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Objectives and Key Results enabled leaders to express the outcomes desired, not the steps to get there, which resulted in maximum autonomy.
Objectives and key results (OKRs) are a goal-setting tool that grew out of management guru Peter Drucker’s Management By Objectives (MBO).
MBO was arguably the first modern management system. Most management thinking before MBO was introduced in the 1950s was still focussed on the need to “manage” workers by giving them carefully defined tasks and monitoring them to ensure these were carried out efficiently. MBO, in sharp contrast, encouraged managers to define the objectives that were to be achieved and allowed individuals and teams to find their own ways of delivering those objectives. It encouraged autonomy, or what Drucker called “self-control” – putting people in control of their own work.
OKRs, first developed by Intel’s Andrew Grove in the late 1970s, provide a framework to help in setting the most effective objectives, and a set of rules and best practices for ensuring they are achieved.
OKR’s spread through Silicon Valley when venture capitalist John Doerr made a major investment in Google in 1999 and persuaded the young company to adopt OKRs as a way staying on track to achieve their initial vision. Doerr had learned about OKRs from Grove himself when he worked at Intel as a young man.
In his 2018 book, Measure What Matters, Doerr describes the ideal objective as being “significant, concrete, action oriented, and inspirational.” They should also ideally be qualitative.
OKRs should only be set for the most important objectives; the things that really matter. They are not meant to be used for everything an organisation does: OKRs are designed to drive growth, change and innovation. Having a numerical objective is not inspirational for most people; it can also be limiting.
At an organisational level, OKRs define the few things (between 3 and not more than 5) that matter most; the things that would define success. They also make it clear what the organisation should and should not be doing.
An organisational OKRs may take years to achieve or even be open ended. Alongside these overarching goals, annual OKRs are needed. These will be more limited and specific, but they should still be qualitative and aspirational. They should be designed to bring about change and move the organisation towards its ultimate goals.
Annual OKRs are typically broken down into a quarterly cadence. At the end of each quarter, OKRs are “closed” and the lessons absorbed before the next quarters OKRs are set. For startups going through a period of rapid development, a more frequent cadence might be needed, reviewing progress against objectives set perhaps every month.
The defining aspect of OKRs is the combination of the objective with the key results that will prove that the organisation has achieved that objective. John Doerr sets out this essential aspect of an OKR as “We will… (achieve this objective) as measured by…. (these key results).”
Key results should, again, be limited in number – between 2 and 5 key results is recommended. Having too many key results becomes confusing and is hard to remember; there should always be a relatively small set of results that will demonstrate whether the individual, team or organization is on track to achieve its objectives.
Key results, by definition, have numbers attached to them. Key results are not tasks (“Make 50 new business sales calls”) they are the relevant bottom-line results (“Close 5 new business deals”). The things that need to be done in order to achieve a key result are usually described as “initiatives”.
Because a key result is numerical and specific, it is easy to put a number on the extent to which a key result has been achieved.
If a key result was “Generate £250k in sales” and the team generates £150k in sales in the given quarter, then the team has achieved 60% of its target. If another key result was “Reduce churn by 30%” and churn is reduced by 15%, the team has achieved 50% of its target. These percentage figures are usually presented as 0.6 and 0.5.
Many OKR practitioners argue that an objective should always represent a “stretch” and that a score of 1.0 should be unusual. Too many scores of between 0.8 and 1.0 would suggest that the key results being set may not be challenging enough.
Scores of 0.6 - 0.7 are seen as ideal, suggesting that teams are setting challenging targets and doing their best to achieve them.
OKRs have been described as the link between strategy and execution.
OKRs are public: everyone becomes aware of the organisation’s core strategy – the key things that the organisation wants to achieve.
The team and individual OKRs that are then set throughout the organisation must clearly contribute towards achieving these overall objectives. The importance of everyone’s initiatives becomes obvious – no one is in any doubt about why they are carrying out a particular initiative. This aligns everyone’s activities with the organisation’s goals and provides focus.
Because OKRs are transparent throughout the organisations, the value of everyone’s activities becomes clear. Individual contributions can be recognised and celebrated.
Though some OKRs stem from the organisation’s overarching objectives and are effectively “top down”, it is generally accepted that at least half of an organizations OKRs should be “bottom up“ – put forward by individuals as objectives they themselves would like to achieve which they see will contribute to the team and organisational OKRs. Ideally, OKRs should be “negotiated” between what the individual would like to undertake and what the team needs to achieve. This creates high levels of autonomy and self-motivation.
A good example of what makes an OKR effective and inspirational is given by the head of a leading OKR consultancy. He compares two objectives: “Deliver a presentation at Conference” and “Deliver a great presentation at Conference”. The first is not qualitative, it is a description of an action. The key results that would be attached to that objective might be these:
- Finish presentation text by end week 2
- PowerPoint with images completed end week 3
- Rehearse presentation three times in week 4
The key results should guarantee that we do indeed deliver a presentation at the conference, but the objective hasn’t stretched us or challenged us in any way; we have no excuse not to fully achieve each key result.
Compare that with the qualitative objective to deliver a great presentation to the X Conference. Now we are focussed not on an output – create a presentation – but the desired outcome: to make an impact.
That objective might require key results like these:
- Finish presentation text by end week 2
- PowerPoint with images completed end week 3
- Rehearse presentation three times in week 4
