OKRs have become quite popular as a goal setting framework in recent years. Especially since Google Ventures partner Rick Klau’s presentation in 2013 on how OKRs work. In this video Rick also demonstrates how Google grades its OKRs. Our previous articles focused on various other aspects of the framework. Today we illustrate how to grade OKRs using Google’s famous method.
How to grade OKRs
Go for ‘The Sweet Spot’
Google employees grade themselves between 0.0 and 1.0 where 0.6-0.7 is the desired sweet spot. If individuals consistently achieve closer to 1.0, then their goals aren’t truly ambitious. Scoring below 0.6 means they are not achieving their targets. It could either mean that they are not competent enough to perform those tasks. Or they are unable to overcome obstacles that prevent them from giving their best. Either ways, it’s essential to identify the root of the problem and help them get better.
Types of Key Results:
There are 2 types of key results: Numeric key result and binary key result. The first type is used to calculate completed percentage of an activity. For example, manufacture 10 prototypes of design A within 3 months. If the team is able to manufacture 7 prototypes then it can be said that it has achieved 70% of its target, which falls within the expected range.
For a binary key result, ratings can be a simple 1 or 0. For example, the target is to open a clothing store in 1 month. If the answer is Yes, then it can be marked 1. If it’s No, then it will be marked 0.
Weightage as per contribution:
While there are 3-5 key results for every objective, their contribution towards the achievement of that objective can vary. Each key result can be assigned a weightage based on the significance of its contribution. Some can be more important thus ranked high on the scale while others can be ranked lower.
|HR Team Objective: Increase Employee Engagement by 10% by Q3FY17
|Employee productivity increased by 30%
|Absence rate reduced by 40%
|95% participation in annual cultural and sports meet
Carry forward incomplete OKRs:
Some objectives are given priority over others owing to their weightage. In such cases, the remaining OKRs need to be carried forward to the next quarter. They may not have been important in that quarter but that doesn’t mean they can be skipped altogether. Similarly if some are not able to achieve their goals, they should take measures and identify ways to overcome shortcomings and try to fulfill those targets in the next period of evaluation.
Grading Company level OKRs:
The framework demands complete transparency within the organisation where individuals should be aware of what everyone’s goals are. An intern should be able to see what his team’s, CEO’s as well as company’s objectives are and how they have been graded. On that note, company OKRs should be publicly graded for everyone to understand how the company is faring. Every quarter, a company wide meeting can be held to grade previous quarter’s OKRs and adjust them for the coming period accordingly.
How to grade OKRs in a startup:
In large organisations, company level goals are more strategic so these can’t be changed frequently. Startups, on the other hand, are more dynamic in nature. Their goals are more short term and can be achieved in lesser time. And unlike the hierarchy of goals in large companies (company, team and individual level), startups can skip team level goals altogether. It depends on the size of the organisation. While most of the process would vary slightly, the manner of grading OKRs would largely remain unchanged.
Keep them separate from Performance Reviews:
It is not a legal document upon which to base a performance review, but should be just one input used to determine how well an individual is doing.
– Andy Grove
As tempting as it sounds, do not use OKR as a means to evaluate performance in the organisation. Performance evaluations are only able to identify how individuals have performed in a certain period and how they compare with their peers. OKRs are meant to determine how an employee can contribute to the company objectives. What are the best ways to align their efforts in one direction. When everyone works in the same direction, unhealthy competition can be avoided. It also fosters a culture of collaboration and coordination.
By using stretch goals, employees are encouraged to push their limits and strive for excellence. You should grade OKRs to measure by what extent have employees been able to reach these boundaries.
The framework has been proven to maximize the efficiency of goal setting process, as evidenced by many Silicon Valley companies. While setting goals is important, grading them in the most efficient manner determines whether all these efforts will help those companies to achieve success.