Coming up with ideas for your business is easy, the hard part is executing them. Research shows that 9 out of 10 companies fail not because their ideas were bad, but because their idea’s execution was poor.
In light of this, the world’s leading companies like Google, Amazon, Adobe, LinkedIn, etc. all use OKRs to help organize and communicate their goals. In this article, we are going to dive deep into the OKR’s meaning.
OKR an acronym for Objectives and Key Results is a management framework developed by Andy Grove, Intel’s co-founder, and it was later popularized by Google. Objectives and Key Results are an overall framework designed to help organizations set achievable and ambitious goals and the strategy to execute them.
OKRs bring clarity and unity of purpose to all levels of your organization. Additionally, your employees will feel an increasing sense of belonging, as they start to understand the organization’s priorities and their importance as an individual to the organization’s strategy.
How OKRs Work?
There are two things you need before you can start using OKRs in your organization:
- The OKR Ambassador
- Your Organization’s Ultimate Objective
The OKR ambassador is the person in charge of overseeing OKR implementation in your organization. He/She is the crucial piece in making sure your execution of OKRs is successful. The OKR ambassador is responsible for making sure that all team members are properly trained and he/she will also provide support and guidance during implementation.
Before you start using OKRs, your organization must also have an Ultimate Objective. An ultimate objective contains your organization’s vision and mission. For example, Amazon’s ultimate objective is to be Earth’s most customer-centric company (this is their vision) where people can buy anything they want online (this is their mission).
Anatomy of an OKR
A good OKR must answer these three questions?
- Where do you need to go?
- How do you know you are getting there?
- What must you do to get there?
These three questions are the key to coming up with good OKRs
OKR Anatomy – Objective
Objectives are aspirational statements that align the company toward its goal. Objectives help organizations answer the question, “Where do we need to go.” The Objective should be easy to understand and it should not include measures. Additionally, every member of the organization should be able to easily understand the objective.
Above all, an objective should be inspirational, understandable, and time-bound. It should neither be measurable nor specific, instead, the objective should be generalized. It should not go into too much detail.
In other words, if your organization is on a journey, the objective is the destination on your organization’s map.
OKR Anatomy – Key Results
Key Results are the goalposts/milestones you will use to monitor your progress towards your organization’s objectives. Out of the three questions, key results address the question, “How do we know we are getting there.” In a way, key results are basically the small achievements that line your way towards your bigger objective.
When you are setting your key results, they should be measurable, specific, achievable and they should clearly demonstrate where you are coming from and where you are going. According to Google’s former vice president, a key result that does not have a number is not a key result.
Continuing the journey analogy, if the objective is the destination then key results are the signposts you must pass on your way to your destination.
OKR Anatomy – Initiatives
Initiatives are the tasks or steps that you must take to achieve your goals. Initiatives are specific, measurable, and time-bound actions that will bring you closer to your goal. A good initiative is quantified and action-based. For example, make 50 sales calls a week or attend 10 conferences a month, etc.
To end our journey analogy, if the objective is the destination and the key results are the signposts, then the initiatives are the means of transportation you will use to reach your destination
Hierarchy of OKRs
OKR hierarchy consists of:
- Ultimate Objective
- Organizational OKRs
- Team / Departmental OKRs
- Individual OKRs
As you can see from the pyramid, the Ultimate Objective is the most important as it guides the direction of the whole organization. An ultimate objective is meant to guide an organization’s strategy for the long term.
Going down the pyramid, each level’s OKRs are derived with the ultimate objective acting as a guiding star. Lower levels’ OKRs help the company or organization achieve its ultimate objective.
To ensure effective strategy execution, objectives and key results should be used at all levels of an organization.
Benefits of an OKR
One of the benefits of setting OKRs and Initiatives is that you will be able to differentiate between outcomes and outputs. Outcomes will be the achievements whereas the outputs will be the work done.
Being able to distinguish these two, means you will use outcomes instead of work done as your metrics for success. In short, doing more doesn’t necessarily mean you are getting more done, that’s why you need OKRs to work smarter and improve your strategy execution.
Here are a few other benefits your organization stands to gain by using OKRs.
Agility: OKRs need frequent updates, this means your organization will be able to quickly notice if something is wrong and quickly reorient itself on the right path.
Transparency: Every member will understand the company’s priorities and they will know how best they can contribute to the company’s success.
Employee Engagement: Goal Setting is an active and collaborative effort that connects employees with your overall vision.
Organization Autonomy: They say great leaders create more leaders, therefore using OKRs, all you have to do is provide the goals and let your employees decide how best they can achieve them.
Streamlined Approach: Pruning your organization’s multiple goals into just a few OKRs leaves you more time to focus on the thingsthat matter.It’s also harder to get distracted this way.
OKR Best Practices
Set OKRs Frequently
Usually, an Organization’s OKRs are set annually whereas Team OKRs are usually set quarterly.
Don’t Have Too Many OKRs
OKRs are meant to help you focus on your most important goals therefore having too many OKRs defeats the purpose of setting your OKRs in the first place. John Doerr, the man who helped Google adopt OKRs, recommends a maximum of 5 objectives with each objective holding about 4 key results.
Don’t Appraise Employees with OKRs
Employees must be comfortable with setting ambitious OKRs. The problem with ambitious objectives is that it is impossible to achieve them 100% of the time. Therefore, do not evaluate employee performance using their OKR achievement rate.
Make OKRs Transparent
OKRs should involve everyone within an organization. This is because each employee must understand the company’s priorities, their position in the scheme of things, and how best they can contribute to the company’s success.
You need to update your progress towards your objectives regularly. Frequent updates help you track your progress and make it much more likely for you to achieve your goal. Ideally, you should update your OKRs every week but if that is not possible, then you need to find your optimal frequency through trial and error.
Do not expect the change to using OKRs to be instant. It’s not an overnight sort of thing. Changing to OKRs is a marathon and not a sprint so give your organization time to adjust and perfect the process.
Successfully launch version 3 of our main product.
Get over 10000 new signups
Get published product reviews in over 15 publications
Increase sign-up to trial ratio from 10 to 25%
Increase trial to paid ratio from 30 to 50%
Research, analyze and understand what our users and non-users really think.
Sales team to conduct 50 phone interviews with key accounts
Support team to conduct 50 phone interviews with churned accounts
Product management to interview 25 external team leaders (non-users)
Design team conduct 30 web-based user testing sessions on new and old users
Objective Sample 3
Make our data security bulletproof.
All 7 team members complete the data training with an 80% score in the test result
Reduce security-related server downtimes from 2 to 0 average
Reduce customers not choosing us because our security measures from 10 to 2 average
For more of these OKR examples go to okrexamples.co.
OKR vs KPI
KPI stands for Key Performance Indicator. A lot of people confuse OKRs and KPIs, this is understandable as both tools help you achieve your goal.
An OKR is an execution framework for setting goals whereas a KPI is a measurement tool that tracks your performance. Having said that, some KPIs can be used as Key Results in OKRs.
Another difference between KPIs and OKRs is that OKRs are a goal-setting tool whereas KPIs are indicators that measure your performance. In other words, OKRs outline the process while KPIs measure the results.
To read more on KPIs click – What is KPI in software development?
Conclusion – OKR Meaning
They say, “Where there’s smoke, there’s fire” so surely all these top companies, like Google and Amazon, that use OKRs make a convincing argument for the use of OKRs in your organization.
Hopefully, you now know the OKR meaning and you can now begin planning your OKR journey.