What are OKRs?
The next revolution in strategy execution is here, and it’s called Objectives and Key Results, OKRs. OKRs is a strategic framework that gets your entire organization laser-focused, aligned and engaged on what matters most. Popularized by the two seminal works Measure What Matters, by John Doerr, and Objectives and Key Results: Driving Focus, Alignment & Engagement with OKRs, by OKRs Coach Paul Niven, the OKRs framework is perfect for fast-paced organizations that compete in a dynamic marketplace. The OKRs framework distills the strategy execution process down to a simple formula – what must you accomplish in order to achieve your strategy, and how do you know if you have arrived?
What is an Objective?
For example: Drive better attendance at our annual user conference to boost the member experience.
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.
Why Use the OKR Framework?
A recent study of 30,000 U.S. businesses conducted by the Center for Economic Studies revealed that the very act of creating a formal measurement framework has huge benefits. According to the study, 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.
Benefits of OKR
1) OKRs Are Easy to Understand—Increasing Buy-in and Use
When OKRs are working well in your company, it’s as if everyone has acquired fluency in a new language.
In California, there is a very popular burger restaurant called In-N-Out. If you’ve been there, your mouth is probably watering as you read this. One of the many reasons this restaurant chain is so popular is because the simplicity of their menu. That’s it. Compare this to other restaurants, whose menus are so crammed with choices it cripples your ability to make a decision.
Consider OKRs the “In-N-Out of managing performance.” One of the biggest benefits the OKR framework features is its sheer simplicity, and that begins with the taxonomy. Four 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.
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. This vocabulary describes what’s most important to the company. 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, and the ability to say no.”
2) Shorter Cadence That Fosters Agility and Change-Readiness
While it is perfectly acceptable to customize the OKR Framework, most organizations set goals quarterly.
While it is perfectly acceptable to customize the OKR Framework, most organizations set goals quarterly. This frequency of goal setting is referred to as ‘Cadence’ which is crucial to the success of an OKR implementation. As the pace of change within and outside a business accelerates, it becomes essential for busy managers to have real-time information that can be captured, analyzed and transformed into knowledge for decision-making. This flexibility is difficult if an organization is bound to annual goals. Why? Because there is just too much lag time between rapid-fire events that can rock your business to the core and your ability to react to it. OKR creates a frequency in performance assessment that gives you the agility you need to make important decisions as your marketplace changes, not after it happens.
Frequent goal setting also establishes a discipline within the organization that may be lacking. By updating your goals each quarter, you are building a muscle that will become stronger with use. This practice will prepare you for the inevitable forces of change and disruption that you will face.
3) OKRs Demand Focus on What Matters Most
Perhaps the scarcest resource in any company is employee mindshare.
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… You have to worry about company goals, unit goals, individual achievement goals, the meeting you’re late and unprepared for, industry trends, career concerns, 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 right now. The OKR framework demands that you isolate your most fundamental priorities and dedicate your focus to what needs to be done now to achieve your Big Vision.
When Dick Costolo, former CEO of Twitter, was asked what he learned from Google, his answer was simple: “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 it. It’s essentially a great way to communicate strategy and how you’re going to measure strategy.”
4) Transparency Promotes Alignment
Regardless of the problem a team is trying to solve, it’s a virtual guarantee that a solution does not reside with just one team.
Regardless of the problem a team is trying to solve, it’s a virtual guarantee that a solution does not reside with just one team. Good solutions almost always depend upon the cooperation of other groups within the organization. In our networked world it’s imperative that teams have visibility into other teams’ performance goals. This transparency is how we check for common purpose and mission overlap. OKRs encourage transparency throughout the organization because OKRs are visible for everybody to see. An effective OKR implementation works on several levels: Corporate, Division or Team, and each has access to the other’s Objectives and Key Results. We call this vertical and horizontal alignment and it is a powerful tool to drive the organization forward toward its strategy.
5) Facilitate Focused Conversation & Drive Engagement
There is an oft-quoted career adage that says people don’t leave companies, they leave managers.
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. 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 survey results, the primary reason employees leave an organization is lack of advancement opportunities! The good news for OKRs users is that the framework demands a constant cycle of coaching, feedback, and learning conversations. When teams create OKRs they review them with their boss, providing an opportunity to ensure everyone is on the same strategic page. This boosts understanding and engagement. Later, as results are analyzed, yet another opportunity for focused conversations emerges. Employees are able to share their accomplishments, potentially opening the door for advancement opportunities as they demonstrate their ability to execute strategy through OKRs.
6) OKRs Promote Visionary Thinking
Organizations that “suffer” from a fixed mindset will often avoid risk, and are primarily motivated by a fear of failure. hereas organizations embodying the growth paradigm relish failure, and embrace a spirit of fail fast and learn quickly.
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. Growth mindset people 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, organizations may be similarly classified. Those organizations that “suffer” from a fixed mindset will often avoid risk, and are primarily motivated by a fear of failure. Whereas organizations embodying the growth paradigm relish failure, and embrace a spirit of fail fast and learn quickly. In order to compete in today’s global economy you must adopt a growth mindset culture in your organization. To succeed you must step out of your comfort zone. OKR demands audacious goals! Indeed, OKRs that simply mimic the status quo are going to be ineffective. They will also alienate talented employees who are looking for meaning and purpose in their work. Objectives and key results are meant to stretch the organization, and to challenge your teams to fundamentally rethink the way work gets done.