OKR vs KPI - a guide to understand how they differ and how they can…
This article will give you everything you need to know about OKR, OKR meaning and definition.
Let’s start by asking the obvious question what is OKR?
OKR is a popular acronym for the goal-setting and management framework called Objectives and Key Results.
Objectives and key results help establish high-level, measurable goals for an organization by establishing ambitious goals and outcomes that can be tracked.
Objectives and key results help to create clarity, focus, accountability, alignment and create momentum. They achieve this by cascading strategic goals to the operational level of an organization and break them down into small achievable tasks.
Traditional planning methods are too slow and cumbersome for today’s fast-paced environment, the framework is a lightweight, fast, efficient method that increases engagement and alignment.
Organizations striving for business agility are increasingly adopting a different approach for goal setting. Objectives and Key Results, the goal framework, is now used by some of the world’s most innovative companies and is quietly being adopted by corporates all over the world.
This section will help you learn the core concepts and also understand why objectives and key results method has been successfully adopted by great companies such as Google, Spotify, Twitter, Airbnb and LinkedIn.
Table of Contents
The Objectives and Key Results framework consists of regular planning and review stages. The whole process thought starts with objectives. OKR’s are both a goal-setting tool and a management framework that eﬃciently synchronizes everyone in an organisation to strategically move towards its short and long term goals.
Although it is used by Google, Linkedin, Airbnb and other famous software behemoths, OKR system is also being used by companies like Walmart, Target, The Guardian, Dun and Bradstreet, and ING Bank.
Doerr’s Goal Formula
I will ________ as measured by ____________.
A proper goal has to describe both what you will achieve and how you are going to measure its achievement. The key words here are “as measured by,” since measurement is what makes a goal a goal. Without it, you do not have a goal, all you have is a desire.
Doerr’s formula is the best way to explain the structure of an OKR:
I will (Objective) as measured by (this set of Key Results).
An objective is a clearly defined goal that is clearly defined and described. Objectives set a clear direction for teams at all levels of the organization.
Key results are specific measures used to track the achievement of that goal. They effectively measure the progress towards an Objective. A Key Result is like a signpost with a distance that shows how close you are to your Objective.
An Initiative is a description of the work you’ll do to influence a Key Result. If an Objective is your destination and a Key Result shows the distance to go, an Initiative describes what you’ll do to get there e.g. fly, drive, boat…
The OKR framework characteristics particularly suit organizations in dynamic environments. Some of the main benefits of using objectives and key results are:
John Doerr also was one of the earliest investors in Google. OKR’s quickly became an important part management of Google’s culture and way of working.
Unsurprisingly, other large tech companies soon adopted the management framework. Famous names such as LinkedIn, Twitter, Dropbox, Spotify, Airbnb and Uber are just a few of the companies that now use Objectives and Key Results (OKR’s).
Both are focused on objectives—broad goals designed to propel the organization forward—and metrics (called Key Results in the OKRs field and measures in the BSC) that gauge your success in achieving the objective.
The biggest difference between the two is cadence. When creating Balanced Scorecards, most companies will draft objectives and measures that are designed to stay in place for at least one year, but often longer. With OKRs, however, most organizations change their Objectives and Key Results each quarter, focusing on what can create the most value in the next 90 days.
Lean and the Objectives and Key Results process are mutually compatible.
|Specify value||Begin by defining what the customer wants||Begin with the company’s mission or WHY.|
|Identify Steps||The Lean process emphasizes cost efficiencies and consistent output. Improve your bottom line by identifying and eliminating unnecessary steps in existing processes||Identify 3-5 high-value objectives and collectively commit to measurable milestones (key results) that, when complete, enable the team to achieve their goal.|
|Make the value||Continuously reduce gaps between process steps. Pursuing smooth, continuous flow helps highlight opportunities for improvement.||OKRs connect strategy and execution. Set and score them openly on a regular cadence. At the end of each cycle, create a new set of OKRs that improve on the prior ones.|
|Introduce flow||Each time you successfully improve the process, look earlier in the decision making or production process to create greater and greater value with each cycle.||As OKRs cascade from top layer to the next, empower each layer to set their own objectives. This enables those closest to the problems and opportunities to surface discussion necessary to make leaps in value and productivity.|
|Perfect flow||Always look for continuous improvement, until all unnecessary actions or expenditures have been removed. A perfect process will result in 100% value creation and zero waste.||As teams improve their skills by setting the right goals at the right cadence, the organization will be able to STRETCH to audacious goals.|
For more about Lean Startup see the how to use the Lean Startup Canvas.
There are lots of Software As A Service (Saas) tools that you can use within your organization. I’ve listed a few here and I will write a separate post on what to consider when choosing an OKR tool.
I recommend that you start using existing tools within your business before using any of these tools. Setup the framework, understand how it knits in or conflicts with any existing management frameworks you use and understand what therefore needs changing.
The Objectives and Key Results framework requires people are trained and aware of the framework, its benefits, why you are moving to it and how you will support and train them.
Objectives and Key Results requires has a clear cultural dimension that requires you to understand how it fits with your existing culture and what, if anything, needs to change.
Here is a free Objectives and Key Results cheat sheet.
In Measure What Matters, John Doerr reveals how the goal-setting system of Objectives and Key Results (OKRs) has helped tech giants from Intel to Google achieve explosive growth—and how it can help any organization thrive.