Organizations are always seeking effective ways to drive innovation and reach strategic goals. The Objectives and Key Results (OKRs) methodology has proven especially valuable for tech companies in setting and achieving these objectives.
OKRs provide a structured approach to aligning individual and team goals with the overall company vision, promoting a culture of focus, transparency, open communication, and adaptability. By implementing this system, companies can optimize their performance and stay agile and competitive in their fast-changing industries.
In this blog post, we'll dive into the details of the OKRs framework and explore how it can help organizations thrive.
Table of contents
A Brief History of OKRs
OKRs have a rich history dating back to the 1970s but have truly become popular in the 21st century.
The story of OKRs began back in the 70s with the former CEO of Intel, Andy Grove. He was a visionary leader who introduced the concept of a management strategy, initially known as "Management by Objectives" (MBO). However, it wasn't until John Doerr, a former Intel employee, that the term "OKRs" was introduced.
In 1999, Doerr introduced OKRs to Google when the tech giant was just an early-age startup. Google's adoption of OKRs played a crucial role in popularizing this goal-setting framework and helped streamline the company's objectives, fostered a culture of transparency, and encouraged ambitious goal-setting.
As we entered the 21st century, the influence of OKRs expanded beyond Silicon Valley and the tech companies. Companies like LinkedIn, Twitter, and Airbnb adopted the OKR system, which quickly spread to organizations in many different industries, providing them with excellent results.
How OKRs Work
In any organization, the leadership team has the responsibility to develop a strategy and guide their teams toward achieving desired outcomes. The OKR (Objectives and Key Results) methodology has proven to be highly successful in effectively implementing strategies, as witnessed by technology giants like Google and Intel.
When organizations adopt the OKR methodology, leaders do not force specific plans and tactics on their teams. Instead, effective engineering managers and VPs of engineering establish the mission's objective and empower teams to determine the most efficient approaches to align with the organization's strategy within the OKR framework.
OKRs are typically set for a specific time period, such as a quarter or a year, and they consist of two parts:
Objectives represent the desired qualitative outcomes that you aim to accomplish, and they should be in sync with the overarching goals of your team or organization.
The Objectives need to be bold, ambitious, and even unrealistic or uncomfortable—some argue that it's wise to make sure they are close to unachievable.
Once the framework has been adopted, if the team happens to achieve some of the Objectives early, it is recommended to move the ladder forward and achieve even more in the time left until the end of the quarter/year.
Key Results are quantitative measures of how you will achieve your Objectives. They should be specific, measurable, achievable, relevant, and time-bound. Most importantly, our Key Results should directly align with our Objectives.
Or, simply, Key Results are just milestones that we need to pass on the way toward achieving our Objectives.
How to Set OKRs
“A good objective encourages you to think bigger than you first thought possible.” - John Doerr
There is no magic formula for setting up the right OKRs since each company and team has its own unique goals, but generally, there are a few directions that can help us get there. Setting up the OKRs can be confusing at the beginning, but as time goes on, quarter by quarter, the teams will get used to it and will be able to set clear and measurable goals.
Setting the Bar Higher
The Objectives need to be stretched: this means that the teams need to stretch a bit to achieve them. But, we need to be careful not to make the goals unrealistic. Goals that are too easy or too difficult have a demotivating effect.
The Objectives need to be defined in a language that will inspire and motivate the leadership team and the whole organization in general.
3-5 Objectives Are Enough
According to the OKR definition, an OKR consists of 1–5 Objectives, and each of the Objectives can have 1 to 5 Key Results. However, it is recommended by Google and other companies that each Objective has 3 to 5 Key Results.
Why aim for 3 to 5 Objectives? Because it's a realistic and achievable range that creates balance. Having more than five Objectives can result in a lack of focus for our teams. On the other hand, having fewer than three Objectives may indicate a limited and narrow perspective.
When setting OKRs, it is important to be specific and to use numbers whenever possible. This will make your goals more measurable and achievable.
For example, instead of saying, "Improve customer satisfaction," you could say, "Increase customer satisfaction scores by 10%."
Involve the Team
The OKRs are bi-directional, not top-down.
OKRs should be a collaborative process. Involve your team members in setting OKRs, and make sure that everyone agrees on the goals and how to measure progress. This will help ensure everyone is aligned and committed to achieving the goals. This can also help improve happiness in the engineering department.
The environment is dynamic; things change, and OKRs should change as well when needed. If your business priorities change or if a Key Result becomes unattainable, don't be afraid to adjust your OKRs accordingly. It is better to be flexible and to adapt to change than to stick to a plan that is no longer realistic.
When it comes to scoring, our target is 0.7 (or 70% of completion). This is because our goals are ambitious, and 0.7 is considered a successful OKR.
Quarter-level OKR scores give us an indication of how effectively we are setting our goals. If we are consistently scoring 1.0 on most of our OKRs, it means we are setting our goals too low. On the other hand, if we are unable to reach 0.7 on any of our OKRs, it means we are setting our goals too high.
OKR scores should be made public to the entire organization, and the owner of each objective should explain their score in detail. This helps ensure transparency and accountability.
Strategic and Tactical OKRs
Strategic OKRs are set on an annual level, generally by the company's senior leadership team. These are the organization's long-term plans to achieve its main goals.
Tactical OKRs, on the other hand, are set on a quarterly level, on a team or department level, and represent the goals the team will focus on during the specific quarter. Tactical OKRs should contribute to one or more strategic OKRs. This helps ensure the team's efforts are aligned with the organization's overall goals.
Both strategic and tactical OKRs should be presented to the whole organization, and they should be revisited at every all-hands or other company-wide meeting.
The scoring of the tactical OKRs is done on a mid-quarterly basis, and the scoring of the strategic OKRs is done on a quarterly basis. The results of both types of OKRs are presented transparently to the whole organization in an open meeting.
Benefits of Using OKRs
Incorporating OKRs into an organization's strategy offers a lot of advantages.
First of all, OKRs serve as an incentive for boosting performance. Organizations can significantly boost their overall performance by focusing on strategic objectives and systematically tracking progress.
What's more, OKRs can create a culture of innovation by encouraging teams to set ambitious goals. Achieving these goals will motivate the teams to look for new and innovative ways to accomplish them.
On top of that, the OKRS can also improve employee morale. They provide a sense of purpose and direction for employees and recognize their achievements.
Other benefits of using OKRs in an organization include:
- Alignment: OKRs can be used to align teams around company strategic goals, which can lead to improved communication and collaboration.
- Accountability: OKRs make it clear who is responsible for what and by when. All OKRS and scores are publicly available to every employee in the company. This can boost accountability and motivation to accomplish goals. It can also reduce underperformance in the engineering team.
- Clarity and focus: OKRs provide a clear and precise framework for establishing and reaching goals. This can ensure everyone is aligned on the most important priorities. Ultimately, this can also lead to avoiding dealing with late projects.
- Transparency: OKRs are usually shared publicly, which encourages transparency and honesty.
In recent years, the OKR framework has been adopted across various industries beyond just technology. This approach fosters clarity in goal-setting, promotes alignment among teams, and enhances focus.
Implementing the OKR framework, while potentially challenging and time-intensive, is pivotal for organizational success. It demands firm commitment and active participation from employees. Once in place, it refines goal-setting, bridges strategy-execution gaps, and sharpens focus on priorities, positioning businesses for success in today's complex market.