Table of Contents
- What Is an OKR?
- Why use OKRs?
- Deep dive into Objectives, Key Results & Initiatives
- Balancing OKRs
- OKR Alignment
- Reviewing OKRs
- Cultivating culture
- Common mistakes and solutions
Part 1. What is an OKR?
Objective & Key Result (OKR) is a goal setting and execution framework that helps align goals and people with company strategy and mission. You can use OKRs to ensure the whole organization is unified in accomplishing the same thing.
An OKR plan should have 3-5 Objectives, with 3-5 Key Results per objective. This ensures you are only focusing on what matters, can prioritise well and execute on those priorities with agility.
Part 2. Why use OKRs?
The OKR framework is one of the top tools for strategy execution around the world.
Traditional goal setting and execution systems have relied heavily on mechanistic and outdated systems that no longer yield results. The sad part is most business leaders remain unaware of alternatives. In a landscape where businesses are experiencing change at an exponential rate, their responses to these changes remain sluggish. This renders businesses feeling vulnerable and impacts their bottom-lines, not only in terms of profitability and sustainability, but also leaves their employees feeling demotivated and disengaged.
Many organisations set goals as part of their Annual Operating Plans, and mesh that with an annual performance management cycle. Employee performance is rated using Bell Curves and the workforce is force-ranked to fit into a rating scale at the end of the year. OKRs on the other hand are meant to be de-linked with performance reward strategies and are set on a quarterly basis. Allowing teams and individuals to assess market changes, pivot in real-time and more importantly learn how to fail fast. OKR encourages to move away from completing tasks, and toward being outcome-driven.
It’s a good practice to make OKRs transparent and accessible to all employees across the organisation wherever possible. When employees understand the company’s objectives and how it links to the work they do, it contributes heavily to ‘job significance’, and finding purpose in their work. This is results in higher levels of employee engagement and motivation.
#1 Laser Focus on Priorities
The structure of the OKR Framework, forces organizations, teams and individuals to focus on what matters most. OKRs are the important layer over the ‘Business as Usual’ metrics, that places significance on a few specific goals to encourange the most impact by your teams. It's a simple 80-20 rule. By focusing on the 20% priority goals, you achieve 80% of business impact.
#2 Higher Aspirations from Employees
Individuals and teams can add bottom-up goals to the strategic and tactical OKRs. This not only helps in tapping into the collective intelligence of the organisation, but it also creates higher levels of involvement and accountability.
#3 Greater Alignment
By nature, OKRs need to be aligned to be successful. They foster teamwork and ensure greater unification to accomplish the strategy and mission.
#4 Employee Engagement
With the alignment of individual and team OKRs to the organisational OKRs, employees can clearly see how their work contributes to the organization’s success. Positively impacting employee motivation, purpose and drive, due to the visibility of their contributions.
#5 Increased Innovation
The collective intelligence of the organisation and cultivating a culture of multi-directional goal setting, employees will naturally contribute, and innovate more. Thus, supporting agility and rapid experimentation, where a ‘fail-fast’ mindset and encouraged learning is a given.
More involvement in what employees are working on, means more ownership. With OKRs, teams and members should be constantly involved and supported by agile leadership. Leaders should play the role of a coach and a facilitator allowing team members to co-create the blueprint for organisational growth.
#7 Value Creation
OKRs help focus on the outcome, and not just the outputs. This leads to employees spending more time in finding solutions to create better results, rather than simply completing activities in their to-do lists. Better results, means more value created.
Part 3. Deep dive into Objectives, Key Results & Initiatives
Where do I want to go?
What do I want to achieve?
Objectives should answers these questions. A well crafted, sense of direction that inspire the people to work toward them. At the end of the allocated timeframe, you should be able to confidently know whether you achieved the objective or not.
- Must be aspirational, exciting, and directional (aligned to purpose, mission, or strategy).
- A qualitative goal.
- Stick to 3-5 objectives, to maintain laser focus.
- Start with action verbs e.g. Create the most loved brand.
- Either, ‘committed’ (short-term) or ‘aspirational’ (long-term).
Where do they sit in an organization?
Objectives can be created at various levels within the organisation. Some examples:
- Annual Organizational Objectives
- Quarterly Organizational Objectives
- Departmental Objectives
- Functional Team Objectives
- Cross-functional Team Objectives
Align objectives with strategy
Objectives should be derived from your company’s strategy. With the global market’s volatility, uncertainty, and complexity, strategies are not often valid beyond an annual term - unless you are clairvoyant. Establishing your organizational OKRs in line with what you are strategically trying to achieve, will help move the needle. For instance, if your strategy is to create new products within an existing market, you’ll need an associated objective to ensure team’s are working toward this, and ultimately yield success.
Annual Organisational Objective Example
Quarter 1 – Objective 1: Release a winning product in Asia.
How do I measure success?
How will I know I have achieved my objective?
Key Results should answer these questions. Clear key results should give a sense of how well (effectiveness), and how quick (efficiency) you should be able to reach your goal.
- Reflects success of the associated objective.
- Must be quantitative *KRs metrics with a target.
- Stick to 3-5 KRs for every Objective.
- Focus on the destination, not the means to get there. Make key results value-based, not activity-based (activities narrow the focus on completion rather than impact).
Annual Organisational Objective Example
Quarter 1 – Objective 1: Release a winning product in Asia.
- Key Result 1.1: Release version 1 of the product.
- Key Result 1.2: Achieve $2 million in product net sales.
- Key Result 1.3: Generate an operating margin of 55%.
What do we do to get there?
The actions, tasks, projects, and initiatives you undertake day-to-day to work toward your goals. They are within your circle of influence.
Part 4. Balancing OKRs
Balancing the efficiency (speed) and effectiveness (quality) of key results will amplify value generation.
This grand-prix OKR anticipates that reducing pit stop time can lead to cutting corners or at the very least, unintentional mistakes as the team speeds up their work. It is not enough just to do a faster job; the pit stop crew also needs to make as few errors as possible. By pairing the two key results, the team makes clear that their goal is to increase both the speed and quality of their work.
Objective - Win the grand-prix 2020.
Key Result 1 - Reduce average pit stop time by one second.
Key Result 2 - Reduce pit stop errors by 50 percent.
Objective - Create the most amazing customer experience.
Key Result 1 - Net Promoter Score increases from 60 to 65 in Q1.
Key Result 2 - 20% of Customers have repeat purchase in Q1.
Key Result 3 - Cost of Customer Service is < 30% of revenue in Q1.
Part 5. OKR Alignment
Company-wide alignment should be the focus of OKRs. From the top, organizational OKRs should speak to your strategy, mission and vision. From the bottom, team and department level OKRs, should align with the company-wide OKRs.
The first rule of alignment is – if the OKR does not contribute to the higher-level organizational OKRs, it must be discarded. This prevents teams and individuals from working on initiatives or projects that do not contribute to the organisational priorities, and from writing OKRs, that don’t really need to be OKRs.
The second key rule - be transparent with your OKRs and initiatives. When teams can see what’s happening across the board, execution becomes faster and easier. The whole purpose of alignment is to ensure everyone is working towards the same goals and is investing time and other valuable resources for a singular purpose.
Part 6. Reviewing OKRs
Fostering workplace learning and growth, are often leading reasons to implement the OKR framework. After the end of any cycle (end of quarter or year), it is critical to review and reflect on your OKRs, in order to learn.
When you assess your OKRs, objectively determine whether you’ve achieved what you set out to. You can use methods of grading, retrospectives or another form of reviewing. Understand the analysis, and use this to shape your next cycle of planning. For example, an end of Q1 retrospective, would help frame the basis of Q2 OKRs. An end of year company retrospective, should support the following year’s strategy and OKRs.
Part 7. Cultivating Culture
A primary reason for nearly 70% of OKR initiatives failing, is the lack of supporting organizational culture. Often, CEOs ask if they should wait to develop the right culture before implementing OKRs.
The simple answer is – not really! It’s a bit of a chicken-egg situation. When you implement OKRs correctly, you support the evangelizing of the right culture; and conversely, when your culture is constructive enough, OKRs tend to flourish. The intention is key here.
Implementing OKRs blindly without taking stock of organizational operations is a colossal waste of time, not to mention the expectation of intangible impact across the system.
Start with agile leadership
Agile leadership practices can truly transform how leaders show up at the workplace and enhance team empowerment, it provides a good basis for OKRs to flourish.
Solidify team rituals
Develop team rhythm’s around goals to drive focus and accountability. This will help team’s work effectively toward their goals, and promote a culture fostering individual growth.
The important thing here is that each team has a ritual, and that it specifies how OKRs are aligned, when progress on goals are reviewed, and priorities are discussed. This might vary from team to team to suit workflows.
Part 8. Common Mistakes & Solutions
Mistake: OKRs as performance management system
Solution: OKRs for goals, direction & strategically prioritzing work. A seperate performance management & reward system
Mistake: No connection of OKRs to strategy
Solution: Start with strategy, then build organizational goals to help achieve the strategy
Mistake: Key results are not measurable
Solution: Ensure key results are a value-based metric
Mistake: Key Results being based on activities
Solution: Train employees to help the understand the difference between outcomes and outputs. Seperate initiatives & tasks, from key results, so they have a place to plan both
Mistake: Setting OKRs for the entire organization at the get-go
Solution: Slowly roll out OKRs starting with a few teams, or just leadership. Once they have grasped it, move to the next
Mistake: Having too many objectives and key results within a single cycle
Solution: Educate the company on OKR theory, and drive home the point that not everything needs an OKR
Mistake: No transparency in across the organization
Solution: Be open with the company strategy and OKRs, where possible
Mistake: Not tracking OKRs throughout the quarter
Solution: Utilize a simple OKR software, so teams can visualize progress and prioritize their work accordingly