What are Objectives
and Key Results (OKRs)?
What is an OKR?
What is an Objective?
The Objective is a memorable, short, qualitative, and inspirational description that answers the question “What do we want to achieve?”. A good Objective must inspire and motivate all stakeholders and employees within the organization. Therefore, there is a strong emphasis on choosing the right wording as statements such as ‘become profitable’ might not spark the same enthusiasm across the hierarchy of an organization, even though it appeals greatly to senior stakeholders. Instead, formulating an action-oriented Objective that relates to the company’s mission or vision is much more motivational and inspiring. Thus, an Objective should be a challenging one that directly impacts a critical business metric and represents where a company wants to go.What is a Key Result?
Accordingly, the Key Results are determined by the answer to the question “How do we measure if we get there?”. More specifically, KRs are a set of – aspirational but not impossible – metrics that measure the organization’s progress toward the set Objective and whether the latter is achieved. It is important to note that since KRs describe how a company is going to fulfill a certain Objective, they should focus on the business outcome, rather than the specific actions that need to be done (the output). Without Key Results, Objectives have no use – they are merely aspirations.What is an OKR cycle?
The OKR cycle is the system for achieving the organization’s OKRs. The OKR cycle may vary from business to business and the version to be adopted (e.g., a quarterly cycle) highly depends on the organization’s structure, culture, and specific needs. Interestingly, it has been reported that companies that set their goals quarterly are more likely to be top performers in their industry. In summary, one OKR cycle consists of two parts. The first is the monthly check-ins with the team to self-assess, discuss possible obstacles, give status updates (confidence level), make quick readjustments, and increase the team’s commitment. The second part is the reflect & reset sessions at the end of each quarter which allows teams to reset their OKRs in the pursuit of their yearly OKR while reflecting on and reviewing their performance.
What is an Objective?
What is a Key Result?
What is an OKRs Cycle?
History of OKRs
Why choose OKRs?
3 reasons why OKRs are the optimum goal setting & monitoring tool
#1. OKRs foster ambitious & transformational goals, complementary to Operational KPIs, focusing on what matters MOST to achieve them.
#2. OKRs provoke a mind shift on how to execute the strategy.
#3. Frequent check-ins allow for Continuous Performance Monitoring & People Recognition.
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What are the Benefits of OKRs?
OKRs usage provides companies with a holistic oversight of all goals and processes, leading to a high growth rate, cost reduction, enhanced cross-team alignment, as well as a high degree of both employee satisfaction and engagement in the company’s vision.
Larry Page
Co-Founder
Jeff Weiner
CEO
What are the Benefits for Board members & C-suite Executives?
1. Focus on the most important outcomes linked to Vision/Strategy
OKRs allow executives to focus their efforts on only the most important goals which connect to a critical business topic. The methodology works best when you set 2 to 4 yearly OKRs and each Objective is measured by up to 4 Key Results. Similarly, during an OKR cycle, teams prioritize the most important outcomes through their OKRs, to create a shared sense of direction and hold themselves accountable. Therefore, it’s best to have a limited number of OKRs. Less is more!
2. Monitor execution plan progress with leading indicators
When Board members track progress towards achieving Company’s Objectives, they use Key Results as a measure of success. Before they can measure the accomplishments though, they need indicators that will tell them if the Company is making any progress. These leading indicators inform the progress plan, enable Executive Teams and Board members to reflect on past decisions, and reset their actions for the next cycle. In OKR terminology we describe this as tracking your OKRs from output to outcome. Thus, the recipe for success is regular check-ins of your progress through a set of measures (indicators).
3. Common data interpretation and transparency
Common data interpretation in OKRs methodology is the process of reviewing data based on measurable and verifiable Key Results, which will help assign some common meaning and understanding to the data and arrive at a relevant conclusion.
Transparency is also a key word of the OKR methodology. Once the mission by vision is set (3-5 years Strategic Objectives), OKRs begin their journey of cascading throughout the organization and connecting Executive Teams with all the departments/functions to what the company is trying to achieve. Teams link or better align their work to a company-wide vision which wouldn’t be possible if the organization hadn’t been transparent and open about its goals and priorities.
4. Money saving from ineffective goal-setting & strategic initiatives
OKRs encourage visionary thinking for outstanding results, while at the same time the OKR cycles provide the company with the necessary agility to learn faster, experiment, and re-adjust if needed. Having an execution process like that also reduces the risk of spending time and resources on topics off the strategy path. These are all elements that contribute to a more cost-effective goal-setting process, but perhaps most importantly OKRs drive results!
What are the Benefits for Managers & Employees?
1. Clear job purpose connected with strategic goals
Managers and employees are responsible for developing OKRs that contribute to the company’s KRs. This top-down and bottom-up approach creates alignment throughout the company as it gives every department, team, or individual the necessary sense of direction, meaning, as well as the ability to focus on what matters. In other words, OKRs can help managers and employees understand how their work directly impacts business goals.
2. Opportunity for individual leadership
It is often said that good leaders are the ones who motivate and engage their teams to achieve the goals they set. The framework of OKRs creates an ideal context and gives people the incentive to develop and showcase their leadership skills. This is another reason why OKRs need to be challenging so that the Objectives can motivate and engage individuals to step up their efforts, grow, and be more visionary.
3. Accountable & results-oriented teams
As the title of this benefit clearly states, companies and thus company teams who use OKRs, transform, and experience behavioral change, resulting in acquiring new skills. Perhaps the most important skills managers and employees develop are the ability to focus their energy and efforts on outcomes rather than processes, prioritize their actions, and be accountable.
4. Aligned teams ensuring organizational effectiveness
When a company is trying to achieve ambitious goals, it’s inevitable that sometimes it’s a case of trial and error in pursuing multiple options to find the best one. As we’ve discussed though, OKRs can help managers and employees focus on the important tasks, understand the ‘bigger picture’, work with clear guidelines and direction, give meaning and purpose to their work, and see how they directly impact business goals. All of the above can improve efficiency and change the performance of a team, which in turn contributes to the company’s vision by mission and ensure organizational effectiveness.
OKRs vs KPIs
Some of the most common questions regarding OKRs are how they compare to KPIs, which of the two is better, and if they can be used together. Before we delve further into the topic, we should first briefly define both OKRs and KPIs.
What is a KPI?
Key Performance Indicators (KPIs) are metrics that evaluate a company’s progress toward certain Operational Goals. KPIs can evaluate the success of projects, programs, products, and other key business activities that a company chooses to monitor.
What is an OKR?
OKRs is a management and strategy execution framework that consists of three main components: the Objectives (O), the Key Results (KR), and the OKR Cycle. The Objective represents what you want to accomplish and is transformative by nature. The Key Results describe how you measure your progress toward achieving the set Objective. The OKR cycle is the system for achieving the organization’s OKRs and acts as a continuous feedback loop. It consists of monthly check-ins and quarterly reflect & reset sessions to evaluate and re-adjust the progress of a team.
The OKRs help move the needle of something strategically important to the company.
What’s the difference between OKRs and KPIs?
KPIs are standalone metrics to track the Business-as-Usual Goals and respective activities (steady state of an organization). OKRs represent the agile framework of the Strategic Goals to scale up the business.
OKRs + KPIs = Best Business Management & Continuous Performance Management Framework
Simply put, OKRs encompass KPIs since OKRs are a larger strategic framework and KPIs are measurement indicators. Ideally, the one complements the other, since an organization should operate using both KPIs to track vital Operational (Business-as-Usual) activities and OKRs to ensure growth and future success.
OKRs examples
Let’s look at an example of a complete OKR now. Consider a team that wants customers to choose them over their main competitor. This sounds great, but how will they know that? As it was mentioned, there is no goal without measurement, which is why the following Key Results were formulated (den Haak 2021):
Objective: Customers choose us over [competitor]
Key Results:
- Increase the percentage of customers that prefer our product to the competitor’s in a blind test from 30 to 75 percent
- Increase the average order rating from 3.1 to 5.0
Now that you know how to write a good OKR and you’ve seen an example of a company-wide OKR, we can look at some more indicative examples break down per company function.
OKRs for Marketing Example
Let’s say the Marketing team wants to raise awareness for a new product launch. Their OKR could be:
Objective: Drive launch awareness through PR activities
Key Results:
- Publish 12 online press pieces with min. 400K views & 2.5K shares
- Reach 500K views on Instagram by hiring top-5 industry influencers
OKRs for HR Example
Accordingly, one of the HR team’s OKRs might look something like this:
Objective: Build a culture of employee engagement
Key Results:
- Achieve grade 9 on the engagement index
- Reduce our employees’ attrition rate by 3 units
OKRs for Engineering & Tech Example
Lastly, an OKR example written by an Engineering & Tech team could be the following:
Objective: We ensure that releases are delivered on-time
Key Results:
- The engineering team contributes 100 story points
- 90% of the code is reviewed within 48 hrs.
- Identified min. 5 front-end improvements by adding 100 automated tests
Getting started
Before you start using OKR it’s important to commit and follow the process, as well as the change management that the framework requires. To roll out your OKRs, you should have an internal OKR Champion and Coach. Additionally, working with an experienced and certified OKR coach is a shortcut to a successful OKRs rollout because they can ensure the smooth and correct way to adopt the framework. At altoValue, we consider OKRs as the most successful agile management, planning, and execution system to focus on top priorities, accelerate growth, achieve results, and have teams aligned and motivated.
We focus on guiding and motivating companies towards achieving their most audacious Strategic Goals and transforming their businesses in a more lean and agile manner through the implementation of a unique OKRs-driven Management Framework®. Our customers have repeatedly emphasized how the implementation of OKRs has increased their growth rate, it has helped them define and clarify both their ultimate goal and the strategy to achieve it, and how it has enabled them to start implementing their best future version.
Ready to get started with OKRs? Contact the altoValue team!