Why OKRs Are Now The Standard Goal-Setting System
Updated: Jul 23, 2020
What gets Measured gets Managed
Business author Peter Drucker’s quote “What gets measured gets managed” was an early precursor to the current obsession with measuring management objectives.
What are OKRs and Why are they Startups Best Practises?
The acronym stands for Objectives and Key Results.
An OKR is a management system introduced by Andy Grove during his stint as CEO at Intel. The goal management framework was then introduced to the founders of Google by John Doerr.
Asked about the efficiency of this new system, John Doerr remarked, “The key result has to be measurable. But at the end, you can look and ask without any arguments - Did I do it or did I not do it? Yes? No? Simple. No judgments in it.”
In other words, OKRs are about getting things done!
The OKR management system, popularised by Google, helps a company to focus efforts on the same important issues throughout the organization.
The concept of implementing OKRs follows a simple formula:
I will… (Objective): Qualitative description of what you want to achieve. Usually short, inspiring and engaging statements.
As measured by... (Key Result): Set of metrics that measure progress towards the objective. For each objective, you should have 2-5 key results. These are quantitative and measurable. “If it does not have a number, it is not a key result.”
An OKR consists of an Objective (a goal to be achieved), with up to 5 'key results.' Each key result measures the progress of the corresponding objective.
Each key result can be further broken down into 'initiatives,' which describe the work that is required to achieve the key results.
Objectives for OKRs as Startup Best Practises
An 'objective' is a description of a goal that is a desirable outcome in the future. It sets a clear direction, like a destination on a map. It provides motivation through clarity of direction. In other words, an objective is qualitative (no numbers!)
Each department within the organisation has further objectives which are derived from the company vision/mission and overall key results for the company.
Make the search engine faster.
Develop a lighter engine.
Increase sales of fiction books online.
A key result measures progress towards an objective. These statements are quantitative and specific.
Example Key Results
Optimize the algorithm to load page in 1 second.
Reduce fuel pump weight by 20%
Achieve € 500,000 of sales.
An initiative is the action steps that helps you accomplish the key result. It answers the question, “What does it take to accomplish the key results?” and “What did we achieve?”
The answer to initiatives is generally a “yes or no.” As a result, there is no judgment on the individual who is responsible for the initiative. If an initiative is regularly missing its deadline, it’s best to change it within a few weeks.
Test a new algorithm with regular performance reports.
Build a new prototype for a fuel pump.
What Tools Are Best For OKRs
For most organizations, an Excel sheet is sufficient to draft and track your OKRs (see templates here). You can use a communication portal like Trello to manage your team’s OKRs or use a specialised software if your teams and operations are more complex.
To ensure that your department leaders are not wasting valuable time implementing OKRs, it is best to offer a short workshop on how they work. The next step would be to pick a tool that is easy to access and use across the company. It could be a simple Excel sheet or an internal communications portal that is available to all departments within the company.
A key feature of OKRs is transparency. Make sure that the overall company OKRs and the ones for each department are accessible to anyone within the company.
The success of achieving all your objectives requires a designated OKR ambassador. This can be a person within your organization or an external consultant who conducts weekly check-ins to ensure you are on track and completing the Initiatives.
What are the Benefits of OKRs as Startup Best Practises ?
OKRs take the focus from output and place it on outcomes.
What’s the difference between output and outcomes?
Imagine you are in charge of a chain of hamburger restaurants...
If you are focused on output, you will end up counting how many hamburgers you make.
If, on the other hand, you are focused on outcome, you will be more concerned about the quality of the hamburgers and the loyalty of customers.
In other words, this approach is not about increasing numbers, it is about knowing how a company’s services are changing their customers’ lives or their circumstances.
The end-result of a process is referred to as the 'output.' Outputs tell the story of what you produced or in other words - your 'organisation’s activities.' Output measures do not address the value or impact of your services for your clients.
On the other hand, an outcome is the level of performance or achievement that occurred because of the activity or services your company provided. Therefore 'outcome measures' are a more appropriate indicator of effectiveness. Outcomes quantify performance and assess the success of the process. As a result, they help companies communicate strategy to employees in a way that is actionable and measurable.
In addition, OKRs are:
Agile: By using shorter goal cycles, companies can adapt and respond to change.
Designed For Simplicity: Reduce time spent on goals from months to days. Invest resources in achieving goals - not on setting them.
Written For Transparency: Create alignment in the organization. They are public to all company levels - everyone has access to everyone else’s OKRs.
Allow Bi-Directional Goal Setting: Bottom-up and top-down.
Interested in learning more about implementing OKRs as startup best practices for your organisation? Or want to learn more about our trainings and workshops?