What is OKR?
At its simplest, OKR is an acronym for the OKR methodology, Objectives and key results (OKR). When training in OKRs that is usually the first question we are asked, so let’s get that out of the way.
But what is OKR? According to Wikipedia, it is a goal-setting framework for defining and tracking an objective and its measurable outcome.
Our belief here at 1ovmany is this description does not contain enough detail to capture the true essence of what OKR is, so we describe it as:
OKR are a specific framework for creating, communicating, constantly validating and adapting corporate strategy.
The OKR framework is designed to install and maintain a mindset and culture at all levels of the organisation that is based around:
- fast data-driven decision making,
- focus on desired outcomes, and
- connecting different parts of the organisation to each other.
So they are a framework and a way to design and install a mindset and culture designed to support corporate strategy and performance management.
The Role of Strategy
The next step in understanding what OKR is would be to clearly understand the concept of a strategy and what it should mean for an organisation and its company goals.
Strategy is a term you hear all the time in business, but it is usually weakly understood especially OKR strategy.
A strategy is a:
“high-level plan of how some organisational unit will take decisions in order to achieve an overarching purpose/mission/vision, preferably including the key objectives that must be taken to describe the achievement of the said purpose.”
Notice here that it is a plan focusing on the what, not the how, of the purpose.
Its function is to give those who will execute the strategy as much clarity and freedom as possible to create their own missions, plans and objectives in order to achieve their part of the higher purpose. If good, it should also allow as much as possible for people to take decisions autonomously (in line with the strategy) when things play out differently on the ground to how was expected.
There are important implications of this understanding. It means
“that to be effective, different levels and units within the organisation should develop their own strategic objectives for their areas within the larger organisational strategy or company objective.”
It also means those different strategies should support each other intrinsically and where there is any conflict or overlap this should be dealt with.
Interconnected but independent strategy
Interconnected but independent strategy is the means by which large organisations of interconnected units are able to operate together in alignment, toward a common goal, without hugely rigid and detailed plans that are brittle. Each unit can adapt its strategy as needed and has the freedom to respond to events within the scope of its own strategy.
It is important to realise here this means that a complete corporate strategy is not just the plan put out by the C-suite or directors for the company as a whole in the coming x years. It is that plan and all the strategies of all the units that make up the organisation.
Whether or not this is acknowledged in an organisation, it is inescapable, and organisations, particularly larger or growing ones, are successful or not in their purpose by the degree to which they manage this.
OKRs are the ability to develop, communicate, constantly validate and adapt corporate strategy throughout the whole organisation in a consistent and effective way.
How do OKRs work?
OKR works by providing the two following features:
A standard way to define what outcomes (objectives) are important for each unit within the organisation for the coming period of time (which may vary depending on the unit, but is usually either a year or a quarter depending on the outcome, the OKR cycle).
A way to define real-world measurements ( key result ) for each objective to show the progress of the unit towards achieving that objective and key result.
When documented, these in combination provide a powerful statement of the unit’s strategy for the upcoming period of time, team OKRs. These OKRs are made openly available (providing transparency) and are subject to OKR review against the higher organisation OKRs, or company objective, as well as those of other units in the organisation, team level.
This OKR cycle of goal setting provides an opportunity for the unit’s OKRs to be confirmed as both contributing to the higher level of organisational objectives (providing alignment) as well as checked for duplication or natural synergy with other units (connecting different parts of the organisation to each other).
When this OKR process, is done well, it should create high levels of employee engagement in the OKR method, as employees can now set goals, define the OKR objective they aspire to achieve and take ownership of their own employee performance.
While this may sound very simple, and conceptually it is, it must be paired with an appropriate, lightweight but comprehensive OKR approach to ensure that OKRs are bound into the operation of all parts of the organisation.
Setting Objectives & Key Results
Appropriate cadences (OKR Cycle) need to be set for creating the quarterly objective and for adding the latest data and key results to the quarterly OKR. Reviewing and setting new objectives as others are achieved or declared no longer relevant must become part of your goal-setting process and OKR management.
In practice, this usually means a key result is updated as regularly as practical with the incoming data, and the objective is usually reviewed quarterly creating an OKR planning, goal setting, and OKR review process appropriate to goal management in your organisation. It is this approach that normally influences an organisation to invest in an OKR software platform or OKR tool to manage all these new and fast-moving data points.
When all this is in place and functioning correctly it tends to breed a mindset in people and a corporate culture that values focus on what’s important, knowing rather than guessing at how effective your work is in delivering the right outcomes and being ready to change and adapt quickly when needed. The key benefits of the OKR methodology.
What do OKRs look like in practice?
Good OKR will identify desired outcomes for the organisation with a set of metrics or measurable goals that tell you your progress towards those outcomes.
They should avoid specifying how those outcomes are to be achieved unless absolutely necessary. The ‘how’ is usually managed separately and is the actual description of the work that will be undertaken. These are often called an initiative, although the work can be packaged in any appropriate way. It is good practice to associate the initiatives with the key result they are expected to impact and therefore the objective or goal they are aiming to manifest. This provides the obvious ability to determine as quickly as possible if the work/initiative that was meant to help take you somewhere is actually doing that, or it is not effective.
A good set of OKRs will be ambitious, some say a stretch goal, in order to push those working who are working towards them. As a result one should expect a less than 100% achievement rate on a given set of OKRs, these are aspirational OKR and stem from the idea by Andy Gove that OKRs were not a contract.
Similarly, it’s not always clear at the outset whether work initiatives will have the expected impact on key results or goals and this is a normal part of the operation of OKRs. This is in fact what will give the opportunity to pivot quickly and redistribute resources should a particular stream of work not be driving the outcome expected.
You may hear OKRs described as a business performance management system, and it is this ability to provide feedback on the performance of work against objectives that qualifies it as such.
What would a typical OKR look like?
Good quality and well-written OKRs are necessary for them to work. There are many resources and OKR examples out there to help you write good OKR such as this post. For our article, we are concerned only with the structure which is a simple OKR template.
The OKR is made up of two parts.
- The objective, which is the statement of the outcome desired. It should be simple, easily understood and relatively inspiring (not everything can be super exciting, but in business terms, inspiring doesn’t always have to sound like building a rocket to get to the moon). e.g. Improve the company website’s effectiveness as a marketing tool.
- The key results, which are several metrics (usually 3-5), selected to give the best indication possible of the progress the organisation is making towards achieving the objective. eg. increase number of leads per quarter from 15 to 30. Key result 1: Key result 2: Key result 3:
The goal of this process is to create a clear and consistent OKR message across the organisation.
How can my organisation excel with OKRs?
OKR is often misunderstood and mis-sold, mostly being touted as easy to implement and without providing a real understanding of the way they create the benefits for which they are adopted. This can lead to failure stories about OKR that are really due to their misuse.
OKRs are designed to operate as an integrated part of the organisation, driving activity on a week by week basis and used to give quick feedback on the impact of business operations. They require buy-in and/or participation from all levels of leadership and they specifically imply an operating model that uses intent-based leadership and high levels of autonomy for the various units within the organisation.
If you want the benefits that are the main reason for adopting OKR then your organisation needs to be ready to make the changes that are necessary for this to be successful.
For some organisations, this will be relatively straightforward whereas others will need to go on a significant programme of work to change the way they operate, perhaps engaging the services of an OKR coach to support them on the journey. This is not a reason not to adopt OKR, but more a reality check on what it really means for an organisation and what work it will need to do to reap the benefits.
So if you really want to excel at OKR you need to consider three aspects that we have covered for you in the following articles:
Failing that come and have a chat with us at 1ovmany.
We have not addressed common questions in this article such as Key Performance Indicator (KPI) and the relationship of KPI to OKRs but we will have a KPI article coming soon. We also haven’t covered strategic OKR, tactical OKRs, balanced scorecard or how the idea of a smart goal and OKR work together, but this just means we have a lot more content to share with you soon.