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 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. 

north-star-metric
A north star metric (NSM) is any metric a company focuses on to achieve growth. A north star metric is usually a key component of an effective growth hacking strategy, as it simplifies the whole strategy, making it simpler to execute at high speed. Usually, when picking up a North Start Metric, it’s critical to avoid vanity metrics (those who do not really impact the business) and instead find a metric that really matters for the business growth.

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?

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 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:

  • 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 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 “Yes/No” approach to understand whether the key results would be achieved and whether the primary 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” 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. 

north-star-metric
A north star metric (NSM) is any metric a company focuses on to achieve growth. A north star metric is usually a key component of an effective growth hacking strategy, as it simplifies the whole strategy, making it simpler to execute at high speed. Usually, when picking up a North Start Metric, it’s critical to avoid vanity metrics (those who do not really impact the business) and instead find a metric that really matters for the business growth.

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
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 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

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.

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

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 fundamental principles are: 

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

google-bets
Of Google’s (Alphabet) over $257 billion revenues for 2021, Google also generated $753 million from a group of startup bets, which Google considers potential moonshots (companies that might open up new industries). Those Google’s bets also generated a loss for the company of over $5.2 billion. In short, Google is using the money generated by search and betting it on other innovative industries.

Where Google is the most potent 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).

OKR examples

Here are three hypothetical OKR examples from which a business can draw inspiration.

Marketing department

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.

Customer success

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.

People expertise

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.

Other Goal-Setting Frameworks And Theories of Motivation

Balanced Scorecard

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.

Backcasting

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.

Maslow’s Hierarchy of Needs

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.

Herzberg’s Two-Factor Theory

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.

Lightning Decision Jam

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

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

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

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

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

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

 

Related Strategy Concepts: Go-To-Market StrategyMarketing StrategyBusiness ModelsTech Business ModelsJobs-To-Be DoneDesign ThinkingLean Startup CanvasValue ChainValue Proposition CanvasBalanced ScorecardBusiness Model CanvasSWOT AnalysisGrowth HackingBundlingUnbundlingBootstrappingVenture CapitalPorter’s Five ForcesPorter’s Generic StrategiesPorter’s Five ForcesPESTEL AnalysisSWOTPorter’s Diamond ModelAnsoffTechnology Adoption CurveTOWSSOARBalanced ScorecardOKRAgile MethodologyValue PropositionVTDF FrameworkBCG MatrixGE McKinsey MatrixKotter’s 8-Step Change Model.

Resources for your business:

Handpicked popular case studies from the site: 

Read also: Business Strategy, Examples, Case Studies, And Tools

Read Next: Lean CanvasAgile Project ManagementScrumMVPVTDF.

The FourWeekMBA Business Strategy Toolbox

Tech Business Model Framework

business-model-template
A tech business model is made of four main components: value model (value propositions, missionvision), technological model (R&D management), distribution model (sales and marketing organizational structure), and financial model (revenue modeling, cost structure, profitability and cash generation/management). Those elements coming together can serve as the basis to build a solid tech business model.

Blockchain Business Model Framework

vbde-framework
A Blockchain Business Model according to the FourWeekMBA framework is made of four main components: Value Model (Core Philosophy, Core Values and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics/incentives through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.

Business Competition

business-competition
In a business world driven by technology and digitalization, competition is much more fluid, as innovation becomes a bottom-up approach that can come from anywhere. Thus, making it much harder to define the boundaries of existing markets. Therefore, a proper business competition analysis looks at customer, technology, distribution, and financial model overlaps. While at the same time looking at future potential intersections among industries that in the short-term seem unrelated.

Technological Modeling

technological-modeling
Technological modeling is a discipline to provide the basis for companies to sustain innovation, thus developing incremental products. While also looking at breakthrough innovative products that can pave the way for long-term success. In a sort of Barbell Strategy, technological modeling suggests having a two-sided approach, on the one hand, to keep sustaining continuous innovation as a core part of the business model. On the other hand, it places bets on future developments that have the potential to break through and take a leap forward.

Transitional Business Models

transitional-business-models
A transitional business model is used by companies to enter a market (usually a niche) to gain initial traction and prove the idea is sound. The transitional business model helps the company secure the needed capital while having a reality check. It helps shape the long-term vision and a scalable business model.

Minimum Viable Audience

minimum-viable-audience
The minimum viable audience (MVA) represents the smallest possible audience that can sustain your business as you get it started from a microniche (the smallest subset of a market). The main aspect of the MVA is to zoom into existing markets to find those people which needs are unmet by existing players.

Business Scaling

business-scaling
Business scaling is the process of transformation of a business as the product is validated by wider and wider market segments. Business scaling is about creating traction for a product that fits a small market segment. As the product is validated it becomes critical to build a viable business model. And as the product is offered at wider and wider market segments, it’s important to align product, business model, and organizational design, to enable wider and wider scale.

Market Expansion

market-expansion
The market expansion consists in providing a product or service to a broader portion of an existing market or perhaps expanding that market. Or yet, market expansions can be about creating a whole new market. At each step, as a result, a company scales together with the market covered.

Speed-Reversibility

decision-making-matrix

Growth Matrix

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).

Revenue Streams

revenue-streams-model-matrix
In the FourWeekMBA Revenue Streams Matrix, revenue streams are classified according to the kind of interactions the business has with its key customers. The first dimension is the “Frequency” of interaction with the key customer. As the second dimension, there is the “Ownership” of the interaction with the key customer.

Revenue Model

revenue-model-patterns
Revenue model patterns are a way for companies to monetize their business models. A revenue model pattern is a crucial building block of a business model because it informs how the company will generate short-term financial resources to invest back into the business. Thus, the way a company makes money will also influence its overall business model.

Methodologies & Frameworks

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