OKR has always been the talk of the town in the corporate world ever since the tech giant Google first used this framework back in 1999. Since then, numerous companies in the Silicon Valley have adopted this strategy, including Twitter, Microsoft, Spotify, Target, and The Guardian. So what is OKR?
What is OKR?
Objectives and Key Results, often abbreviated as OKR, is a goal-setting system used in the corporate world to identify particular business objectives and track progress towards achieving these outcomes. It is a simple instrument used to align the organization towards actively achieving specific, measurable goals set by the management.
Unbeknownst to most, the roots of this framework actually lie in the multinational corporation Intel. Andrew Grove, an American entrepreneur and author known as the “Father of OKRs”, first documented this strategy in his book High Output Management in 1983. At that time, OKRs were referred to as iMBOs, that is, Intel Management by Objectives. However, it was after its introduction to Google that OKR gained widespread popularity in the world of commerce.
This popularity was due to several reasons. Unlike traditional yearly goals, OKRs are regularly set, monitored, and reassessed—often on a quarterly basis. They often involve the entire organization as they are set at an organizational, departmental, and individual level. This helps each team within a corporation to focus and take concrete steps towards accomplishing one clear goal. Overall, OKRs provide a great boost to an organization’s productivity.
Components of OKR
As is implied by the name itself, there are two significant components of OKR: Objectives and Key Results. John Doerr, the affluent American investor and venture capitalist who initially introduced OKR in Google, has created a formula to describe the relationship between these two components briefly:
I will (Objective) as measured by (this set of Key Results).
An Objective is, therefore, a specific end-goal that you want to achieve. It is a short yet motivating statement that encourages your team to take action. On the other hand, a Key Result is a particular set of measures that are used to track your progress towards achieving the Objective that you have set.
These results can be evaluated on a scale of 0-100% or any numerical measure. A constant 100% success rate implies that workers might be effortlessly meeting their targets. Therefore, in order to ensure that they are provided with more of a challenge, a success rate of 70% is recommended instead.
There is also a third component that can be identified within this framework: Initiatives. While Objectives describe your end result and Key Measures indicate the measures of your progress, Initiatives are the activities you have to perform in order to meet those standards and achieve your end-goal. Initiatives play the vital role of reinforcing your Objectives and advancing your Key Measures.
Examples of OKR
Now that we’ve established the definition and significance of OKRs, we’ll take a look at some examples which can help you set OKRs for your business.
To start off, we’ll need to set an Objective. Let’s assume that we’ve set a business objective to “Have Excellent Customer Service”. Sounds pretty impressive, right? Except it isn’t exactly a solid goal unless we set some standards to measure the customer service against.
This is where Key Results come in. For each Objective we specify, there should be a set of 3-5 Key Results. What measures can we use to ensure that customers are satisfied with our performance?
The Customer Retention Rate or the Resolution Rate of our business would be an excellent place to start. Or, to get more reading on our customers’ reactions, we could use the Sentiment Analysis method as well. These measures will allow us to evaluate how likely our customers are to continue business with us and how satisfied they are with our products and services.
Therefore, our OKR would have a form similar to this:
Objective: Have Excellent Customer Service
- Increase Customer Retention Rate from X to Y
- Increase Resolution Rate from X to Y
- Improve Sentiment Analysis score from X to Y
Let’s take a look at another example that focuses more on the inner workings of a business. Suppose that we have set an Objective to “Improve the Quality Assurance Process”. We’ll use several Key Performance Indicators to assess the effectiveness of our quality assurance methods for the Key Results.
The final form of our OKR will, hence, look like this:
Objective: Improve the Quality Assurance Process
- Improve Efficiency score from X to Y
- Reduce Injury Frequency and Severity score from X to Y
- Review every design and report any functional issues
- Mark zero critical issues on production
Now let’s examine an OKR set for a business that wants to improve its profitability.
Objective: Increase Profits by X%
- Launch a brand awareness campaign, doubling the revenue from the previous quarter
- Negotiate a supplier contract to save Y% on the purchase of raw materials
- Increase number of paid users from X to Y
- Establish a partnership with two new firms
And finally, we’ll analyze the OKR set for the Human Resources Department of a business.
Objective: Acquire new talent to build team capabilities and strength
- Launch hiring campaigns across at least two job sites
- Reduce the time to hire new employees from X days to Y days
- Reduce new hire 90-Days failure rate in the Production Department from X% to Y%
- Introduce X new members into the Digital Marketing team
- Recruit Y new members for the Data Analytics team
While you’re setting OKRs for your business, keep in mind that while another team or business might have the same Objective as you, it is very likely that their Key Results might be different. This is because there is no one “proper” way to use OKR; each group molds it according to their interpretation to fit their business model.
Tips For Writing Good OKRs
It’s quite possible that you and your team have set several OKRs, expecting to see a dramatic shift in your business’s performance, but are instead quite disappointed. While it sounds like quite a simple task, a lot of thought and planning goes into establishing good OKRs. So here are some tips you should keep in mind while drafting OKR for your business:
Writing Good Objectives
- Your Objectives must align with the overall strategy of your business. If you set an Objective without the collaboration of other departments in your company, you might end up with conflicting aims that will hinder business productivity. Therefore, while you’re writing your Objective, make sure that it is relevant to your company’s broader vision and that it contributes to the bigger picture.
- Solve a fundamental problem within the business. When brainstorming for an OKR, identify the root cause of an issue within your company that is disrupting productivity. Think of a solution that, if implemented, can help overcome the shortcomings of your current strategy. This solution will act as a basis for your OKR.
- Write for the people in your organization. Make sure that employees across the company can understand the terms you use in your statement. For example, if you work for the Accounting & Finance Department, avoid using technical jargon that someone from the Operations Department might not understand. Your Objective should be easy to read and memorize. If it fits with the culture of your organization, you can also write using informal terms or slang!
Writing Good Key Results
- Make sure that your Key Results are in compliance with the SMART criteria of goal-setting. This means that the goals you set in order to measure your progress should be Specific, Measureable, Actionable, Relevant, and Timebound. For example, setting a Key Result of “improving response time to customer complaints” is rather vague. Adhering to the SMART criteria, you can reword your Key Result as “improve response time to customer complaints within the next quarter by increasing the customer service staff from 3 to 5”.
- Ensure that only 2-5 Key Results are set per Objective. If more than five results are set, you and your team members might feel overwhelmed while trying to meet different standards of performance at the same time. This may also result in confusion about which standards should be prioritized and met first. In contrast, if you set a limited number of Key Results, you will be able to hone your focus on achieving those few results efficiently and effectively.
- Separate your Key Results from your Initiatives. Your Key Results should be describing outcomes, not activities. Avoid the use of words such as “consult”, “attend”, “help”, or “analyze”. These words indicate activity, whereas your primary focus should be the end result of these activities.
A Final Word
Implementing the OKR strategy in your business is not an occurrence that can change the entire dynamics of your organization overnight. However, with time and effort, along with your entire team’s active support and participation, you can definitely bring about this revolution in your business!