Having a vision for your business is important, but it’s hard to focus when the world pulls you away from your higher purpose. Setting goals and measuring them, manually or through performance management software, helps everyone stay on track. That’s where OKRs enter the picture. The last thing you want is to create company values and have them ignored.
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Maybe that’s why teams who set goals perform between 20 to 25% better than those who don’t, according to the Center for Management and Organization Effectiveness. By using questions and actionable insights, you can hone one achievement. So…
Article Roadmap
- What Is an OKR?
- History of OKRs
- Importance of Questions
- Process
- Types
- Benefits
- Examples
- Reaching Your Goals Faster
- Key Takeaways
What Is an OKR?
OKR is a goal-setting methodology used to define measurable objectives and create effective plans to accomplish them. The acronym “OKR” stands for “objectives and key results.”
An OKR is broken down into two key parts. An objective is a goal post. It must be qualitative, actionable and move the company the right way. They relate to revenue growth, specific campaigns, partnerships, brand awareness or other goals. You need at least two and no more than five to keep focused. Here’s an example:
- Objective: Increase online brand awareness by 20%.
If you want to determine the potential for success or failure, you turn to the key results. Key results, similar to any goals, should be SMART: specific, measurable, achievable, realistic and timely. They can tell you how close you are to an objective. Here’s an example:
- Key Result: Receive at least four positive reviews from influencers with over 500,000 followers by June 30, 2023.
Ultimately, the formula goes like this:
- I will [OBJECTIVE] as measured by [KEY RESULT].
Now that we understand the basic vocabulary, it’s time to ask another question. How do you craft goals that work for your company?
History
Objective-based management was born out of how asking questions can lead to greater efficiency. In 1954, Peter Drucker invented Management by Objectives or MBOs. These were created by the management team to communicate a greater vision to employees.
In 1970, an Intel employee named Andy Grove refined and simplified the MBO process into OKRs. In his book, “High Output Management,” he outlined how this process worked and began sharing this idea throughout the business world.
During one of Andy Grove’s talks, he inspired another Intel employee named John Doerr. Doerr took the ideas with him and ended up working for a venture capital firm where he applied these concepts to a small company known as Google. From there, the idea spread. Doerr ultimately wrote a book on the subject called “Measure What Matters.” Thus, OKRs were born and spread to the business world.
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Importance of Questions
Questions are the basis of the OKR process. In Grove’s case, he created the process in response to three questions that he had: Where do I want to go? Am I making progress? And how will I know if I’m making progress?
The point is to ask how people focus their time while they work. OKRs break down yearly and quarterly objectives for teams and employees. The company makes objectives and goals to reflect not only its mission, vision and values but also those of employees.
Now that we have a framework, it’s time to drill down to the details.
Process
To generate objectives, achieve results and pull insights from OKRs, here are six easy steps to kick things off:
- The company first designates two to five objectives for the year and each quarter.
- Each team sets three to five goals in line with the benchmarks the leadership assigned for the company.
- Employees and managers come together to set up three to five goals and key results to align with the team and the company’s objectives.
- Both the managers and employees agree that the OKRs are stretch goals that are not easily achievable. Thus, they shouldn’t factor in annual employee performance reviews.
- OKRs are transparent throughout the company so that everyone can hold each other accountable. This also gives everyone a sense of the bigger picture.
- Employees evaluate their key results at the end of every quarter.
By using OKRs to set goals for your organization, you can push your company’s productivity forward and sync up your vision, mission and values, so they’re more than just buzzwords. As you look for a program, consider what features it’ll need in order to best integrate into your company and boost your OKR strategy.
Types
How ambitious are your goals? Can your employees easily achieve them, or do they have to work harder? Based on the difficulty level of your objectives, OKRs are categorized as committed and aspirational.
Committed OKRs, or “roofshots,” are objectives that your team members can meet by the end of a fixed cycle. Aspirational OKRs, also called stretch goals or “moonshots,” set the success bar even higher, involving challenging goals that aren’t entirely achievable in one go.
For example, if you start an Instagram page, a goal to reach 100 followers by the end of your first month would be a committed OKR, because it’s something you could do within reason. But taking that number up to 1,000 followers would make that goal an aspirational OKR — something that is unlikely to happen in that time frame, at least without a clear and achievable plan.
Since committed OKRs are meant to be achievable, your employees should be able to meet the goal fully in the timeframe you set.
Aspirational OKRs, on the other hand, are complete even with a success rate of 70%, but often inspire employees to think outside the box and experiment with new ideas to ultimately reach the 100% mark.
Primary Benefits
Using OKRs is popular among small and large companies alike. They not only help you set a clear direction for your team, but also help you frame your objectives as a company.
John Doerr spells out the key benefits of OKRs in the acronym “F.A.C.T.S.”:
1. Focus
OKRs define a direction for the whole company, aligning teams and individuals with fixed objectives and results. By limiting the number of things your employees focus on, you allow them to give their full attention and effort to achieving company goals together.
2. Alignment
In order to achieve team-, department- or company-wide goals, team members have to see eye-to-eye and collaborate effectively. A recent report by Ally.io found that 60% of OKR users adopted the practice to create team alignment. Having matching priorities can help staff with different perspectives, skills and expertise work together better.
3. Commitment
Goal-setting and planning can only work if all your team members stay committed to achieving each milestone. OKRs ensure that each individual fulfills their responsibilities in moving the project forward.
4. Tracking
Accountability is key to building commitment. You can keep your staff more accountable by tracking each individual’s progress to measure their contribution towards meeting each goal.
Foster a result-driven culture with regular progress tracking. Source
5. Stretch
As Doerr says, “I’d rather have the objective be to go to Mars, and if we fall short, we’ll get to the moon.” Aspirational OKRs push individuals out of their comfort zone to find creative and innovative solutions to achieve results, even if they fall short of the ultimate goal.
Examples
1. Hardware Chain Franchise (Executive Level)
Imagine you’re the CEO of a hardware chain franchise, and you have a few stores throughout the West Coast. As the CEO, you set the following two objectives:
- Increase profit by 10%
- Increase the number of franchises by 15%
From this point, set your key results. Remember, to define this, answer this question, “How will I know if I’m getting there?” Pick key results that determine the progress to your objectives.
For your first objective, which is to increase your profits by 10%, your key results should include methods or actionable items such as outsourcing your distribution fleets to reduce costs or launching specific campaigns during seasonal holidays to boost revenue.
For your second objective of increasing the number of franchises by 15%, you can implement key results, like selecting a specific amount of franchise candidates by February or signing contracts with them by August. With that in mind, here’s what the first two might look like.
- Objective 1: Increase profit by 10%.
- KR 1: Outsource 50% of distribution fleets by Q2 and 100% by Q4.
- KR 2: Increase sales from the Holiday PPC campaign by 20% by Q4.
- KR 3: Produce 6,000 more MQL by Q4.
- Objective 2: Increase the number of franchises by 15%.
- KR1: Create a marketing campaign to attract franchise owners and reach 25,000 people by December 31.
- KR2: Collect 5,000 HQL for qualified franchise owners by February 27.
- KR3: Identify and send offer letters to at least 1,000 new franchise owners by August 1.
2. Hardware Chain Franchise (Management Level)
The great thing about OKRs is that you can work down from the higher-level benchmarks so that the entire company can move towards the same goals. Using the key results derived from the original two objectives, you can distribute these down into the lower hierarchical levels to use as goals.
For example, for the original first objective to increase profits by 10%, one of the key results was outsourcing your distribution fleets to reduce costs. You can revamp this key result in an objective for your sales team.
However, objectives don’t cascade from one level to another. While a department should make its goal based on the overarching executive OKRs for the company, the department must establish it in a way that suits their abilities and specialty.
- Objective 1: Increase sales revenue by 40% by leveraging the distribution fleet.
From this, you can break down further key results for this new goal, such as selling your existing distribution fleet before April or seeking five different outsourced distribution fleets to get quotes from.
It would look like this:
- Objective 1: Increase sales revenue by 40% by leveraging the distribution fleet.
- KR1: Make 30 calls per week to potential buyers.
- KR2: Get to the demo stage with at least five potential buyers by March 31.
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3. Investment Firm
Let’s move on to a different example. Say there is an investment firm and the executive team has rolled out a plan of increasing revenue by 40% by the end of the fourth quarter. If you’re the leader of an IT team, your team needs a very different OKR.
A sample OKR timeline from Google’s re:Work guide.
In that case, your team must think about what they can do to contribute to revenue. Unlike a sales or marketing team, this won’t involve creating campaigns or community outreach. Increasing productivity might be a better goal. If so, it could look like this.
- Objective 1: Raise company productivity.
- KR 1: Equip the top 20% of employees who most need new hardware to do their job more efficiently by Q2.
- KR 2: Create an efficiency committee to revamp workflows by Q3 and identify three key areas to adjust by Q3.
- KR 3: Reach an average system uptime of 90% in Q4.
4. HR Department at a Manufacturing Plant
For our next example, let’s look at a different scenario. For an HR department, goals may not be as straightforward. Making employees happy and motivated is always a big company goal, but how do you measure something like that? Let’s look at our next objective and the key results that will help to accomplish it.
- Objective 1: Increase overall employee satisfaction.
- KR 1: Develop a continuing education and enroll at least 40% of all employees by Q2.
- KR 2: Find an external source for leadership training and enroll at least 20 employees by Q3.
- KR 3: Get a 60% score of “adequate,” “good,” or “exceptional,” on employee satisfaction surveys by Q4.
Reaching Your Goals Faster
Now that you understand how to create OKRs, this funnel helps your team become more efficient and productive towards your company’s goals. The strength of OKRs is that they’re transparent and easy to implement, ensuring everyone on the team is fully aware of the expectations on their progress. It’s also easy to track these objectives and key results to fully understand where teams are most effective and how the company is progressing.
Having an efficient way to track your goals is also important. For company learning, a learning management system can help company training and individual learning plans. Otherwise, consider performance management software to dig into how employees are doing or project management software to keep things on track.
Key Takeaways
- Objectives and key results can be a useful way of keeping an entire company on target.
- An objective is a goal post that must be qualitative and actionable. Key results are outcomes that tell you if your group has succeeded or failed.
- It’s important to keep everyone on track company-wide.
- Using questions to drive the conversation, executives determine the top objectives and other departments create an objective that motivates them.
Every journey needs a road map. Using OKRs could be what you need for a successful, motivated and unified time ready to take on the world. All you have to do is start asking questions.
What Do You Think?
All organizations have goals, but how you work to achieve them is what can make or break your success. OKRs allow you to set growth-oriented objectives and use time-bound planning to accomplish all of your aims, big or small.
Has your organization tried using OKRs? How have you succeeded? Have there been any failures? What advice do you have in creating the best OKRs? Do you find this method helpful or not? Tell us in the comments below!