What is an OKR?

An overview of Objectives & Key Results (OKRs), how to create them, and how to implement them in your organization.

OKR stands for Objectives and Key Results. It is a collaborative goal-setting tool that teams can use to set challenging, ambitious goals with measurable results. OKRs are how you track progress, create alignment, and encourage engagement around quantifiable goals. Key Results can be any quantifiable metric with a well-defined success target that teams can track over time. Using OKRs ensures everyone is working in the same direction with clear priorities.

Components of OKRs

Objectives

Objectives are the goals that you want to achieve and measure. They should be specific, clear, and measurable.

Key Results

Key Results are measurable outcomes that will help quantify the success of an objective. They can be qualitative or quantitative. Key Results should be specific, clear, attainable, realistic, and flexible (with a well-defined success target). You should have an agreed-upon target with a deadline for completion to plan your Key Results so that you know what needs to get done to reach them.

Efforts

Efforts are the initiatives taken to impact a specific Key Result. For instance, if your Key Result increases the number of signups from organic traffic, your effort might include investing more resources into SEO.

The founding of OKRs

While we haven't always been calling them OKRs, management by objectives (MBO) has been used by businesses since 1954 when Peter Drucker published his book, The Practice of Management.

In the 1960s, Andrew Grove founded and led Intel as its CEO. During his time there, he distilled Drucker's MBO ideology into the framework we know as OKRs. Grove had initially named the framework iMBOs or Intel Management by Objectives. However, he created one key difference between the two, pairing objectives with “Key Results” and rarely mentioned objectives without tying them to a measuring outcome.

In the 1970s, John Doerr joined Intel and learned the OKR framework. In 1999, Doerr, who was working for Kleiner Perkins —a venture capital firm-introduced OKRs to Google.

The idea took hold, and OKRs quickly became central to Google's culture as a management methodology that helps to ensure that the company focuses efforts on the same important issues throughout the organization".

As an advisor, he introduced OKRs to Larry Page and Sergey Brin, who then implemented OKRs at Google. Today OKRs are a wildly successful goal-setting methodology used by Google and many companies looking to achieve measurable results at scale.

How to create an OKR

Define your stretch goals

The targets or stretch goals for your Key Results should be ambitious and challenge the teams held accountable for changing them. Setting too low of a target may result in teams quickly achieving their goals and not reaching their full potential.

Too high of a mark may result in a false perception of team performance and hurt team culture. Set ambitious goals for your team to ensure that everyone is reaching their full potential. Goal setting should challenge your teams but should also be based on realistic targets.

Tie your objective to the mission of the team accountable for

Before establishing OKRs, you'll want to ensure that your objectives tie into or align with your team's mission and vision. In addition, they need to be realistic for a team given its resources and talent pool. For example, if your team's mission is focused on customer retention, you may want to create an OKR to concentrate on customer satisfaction. Your Key Results may be measuring metrics like NPS or the number of issues or tickets customers are submitting.

Set measurable and realistic Key Results

Key Results need to be measurable and have a clear success target that teams can track over time. Therefore, it's essential to look at historical data for the metric you're trying to change to understand a realistic yet challenging target goal for your Key Result. Additionally, understanding existing trends will help you set teams up for success and understand how your key performance indicators will change over time.

How to implement OKRs at your company

As with any new process or management tool, OKRs may take time to implement. Employees may need some time to get used to the goal-setting process or you may need to shift your company culture towards measurable business goals.

Defining an OKR cycle

OKRs are typically set as quarterly or yearly targets. Within each of these time frames. You may want to divide your quarter into smaller segments called "sprints."

At the beginning of a sprint, a team may decide what efforts they want to impact their OKRs. At the end of each sprint, teams may find it helpful to review the impact of their actions. It's important to note that an effort that results in no effect on an OKR is just as significant as a massive success. Learning what your customers may not see value in will help inform teams of where opportunities might lie.

Score your OKRs

Key results are typically numerically graded to obtain a clear performance evaluation for each OKR. Commonality automatically scores all your OKRs and teams to ensure that teams are challenged but not overburdened. Our alignment features allow leaders to identify what teams may need to reduce their targets or pivot their mission and which teams can handle more responsibility.

Define your vision statement

It's essential to have a vision statement for your company. This should be the overarching goal that all Objectives and Key Results should align with. Your vision statement should align with the value you're trying to deliver to your customers and be ambitious enough to keep working on for years to come. It should be the ideal that your business hopes to achieve.

Some examples of vision statements:

Amazon 

“Our vision is to be earth’s most customer-centric company, where customers can find and discover anything they might want to buy online.”

Ben & Jerry’s

“Making the best ice cream in the nicest possible way.”

Dunkin

To be always the desired place for great coffee beverages and delicious complimentary doughnuts & bakery products to enjoy with family and friends."

Southwest

To be the world's most loved, most efficient, and most profitable airline."

Define company objectives

OKRs should be created from the top down, and your company objectives should align with your vision statement and support high-level efforts that encompass many teams. For instance, if your vision statement is "Make the world's best toothbrush," a company-wide OKR for your Marketing department might be "Make sure everyone knows about our product."

High-level objectives should be ambitious goals that can be tackled by many teams and align with your broader company strategy. These broader OKRs are often referred strategic OKRs.

Define team OKRs

The specificity of team OKRs will differ based on how high or low the team is within your organizational chart. For example, teams closer to the leadership team may have strategic OKRs that encompass the teams below them, while teams more proximate to the front lines may have concrete goals. OKRs that support higher-level OKRs are referred to as tactical OKRs.

The benefits of using OKRs

Measurable results

The main benefit that teams see when they start using OKRs are measurable goals. When you have a set goal with measurable data backing it, it’s easier to keep track of your progression and make adjustments as needed to stay on target.

For instance, previously, you may have had a goal for yourself to write a blog post every day. Even though that's a great idea, it places focus on the output rather than the outcome. OKRs place emphasis on the results that your efforts achieve rather than the efforts themselves.

With OKRs, a team could track the same effort as "Increase daily organic traffic to blog by 1000 page views". Emphasis on a measured KPI or metric allows you to explore many different efforts to reach success. The most significant impact of using OKR in most organizations without goal management already in place is a cultural shift from output to outcomes. 

Increased engagement through a shared ownership

The OKR process is a powerful tool because it creates accountability and shared responsibility for goals. When team members have skin in the game, they'll be more engaged with their work and what other people on the team are doing to support them (or not). This can result in less confusion and higher employee engagement because accountability is more transparent. Additionally, when teams do or do not reach their success criteria, a team can share learnings across the organization to improve the efficiency and understanding of everyone.

More incredible speed by avoiding wasted time

Another benefit of using OKRs is increased speed. When everyone knows what they're working on and why it's less likely that people will spend time doing things that don't matter or won't help them achieve their goals.

Using OKRs can also make decision-making much easier as you collect more and more data about your progress against goals. For example, teams with measurable success criteria can eliminate distractions and decide which path will lead them towards achieving those key results faster instead of wasting time on approaches that won't.

A culture of trusting and recognizing impact

The last significant benefit of using OKRs is creating a culture where people feel trusted, recognized for their work, and rewarded. When you're working on OKRs with your team or company-wide goals, there's more recognition when someone achieves success because they've contributed to it through hard work--no matter how big or small the contribution might have been.

Trust comes easier when everyone feels like they are an essential contributor to the organization's vision and progress towards that vision. Building a culture where teams set goals based on their own context provides a sense of ownership that is absolutely essential when building a culture of servant leadership.

What you should not do with OKRs

You should not be outperforming all your OKRs

The targets for your Key Results should be stretch goals that challenge the teams hoping to accomplish them. Teams that achieve their desired targets for key results too early may need to take on more responsibility or have their targets increased.

OKRs should not be used as an employee evaluation tool

Although objectives and key results are great for measuring the performance of your teams, they should not be used to measure the performance of an individual team member. OKRs are used to measure the outcomes of the initiatives undertaken by teams. They are great for measuring what the team accomplishes, not for measuring how they accomplished it.

Choosing the right OKRs

Businesses often see a lot of success using the OKR methodology. But the OKRs that work for one company may not be suitable for another. Creating OKRs is an individual process. While some best practices to consider as you set out on this journey, it's important to remember that OKRs should reflect what drives your team forward.

OKR Software

Commonality provides software that helps cross-functional teams and your entire organization get up and running with OKRs with just a few clicks. We enable teams to work autonomously, have a clear understanding of what's expected of them, and effectively add business value.

Our OKR features allow you to create OKRs backed by the measurable data in your databases, APIs, and software you already use. OKRs can be assigned to teams and are automatically scored so that leaders and teams can measure progress towards essential milestones.

Our alignment features let everyone see big picture goals as well as team-level performance. Best of all, Commonality is free to get started with. So get started today and transform your business with OKRs.