What is OKR? #
OKRs is an abbreviation for the phrase Objectives and Key Results, which is a goal management methodology developed by Andrew Grove – CEO of Intel, in the 1970s.
It was later popularized by John Doerr when he introduced it at Google in 1999. Along with many other organizations, Google is considered a highly successful company in terms of setting priorities, fostering internal alignment, increasing accountability, and achieving its goals.
- An objective describes the ultimate outcome you want to achieve in the future and sets a directional focus, essentially serving as a destination on the map.
- Objectives answer the question: “Where do we want to go?”
- Ensure that objectives are written to inspire and are easily understood by everyone, avoiding excessive technical or specialized language.
- Key Results are specific, measurable outcomes that must be achieved in order to meet the set objectives. Key Results help you measure the progress towards your goal, much like signposts indicating how you will reach your destination.
- They answer the question: “How do we measure this progress?”
- Key Results encourage ambition while remaining realistic, and they must have a starting value and a target value.
- Initiatives are all the projects or tasks that will help you achieve the Key Results.
- They answer the question: “What are we doing to reach the destination?”
Why Choose OKRs? #
Mastering the mindset of OKRs can lead to a revolutionary transformation for you, your team, and your corporate operations. Below are five benefits of implementing OKRs:
- Transparency & Strategic Alignment: OKRs prioritize strategy, compelling you to define and openly engage with your company’s strategy in a way that ensures everyone understands it. Managers and employees at all levels have the necessary context to align their efforts with the big picture. This helps the entire organization move forward in a unified direction.
- Clarity & Focus on Execution: OKRs help focus on what matters most, as they prioritize tasks that have a direct impact on the big picture. Each team and individual knows precisely what the business expects from them, facilitating effective task and resource prioritization. Once priorities are set, OKRs provide clear, measurable outcomes, ensuring that everyone in the company remains focused on what’s most important.
- Continuous Improvement: OKRs promote ongoing learning and improvement. Through regular check-ins and motivation, OKRs ensure that the organization can adjust, fix, and refine any aspect at any time when it’s truly needed to achieve the goal. Setting an OKR at the end of a time frame also puts pressure on the team to pause, reflect, and gather lessons learned before moving on to something new. This helps them make informed decisions about what to focus on next.
- Employee Commitment: People achieve outstanding results when they are committed to a specific goal. OKRs convey that goal by clearly and tangibly delivering the bigger picture. When employees can see their contributions to the company’s growth, they are more likely to collaborate effectively in important tasks and are more motivated in their work.This is a win-win situation. Overall, the most significant impact of using OKRs is a cultural shift from output to outcomes. OKRs result in focus, accountability, transparency, and alignment within an organization. The result of all this is increased performance and employee engagement.
Principles of OKRs #
1. Regular review/feedback
One of the crucial aspects of OKRs is that those involved need quick feedback on the effectiveness of execution and whether they are staying aligned with the strategy.
If OKRs are only updated monthly, you and your business may fall into the trap of feeling “wrong safety” until the second month – often too late to correct mistakes when issues become more severe.
On the other hand, weekly check-ins make it very easy to anticipate and address issues. The challenge is to create an environment where people can quickly share weekly progress updates without wasting a whole morning at the workplace.
2.”Outcomes” and “Outputs”
OKRs emphasize that teams should place “Outcomes” at the core of their OKRs.
“Outputs” are applied to Initiatives or Tasks as an important part of the picture. The more easily OKRs are linked to Initiatives/Tasks, the better your ability to execute your strategy.
Focusing on “Outcomes” means starting with a clear expected result and then reviewing all activities to refine and adjust them. So, changing OKRs (if needed) becomes a result based on the lessons learned from your progress.
3. Alignment, Not Punishment
OKRs won’t be effective if not applied in a proper, healthy organizational culture. This is a crucial factor that makes teams feel safe in reporting risks or issues.
The mindset of “Give me solutions, not problems” is detrimental in this environment. OKRs encourage everyone to provide honest insights about their execution, including the risks/issues they’re facing.
4. “Collaboration” better “Reporting”
OKRs are about using goals as a conversation. You can automate somethings, but OKRs shine when they are used as a means to organize discussions focused on direction and strategy.
Setting Up OKRs #
The process of setting up OKRs can either make or break the success of your objectives.
A well-written OKR is inspiring and guides each team or individual towards the desired outcomes, while a poorly crafted one can demotivate, lack direction, waste time and resources.
Below are three fundamental steps when setting up OKRs.
Step 1 – Setting Objectives #
First, you need to understand the types and forms of Objectives to have a clear understanding and precise naming of your objectives.
Depending on the duration of each OKR, they can be categorized into three types as follows:
- Committed Objectives, despite being challenging (an inherent characteristic of any successful OKR), are still expected to be fully achieved by the end of the cycle (100%). Therefore, teams/individuals will need to adjust their resources and schedules to ensure complete fulfillment.
- Committed OKRs typically aim to improve day-to-day operations.
- In short:
- Challenging yet attainable objectives
- Context: Aims to improve day-to-day operations
- Success Criteria: 100% achievement
- Also known as “Stretch Objectives” or “Long-term Objectives,” these objectives express ambitious goals with the purpose of pushing the boundaries of what is possible, setting a new definition of what can be achieved.
- These are OKRs that may make you feel uncomfortable, but make sure your team steps out of their comfort zone.
- They often represent a new project never undertaken by the team before, a groundbreaking product to be created, a process to be entirely renewed, or something with high risk but high value.
- Indeed, the primary purpose of these ambitious OKRs is to transcend boundaries, challenge you to rethink your work, and stimulate creativity and new ideas. When grading this OKR, the expected score will be around 60-70% at the end of the cycle.
- In short::
- Often referred to as broad, beyond the norm objectives
- Context: Stimulates creativity and new ideas
- Success Criteria: 60-70%
Above, you’ve learned about Commitment Objectives and Aspirational Objectives, which are the two most discussed and well-known types, but they don’t tell the whole story.
Commitment OKRs and Aspirational OKRs are great for achieving results-based goals, driving progress, and aiming for clear objectives. However, when your business’s focus is on gathering knowledge and deep understanding, we employ the method of “Learning OKRs.”
Learning objectives encourage teams to experiment and learn when outcomes are uncertain, and they focus on gathering knowledge and experimenting with new approaches to achieve results. Typical use cases include:
- Using a new programming language to determine if it’s more effective.
- Gathering feedback from customers on newly deployed features.
- Applying a new team working method.
However, remember that while Learning OKRs are a valuable tool for testing and gathering detailed information, there is still a risk of getting bogged down in analysis and not taking enough action to produce results. So, implement them wisely.
- In short:
- ✔️ Learning OKRs encourage teams to experiment and learn when outcomes are uncertain.
- ✔️ Context: The objective is to focus on gaining deep knowledge and understanding.
Forms of Objectives
- An objective that helps you create something that has never existed before is called a Building Objective.
- Making something that already exists function better is called an Improvement Objective.
- Or, completely rethinking something that already exists is called an Innovation Objective.
During the process of formulating objectives, please keep in mind the following standards and principles:
- Objectives Must be STABLE: Your objectives will be the focal point of teams and departments in the quarter. Therefore, they need to remain stable throughout the OKRs cycle.
- Direction and Inspiration: Use language that not only centers on the objective you aim to achieve but also motivates and engages your team to exert effort in pursuing and attaining that objective.
- Ambitious yet Realistic: OKRs push you beyond the current state. Your objectives should encourage you to step out of your comfort zone while still keeping them realistic.
- Understandable: To ensure that everyone comprehends the direction they are heading, make sure your objective’s title is clear and concise. Avoid using technical jargon. You can always provide additional context in the description.
- Excludes Metrics: Objectives set the context and convey the business’s prioritized outcomes. Therefore, let measurement be applicable to the Key Results.
- Alignment: Objectives can serve various different purposes – they can directly support a strategy, aid another objective, or contribute to improving KPIs. Alternatively, an objective might be unrelated to any specific purpose, such as a personal development goal.
- Time-Bound: To ensure that you are learning and making efforts to achieve the desired results, it’s essential to set a timeframe for your objectives, whether it’s a quarter or a year.
Step 2 – Setting Key Results #
Once the objective is established, the next step you need to take is to create Key Results. This will define and communicate the significance of achieving that objective and whether you have the capability to achieve your goal.
Key Results should ensure the following elements:
- Focus on Output: These are the results you want to achieve by the end of the time frame. Remember: Key Results are not tasks or to-dos; instead, they quantitatively determine whether you have achieved the Objective or not.
- Measurable: Key Results must have clear, measurable data.
- Relevance: Your Key Results should be specific, relevant, and related to the Objective you are trying to achieve.
- Ambitious yet Realistic: Don’t be afraid to push your limits when setting Key Results to help you break out of the current state. However, be cautious and ensure they are within your sphere of influence.
- Balance: Ideally, don’t set more than 5 Key Results for each Objective. While too few Key Results might not provide a comprehensive picture, having too many can lead to a lack of focus.
- Key Results Can CHANGE: Predicting is challenging, and it’s not uncommon to realize that we’ve made mistakes in our objectives (or even that we’re using the wrong measure of success).
Step 3 – Establish Initiatives #
Once you have set the Objectives and Key Results, you have a complete picture. Now is the time to identify Initiatives – which can be understood as tasks, projects, or actions that can help drive the achievement of Key Results.
If your Key Results aren’t delivering the desired impact on the corresponding Key Results, it may mean you need to rethink what needs to be done to improve that. Your Initiatives need to be:
- Specific: The scope needs to be clearly defined, accurately conveying what is expected. You should use clear verbs like: Establish, Write, Launch, Access, Release, etc.
- Within Your Control: You must have full authority over your Initiatives. That means you can accomplish them within your capacity.
- “Initiatives” are a BET: Finally, the significant difference between teams focused on results/outcomes and teams focused on “outputs” is that outcome-focused teams are comfortable discarding projects/initiatives/actions when they feel unnecessary. They see them as bets to achieve specific results.
Common Mistakes to Avoid #
OKRs, like a muscle, need to be trained. To achieve OKRs correctly, practice is required. To ensure you maximize the success of your OKRs, here are some common mistakes to be aware of:
- Misalignment with Company Strategy: The company’s strategy clarifies the organization’s priorities and direction. By aligning OKRs with the company’s strategy, you ensure that your team is working on the most critical tasks.
- Confusing OKRs with KPIs: KPIs help manage ongoing processes and performance – the everyday operations of the business. OKRs, on the other hand, are used to help you achieve significant, transformative goals. It’s crucial to understand the difference between them and manage your objectives accordingly.
- Prioritizing the Good Over the Great: Setting too many OKRs to reflect every task you want to do can create a lack of focus. OKRs are about focus, so if the work is not important and urgent, it’s something that can be nice to have but isn’t worth your attention right now. Resources are limited – it’s more valuable when you concentrate on your top 3-5 priorities.
- Focusing on Outcomes: OKRs encourage you to shift from an output-focused mentality (What do I need to do?) to an outcome-focused mindset (What do I want to achieve?). By doing so, you set the results and keep a broader perspective. You work backward to achieve that result in the best way possible.
- Aimlessly Pursuing Ambitious Goals: To create an effective goal, you need to strike a balance between ambition/inspiration and achievable reality. OKRs encourage you to push the boundaries of imagination when setting goals, but be mindful that limits still exist. Exceeding these boundaries can turn goals into “wild” ones. The side effects of overambitious goals include eroding the culture, reducing motivation, and tempting participation in risky or unethical behavior.
Commitment OKRs or Aspirational OKRs #
If your business is just starting to adopt the OKR framework or is still in the process of introducing it to your teams, the most effective approach would be Commitment OKRs.
Commitment OKRs boost team motivation and commitment when a goal is accomplished. Moreover, teams will quickly develop the habit of using Commitment OKRs and integrate them into the workplace culture.
Then, once you have been using OKR thinking for a while, Aspirational OKRs may be a great fit.
However, it takes time to establish a results-oriented culture. It demands persistence, discipline, and a change in the way employees are managed. Therefore, it’s advisable to start with a more straightforward approach, focusing on mastering the methodology and establishing the necessary processes for OKRs to function.
Occasionally, your team may feel overwhelmed and stressed if you set highly ambitious OKRs right away. Overly ambitious Key Results can quickly turn into a nightmare and erode the team’s motivation to achieve their goals.
A new approach takes time to learn. You can consider adopting ambitious OKRs when your team is familiar with the framework, and it has a place in their daily work life.
Well-Defined OKRs #
Here are some characteristics of well-defined OKRs:
- Easily understandable; anyone reading them can comprehend even without specialized expertise.
- Avoid overly technical language and undefined abbreviations.
- Measurable and easy to track within the quarter.
- Focus on results and impact rather than product delivery and deadlines.
- Not tied to compensation.
- A reasonable number of OKRs and Key Results.
Poorly Defined OKRs #
Here are some characteristics of poorly defined OKRs:
- They seem to be relevant to only a small part of the organization.
- Vague or difficult to understand language.
- Key Results are challenging to assess progress.
- They look like a different presentation of a roadmap.
- They are used for performance management rather than linking teams.
- Too many objectives/key results.
OKRs and KPIs #
OKRs and KPIs are two forms of objectives with different purposes. Let’s take a closer look at this difference:
- KPIs are like a flashlight. They are a performance measurement tool used to evaluate the success, output, quantity, or quality of a process or operation currently taking place. These processes or operations are often already in place within your team and organization.
- On the other hand, OKRs provide the missing link between ambition and reality. They help you break the status quo and take you into territories often uncharted. If you have a big dream, something you want to achieve with your organization or team in the future, you need OKRs to guide you there.
Although OKRs and KPIs have a clear difference in their intended use, they can still work together seamlessly. This combination provides you with all the tools to manage the state of the entire organization for maximum efficiency.
Imagine your organization is a car, and you are driving to a destination.
- Your KPIs are what you will find on the car’s dashboard, such as the fuel temperature gauge and engine status. These are things you need to continuously monitor to ensure your engine doesn’t overheat and you don’t run out of gas.
- On the other hand, your OKRs are like the directions guiding you to your destination. These are temporary goals and will change over time. So, as you pass one milestone (towards your destination), you focus on the next one.
OKRs and EOS Model #
As you’ve learned about OKRs above, OKR is a mindset framework to help businesses manage objectives, aiming for end results.
OKRs are composed of elements: Objectives + Key Results + Initiatives or projects.
On a broader level, EOS is a holistic operational model based on 6 components: Vision, People, Data, Process, Issues, Traction. Within each component, there are 2 tools to help businesses operate that component effectively, especially in the Traction component, EOS provides a tool called ROCKS, which can be broadly understood as similar to Commitment OKR.
However, there are still differences between these two terms and how they are used, which you can explore here: “ROCKS and OKRs.”
Tracking OKRs #
Focusing solely on setting up OKRs is not enough to ensure success. Regular tracking plays a crucial role in monitoring progress, identifying obstacles, and making appropriate adjustments. Below, I will provide you with the tools and knowledge you need to effectively track your OKRs.
Tracking Frequency #
First, you need to consider the tracking frequency based on the following guidelines:
- Quarterly OKRs should be tracked weekly.
- Annual OKRs should be tracked monthly.
This approach allows you to have enough data points to identify trends in the Key Results of each objective.
Do not track your quarterly OKRs monthly. This often gives you a false sense of security in the first month and then panic sets in during the second month if you’re not on the right track. It will be too late to adjust your strategy before the end of the quarter.
On the other hand, weekly check-ins will help you spot issues much earlier. You’ll quickly notice trends and can take action to adjust your course promptly.
Similarly, you won’t need to track annual objectives weekly (that would be too lengthy), but you should give yourself the chance to realize when things are not going as planned.
Weekly Check-ins Process #
For effective OKRs, we recommend implementing a straightforward process that naturally establishes accountability for results within the team.
- Every Monday:
- Start the new week by reviewing the progress of key results.
- Then, assess whether you need to adjust your course or not.
- Every Friday: Conduct demos with the team to celebrate the work that has been completed. This protocol will help everyone stay connected to top priorities by beginning each week with a concise reminder of what’s important.
How to Conduct Weekly OKR Check-ins #
Every team should have its own weekly schedule, for example: leadership OKR Check-ins, product team check-ins, etc.
Regardless of the protocol, what’s more important is to establish a culture where conversations focus on the outcomes of goal execution rather than tasks.
Try to keep the number of participants to around 10, and the duration should be 1 hour on Mondays (not necessarily every demo on Fridays).
Here is the process to follow in an OKR check-ins meeting:
- Limit the participation to no more than 10 people.
- OKR progress must be updated before the meeting.
- Start by talking about OKRs, then discuss changes in the trajectory (first result, second result).
- Don’t spend too much time on items that are on track.
- Celebrate wins but allocate time to discuss items at risk or off track.
The first OKR meeting might take a bit of time as people are still getting accustomed to OKRs, but you’ll find that by the third or fourth week, this meeting can be quite fast as everyone has shared priorities in mind.
Effective OKR Tracking Methods #
Ensure You Write Good OKR Updates:
There are 5 weekly check-in questions to answer in your progress update:
- Progress: Where are we today?
- Expectations: Is this where we should be?
- Trends: Are we getting better or worse?
- Root Causes: What do we think happened?
- Plan: Should we do anything differently?
The more context you provide for your team, the easier it is for them to assist you.
- Look at Trends More Than Current Status: Individual data points can give you a false sense of security. Look at the overall trajectory you’re on rather than just the current result.
- Minimize Friction in the OKR Update Process: Updates need to be extremely easy if you want to get value from the framework. Any clicks, formulas, spreadsheet gymnastics that get in the way will leave your team unhappy with the OKR process. As a result, they’ll stop sharing progress, and soon enough, the Objectives and Key Results will be forgotten.
- What to do when key results are at risk: Don’t panic, if there’s a risk, identify the root cause (often it could be overly ambitious goals). Then discuss possible actions.
- What to do when key results are off track: You need a clear assessment of the risk and an honest discussion about the likelihood of achieving the goal. Sometimes, it’s best to stop pursuing an OKR if it’s not realistic – you can redirect efforts towards achieving other results.List action items and track what’s been done clearly in the next meeting.
Example of Departmental OKRs #
Sales Department #
- Objective: Increase sales of premium products.
- Key Result: Launch new sales promotions for the premium segment in January.
- Key Result: Establish new partnerships in the US market by the end of Q1.
- Key Result: Improve all sales collateral by mid-March 2023.
- Objective: Boost sales in the enterprise segment.
- Key Result: Acquire 10 new customers (average deal size > $50,000) by year-end.
- Key Result: Hire 3 experienced enterprise sales representatives in Q1 and Q2.
- Key Result: Showcase our company at six major industry events this year.
Marketing Department #
- Objective: Become a leading resource on LinkedIn for Accounting content.
- Key Result: Identify 20 new content ideas and topics by January 31st.
- Key Result: Gain 2,000 organic followers by the end of Q4.
- Key Result: Build a dedicated marketing team for our LinkedIn channel by early next year.
- Key Result: Increase engagement rate by an additional 2.2% each month.
- Key Result: Enhance brand awareness by collaborating with 3 LinkedIn influencers.
- Objective: Double the organic website traffic.
- Key Result: Improve our website speed by an additional 10% by year-end.
- Key Result: Reduce the bounce rate by less than 12% over the next four months.
- Key Result: Produce seven SEO-optimized content pieces every month.
- Key Result: Redesign the landing page for our three verticals by the end of Q2.
- Key Result: Revamp the blog for a better user experience by the end of Q4.
- Objective: Raise brand awareness in the market.
- Key Result: Attract 100,000 organic website visitors this quarter.
- Key Result: Market the brand at 10 national events, conferences, or roadshows this year.
- Key Result: Generate 2,000 MQLs over the next 12 months.
- Key Result: Achieve a 13% conversion rate on our MQLs this year.
Finance Department #
- Objective: Optimize the budgeting process:
- Key Result: Hire an accountant by the beginning of the next quarter.
- Key Result: Ensure financial records are updated every month.
- Key Result: Implement accounting software by the end of this quarter.
- Objective: Rationalize the company’s cost advantage:
- Key Result: Identify the three most cost-intensive areas of the business each quarter.
- Key Result: Keep the operating cost ratio under 60% by the end of 2023.
- Key Result: Review budget allocation every six months based on revenue generation.
Human Resources Department #
- Objective: Make the onboarding process smoother for new employees.
- Key Result: Document all SOPs (videos, guides, and training sessions) by the end of Q2.
- Key Result: Develop onboarding guides and templates for all departments by the end of April.
- Key Result: Delegate ownership of the training process to an HR manager before the next onboarding cycle.
- Objective: Make employees never want to leave (employee retention).
- Key Result: Conduct an internal employee benefits survey between January and February.
- Key Result: Keep the employee turnover rate below 5% for the year.
- Key Result: Run monthly pulse surveys to monitor employee satisfaction and engagement levels.
- Key Result: Review the salary structure for all 6 departments by March 31.
- Objective: Improve knowledge and organizational skills.
- Key Result: Conduct quarterly skills gap analysis.
- Key Result: Plan recruitment to fill knowledge gaps within the organization.
- Key Result: Achieve 60% utilization of our continuous learning platform by our employees.
Operations Department #
- Objective: Improve the company’s IT recovery capabilities:
- Key Result: Identify 10 critical weaknesses in the IT infrastructure.
- Key Result: Improve resilience by 5% in each quarterly stress test over the next 16 months.
- Key Result: Reduce server downtime by 75% over the next ten months.
- Objective: Minimize maintenance impact on production output:
- Key Result: Reduce maintenance-related downtime by 25% over the next 18 months.
- Key Result: Plan and execute surplus capacity strategy every quarter.
- Key Result: Implement a new preventive maintenance process by the end of Q3.
Company OKR #
- Objective: Turn customers into company advocates.
- Key Result: Achieve a 55% product referral rate.
- Key Result: Conduct market research with 1000 of our product users in 2023.
- Key Result: Maintain a product return rate below 2%.
- Objective: Build a company culture that eliminates competition.
- Key Result: Implement a new incentive structure to reward hard work and innovation before the end of Q2.
- Key Result: Hold monthly town hall meetings between the public and our leadership team for the next four months.
- Key Result: Maintain high employee satisfaction (80%+) throughout the year.