What are OKRs?

Category: OKR University, Featured.

OKRs – The Bridge between Strategy and Achievement of Goals:

We are sure that you have read a lot about the importance of Strategy and the discipline of Execution. As the below, Jim Collins quote indicates — one without the other is meaningless.

Jim collins

Building a visionary company requires one percent vision and 99 percent alignment.

Jim Collins, Built to Last
 

OKRs help teams and companies execute their strategic goals using a well-defined operational framework. OKRs are actively used by the technology titans revolutionizing our 21st-century world – Apple, Google, Amazon, Microsoft, Netflix, Twitter, and Spotify, as well as countless start-ups and innovative companies.

winston

However beautiful the strategy, you should occasionally look at the results.

Sir Winston Churchill
 

What are OKRs?

OKR is a goal management system used by teams, large and small, to collaborate and achieve stretch goals through a framework that requires regular check-ins, feedback, continuous learning, collaboration and problem-solving.

OKRs are simple yet powerful as they are useful for startups and large corporations to execute their strategy with focus and alignment.

Objectives (the O in OKR) are qualitative and inspirational, time-bound (typically in a quarter) goals to be executed by a team (say, Recruitment) or an individual.

Here is an example of a good Objective:

  • Build a high-performance analytics team.

Key Results (KR), on the other hand, quantify the objectives and break it down to specific metrics that can be used to measure the achievement of the Objectives.

map

Vision without action is a daydream. Action without vision is a nightmare.

Japanese proverb
 

The above Objective can be broken down into Key Results like:

  • KR1 — Hire 10 new employees for the Analytics team.
  • KR2 — 95% completion rate of “closed tickets” by team members within 30 days of hire.
  • KR3 — Achieve 90% and above scores on Employee satisfaction surveys for new hires

OKR Example

The 5 Key Elements of OKRs

According to John Doerr (the celebrated Venture Capitalist who popularized the OKR framework), there are 5 key elements of OKRs

FACTS

Focus: Companies should define not more than 3 – 5 Objectives and less than 5 Key Results per Objective.

Objectives also need to fit in a single line. These limits force organizations and teams to focus on their most important goals and targets. The problems of “multitasking” and dilution of attention have been well documented by productivity experts. Focus ensures that individual and organizational bandwidth is concentrated on the few items that matter. Achieving stretch goals is possible only when individuals and teams give their undivided attention to the few goals that are important.

Alignment: Research indicates that over 85% of corporate employees are unaware of organizational strategy and goals. OKRs solve this problem by ensuring that the Corporate goals (OKRs) are cascaded to department and team goals through top-down assignment or bottom-up alignment.

Alignment gives clarity to employees about how their work contributes to the corporate goals and results in the entire organization executing in unison.

Commitment: Commitments are OKRs that should be achieved without fail in the chosen time period. (Example: 100% of employees to be given sexual harassment awareness training this quarter).

Tracking: OKRs should be tracked every week. The metrics for the various Key Results are established at the beginning of the quarter and will be used for monitoring and tracking.

Teams will track their OKRs transparently using tools like Profit. It keeps everyone aware of the scoreboard and facilitates members helping those who need assistance in completing their commitments by sharing resources and expertise as required.

Stretching: OKRs should help the team elevate their performance beyond what they thought “was possible.” So the goals are ambitious, and a 70% achievement is considered as “strong performance.”

An excellent way to encourage “Stretch Goals” is to delink the achievement of “stretch goals” from “compensation discussions” and instead make compensation decisions based on the “efforts.”

Arnold

In life, as in football, you won’t go far unless you know where the goalposts are.

Arnold H. Glasow
 

OKRs – The Beginning

Andy Grove, the legendary CEO of Intel, is credited with introducing the concept of OKRs in the 1970s.

Intel encountered several large competitors like Motorola as they pivoted from being a memory vendor to a microprocessor vendor. The company had to battle against larger rivals in a highly competitive market.

OKRs provided an excellent framework for Andy Grove to communicate his goals to the teams across the world. Teams agreed on stretch targets and executed them with great focus and alignment.

Andy Grove reviewed progress every week, and early feedback helped teams on quick course corrections. The results were spectacular.

Intel beat every other competitor to become the world’s leading CPU vendor and, along with Microsoft, has been dominating the IT industry through the Wintel duopoly.

John Doerr worked directly with Andy Grove at Intel and became a great believer in OKRs. He moved on from Intel and became a prominent Venture Capitalist with his investments and mentorship to companies like Google, Intuit, Amazon, Square, Uber, and Zynga.

In 1999 he introduced OKRs to Google when they were just 60 employees. Google has publicly credited OKRs for their phenomenal success. From Google, OKRs spread like wildfire across companies in Silicon Valley and beyond.

Today we see OKRs being adopted in companies across other verticals such as Banking, Media, Telecom, Insurance, and even the Public Sector.

Interest in OKRs has been surging in the 2010s

As you can see from the Google Trends curve depicted below — the interest in OKRS has been steadily increasing from 2012, and it surged after 2018 when John Doerr published his best-seller “Measure What Matters.” The book helped make OKRs go mainstream, and its popularity has steadily grown outside the tech industry.

Google Trends – OKRs (In US)

google-trends

Marc Andreesen declared that Software is eating the world, in his landmark 2011 Editorial in the Wall Street Journal. He describes that “Silicon Valley-style technology companies” will be taking over large swathes of the economy. He was citing companies like Apple, Amazon, Netflix, and LinkedIn completely disrupting large industries like Entertainment, Communication, Advertising, and Recruiting.

In August 2020 (at the time of this writing), the takeover of the “large swathes of the economy“ by Tech companies has been realized.

market-cap

The top 4 companies here and almost all the companies referred by Marc Andreessen have one thing in common: they have been operating with OKRs as their goal management system.

In addition to this, we see several other tech companies like Linkedin, Zynga, Spotify, and Netflix that also dominate their industry using OKRs.

As Steve Jobs said about the success of Apple products, the reason OKRs have been gaining widespread adoption compared to the hundreds of other competing Management Theories is that “it works.”

Comparison of Goal Management Systems

BHAGWIGOKR
NameBig Hairy Audacious GoalWildly Important GoalsObjectives and Key Results
Proposed byJim Collins in his classic book – ‘Good to Great”Stephen Covey, in his book “The 4 Disciplines of Execution”Andy Grove Practiced OKRs first in Intel in the 1970s, Introduced to Google by John Doerr in 1999
DefinitionA BHAG is a huge and daunting goal, that is clear, compelling, capture’s people’s imagination and brings teams together to strive towards the finish line.Wildly Important Goals are the most important goals that Can have an outsized impact on the performance of an Organization, Team or Individual. At each level it is recommend having not more than two WIGs

Objectives are inspirational, directional and qualitative statements, describing the goals to be achieved.

Key Results are a set of metrics that help to measure and benchmark the progress towards the objective.

ExampleThe most iconic example is President John F Kennedy’s 1961 declaration that “America should by the end of the decade, land a man on moon and bring him safely back to earth”Reduce Churn from 15% to 5% in 18 monthsObj: Improve Product Stability

KR1: Ensure all APIs respond within 100 ms
KR2: No Severity 1 bug in Production system
KR3: Achieve Average Page Load time of 3 seconds

PurposeCommunicating clearly ONE audacious goal and laying out the long-term missionTo help Focus on the most important goals at all levelsOKRs (Objectives and Key Results) help individuals, teams and companies to achieve stretch goals through a well-defined framework . The framework helps companies to achieve their strategic vision through OKR cycles.
TimeframeLong term – will probably be longer than several OKR cycles.Depends on the goal and the specific circumstances.Typically, one quarter, some-times can be 1 year
Availability of Implementation FrameworkDoes not provide any operational framework for realizing the lofty goal.Has a high-level framework, but leaves out low-level Implementation detailsDetailed Framework for implementation available
UsageUsed by many start up founders, CEOS and political leaders to communicate their long-term vision Most widely used goal management system by some of the most successful tech companies of our times and now spreading to other verticals as well.
ToolsLimited or no toolsLimited or no toolsich availability of software products for implementation

Tips to write Good OKRs

Objectives:

Objectives should be motivating short, memorable statements. Every team member should be able to recall their Objectives from memory without referring to their app or system.

Objectives need to be energizing, not dull. Feel free to use whatever works in your organization and is in synch with your culture. We have seen words like “Out of this world,” “Kickass,” “wicked,” “Groovy,” “Sweet,” ‘fab,” and ‘Super-Duper” used to describe Objectives.

Here are a few OKRs set by some companies that we all know:

  • YouTube — “Reach 1 billion hours of watch time per day (by 2016)
  • Google — “We should make the web as fast as flipping through a magazine.”
  • MyFitnessPal — “Help more people around the world.”
  • The Gates Foundation — “Global eradication of Malaria by 2040“.

Key Results:

Key Results should be less than 5 for every objective.

Key Results are metrics that need to be achieved and hence need to have numbers.

Key Results are ‘Results” not “tasks.”

Here are a few examples of Key Results that a few companies have used for their Objectives:

  • YouTube — “Grow kids’ engagement and gaming watch time (X watch hours per day)
  • Google — “Achieve 20 million weekly active users for Google Chrome by year-end.”
  • MyFitnessPal — “Add 27 million new users in 2014“.
  • The Gates Foundation — “Sustain current global progress to ensure the environment is conducive to eradication push“.

Conclusion:

While there are hundreds of Management theories and frameworks — the power of OKRs comes from the widespread adoption and proven success stories across the globe. OKRs help companies and teams to excel in execution.

The critical elements of OKRs tie into each other. During the Planning process, teams are forced to drop all but 3-5 Objectives. It brings in the focus.

Similarly, as Corporate OKRs are cascaded to department and team levels, alignment and employee empowerment happen.

Transparent scoreboards, regular reviews, and feedback cycles provide the framework the necessary support and rigor to excel in achieving stretch goals. No wonder OKRs have been an incredible tool powering some of the most innovative companies of this century.


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