Successful companies like Google, Netflix, and Adobe like using Objectives and Key Results (OKR) for business growth, ensuring they stay the leaders in their industries for years to come. By setting up robust business strategies and OKRs, organizations strive to align their employees' efforts with the company's broad vision. This integrated approach to goal achievement has proven effective for fostering transparency and streamlining goal attainment strategies. Read on to understand OKRs in depth.
What is OKR?
OKR stands for 'Objectives and Key Results.' Companies use this goal-setting technique to align their teams' work to corporate strategies and goals. Thanks to its design, the methodology helps corporations track their progress, improve team focus and productivity, and ensure transparent workflows between teams.
Intel's former CEO and President, Andrew Groove, is well-known as the 'Father of OKRs.' Groove was the first to speak about Objectives and Key Results as a means of achieving measurable goals. In his book, High Output Management, the former chairman of Intel discusses how excellent management strategies help businesses succeed.
When well-thought-out, OKRs are fantastic management frameworks that companies, teams, and individuals can use. These performance plans comprise one clearly-defined goal and 3-5 key results that show whether the goal was achieved. By sharing OKRs with employees, organizations ensure that everyone's effort is aligned with the company's targeted goal.
Goal Setting With OKR
The rules of the OKR method help employees prioritize the outcomes of their work and measure them. Objectives need to be clear, challenging, inspiring, time-bound, and innovative. On the other hand, key results track progress. If you're just beginning to familiarize yourself with the OKR technique, strategy consulting will be of good use for you.
Setting goals with OKRs is a question of balance between generating ideas and executing them. Your goal has to be ambitious but achievable in the desired timeframe. You can have many objectives, but they should also be aligned with your company's mission. While you'll need to set short-term, tactical goals, you'll need long-term, strategic ones too!
Furthermore, you'll have to keep your company employees engaged and train them throughout the OKR implementation process. Everyone in your company should be aware of the new strategy for achieving goals! Finally, regularly checking OKRs will help you see if new objectives and key results are necessary.
In brief, using the OKR methodology requires preparing your company for the implementation process and having clearly-defined goals in mind. By encouraging all teams in your organization to align with the company goals, you'll avoid many obstacles on the way to corporate success. The OKR method can help you use resources thoughtfully to pursue your organization's mission successfully.
Google's Approach to Goal Setting
Google has long recognized how important teams and individual employees are for achieving corporate goals. One of Google's investors, John Doerr, told Larry Page and Sergey Brin about OKRs back in 1975. The company has been attributing its success to the method ever since! You can read more about Google's introduction to OKRs in John Doerr's book Measure What Matters.
Google uses OKR to establish these four great elements for business growth: clear objectives, company-wide alignment to strategies, ongoing goal management, and an easy-to-follow plan. With OKRs, teams stay focused on important goals, and their progress is easily tracked. However, the company also stresses that OKRs have to be well done and managed to drive success.
According to Google, objectives have to be aggressive, objective, unambiguous, and valuable. Key results need to describe measurable outcomes and not activities. For example, Key Results (KRs) that include words like 'help' and 'participate' describe activities, not results. Proof for the completion of KRs, like published metric reports or change lists, is also necessary.
Google also stresses the difference between committed and aspirational OKRs and the importance of well-formulated cross-team OKRs. The company is against timid aspirational OKRs that use all the resources available to a team, and objectives that bring no value to organizations. Goals need to have enough KRs that will indicate the goals' accomplishment.
In addition to paying such great attention to defining committed and aspirational OKRs, Google employees also grade each OKR on a scale from 0.0 to 1.0. This practice helps the company see to which degree the goals have been achieved. In general, Google successfully targets challenging but clearly-defined goals, prioritizes important OKRs, and uses distinct strategies to implement committed and aspirational OKRs.
OKR vs. KPI
Key Performance Indicators or KPIs help you track metrics related to your company's performance. On the other hand, OKRs are used to pinpoint the areas of improvement to drive change. In other words, OKRs show you metrics that reflect your daily work, and KPIs are valuable performance indicators. KPIs can tell you what your optimal performance level should be and which OKRs will get you there.
While KPIs are led top-down, OKRs can be conducted both top-down and bottom-up. OKRs are more adaptable and frequently re-evaluated; companies don't usually change KPIs regularly. Furthermore, OKRs are fantastic for informing everybody about the changes you need to make to achieve the goals you've set. KPIs provide benchmarks and are great for monitoring the steady-state.
Importance of OKR for Business Growth
Corporative giants like Microsoft, Apple, and Amazon use the OKR model for greater client satisfaction and competitive advantage. OKRs are potent means of setting and realizing business goals. By using them, your company can have a clearer, more achievable mission based on realistic expectations.
The effectiveness of OKRs lies in the methodology's premise, which is about obtaining a balance between challenging aspirations and realistic scenarios. This method increases employee engagement and aligns your teams' work with the company's collective objectives. As a result, the transparency between teams increases, and everyone's focus is improved.
Benefits of OKR
We already mentioned some of the benefits of using OKR for business growth. Now, let's take a detailed look at how OKRs can help a company thrive.
OKRs help your employees understand how their work is connected to the company's mission. Once they have a clearer perspective on how they can help the organization reach its goals, they'll feel more involved in the process. They'll also be able to align their work with the company's objectives and focus on their true priorities.
Because of the idea behind them, OKRs are usually evaluated and reviewed once a week or every two weeks. This practice helps teams talk about goals frequently and stay focused on them and the big picture. If their work activity needs some adjustments, changes can be done at the right time.
Thanks to their framework, OKRs foster efficiency and productivity within companies. They specify the measurements of corporate success and set a reasonable timeframe for the realization of goals. Regular progress tracking fosters informed decision-making and resource management. This, in turn, helps your employees differentiate between crucial and less important objectives, increasing productivity and showing what your teams need support with.
No detail of an action plan should be overlooked because it can cost you your success, no matter how insignificant it seems. OKRs ensure that there's more transparency between leaders and their teams and between different departments accordingly. Because of this, employees can rethink even the slightest of their tasks and align them with the company's mission.
Why Use OKR for Your Business
With OKRs, goal alignment, focus, and transparency become your company's top priorities. There are OKRs for literally every objective and mission! OKRs will let you achieve your corporate purpose faster, help your teams focus on their priorities, and have your employees follow through with their tasks.
By using the OKR framework, your business' productivity and performance will increase. As a result of that, you'll also see your company's profits growing! Additionally, the organizational climate in the corporation will evolve into one that fosters higher employee engagement due to improved transparency, focus, and alignment.
By having clearly defined goals and implementing inspiring OKRs, you'll pave the way to your company's success. Let's say that your company's goal is to increase lipstick sales. Take into account that this should be your collective objective only if it's inspiring and ambitious enough for your company.
The next step in the process would be to imagine three to five key results for this objective. For example, one of them could be to have at least 2,000 people buying lipsticks from your new lipstick line in three months. When the time comes, you'll need to check if you’ve achieved the desired result within that time frame.
Your second key result could be to upsell your product to 50% of existing customers. The third one could be to increase the lead conversion rate from 20% to 40%. Once you evaluate the OKR, you'll see how well you've achieved your goals and 'measure' your company's success.
The OKR Framework
The OKR framework consists of several components that make it a successful method of achieving corporate goals:
- The mission of the company, which is a short description of the company's purpose and the ways of achieving it;
- Midterm goals, which are usually annual and serve as a link between the mission of a company and the OKR;
- Planning the OKR, which is a process of defining the objectives and key results for the entire cycle of the OKR framework;
- OKR weekly summary, which is a brief, 15-minute overview of the OKR status done each week. Its purpose is to strengthen the link between objectives and key results and make some changes to them if needed;
- OKR review meetings, which are held at an evaluation's cycle end so that the company can see how successful they've been at achieving their goals;
- OKR retrospective, which lets teams look back at the OKR process and analyze it. During the retrospective, teams go over what they've learned throughout the process and discuss future improvements;
- OKR coaches, who help the company easily implement the OKR and support the teams throughout the OKR process. These coaches or strategy consultants can be facilitators, experts, change agents, and more.
It's important to note that it'll take about three or four cycles before a company can fully feel the benefits of OKR. Well-thought-out implementation plans will shorten the learning curve of your employees. Coach and in-house training, planning moderated by experts, and orientation workshops can help the process. Adjusting to the OKR framework will be something new for your employees, so remember to provide training and support..
When using OKR for business growth, you should be strategic with introducing it to your employees and how you implement it in general. Follow the next few steps for a successful implementation:
- Explain the concept of OKRs to your teams. Talk about objectives and key results, and encourage everyone not to feel afraid of ambitious goals but to see them as means of success.
- Define your OKR. It's best to set objectives with three to five key results at a company, team, and individual level while following the Specific, Measurable, Achievable, Realistic, and Time-bound (SMART) goals. Make sure that your KRs are ambitious enough; if you think you'll hit them all, they're probably too safe.
- Have regular checks, and make some adjustments to the plan if needed. Public weekly check-ins are fantastic for gaining more insight into your teams' approach to OKRs. They're also an excellent way for your employees to clarify some things or for you to make the necessary priority shifts.
- Grade your OKRs at the end of each quarter. By doing this, you'll know how successful your team members have been in achieving their goals. Encourage your team leaders to have one-on-one discussions with their team members to talk about what's been achieved and what could be improved. The more feedback you get from all of the employees individually, the more your company will grow.
Remember to keep your objectives short, simple, and clear with just a few key results. Avoid setting ambiguous or business-as-usual OKRs, low-value objectives, sandbagging, and not having enough key results per objective. Implementing OKR is a journey and not something that will happen overnight. However, by aligning, focusing, and engaging your teams, positive changes and corporate success are possible.