What are Objectives and Key Results (OKR)?
The Objectives and Key Results (OKR) framework helps businesses and individuals achieve their goals. The framework consists of two components: Objectives, which determine the goals, and Key Results, which measure progress toward achieving the Objectives.
OKRs should be ambitious, but they should also be attainable. They should push individuals and teams to stretch beyond their comfort zones and aim for higher performance. OKRs should also be transparent, so everyone can see what the company is working towards.
Reviewing OKRs regularly, usually quarterly, can help you track your progress and adjust as necessary. It helps to ensure that the organization stays focused on its most important priorities and continues to make progress toward its long-term goals.
Who Created the OKR Methodology?
The OKR methodology was created by Andrew Grove, the former CEO of Intel, in the 1980s. Grove developed the OKR system to help Intel set and achieve its goals more efficiently and effectively. John Doerr, a venture capitalist who worked with Grove at Intel, has popularized the methodology and has since introduced the OKR system to many other companies.
Grove believed traditional goal-setting methods were too rigid and didn’t allow the flexibility needed to adapt to changing circumstances. With OKRs, he sought to create a system allowing more agility and responsiveness while providing a clear roadmap for success.
Many successful companies, including Google, Netflix, and Allbirds, have since adopted the OKR methodology. Its popularity is partly due to its simplicity and flexibility and its ability to align individual and team goals with larger business objectives. Companies can achieve greater clarity, focus, and success by setting measurable, achievable goals and tracking progress through regular check-ins.
What’s the Difference Between OKR and KPI?
While both OKR and Key Performance Indicators (KPIs) measure progress and success in a business, they serve different purposes.
KPIs are specific metrics chosen to measure the performance of a particular aspect of a business. For example, a KPI might be the sales made in a particular period or the average customer satisfaction rating. A KPI is often used to track progress toward a particular goal.
On the other hand, OKRs are a more comprehensive framework for setting and achieving goals. Several key results support a specific objective. The key results are measurable milestones that indicate progress toward the objective. An OKR is typically set quarterly and aims to align the efforts of an entire team or organization.
Below is a summary of their differences:
|Objectives and Key Results (OKRs)
|Key Performance Indicators (KPIs)
|Strategy Execution Framework
|3-5 Objectives, 4-6 Key Results
|100s of measures
|Focus on the “What” and “Why” of work
|Focus on measurement of activities
|Focuses on the most important outcomes
|Provides updates on company activities, but no context or learning
|Aligns vertically and laterally
|(Not meant as an alignment tool)
|Teams develop OKRs from top-level objectives
|Authored and managed top-down
|Leading and lagging measures
|Primarily lagging measures
Although some may view OKRs as a simple goal-setting approach, the true transformational power lies in the mindset behind the framework. In the book Measure What Matters, Doerr outlines the four unique “superpowers” of OKRs that differentiate the system from other goal-setting frameworks:
OKRs provide a framework for identifying top priorities and allow teams to decline non-essential tasks. The focus provided by OKRs is significant in today’s fast-paced business environment, where distractions and competing priorities can quickly derail progress toward meaningful goals.
By setting objectives aligned with overall business strategy and identifying key results that measure progress towards those objectives, OKRs keep teams focused and prevent distractions.
OKRs offer a dual goal-setting approach, encompassing top-down and bottom-up methods. Although the company sets high-level, strategic OKRs (top-down), teams and individuals determine their OKRs based on how best to meet the company’s goals (bottom-up).
It requires regular check-ins to ensure that everyone is on track. Managers should conduct regular progress reviews and offer feedback to their employees. In cases where an employee’s goals don’t align with the company’s objectives, managers can work with them to realign their goals.
OKRs promote a mindset of accountability without judgment. Establishing clear deadlines, utilizing objective measurement, and conducting regular check-ins can help ensure prompt action is taken if necessary and maintain focus on key results.
In today’s business, where quantifying output can be challenging, OKRs serve as an agreed-upon framework for evaluating progress, obstacles, and necessary adjustments.
When properly utilized, OKRs can provide a solid incentive to push individuals, teams, or companies beyond their current capabilities. Setting OKRs involves embracing discomfort and accepting failure as a natural learning process.
Components of an OKR
The standard format for OKRs includes one objective at the top, with 3-5 key results underneath to support it. Below are descriptions of each component:
An objective is a statement outlining the direction and intention of an organization or team. However, the purpose is not to summarize the team’s achievement process. Here are some characteristics of the Objectives component:
- Aspirational – Objectives inspire and motivate individuals to achieve a desired future state. They’re ambitious goals that may seem unattainable, but they encourage teams to aim higher than before.
- Not Measurable – Objectives and Key Results serve different purposes, with Key Results providing numerical and measurable goals.
- Short or Long-Term – Objectives can vary in duration, ranging from short-term goals that last a quarter to long-term goals that may take months or years to achieve.
- Five or Less – Teams should limit their quarterly objectives to 3-5 to maximize productivity.
Key Results (KRs)
Meanwhile, key results are used to measure the progress of an objective, as they provide tangible outcomes that contribute to its advancement. Here are their characteristics:
- Measurable – Key Results are defined by a numerical target clearly defining a completion.
- Defined Quarterly – Key Results have a defined target that can be measured and achieved within a quarter, while Objectives may have a longer time frame that spans multiple quarters or years.
- 4-6 per Objective – Teams should have 4-6 KRs per Objective for optimal time and resource management.
- Outcome-Focused – Effective KRs prioritize the desired outcome over specific activities, emphasizing achieving intended results rather than simply completing tasks on a list.
How Do You Measure the Success of OKRs?
The OKR grading method utilizes a numerical scale of 0.0 to 1.0 to assess success by calculating average completion rates for all key results and disseminating objective-related data.
- A grade of 70-100 percent (0.7-1.0) completion of our OKR, then the status is “green,” meaning we achieved impact.
- A grade of 40-60 percent (0.4-0.6) completion of our OKR, then the status is “yellow,” meaning we made progress toward an impact but fell short.
- A grade of less than 30 percent (0.0-0.3), the status is “red,” meaning that we failed to make significant progress.
Common Mistakes to Avoid
Developing effective OKRs requires practice and an iterative learning process that may take several quarters to refine. Avoid these common mistakes when starting your OKR to ensure success:
Having an Unbalanced Number of OKRs
Setting too many OKRs is a common mistake many organizations make. It happens when there are too many objectives, and the key priorities get lost. Additionally, organizations tend to link only one key result to each objective, which may not be enough to achieve them.
Setting Objectives That Are Too High or Too Low
Having overly ambitious objectives is essential, but setting unrealistic ones is a common mistake in OKRs. These unachievable business goals can demotivate employees instead of challenging them. On the other hand, setting very easy objectives can lead to a lack of challenge and motivation for employees.
In either case, the significance of the OKRs is lost, and they fail to make an impact, resulting in the underutilization of resources.
Lacking Accountability Measures
The absence of accountability can be crucial in the unsuccessful implementation of OKRs. Without defined roles, there may be a tendency to shift blame and evade responsibility, resulting in unsatisfactory results.
Adding Objectives With Low Value
The success of OKRs lies in their direct contribution to business growth and strategy. Effective OKRs have a measurable impact on end-user experience and profitability, while low-value ones, even when accomplished, don’t bring significant benefits and waste valuable resources.
Creating Open-Ended and Vague OKRs
OKRs lacking specificity and measurable outcomes are often ineffective, particularly regarding key results. The most common mistake is setting objectives and determining key results without a quantifiable measure.
Being Unable to Track Progress
Monitoring progress is crucial for achieving OKRs as it allows for the identification of improvement opportunities and ensures alignment with priorities. Failure to track progress may restrict the impact on the overall business.
Mistaking OKRs for Daily Tasks
It’s important to distinguish between OKRs and to-do lists. While daily tasks may contribute to achieving objectives and key results, it’s important not to treat OKRs like checklists of tasks.
Using OKRs to Evaluate Performance
Managers often misuse OKRs by using them to evaluate employees’ performance. It can lead to employees setting lower objectives to avoid negative consequences. OKRs should be ambitious, with a 70-80 percent achievement ratio indicating good progress. If objectives are 100 percent achieved, they may not be ambitious enough to capitalize on team members’ strengths.
Preparing Your OKR
To ensure your OKR program’s success, you should keep a few factors in mind:
Plan Your Company’s Strategy
A clear understanding of an organization’s strategy is essential for effectively implementing OKR. The strategy serves as a roadmap for the company’s goals and decision-making, allowing teams and individuals to prioritize and align their work with the organization’s objectives, ultimately leading to increased business impact.
Ensure Leadership Support
Senior leadership sets an example for the company. If they don’t use OKR, neither will others. Consistent leadership commitment to OKR is essential to drive change throughout the organization.
Define Your Rollout Strategy
The approach for implementing OKR in an organization should consider the organization’s characteristics, culture, and prior experience with OKR. Here are a few ways to deploy OKRs in your organization:
- All at once – Roll out OKRs to your entire organization at once.
- Top-down – OKRs are introduced to the organization after your leadership team has piloted them.
- Department by department – An approach similar to top-down involves having a single department test OKR before implementing it across other teams and departments.
Identify an Ambassador
The successful implementation and management of an OKR program require designated personnel within the organization, typically referred to as the “Ambassador.” The Ambassador provides comprehensive training, fosters engagement, and offers ongoing support and guidance to all OKR users.
Design Your OKR Program
An effective OKR program clarifies expectations and timelines. It includes setting cadences, timeframes, check-ins, and progress reviews. Annual OKRs are typically set at the company level, whereas quarterly OKRs are set at the team level. While keeping track of progress requires weekly check-ins.
Train Your Teams
Organizations must train everyone on the OKR framework to ensure everyone speaks the same language. Online training is popular due to its scalability and cost-effectiveness, although workshops are also an option for some organizations.
FAQs About Objectives and Key Results
Innovative startups, technology companies, and other fast-paced organizations use OKRs to remain agile and adaptable. However, OKRs can be used by any organization or team, regardless of size or industry. They are beneficial for companies experiencing rapid growth or undergoing significant changes.
There’s no set cadence for OKRs, but 1-3 months is the sweet spot. It allows enough time to observe results while maintaining a sense of urgency. It’s also possible to have overlapping timelines, such as setting annual OKRs and breaking them down into quarterly or monthly objectives.
You should have a maximum of five objectives and four key results per objective. Having too many objectives can be overwhelming and lead to a lack of focus in the team. However, too few objectives can mean the team is not challenging itself enough.
Leading indicators are preferred over lagging indicators when achieving the desired key results for OKRs. It’s because of their focus on future outcomes, which allows for greater growth and success for organizations and teams utilizing them.