OKR stands for Objectives and Key Results that will make you think that there are only two components to an OKR. But in fact there are three: an Objective, Key Results and Initiatives. The Objective tells you where to go.
Key Results help you measure progress towards your Objective. And Initiatives are everything you'll do to achieve your Key Results. Let's take a closer look at each of these three components starting with Objectives.
An Objective describes something that you'd like to achieve in the future. It sets the direction for your organization or team – think of it as a destination on a map. It's important that an Objective is easy to understand, memorable, and inspiring.
Objectives are a great tool to communicate across the organization what everyone is working on. For that reason, Objectives shouldn't contain technical jargon and they also shouldn't contain a metric. An example of an Objective would be "Our customers are the happiest they've ever been".
Now let's take a closer look at Key Results. Key Results are all the results that need to be achieved in order to get to your Objective. Key Results do two things: firstly they help specify the Objective.
Qualitative Objectives can be a bit ambiguous so you need Key Results to quantify the Objective and to make them specific. Imagine your Objective is to be a top place to work in the United States. You could measure this in terms of where you rank in Fortune's 100 top places to work list, eNPS score, number of applicants per job post, or multiple indicators at once.
Whatever you mean by being a top place to work the Key Results will make that clear. Secondly, Key Results help you measure progress toward your Objective. Therefore, a Key Result must always contain a metric, and have a start and target value.
Think of Key Results as a signpost with a distance marker that shows you how close you are to your Objective. Imagine your desired destination is New York, that's your Objective. The signposts indicating distance towards your destination are your Key Results.
One important thing to note is that a good Key Result is typically an outcome and not an output. An output simply is something that you do, such as a task or a project. For example, make 50 sales calls will be an output.
An outcome is a result of what you do, for example, I closed 10 new customers. That's an outcome. Now given the example Objective provided earlier, a good key result will be: Increase our employer NPS score from 30 to 50.
Finally let's take a look at Initiatives. Initiatives are all the projects and tasks that you work on in order to push progress on your Key Results. Think of it as everything you'll do in order to get to your destination.
An example of initiatives could be: (1) squash all high priority bugs in our product or (2) hire two new support agents. By now you have a clear understanding of the components of an OKR. But you're probably wondering what all the fuss is about.
Why not stick to calling these simply goals as we already know it? Why complicate things? Trust me we have a good reason for it.
After all we didn't build an entire platform with OKR at its very core for no reason. So let's briefly talk about the difference between goals and OKR. OKR is two things: on the one hand it's a framework that contains best practices to help you manage your organization's goals.
On the other hand it's a way to formulate those goals. Let's first have a look at how you're used to managing goals. Imagine you want to increase brand awareness for your business.
You would then set yourself a goal to acquire 20 000 new leads per month. And you'd probably go on to set yourself even more goals such as setting up 10 ad campaigns and writing five new blog posts per month. You end up with this list of goals that all feel equally important and you don't really know where to start.
But the only thing that truly matters is to increase brand awareness. Now if you'd structure these goals as an OKR you would have much more clarity about what really is important to you. Your Objective would be our brand is the talk of the town.
Your Key Results will be to acquire 20 000 new leads per month. Together this Objective and the Key Result form the outcome that you'd like to achieve. Your Initiatives are the things that you'll be doing to help you reach that outcome.
That could entail setting up 10 ad campaigns, write 5 new blog posts per month, or put up 100 new billboards around the city's most busy spots. Make sense? Great!
Before we get any further into the details, let's just go back in history shortly to see where and when OKR came into being. OKR dates back to 1954 when Peter Drcker invented Management By Objectives, also known as MBO. In 1968 Andrew Grove co-founder of Intel, also known as the 'Father of OKR' further developed and refined MBO into the OKR framework as we know it today.
In 1974 John Doerr joined Intel and learned about the concept of OKR. Doerr went on to join Kleiner Perkins Caulfield and Byers – one of the first major investors in Google. Doerr became an advisor to Google in its very early days.
He introduced OKR to Google's founders Larry Page and Sergey Brin. They then implemented OKR at Google. In fact, Google still works with OKR today.
Now that you have a good understanding of what OKR is all about and before we move on there's one important thing I need to point out since many people confuse OKRs for KPIs. OKRs are not the same as KPIs. OKRs and KPIs are completely different goals with different purposes.
They work really well together and there's great value in tracking them alongside each other. But what's the difference between the two? KPI stands for Key Performance Indicator.
KPIs are a type of performance measurement aimed at evaluating the success, output, quantity or quality of an ongoing process or activity. These processes and activities are usually already in place. OKRs on the other hand provide the missing link between ambition and reality.
They help you break the status quo and take you into new often unknown territory. If you have a big dream; something that you'd like your organization to achieve in the future, you'd need OKRs to take you there. As I said, OKRs and KPIs work well together.
Let's imagine your organization is a car and you're driving that car towards the destination. Your KPIs are what you'll find on your car's dashboard such as the fuel gauge and the engine temperature gauge. These are the things that you constantly need to watch to ensure your engine isn't overheating and that you're not running out of gas.
On the other hand, your OKRs are like your roadmap that guides you toward your destination. These are all the temporary goals that will change from time to time. So once you've passed the landmark toward your destination you'll then focus on the next landmark and then the next one.
Now that we've clarified the difference between OKRs and KPIs, it's time to take a closer look at the purpose of OKR. Why should you adopt OKR for your organization and what should you be using it. Following Google's success with OKR it's become a popular goal management framework and has been adopted by millions of organizations worldwide.
A key reason for most organizations to implement OKR is to improve alignment across their organization. They essentially want to make sure everyone is pulling in the same direction and working toward a common goal. But in order for OKR to boost alignment, you first need to get your strategy in place.
Every organization has limited resources and is faced with competition. For that reason, strategy becomes critical and tough choices will have to be made. Such as which battles you want to fight and which battles you don't want to fight.
And what winning looks like. The answers are your strategy. Your strategy consists of two parts: your Ultimate Goal and your Strategic Pillars.
The Ultimate Goal defines your organization's ultimate winning aspirations, making clear what the purpose of your business is, for whom your organization is fulfilling that purpose, and when you'll consider your venture a success. Once you know your business' playing field and what winning looks like the next step is to figure out how you're going to win. Those how-to-win choices reflect what you do to differentiate yourself in the market.
Those choices will be the pillars that will support your Ultimate Goal. If you decide to change your Ultimate Goal, you also have to revisit how to win on that new playing field. Your Ultimate Goal and Strategic Pillars are therefore jointly called your strategy.
This strategy will serve as the foundation that will inspire all the OKRs and KPIs that your organization will be working on. And that's why it's so important to track your strategy and goals in the same place. It creates transparency, enabling everyone to see the bigger picture and if what they're doing is aligned with it.
An OKR rhythm is most successful when it operates on a combination of cadences. These cadences interact with each other to create a rhythm of continuous and focused progress. If you're wondering what a cadence is: a cadence is quite simply the frequency with which the organization and its teams set and review their OKRs.
While your organization's strategy guides you in everything you do, it needs to be made actionable through OKRs. On company level, these OKRs are usually annual. On department and team level OKRs are typically quarterly.
Toward the end of the year, executives start reviewing current year's performance as well as the organization's strategy. They then define the organization's key priorities for the next year. These company level OKRs communicate the three, four, or sometimes even five bigger themes that the leadership team wants everyone to focus on throughout the next year.
Teams and departments then set shorter term OKRs that support the higher level company-wide priorities. It's important to note that the OKR framework is flexible and forgiving. There's no one-size-fits-all rule on setting the right combination of cadences for your organization and its teams.
Since 94% of organizations work with this annual quarterly cadence, it offers a safe starting point. From there you can modify your approach as you learn what works best for you. Staying on top of OKR progress is the key to success.
Our data is showing that organizations updating and reviewing their goals progress frequently are more likely to achieve their goals than those that don't. Therefore to ensure that execution succeeds it's important to clearly define the frequency at which people need to update and review their goals. For quarterly OKRs it's a best practice to check in on a weekly basis.
An often overlooked part of an OKR program is the process of closing OKRs. As you approach a new quarter and are wrapping up work on the current quarter's OKRs, it's important to pause and reflect. It enables you to collect and share your learnings before you start focusing on something new.
By doing so you and your teams have enough information to make informed decisions for the future. So don't forget to allot time at the end of the quarter to take a step back and reflect on your goals. I know that probably was a lot of information.
We're almost done before you go I'd like to sum the key takeaways from this video and share a few important best practices to help you kick-start your journey with OKR. 1. When it comes to OKR, less is more.
OKRs help you focus on what's most important right now. So don't set too many OKRs and avoid putting everything you're doing in your OKRs. Don't be afraid to say no to things that are just not critical right now.
2. Strategy first, OKR second. If your people don't understand your organization's purpose in the field it's playing in, no amount of well-written OKRs can support your organization in reaching its desired destination.
3. Transparency. To ensure you're moving in the right direction you want to involve everyone in your organization.
Your people can't make an impact if they don't know what they're working toward and what's currently happening across the organization. So make sure your strategy company and team goals are visible to everyone. 4.
OKRs are not the same as KPIs. Instead, they perfectly complement each other. KPIs monitor performance and identify problems and areas for improvement.
OKRs solve problems improve processes and drive innovation. Tracking them alongside each other not only provides the bigger picture at all times but you also have all the functioning parts in front of you that your organization, teams, and people need to deliver strategy. 5.
Create a rhythm for your OKR program. Standardize the processes for when you set, close, update, and review your OKRs. By doing so everyone knows what's expected of them and when.
If you're ready to start working with OKRs and put your new knowledge into practice head over to our website perdoo. com and sign up for a free Perdoo account. If you'd like to learn more about OKR, head over to our resources hub at perdoo.
com/resources for a wealth of knowledge on everything about strategy, OKRs, KPIs, and growth.
