomplish. Objectives should be significant, ambitious and aligned to company, departmental or cross-functional goals.
Example: Launch a new employee engagement program by the end of March.
What Are Key Results?
To sum things up, it’s how you’ll accomplish the objective. Key results should be measurable, limited in number (3-5 key results) and have a deadline.
Example: Send employee engagement survey by January 15.
What Are the Types of OKRs?
There are two sets of represented goals that must be as measurable as possible, and that measurement should be linked. For example, “I will accomplish this goal by doing X, Y and Z.” When both of these goals are visible, all employees know how a company is oriented and also understand that thinking big is required.
These goals have to do with a company’s metrics, such as product releases, bookings, hiring, number of customers, etc. They are the organization’s operating drumbeat. Management will typically set these at the company level while employees set goals at departmental levels.
In contrast to operational goals, aspirational goals are big-picture ideas about how a company will change the world. These goals set the scene and are designed to help all employees figure out how they can contribute to the aspirational ideas. Aspirational goals can come from any level in the organization.
Organizations That Can Benefit From OKRs
OKRs are a good fit for all types and sizes of organizations because they lead to the organizational alignment that drives operational excellence.
In organizations with many departments, it’s critical for all members of the organization to be able to provide feedback and input into the goal-setting process. By making everyone’s goals transparent and visible, organizations can attain and maintain alignment. The process of recording operational goals (e.g., grow revenue, hire employees, etc.) and aspirational goals (e.g., how an individual will help the company move into a completely different space, revolutionize a market, etc.) drives operational excellence.
Small and Medium Organizations
As organizations try to determine market fit or maintain competitive advantage, OKRs keep employees driving toward the same goals. SMBs may set and evaluate goals more often than enterprises.
In more fluid reporting structures, such as highly projectized consulting organizations where individuals move between projects, it’s important to provide a way for employees to see and support the work being done by other team members — onsite and offsite.
How to Get Started
The most difficult step for many organizations is committing to the OKR meaning and its process. Businesses should identify an OKR Executive Sponsor who fully understands the benefits of the approach and can help teams that may be having difficulty getting started or staying on track. This person is often a chief executive, line-of-business leader, operating officer, or human resources professional. OKRs are a multi-step process. Businesses may choose to roll out the entire OKR model at once or simply one step at a time. To help ensure success, follow these best practices for OKR processes:
- Ask employees to individually set OKRs.
- Establish a time frame after goals are set (one day, one week, etc.) during which managers meet 1:1 with employees to review OKRs.
- Establish a time frame after goals are negotiated for a larger group (e.g., all employees in a group) to review and collectively negotiate departmental OKRs.
- Establish a time frame after goals are negotiated by the group to present OKRs to everyone in the company during an all-hands meeting.
How Often Should OKRs Be Set?
Most organizations work through OKRs quarterly. Others set OKRs in monthly or six-week intervals. It is important to be sure the cadence matches the stage and culture of the business. A quarterly cadence may be too long for a very early stage company trying to determine its market fit. It may also be too long for a unit within a larger company that is working to substantially change its delivery processes.
The interval is important because the relevance of goals diminishes in fast-paced environments. Whether the cadence is six weeks, one month, or quarterly, businesses typically see huge operational wins when they move from annual assessments to more frequent goal setting. Moreover, because agility is a key indicator of business success, companies should consider providing a way for employees to set, show progress, and get feedback on goals daily.
OKRs and Multi-Generational Work Forces
The workforce is on the cusp of significant change as many older employees will retire in the next 10-15 years. The challenge for businesses is to replace this group that currently holds leadership positions with new talent that keeps innovating.
Here are six suggestions to businesses to help ensure they understand the millennial generation and are acting to attract and inspire the best of them:
- Understand this generation – Use metrics to segment the workforce to better understand and address generational differences and tensions
- Get the “deal” right – Ensure everyone knows what is expected.
- Help millennials grow – Understand personal and professional goals.
- Feedback, feedback and more feedback – Give real-time, honest feedback.
- Set them free – Provide flexibility yet clear instruction and concrete targets.
- Encourage learning – Deliver continuous training and development.
- Allow faster advancement – Value results, not just seniority.
- Expect millennials to go – Build churn into business plans.
OKRs and Performance Management
As a best practice, OKR completion should be decoupled from performance evaluations so individuals feel free to take more innovative risks than they might otherwise. Separating the two also means employees won’t spend time trying to game the system to reap rewards. OKRs are designed to bring alignment, focus and better coordination to companies. That said, the level of engagement you show with OKRs and your impact delivered through OKRs can very well be considered by your manager during performance evaluations.
Taking Your OKRs to the Next Level
Once you’ve developed the basics, it’s only natural to see exactly how far you can go to supplement your objectives and key results. Be sure to check out our webinar with Paul Niven to learn more: