Objectives & Key Results (OKR) is a goal-setting framework used by organizations of different sizes – startups, scaleups, established businesses, and others. Organizations and teams can create their own goal structure using OKRs by making use of processes that suit their organizational culture and needs. Teams are free to take it up & flavour it in their quest to Re-architect work.
What OKR means
OKRs are the spiritual successors of MBO and have been around since the 1970s in different forms. The first variation of OKRs was seen in Intel when its then-president Andy Grove insisted on attaching key results to the goals set by, or for, employees. To ensure that these goals are not low-hanging fruits, he placed a condition that hitting 70% of goals as the target of the process.
Brief history of OKRs – Who created the OKR methodology?
The ‘Objectives’ part of OKRs can be traced to the 1954 book “The Practice of Management ” by Peter Drucker, a name ubiquitous with management principles. His idea was to consider management as an entity that stands separate from the existing duties of employees, as it was the norm then. His reasoning for the bifurcation was termed “activity trap,” where managers are occupied with the day to day responsibilities and were unable to spend time on the vision and long term strategy for the organizations they worked for. His solution was ‘Management by Objectives’, or MBO. (The idea of Objectives goes much further in history: It is based on the concept we now know as ‘productivity’ introduced by Taylor and Ford, who were interested in measuring and improving the output of employees.)
MBOs operated on the following principles:
- Clearly defining the objectives of employees and their managers, and reaching an agreement on the same.
- The process involved five steps: reviewing organizational goals, setting objectives for employees (and getting sign offs), tracking progress, evaluating results, and finally – rewarding goal achievement.
But the model ran into some problems, where employees went head-on to meet their production targets by any means necessary. This meant the quality of the product or solution suffered, not in the least because the goals of the organization weren’t in line with that of the organization they worked for.
What is OKR used for?
This framework of goal-setting caught the attention of John Doerr, who championed its case as a venture capitalist. He introduced OKRs to Google, where the employees’ objectives were in line with the goals of the organization. Since then, various technology giants like Intel, Google, LinkedIn, Oracle and Twitter have used them to great effect (among others). In the wake of Work From Anywhere (WFX), organizations are trying to Re-architect work so that their “augmented workforce” adapts and stays primed to maximize growth in the future – and OKRs can make the process smooth.
What are the types of OKRs?
OKRs can be classified based on two parameters – committed and aspiration OKRs, or Strategic and tactical OKRs.
Committed OKRs are Objectives that the organization, team, or employees who have adopted them have agreed to pursue. They involve precise plans, are executed at a predetermined frequency and have specific resources earmarked so that they can be graded for success, on a scale of 0.0 to 1.0. If committed OKR grades are less than 1.0, then a discussion is held between primary stakeholders to determine where improvements could’ve been made – be it in the planning or the execution stage.
Aspirational OKRs are Objectives that are not as clearly defined as committed OKRs. They are, as their name suggests, are aspirational – and aren’t expected to reach the full 1.0 grading. That’s why they’re also known as ‘moonshots’ or stretch goals, as they involve experiments and get resources allotted as and when the needs arise. Progress on aspirational OKRs can be slow and sometimes span much farther than typical intervals set for OKRS.
The grading for aspirational OKRs, as mentioned before, is not expected to reach the full 1.0 scale; if it does, then it is considered that the goals weren’t aspirational enough. Anything around 0.6 to 0.7 is considered a success for aspirational OKRs, as they are expected to challenge the teams (or organizations) attempting them.
Strategic and tactical OKRs are meant to help the organization or teams to focus on a specific goal and are set by the executive-level managers of the organization (in case of strategic OKRs), or by teams and team leads (for tactical OKRs). Tactical goals tie into organization-wide strategic goals.
How can OKRs help
The popularity of OKRs and its goal setting framework stems from its efficiency in defining objectives and breaking them down into easily measurable key results. Changes in the talent pool, engagement models, cognitive tools and more are transforming work and accelerating shifts in how organizations view employee responsibilities. The benefits that organizations can expect to achieve are neatly summed up in an acronym, ‘F.A.C.T.S.’ by John Doerr.
- Focus: According to Doerr, every OKR cycle starts with identifying what is the most important factor that needs to be addressed in the allotted time frame. The time frame can be a month, quarter, or year – and the limit highlights the steps that can be taken to create an immediate impact. As OKRs limit the number of objectives that can be set in a cycle to less than seven, the focus it provides can help managers who have plenty on their plate.
- Alignment: Aligning objectives to the goals set, helps employees and the organizations they work for be on the same page. With this, the organization can help its employees grow while reaching the objectives that help the organization succeed too. A Harvard Business Review research shows that the organizations in which employees are highly aligned, tend to be high performers at a 2X rate than their counterparts.
- Commitment: After setting the objectives and agreeing on the key results, tracking them offers a level of transparency. As employees go about achieving their objectives, the process requires regular reviews and this instils commitment, and allow employees to focus on the bigger picture – not just finishing the task at hand.
- Tracking: The tracking portion of OKRs enables employees to change course faster in case of setbacks, and helps managers to guide their team members while giving them the autonomy to go about their duties. The constant feedback element inherent in tracking also allows teams to improve their processes.
- Stretching: As the name suggests, stretching involves setting goals in OKRs that push employees and their organizations a little further. In stretch goals, the idea of 70% completion to be considered as a success, frees employees up from the fear of failure.
Planning to set good OKRs
Adopting OKRs in an organization isn’t an easy task, but the upsides of implementing them successfully are many. From resistance to change to lack of resources, many factors can derail OKR adoption – but strategic planning can help in identifying such roadblocks and allow organizations to move ahead smoothly.
While finalising the results an organization wants to see from its OKR practice, it is essential to identify the starting point. Thorough organization-wide research can shed light on shortcomings and issues that need to be addressed before OKRs can be set.
Since OKRs of employees need to be aligned with that of the organization, having a powerful vision and mission statement is a must. If these aren’t adequate, then the corresponding objectives and key results of employees may not have any effect on their performance.
Training the teams
Once the shortcomings and roadblocks are identified, the time is right to implement OKRs – but before that, employees need to understand why they are shifting to OKR-based performance management. Managers and leaders need to understand the need for OKRs first, and then they can help their team members understand the same. A combination of in-person training by managers, and self-paced learning through online courses (or OKR workshops) can bridge the gap.
Developing OKRs strategically
Before setting OKRs that individual employees in the team can adopt in their own way, managers should discuss the possibilities with key stakeholders in the project. These discussions will provide a deep understanding of the task and can allow managers to interpret objectives and key results better. They can also help their team members set their objectives with authority.
Creating strategic implementation plans
Once OKRs are planned strategically for the organization (or teams), implementing them is the next step. For that, organizations need to have a strong strategic implementation plan that is aligned with the objectives of their employees. This involves reinforcing the best practices that suit the organization so that adoption rates go up.
Objectives are measured against their corresponding key results, which have a definitive number attached to them. However, having a Key result and sticking to it may not guarantee the success of OKR: managers (and team members) should constantly keep track of the progress and get feedback on the same.
How to implement OKRs?
Implementing OKRs allows organizations to innovate better and plan their processes efficiently, but making it another tool that employees need to use can nullify the effectiveness. Here are a few ideas to make the implementation process easier for managers and employees alike.
- Starting small and defining clear objectives is essential to get OKRs off the ground – and creating a pilot program can show the readiness of the organization. Instead of forcing a new process on employees who have more than enough on their plates already, this can show how the principles of OKRs gel with the employees.
- Communication is essential for the adoption of OKRs, as employees need to be assured of their psychological safety before making their objectives known. Managers who understand the goals of their employees can help them align those goals with that of the organization’s, and a continuous (2-way) feedback process builds the confidence of employees.
- Understanding the principle behind setting goals allows employees to stop thinking in terms of deliverables and focus on outcomes. Since the objectives set are considered achieved at 70%, employees need to set goals that are just above their current capabilities – so that they can improve while taking the project forward.
- Establishing a culture of feedback allows employees to be honest with their shortcomings and seek help in those areas, while it allows managers to fine-tune their leadership style. Also, it can highlight minor issues that might turn major in the long run.
Why do OKRs fail: common OKR mistakes
Because of the hype and the profile of organizations using OKRs, sometimes OKR adoption is treated as an answer to a multitude of issues that need to be fixed in the organizations that are looking to adopt the framework. Nothing can be farther from the truth. OKRs can help good organizations move towards greatness, but the basics should be in place first-hand.
But even the organizations that have all the necessities in place, can falter while adopting OKRs. Here are a few major reasons.
Making OKRs truly unachievable
OKRs are designed to be not achievable – but the difficult setting matters here. The goals should be just out of reach so that employees trying to achieve them should put in extra effort in learning and developing their skills. If the allure of ‘almost there’ is missing, it is easy for even the most dedicated employees to get disheartened and give up on their set goals.
Not defining OKRs clearly
Objectives and Key Results need to be specific and quantifiable – so that they can be tracked easily. Objectives can have a degree of vagueness in them, like ‘improve performance of the team’ – but corresponding key results should clearly mention what defines the improvement in performance.
Not following up regularly
The frequency of feedback and review of OKRs is essential for the success of the process. This also means that the environment should be conducive to positive feedback. Keeping a set frequency for follow ups also helps employees to plan and pace their work, and be honest about the issues or successes they have experienced. Managers can weigh in the struggles and successes of their employees and provide them with the necessary coaching (or recognition) to help them perform better.
Having too many goals
OKRs should be achievable, clear, and followed up on regularly – but none of this matters if there are too many of them for the employee to stay ahead of. A good rule of thumb is to have 3-5 objectives (at most), and the corresponding Key Results should be 5 to 6. Anything more than that, and employees (along with their managers) will get overwhelmed.
Preparing for OKRs
The OKR framework necessitates practising organizations to have a few prerequisites in place so that the objectives for different teams can be derived in the most effective way. The first prerequisite is a concrete vision and mission, from which the OKRs can be derived. This allows teams and individual employees to align their goals and targets to that of the organization.
Transparency to a large degree also helps employees set their individuals or team-level OKRs efficiently. Managers can help their team members in understanding how their daily tasks translate into the bigger picture and set OKRs to reflect the same. Some organizations like Spotify limit their OKRs to team levels – while some others insist on Individual OKRs. The flexible nature of the framework enables both methods to function based on the conditions set (or derived) from the organizational OKRs.
Objectives set in OKRs are derived from the top corporate objectives of the organization, and then can be adopted by different teams to support them. Here’s an example of an OKR for a SaaS organization:
Build software that solves customer problem area
Increase the NPS score by 2 points.
Get X number of subscriptions for the solution.
Increase customer satisfaction rate by Y%
(OR achieve Y% reduction in support calls)
Reaching the Objective depends on achieving the key results, and the important factors for the achievement to happen are Initiative, score, and ownership.
Initiatives are projects or activities that result in achieving one (or more) of the Key Results. Tasks that form the part of employees’ everyday work can be considered as initiatives when they’re aiding in the achievement of key results. If that isn’t the case, the onus is on the employee and their manager to modify them.
Frequency is the interval at which the progress of OKRs is reviewed. This can be a formal or an informal process, where the employee (or team) and the manager focus on the output and check if it is in line with the overall objective. Changes can be made to the key results if the current ones are not reflecting the required values.
Scores for OKRs are between 0.0 to 1.0, where 1.0 represents a completion of the objective. This should not be the end goal of the OKR process, as a score of 0.6-0.7 is considered ideal. Scores that consistently fall below or above this indicate unclear objectives (lower spectrum) or unambitious ones (higher scale).
Ownership of every key result among team members ensures there is more accountability, alignment and transparency. Having an owner for every OKR simplifies collaboration.
Here are some examples that include organizational level, team level, and individual OKRs.
OKR tools: What is the best OKR software?
Organizations trying to adopt OKRs can choose from a variety of solutions available in the market. Some of the resources are free, some are paid, and some have free and paid tiers that cater to different levels of organizations.
The important factor to consider while adopting an OKR tool is the ease with which it can be adopted by employees. A standalone tool, be it free or paid, is bound to add an extra layer of learning to the workday of employees, and puts the onus on managers or team leads to ensure compliance. Having an add-on app like Upraise for Employee Success can alleviate this, as the app works as an add-on to Jira and can be accessed from a platform that is used every day by almost all teams in the organization. Other apps from UpRaise Suite of Apps can complement it and allow employees to access information easily so that they can make informed decisions. They help employees achieve the level of autonomy necessitated by OKR adoption, and help them track records from within Jira.
FAQ on OKRs
1. Are OKRs useful?
OKRs help teams and organizations set objectives and find the best way to achieve them. The effectiveness of Objectives is measured using Key Results – and reaching 70% of objectives is considered a good performance. Due to their flexible nature, OKRs nudge employees to get more out of their skills and innovate.
2. How is OKR measured?
The Objective part of OKRs is set with the help of employees, who are responsible for achieving Key Results associated with the said objectives. The effectiveness of OKRs is measured based on their completion rates – but these rates are not expected to be above 70%, to ensure the goals set are challenging. Also, OKRs require continuous feedback to be refined and adjusted, so that employees responsible for them have room to experiment and achieve success.
3. Is OKR part of Agile?
The basic principles behind OKRs are similar to the values of the Agile Manifesto. When used properly, OKRs can help organizations function in a more agile way, be responsive to changes in the market, and embrace a growth-oriented mindset.
4. How many OKRs should we set?
In order for OKRs to be effective, they should be precise – and limited in number. Typically, 3 to 5 Objectives are good enough, and each objective can have 5-7 key results associated with it (at most).
5. How is OKR different from KPI?
OKR is a goal-setting framework that helps in managing performance, while KPIs are measurement tools that tell us more about the result. The ‘Key Results’ part of OKRs can be compared to KPIs, as both of them can be used to evaluate outcomes.