OKR stands for Objectives and Key Results. In times of tremendous transformations, this method increasingly gains the attention of enterprises and SMEs. For instance, OKRs are being used by some of the world’s leading organizations such as Google and Amazon. An Objective should represent a long-term goal which you strive to accomplish, whereas Key Results are measuring whether you are achieving this goal or not and to what extent.
In the following, we will take a closer look at the impact and implications of objective-based management with the OKR method. Furthermore, this article explains the meaning of OKR, determines advantages and challenges, and gives an overview why it may be beneficial to implement OKR.
If you only want to get a brief overview on OKRs, you can jump to the conclusion at the end of this article.
Before diving deeper, let’s start with some general facts about OKRs and its advantages.
OKRs can be defined as a holistic method for the management of goals and performance on every level of an enterprise.
Leading organizations use them to manage fast growth, to optimize alignment and collaboration processes, and to enable employee engagement and transparency in a more agile work context. OKR connects strategies with operations and results while intentionally promoting the autonomy and self-organization of teams.
Moreover, Objectives and Key Results support a more data-driven goal setting process and help to allocate resources efficiently by focusing on the right metrics. Establishing an OKR goal setting system, which is new and different for most employees, requires management buy-in, persistence and time. However, for more and more organizations it is an important step to position their company as an innovative workplace and an attractive employer. A structured OKR process supports the implementation and establishment of the OKR framework .
Defining Objectives and Key Results follows some simple rules: Every Objective has a set of 2–5 Key Results. Thereby, you do not only have an important goal. But also a quantification of how you measure your way of getting there.
The most successful companies using OKR regularly define OKRs for every organizational level. For the company, every team and (often not mandatory) every employee. In order to ensure disciplined planning and a focus on the most important activities, the number of Objectives for each unit should not exceed 3–5. And you should limit the number of Key Results to 2–4 per Objective.
Key is to ensure that during the definition of OKRs, all teams and individuals can already participate so that alignment can be achieved within these 2–3 weeks of coordinating priorities. Does the majority of team goals contribute to company goals? Are individual Objectives and Key Results defined in a way that they contribute to the goals of the team and the enterprise?
While it is often easy to define Objectives, the definition of effective Key Results is usually more demanding. For instance, it might be easy to set the goal of increasing customer retention. However, quantifying this goal with measurable and actionable metrics (not just using the typical KPIs that are often difficult to influence directly) is a process, to which you should dedicate time and which only improves by applying the framework over several cycles.
OKR example (for Customer Relationship Management / Sales)
To understand the OKR drafting process a bit better, take a look at the following OKR example for Customer Relationship Management:
Customer Relationship Management is about creating a great relationship with customers since it increases customer loyalty, as well as the chance of closing a deal.
You can find more examples in our article "OKR examples for professional groups and managers".
Of course, objective-based management is hardly a new idea. Indeed, similar frameworks have been existing for more than 60 years. OKR unifies the advantages of many of these approaches while putting simplicity, agility and usability first. They break down the silo mentality and offer benefits to managers and employees alike.
If you want to understand the origins of OKR, you have to start with the traditional „Management by Objectives“ (MbO) approach.
- MbO was developed by Peter Drucker in the 50s.
- In the 1970s, Andrew Grove adopted and continued the today still widespread MBO method. Grove at that time was Intel’s CEO. In his classic of management literature, „High Output Management“, Grove describes his interpretation of MbOs and introduces the term „OKR” for the first time.
- Over the time, the framework has been more and more tailored to the needs of agile organizations in the Silicon Valley and beyond.
- John Doerr, another Silicon Valley legend, became acquainted with OKR when he worked for Intel and later introduced OKR at Google. There, OKR had their final breakthrough. They are deemed as one pillar of Googles’ rapid development to one of the most valuable and successful companies in the world.
- Starting from Google, OKR were adopted by more and more firms in the digital economy, such as LinkedIn or Twitter.
- Starting around 2014, also more and more established enterprises in Europe, such as Zalando, BMW, and Daimler introduced OKR.
In order to keep up with today’s competitive landscape, more and more enterprises are using the OKR framework Objectives and Key Results as a key instrument to enable a successful digital transformation of their organization.
OKR enables Focus and Discipline
A limited set of important goals are documented, being precisely and clearly communicated to everyone. Actionable metrics that allow quantifying progress lead to discipline and a more efficient allocation of work.
- Teams and their members know the Objectives the company pursues, what the strategy looks like, and what contribution is expected from them.
OKR supports Coordination and Alignment
Aligning all teams and individuals from the beginning of a quarter increases the overall efficiency and helps to reduce conflicts.
- The organization is aligned with regards to its strategies and goals. Teams are working coordinated and aligned with other teams.
OKR enhances motivation among employees
Every team member understands how goals can be achieved collectively and what is expected from them. You can engage individuals in the goal setting process, which increases motivation and commitment alike.
- Individuals understand their contribution to the achievement of team or company goals and their work’s purpose is being clearly communicated.
- Employee contribution is measurable and therefore acknowledged.
Reach more Transparency with the OKR framework
The OKR method makes accomplishments transparent and hence promotes acknowledgement and recognition. Moreover, it becomes easier to learn from past performance and to iterate and optimize over time.
- Contributions of particular teams are communicated and transparent (e.g. what „these people of team X“ are working on and if it is relevant for your team).
- Determine internal OKR masters who moderate, support, and take long-term responsibility for the process.
- Plan with enough time and allow employees to get used to the process. Particularly the definition of good Key Results needs practice. The dedicated time for planning will pay off multiple times during the following cycles.
- Demand prioritization. A limit of 3–5 OKRs per organizational level and 2–4 Key Results per Objective is non-negotiable.
- Objectives should give directions and be ambitious and time-bound. Pay special attention to the alignment between different Objectives.
- Every Key Result needs to be clearly quantifiable, measurable and assigned to one or several people.
- Key Results are neither tasks nor KPIs: they can target certain KPIs as a result but should not be considered a traditional performance indicator that only indicates success with a certain time lag and without being actionable. Tasks and initiatives have to be derived from Key Results. But your OKR system should not become a project management tool.
- Key Results should correspond with the criteria of S.M.A.R.T. goals and be definite and meaningful.
Integrate OKR into everyday work
- Objectives and Key Results should be an integral part of your weekly routine. You should ideally update progress on a weekly basis and OKRs should be part of the agenda in weekly meetings and one-on-one conversations.
- The buy- in and the support of the executive team are indispensable for a successful introduction and implementation of goal management with OKR. This also means that you should publicly promote communicating and working with OKRs.
- On top, refer your regular feedback for employees (ideally several times per month) to OKRs. Quarterly meetings for performance assessments and feedback are usually disentangled from the actual work of an employee, neglect goals and prohibit a steady development of individuals.
- Objectives and Key Results should be transparent and tied to other goals, in particular on team and organization level. As it turned out, goals are more likely to be attained if there are responsibilities and links across team borders.
- Keep the system flexible for changing contexts. Sometimes it can make sense to adapt or even drop a goal during a quarter.
- Discuss and reflect OKRs retrospectively. Learn from your performance but do not make bonuses or other incentives directly dependent on the attainment of OKRs. A more detailed explanation will follow in the next paragraph.
You can find Workpath's OKR coaching and enablement offerings here.
- OKR stands for Objectives and Key Results. An Objective should represent a long-term goal which you strive to accomplish, whereas Key Results are measuring whether you are achieving this goal or not and to what extent.
- Agile goal and performance management systems are indispensable in an increasingly complex and digitized economy.
- An ever increasing pressure to innovate and more flexible working models, require new standards that help enterprises to organize work and foster focus, engagement, accountability, and alignment.
What is the definition of OKR?
Objectives and Key Results support a more data-driven goal setting process and help to allocate resources efficiently by focusing on the right metrics. An Objective represents a long-term goal, whereas Key Results are measuring whether you are achieving this goal.
What are the benefits of the OKR framework?
The core benefits of the OKR methodology are enhanced focus and discipline and better coordination and alignment across all departments/teams. Further, the motivation among employees may be enhanced by implementing Objectives and Key Results and more transparency will be reached.
Who “invented” OKR?
The OKR framework is based on the Management by Objectives method (MbO) invented by Andy Trucker in the 1950s. In the 80s the MbO approach developed into the S.M.A.R.T. methodology. Finally, in 1990, John Doerr first introduced OKR to Google and the framework as we know it today was “born”.
Why are OKRs so popular at the moment?
The organizational context to develop, learn, and innovate increasingly becomes a key driver of success. And one of the few aspects management can actually influence. Established enterprises are still mostly stuck in hierarchic processes and a tayloristic logic where managers control and delegate work centrally. In order to keep up with today’s competitive landscape, more and more enterprises are using the OKR framework as a key instrument to enable a successful digital transformation of their organization.