Andy Grove, helped Intel become among the most valuable companies by 1997. In his years at Intel, he conceived a management and goal-setting system, called OKR, standing for “objectives and key results.” Venture capitalist and early investor in Google, John Doerr, systematized in the book “Measure What Matters.”
A glance at the OKR system
Back in the 1970s, Intel was among the most respected and admired companies in Silicon Valley.
During that time, Intel’s CEO, Andy Grove, was the man who managed to drive organizational change.
Andy Grove did that via a goal-setting process called OKRs, or objectives and key results.
Where the objective is the direction toward which the organization needs to be in the medium term.
And the key results are milestones that allow the company to get there.
Those key results must be easily trackable, understandable, and shared across the company.
This is critical as the whole ability of the OKR to become actionable is expressed in how well a company can address its key results.
In its purest form, OKRs consist primarily of four superpowers:
Focus and Commit to priorities
This superpower focuses on making clear what matters and what doesn’t.
More precisely, it allows whole teams and departments to decide where the focus is and dispel any confusion.
Align and connect for teamwork
One essential ingredient of the OKRs is its transparency and the fact that it needs to be openly shared across the organization, from the CEO down to each team and member of the organization.
OKRs is not a siloed process but rather a transparent goal-setting tool.
This is another core tenet of the OKR framework.
Indeed, this is one of the aspects which differentiates OKR from any other goal-setting tools.
OKR uses an open approach to goal-setting, where these goals are shared across the organization and made visible to anyone.
In addition to that, OKR enables teams to work together on shared – ambitious – goals while keeping them measurable and achievable.
Track for accountability
OKRs are data-driven.
It doesn’t stress, though, on countless metrics that help to increase the noise level.
OKRs instead focus on a few critical metrics to measure the impact on the business.
This sort of North Star Metric, or set of metrics, is the one that will inform the whole plan as it moves forward.
Stretch for amazing
Objectives set in OKRs aren’t conservative; those are aggressive, hard yet possible, and attainable.
From this balance, OKRs bring the organization forward.
Those superpowers are kept together by continuous improvement and corporate culture.
How are OKRs different from MBOs?
For those that know Management by Objectives or MBO, it might be easy to confuse it with OKRs. However, there are a few key differences.
At its core, the MBOs focused on what while it was primarily top-down and risk-averse.
By converse, OKRs focus on the “what” (direction) and “how” (key results).
Rather than an annual review process which might make it too complicated and formal OKRs follow a quarterly or monthly schedule that is public and transparent, and usually bottom-up.
Where MBOs’ goals are risk-averse, OKRs goals are aggressive and aspirational.
OKRs objectives have a few key elements, such as:
- Actionable by the team.
While OKRs key results are primarily:
- Measurable and quantifiable.
- Make the objective achievable.
- Lead to objective grading.
- Difficult but not impossible.
The OKR cycle
In this phase, the top senior leaders set the company-wide OKRs.
The OKRs can be communicated to everyone.
At the same time, teams develop their OKRs to be shared
Contributors share their OKRs but also negotiate them with their managers.
Employees track and share their objectives with managers.
At the end of the cycle, employees perform a self-assessment and what they have accomplished
OKR scoring system
How do you score the success of the OKRs?
There are two ways to score OKRs:
The simple way
Andy Grove would use a very simple “Yes/No” approach to understand whether the key results would be achieved and whether the primary objective also got accomplished.
Objective: Reach $100K in revenue this year:
- KR: build a newsletter with a thousand subscribers to sell $33K worth of products
- KR: attend three events where to find 10 clients worth $33K in contact value
- KR: publish 10 articles to share to sell $33K worth of products
Track the results with the simple method:
- Build a newsletter with a thousand subscribers to sell $33K worth of products? Yes
- Attend three events where to find 10 clients worth $33K in contact value? No
- Publish 10 articles to share to sell $33K worth of products? Yes
The advanced approach
Each key result can be scored on a scale. “0” means failure, and “1.0” means achieving the objective.
Therefore, you can score each result against its outcome and evaluate whether you failed, made progress, or achieved them.
It’s essential, in this phase, to be honest about the self-assessment as the OKR itself requires self-reflection.
OKR vs. KPI
It is also important not to confuse OKR with KPIs (Key Performance Indicators) are performance metrics for a specific activity.
OKRs are aggressive and aspirational.
They drive the key objectives underlying the plan.
Where KPIs are a set of more objective standards to measure activity and operating plans.
OKRs are set to achieve extraordinary goals.
Therefore, KPIs and OKRs might be connected, yet OKR, it’s a specific methodology where the company needs, through aggressive yet achievable, shared goals, to work through them.
Often, KPIs can be made more useful and focused by picking up a so-called North Star metric, which can help the company be more focused.
Most organizations use KPIs to address their short and long-term goals. While OKR is quite popular among startups.
OKR vs. SMART Goals
SMART goals are very similar to how objectives are defined within the OKR framework.
The critical difference is that OKR is a company-wide exercise whose target is to align an entire, potentially large company to achieve goals and move fast, nonetheless size.
SMART goals, instead, might be more suited for individuals.
Another core difference is that OKR’s objectives, even if achievable, they are very ambitious, often connected with 10x targets.
Where SMART goals might and might not be as ambitious.
OKR vs. Balanced Scorecard
A balanced scorecard’s main aim is to track, control, and improve the execution of activities that can be monitored by executives and managers within an organization.
The balanced scorecard differs in scope and aims from the OKR, which is set to achieve an ambitious growth plan.
OKR and 10x: Moonshot thinking as a way to renew your business model
In 2010, Google founded its research and development lab, called X, or Google X.
As pointed out by Google:
“While almost every corporate research lab tries to improve the core product of the mother ship, X was conceived as a sort of anti–corporate research lab; its job was to solve big challenges anywhere except in Google’s core business.“
What are some of the key elements?
As I highlighted in the moonshot thinking guide, the fundamental principles are:
- Create exigency
- Context is king
- Give up on incremental changes
- Embrace the 10X attitude
- It all starts by reasoning from first principles
- Target the impossible but make it actionable
- Fail most of the time
- Do the hardest thing first
- Take massive actions
- Forget T-shaped; it’s all about X-shaped people
- Why 10X thinking is cheaper than incremental thinking, in the long-run
When you apply this sort of mindset, it might seem way more difficult to implement in the short-term.
In reality, once the proper context has been developed, it becomes cheaper and more effective.
It’s essential to align part of the team around 10x goals, enabling the company to look for opportunities outside the core business model.
Like in Google, where most of the organization is focused on maintaining and incrementally growing the core business model, Google is also invested in other bets, a strategic set of initiatives that could change its whole business model.
This is at the core of reinventing your business model.
Here are three hypothetical OKR examples from which a business can draw inspiration.
Objective: Increase brand awareness and reach outside of the United States.
- KR 1 – Publish one thought leadership article each week.
- KR 2 – Increase web traffic from the Canadian market by 15%.
- KR 3 – Add at least 300 new weekly subscribers to the newsletter.
Objective: Create a customer community
- KR 1 – Devise a customer community strategy based on best practices.
- KR 2 – Achieve a 25% community participation rate via discount incentives.
- KR 3 – Publish at least 15 articles in the first quarter that outline and draw attention to customer success.
Objective: Improve the efficiency and consistency of social media marketing
- KR 1 – Increase posting frequency from two times per week to three times per week with a core focus on video content in TikTok and Instagram Reels.
- KR 2 – Boost user engagement to 30% by hosting live chat events and increasing the quality of the content posted.
- KR 3 – Add at least 1,000 TikTok followers every month for the first half of the year.
Objective: To demonstrate to our customers that their input drives/influences company outcomes.
- KR 1 – Interview at least 50 customers monthly and collate suggestions for product and service improvements.
- KR 2 – Hire three additional customer success managers.
- KR 3 – Reduce product-related complaints from 65 to 30 before the end of the year.
Objective: Train customer success staff to enhance their capabilities.
- KR 1 – Ensure that every member of the team has a personal development plan in place.
- KR 2 – Increase task success rate from 75% to 90%.
- KR 3 – Come up with 4-6 coaching and training opportunities each year.
Objective: Ensure the team has the necessary support to achieve company objectives.
- KR 1 – Solicit training firm to run three personal development sessions per quarter.
- KR 2 – Onboard 15 new customers per month.
- KR 3 – Maintain a customer response time that never exceeds 18 hours.
Objective: Create a team of employees that is motivated, happy, and engaged.
- KR 1 – Offer regular opportunities for personal and professional development.
- KR 2 – Employees who meet stated objectives and performance standards shall be offered at least one raise of 5% per annum.
- KR 3 – Schedule at least two meetings with department heads per quarter and ensure that quarterly check-ins are maintained.
Objective: Acquire more talent to increase the collective strength and capabilities of the organization.
- KR 1 – Launch hiring campaigns in three regional markets.
- KR 2 – Devise and implement an employee referral program.
- KR 3 – Decrease the average time to hire from 25 days to 18 days.
Objective: Become an industry leader in talent retention.
- KR 1 – Implement a program to provide continuous educational assistance to employees.
- KR 2 – Review current remuneration policies and adjust where appropriate according to peers.
- KR 3 – Distribute a questionnaire to employees to assess the current corporate culture and where it could be improved.
- Introduction to OKRs: The OKR (Objectives and Key Results) system was developed by Intel’s CEO, Andy Grove, in the 1970s as a goal-setting process for driving organizational change.
- Objective and Key Results: OKRs consist of objectives, which are the direction a company aims to move in, and key results, which are measurable milestones that help achieve the objective.
- Superpowers of OKRs:
- Focus and Commit to Priorities: OKRs clarify what matters, helping teams and departments make informed decisions about where to focus.
- Align and Connect for Teamwork: OKRs are transparent and shared across the organization, fostering collaboration and alignment from top management to every team member.
- Track for Accountability: OKRs are data-driven, focusing on a few critical metrics that measure the impact on the business.
- Stretch for Amazing: OKRs are ambitious and challenging, driving the organization forward.
- Comparison with MBOs (Management by Objectives): MBOs are more top-down, while OKRs involve both the “what” (direction) and “how” (key results). OKRs are transparent, frequently updated, and more aggressive in setting goals.
- OKR Cycle:
- Brainstorm: Senior leaders set company-wide OKRs.
- Communicate: OKRs are shared and communicated across the organization.
- Share: Teams develop their OKRs and share them.
- Track: Employees track and share their progress with managers.
- Reflect: At the end of the cycle, employees self-assess their accomplishments.
- OKR Scoring System:
- Simple Method: Uses a “Yes/No” approach to determine if key results and objectives were achieved.
- Advanced Approach: Scores each key result on a scale from 0 (failure) to 1 (achievement).
- OKR vs. KPIs (Key Performance Indicators): OKRs are aggressive, aspirational goals that drive growth and are shared transparently, while KPIs are performance metrics that measure specific activities.
- OKR vs. SMART Goals: Both OKRs and SMART (Specific, Measurable, Achievable, Relevant, Time-bound) goals focus on specific objectives, but OKRs are more ambitious and often aim for 10x growth.
- OKR vs. Balanced Scorecard: The balanced scorecard focuses on tracking and improving activities, while OKRs aim for ambitious growth and align the organization to achieve extraordinary goals.
- OKR and 10x Thinking: OKRs can be aligned with moonshot thinking, aiming for at least 10x goals to drive innovation and renewal of the business model.
- OKR Examples:
- Marketing Department: Increase brand awareness, create a customer community, improve social media marketing efficiency.
- Customer Success: Demonstrate customer input drives outcomes, enhance customer success staff capabilities, provide necessary support for team objectives.
- People Expertise: Create motivated team, acquire more talent, become industry leader in talent retention.
Other Goal-Setting Frameworks And Theories of Motivation
Related Strategy Concepts: Go-To-Market Strategy, Marketing Strategy, Business Models, Tech Business Models, Jobs-To-Be Done, Design Thinking, Lean Startup Canvas, Value Chain, Value Proposition Canvas, Balanced Scorecard, Business Model Canvas, SWOT Analysis, Growth Hacking, Bundling, Unbundling, Bootstrapping, Venture Capital, Porter’s Five Forces, Porter’s Generic Strategies, Porter’s Five Forces, PESTEL Analysis, SWOT, Porter’s Diamond Model, Ansoff, Technology Adoption Curve, TOWS, SOAR, Balanced Scorecard, OKR, Agile Methodology, Value Proposition, VTDF Framework, BCG Matrix, GE McKinsey Matrix, Kotter’s 8-Step Change Model.
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