by Denis Calin ・7 minute read
The acronym OKR stands for Objectives and Key Results. Much has been written on the topic over the years yet they still remain a mystery for many. I want to cut out all of the buzzwords and lift the veil on what OKRs are, how they work, why they are good, how to set them and why you actually should use them at your company or startup. Consider this The Ultimate Guide to OKRs. Let’s get started.
OKRs (Objectives and Key Results) is a methodology of setting and achieving goals within a set time frame. You can use words like tool, framework, system, approach, strategy to describe it but they all mean the same thing. At the end of the day you and your team are going to sit down and write a few sentences on a whiteboard (or a napkin, as was the Uber’s case). Each sentence is going to have a top part (the Objective) and a few key points under it (the Key Results). Let me give you an example of what these look like right now:
Objective: Increase user-base
–Increase per day views to 2,500
–Increase total monthly unique visitors to 40,000
Before we get to explaining anything in more detail, let me give you another example:
Objective: Delight our customers
–Hire 25 new motivated and aware customer account representatives
–Simplify the refund process from 15 clicks to 5 clicks
–Create 5 new seasonal products and start selling them in our stores
What can we see from these 2 examples of real-world OKRs?
We see that Objectives are short, bold, memorable and generally, inspiring. We see that Key Results are much more specific and they all have a number. In fact, in the OKR methodology, key results are almost always defined with numbers. They don’t tell you how to hit those numbers, only outline a specific goal. Also, key results often help define the objectives. For example, how do you know what Delight our customers means specifically for this business? Here, the key results explain and provide a definition for the objective: hiring 25 reps, giving customers refunds in 5 clicks and creating 5 new products will delight our customers.
So, OKRs are…
simple, concise and self-explanatory. They are well understood by every single employee in the company. Yet together Objectives and Key Results create a powerful system that helps not only to evaluate, measure and achieve what matters for your company, it unites employees around a common goal. Let’s take a look at what companies use OKRs today.
What Companies Use OKRs?
Those would be Google, Intel, Amazon, Uber, Box, Dropbox, Deloitte, Facebook, LinkedIn, Sears, Oracle and Netflix. And many more. Did I mention Panasonic? What about Slack? Yep, they too use OKRs. As you can see, OKRs are used by a wide array of companies which ranges from tech to retail to manufacturing. The reason I mention Google and Intel first is because these two companies are seen as the originators of Objectives and Key Results method. Let’s delve into a brief history of OKRs.
A Brief History of OKRs
Andrew Grove developed and implemented a system called Objectives and Key Results during his CEO tenure at Intel (the overwhelming success of Operation Crush has been attributed to his use of OKRs). In 1975 an Intel employee named John Doerr took a class on OKRs taught by Grove. John went on to work for a venture capital firm called Kleiner Perkins, which invested in a startup called Google in 1999. John introduced the idea of OKRs to Google’s founders and they have implemented it throughout the company during its first year. Google grew from 60 employees to 100,000 and still uses OKRs today.
OKRs vs KPIs
Key Performance Indicators have been around for a long time and are still used widely by many companies. KPIs are performance metrics which demonstrate how effectively a company is pursuing its key business objectives. KPI goals are defined to be attainable and to measure the process or a project already in place. OKRs, on the other hand, are bolder. They have greater depth than KPIs and provide a better framework for taking on new projects, ventures, even new directions for your business. They are aggressive and ambitious and in setting them higher than what is achievable right now, they make your company and employees stretch farther than previously thought possible. This helps promote individual and company growth.
Why Use OKRs and How to Use Them?
There are three major benefits to using OKRs. The process of defining and setting OKRs in and of itself is a great way to evaluate where you and your company stand on your journey. OKRs are about being honest with yourself. This is a chance to sit down and say: “This is where we are great – let’s do more of that”. And “this is where we suck – let’s change that”. By brainstorming for the OKRs you will be able to identify the weak and strong points of your company, from the company vision down to the marketing team’s productivity. You want to take an honest look at your business and create Objectives and Key Results which will empower your strengths and correct your weaknesses.
A Clear Vision
The second major benefit of OKRs is that at the end of their time frame they provide a reference to evaluate how well you did in executing the set objectives. Things become clear – what works and what doesn’t. They let you reflect on the progress made and provide you with a clear numerical expression of success.
Because key results and objectives include numbers in their definitions, it is easy to tell whether you have hit the number or not. Hire 25 motivated and aware customer account representatives this quarter? We hired 20. That is an 80% success rate, which is a great indicator that not only we were able to secure 20 new stellar employees, but we were able to move towards achieving the goals we have set in the beginning of the quarter. The total success rate of an Objective is calculated by averaging the success rates of its Key Results. Hitting a 70% success rate and above for objectives is a good indicator of a healthy team or company.
A Way of Management
The third major benefit of using OKRs is that it offers a transparent and intuitive way of managing a company. OKRs are a communication tool. Setting company, team and individual Objectives and Key Results aligns the business in a way where all people focus their efforts on the same important issues. It communicates where the company is moving and how it is maturing. This helps promote a healthy culture of fellowship and unity among employees on all levels. And that, as we know, is good for business.
OKRs Are Agile
OKRs are usually set in the following way throughout the company: Company OKRs are set quarterly, Team OKRs are also set quarterly and Individual OKRs or initiatives are set weekly. Depending on the size of the business, whether a 2-person startup or a 1,000-strong company, this may change to accommodate your current growth dynamics.
Unlike the rigid annual planning, OKRs let you adapt and respond to change. They allow for flexible goal setting and progress tracking. Because updates for OKRs are usually provided weekly, monthly or quarterly, it is easy to track progress during their life cycle.
OKRs provide the flexibility to pause certain objectives if they become irrelevant after their implementation. You can adjust key results as the company needs shift and the business environment changes. Of course this might mean that Objectives and Key Results were not defined correctly. No big. Like with everything worth getting better at, you get better at OKRs with practice. Defining OKRs becomes easier as you learn what you should be measuring and what matters to your business.
The agility of OKRs lies in the impact on the outcome and the people. Objectives and Key Results are less of a contract and more of a collaboration between various parts of a company, its teams and employees. OKRs facilitate synergy between profits and ideas. Not only do they help provide insight into your own business, they let you know exactly which areas you are being successful in and which areas need improvement and redesign. OKRs help inspire employees and promote a healthy, organic growth of the company.