what is OKR

What is OKR – The Simple Formula That Google Uses To Succeed

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.

How Google Uses OKR (Video)

What Are Objectives and Key Results

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.

How To Set Goals

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).

What Is an Objective?

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.

What Are Key Results?

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.

What Is An Initiative?

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…

okr examples

Objective

“Where do I want to go?” An Objective describes where you want to go and sets a clear direction. Think of it as a point on a map, a destination like London.

Example Objective

  • Improve Customer Experience Across Channels.

Key Result

“How do I know if I’m getting there?” A Key Result shows you how you’re progressing towards your Objective. Think of it as a signpost with a distance marker.

Example Key Results

  • Improve Net Promoter Score from X to Y.
  • Increase customer acquisition rate across channels from X to Y.
  • Reduce customer complaints by X per cent.

Initiative

“What will I do to get there?” An Initiative describes what you’ll do to influence your Key Results. Think of it as the description of what you’ll do to get to your destination.

Example Initiatives

  • Implement new omnichannel CRM system.
  • Create content aligned to customer segments.
  • Research customers that drop off after X weeks.

Creating high-quality OKRs is a crucial first step. They should be:

  • Valuable: OKRs should measure impact and not be merely a list of activities. Focus on Value-based Key Results.
  • Engaging: The OKR setting process should engage the creativity and the perspectives of the employees. The OKRs themselves should be inspiring instead of boring.
  • Actionable: The team has to understand the metrics and how they relate to each other. If the team does not know what it can do to improve a Key Result, it will never be successful.

Why Use OKR?

The OKR framework characteristics particularly suit organizations in dynamic environments. Some of the main benefits of using objectives and key results are:

  • Agile and dynamic process. Instead of using annual static planning, OKR takes an agile approach. By using shorter goal cycles, companies can adapt and respond to change.
  • Simplicity. The process is straightforward and easy to understand. It reduces the time spent setting goals from months to days.
  • Cultural Benefits. Using the framework leads to increased employee engagement. OKR essentially shifts from a focus purely on metrics and KPIs and output to outcomes. OKR creates focus, transparency, and alignment for all the work in an organization.
  • Bi-directional system. The traditional top-down cascading model takes too much time and does not add value. OKR uses a market-based approach that is simultaneously bottom-up and top-down. The company sets the strategic OKRs that each team should use to draft their tactical OKRs.
  • Stretch Goals and Moonshots. Instead, OKR targets bold, ambitious goals. Besides aspirational objectives, OKR believes in enabling the team to set challenging goals. Goals that make the team rethink the way they work to reach peak performance.
  • Decouples Rewards. By separating OKRs from compensation and promotions employees need to set more ambitious goals. It is hard to set moonshots when you need a bonus to pay for your kids’ college.

History of Objectives and Key Results Approach

history of okr
History of OKR

Who created OKRs?

The Objectives and Key Results framework has been around since the 1970s. The concept was created by Andy Grove, but popularized by John Doerr in his book Measure What Matters.

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).

okr vs kpi and The balanced scorecard

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.

OKR and Lean

Lean and the Objectives and Key Results process are mutually compatible.

ValueLEANOKR’s
Specify valueBegin by defining what the customer wantsBegin with the company’s mission or WHY.
Identify StepsThe Lean process emphasizes cost efficiencies and consistent output. Improve your bottom line by identifying and eliminating unnecessary steps in existing processesIdentify 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 valueContinuously 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 flowEach 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 flowAlways 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.

OKR software

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.

Watch The Ted Talk On Objectives and Key Results

OKR Cheatsheet

Here is a free Objectives and Key Results cheat sheet.

okr cheat sheet infographic
OKR Cheat Sheet Infographic

Further Reading – Best okr book

measure what matters book by John Doerr
measure what matters book by John Doerr

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.

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