what-is-okr

What Is OKR? The Goal-Setting System To Scale Up Your Business

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, things that allow the company to get there. Those key results need to be easily trackable, understandable and shared across the company.

In its purest form OKRs consists 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

Track for accountability

OKRs are data-driven. It doesn’t stress though on a countless number of metrics that help to increase the level of noise. OKRs instead focuses on a few critical metrics to measure the impact on the business

Stretch for amazing

Objectives set in OKRs aren’t conservative, those are aggressive, hard yet possible and attainable. From this balance, OKRs brings the organization forward

Those superpowers are kept together by continuous improvement and corporate culture.

How is OKRs different from MBOs?

mbo-vs-okr

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 focuses 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 which 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:

  • Ambitious
  • Qualitative
  • Time-bound
  • 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

  • Brainstorm: in this phase, the top senior leaders set the company-wide OKRs
  • Communicate: the OKRs can be communicated to everyone. At the same time teams develop their own OKRs to be shared 
  • Share: contributors share their OKRs but also negotiate them with their managers
  • Track: employees track and share their objectives with managers
  • Reflect: 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 approach of “Yes/No” to understand whether the key results would be achieved, so whether the main objective also got accomplished. 

OKR example

Objective: Reach $100K in revenue this year:

  1. KR: build a newsletter with a thousand subscribers to sell $33K worth of products
  2. KR: attend three events where to find 10 clients worth $33K in contact value
  3. 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” meaning failure and “1.0” meaning the objective was achieved.

Therefore, you can score each result against its outcome and evaluate whether you failed, made progress, or achieved them.

It’s important in this phased to be honest about the self-assessment as the OKR itself requires self-reflection. 

OKR vs. KPI

It is important also not to confuse OKR with KPIs. KPIs (Key Performance Indicators) 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.

OKR vs. SMART Goals

smart-goals
A SMART goal is any goal with a carefully planned, concise, and trackable objective. To be such a goal needs to be specific, measurable, achievable, relevant, and time-based. Bringing structure and trackability to goal setting increases the chances goals will be achieved, and it helps align the organization around those goals.

SMART goals are very similar in nature to the way objectives are defined within the OKR framework. The key difference is that OKR is a company-wide exercise, which 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 with the OKR which is set to achieve an ambitious growth plan.

OKR and 10x: Moonshot thinking as a way to renew your business model

moonshot-thinking
Moonshot thinking is an approach to innovation, and it can be applied to business or any other discipline where you target at least 10X goals. That shifts the mindset, and it empowers a team of people to look for unconventional solutions, thus starting from first principles, by leveraging on fast-paced experimentation.

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.“

This connects with Google’s founders 10x mindset, which we can apply back to the business world as it makes us switch from an incremental growth mindset to a 10x mindset.

What are some of the key elements? As I highlighted in the moonshot thinking guide, the key principles are: 

When you apply this sort of mindset, while it might seem way more difficult to implement in the short-term. In reality, over time, once the proper context has been developed it becomes cheaper and more effective. 

It’s important to align part of the team around 10x goals, as it enables the company to look for opportunities that are outside the core business model.

Just 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. 

Where Google is the most powerful advertising machine, with the cash invested in new bets, it might become something else in the future decades.

This is at the core of reinventing your business model. 

growth-strategies
In the FourWeekMBA growth matrix, you can apply growth for existing customers by tackling the same problems (gain mode). Or by tackling existing problems, for new customers (expand mode). Or by tackling new problems for existing customers (extend mode). Or perhaps by tackling whole new problems for new customers (reinvent mode).

Other Goal-Setting Frameworks And Theories of Motivation

balanced-scorecard
First proposed by accounting academic Robert Kaplan, the balanced scorecard is a management system that allows an organization to focus on big-picture strategic goals. The four perspectives of the balanced scorecard include financial, customer, business process, and organizational capacity. From there, according to the balanced scorecard, it’s possible to have a holistic view of the business.

 

The Lightning Decision Jam
The Lightning Decision Jam (LDJ) is a means of making fast decisions that provide quick direction. The Lightning Decision Jam was developed by design agency AJ&Smart in response to the inefficiency of business meetings. Borrowing ideas from the core principles of design sprints, AJ&Smart created the Lightning Decision Jam.

 

backcasting
Businesses use backcasting to plan for a desired future by determining the steps required to achieve that future. Backcasting is the opposite of forecasting, where a business sets future goals and works toward them by maintaining the status quo.

 

maslows-hierarchy-of-needs
Maslow’s Hierarchy of Needs was developed by American psychologist Abraham Maslow. His hierarchy, often depicted in the shape of a pyramid, helped explain his research on basic human needs and desires. In marketing, the hierarchy (and its basis in psychology) can be used to market to specific groups of people based on their similarly specific needs, desires, and resultant actions.

 

herzbergs-two-factor-theory
Herzberg’s two-factor theory argues that certain workplace factors cause job satisfaction while others cause job dissatisfaction. The theory was developed by American psychologist and business management analyst Frederick Herzberg. Until his death in 2000, Herzberg was widely regarded as a pioneering thinker in motivational theory.
lockes-goal-setting-theory
The theory was developed by psychologist Edwin Locke who also has a background in motivation and leadership research. Locke’s goal-setting theory of motivation provides a framework for setting effective and motivating goals. Locke was able to demonstrate that goal setting was linked to performance.
nadler-tushman-congruence-model
The Nadler-Tushman Congruence Model was created by David Nadler and Michael Tushman at Columbia University. The Nadler-Tushman Congruence Model is a diagnostic tool that identifies problem areas within a company. In the context of business, congruence occurs when the goals of different people or interest groups coincide.
personal-swot-analysis
The SWOT analysis is commonly used as a strategic planning tool in business. However, it is also well suited for personal use in addressing a specific goal or problem. A personal SWOT analysis helps individuals identify their strengths, weaknesses, opportunities, and threats.
ogsm-framework
The OGSM framework is a means of creating a well-structured and actionable marketing strategy. Fundamentally, the OGSM framework allows businesses to first define what they want to achieve and then determine how they will get there. To provide direction for marketing teams, the acronym of OGSM (objectives, goals, strategies, measures) should be followed in sequential order. Here is a look at each in more detail.
mckinsey-7-s-model
The McKinsey 7-S Model was developed in the late 1970s by Robert Waterman and Thomas Peters, who were consultants at McKinsey & Company. Waterman and Peters created seven key internal elements that inform a business of how well positioned it is to achieve its goals, based on three hard elements and four soft elements.
personal-mission-statement
A personal mission statement clarifies what is important in life to an individual. A personal mission statement is a written statement of purpose that allows individuals to define their calling in life. It helps clarify goals, values, beliefs, or passions, communicate them, and better execute a personal growth strategy.

Suggested reading:

OKRs-book

 

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get in touch with Gennaro here

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