Objectives and Key Results (OKR) framework is becoming popular these days. It has been adopted by Intel, Google, LinkedIn and others. It is lightweight, transparent, and supposed to be less biased.
Key results make the objectives quantifiable and more tangible, but still, there are some pitfalls with OKRs, just to mention two:
- No leading part. Quantifying expected results doesn’t mean that we know exactly how we plan to get there.
- No link to the strategy. Even if we get there, there is still no guaranty that the initial objectives were the right ones.
Let’s discuss some best practices of OKR framework and focus on two major improvement points: how to make result metrics smarter and how to align the framework with a company´s strategy.
History of OKR
The idea to manage a business by focusing on tangible objectives is not a new one:
- Back in 1954, Peter Drucker in “The Practice of Management” introduced Management by Objectives (MBO) .
- In the 1970s Intel was exploring ORK practices . That’s when John Doerr under the leadership of Andy Grove was working with OKR.
- Later, John Doerr introduced OKR to Google’s leadership team .
Today, the list of the companies that use OKR includes  Amazon, Intel, Google, LinkedIn, Oracle, Salesforce.com. But obviously, it is hard to say if the buzzword means the same in different organizations.
What is a typical OKR system?
The OKR framework is quite flexible. There is no official “manifesto” for OKR and companies are recommended adapting it to their culture. Still, there are some shared features.
- Starting point: OKR is a framework for setting objectives, and measuring outcomes
- Biggest benefit: OKR framework helps to communicate and prioritize objectives
- Objectives are qualitative goals (dreams)
- Key results are quantitative outcomes (metrics)
- There are normally 3-4 objectives, and 3-5 results for each
- OKR system is timebound (normally reported quarterly)
- OKRs are for personal, team, and company level
- OKRs must be public within an organization
- OKR system is not linked to the direct performance review (at least OKR is not the only part of it)
OKR process is relatively lightweight. While the final implementation varies from organization to organization, 4 common steps can be defined.
Step 1. Discussion
Formulating objectives and key results.
- What matters?
- What is our strategy? Where we are now? Where do we want to go? How can we get there?
- What are the global and local objectives?
- What results do we need to achieve the objectives?
Step 2. Execution
Practical use of OKR to focus daily activities on what matters.
Step 3. Grade
Calculation of the final score for the objectives
- Most companies calculate mathematical average;
- Some calculate weighted average of the achieved scores.
Step 4. Review
Analysis of successes and failures.
- Why were some OKR missed?
- What should be changed in the next period?
- Are all the objectives still important?
- What can we do better/differently?
OKR framework is not just a way to have a list of things to do. It helps to solve some typical management problems. Here are some common benefits of using OKR framework:
- Understanding priorities. Knowing (and communicating) what matters and what doesn’t
- Focusing efforts. That’s why we limit the number of objectives to 3-4
- Aligning actions with what is important for others (that’s why OKR are public inside the company)
- Unbiased Unbiased view on the achieved results (that’s why it’s not recommended to connect an OKR system directly to the performance evaluations)
Example of OKR: vertical landing
Objective (hard, but not impossible): Vertical landing for a rocket
What do we need to achieve an objective?
- Key result 1: Better calculation of vertical deviation (“better” to be defined in numbers)
- Key result 2: Keeping correct angle (“correct” to be quantified, e.g., certain error level)
Example of OKR: website landing page
Objective: Create a perfect website landing page! Where “perfect” means:
- Key result 1: Responsive theme design (binary result)
- Key result 2: Adjusted bounce rate <= 30%
- Key result 3: Visitor to subscriber conversion >= 20%
Potential risks of OKR or how to do better OKR
The obvious risks are associated with doing OKR “in a wrong way”:
- Having too many objectives (no focus on what matters)
- Aggressive linking OKR system to the performance evaluation or incentive plan (having biased measurements as a result)
- Building informational silos and keeping OKR private (no way to align with objectives of others)
There are also less obvious risks that I suggest discussing below together with possible ways to improve.
Hack 1. Not just key “results” – how to consider leading factors
The “key results” are lagging by their definition, they help to validate the achievement, but not to quantify the success factors. One might argue that in the context of the objective the key result might be a leading factor as well. That’s correct, and it’s important to have this in mind when discussing key results and later doing the review.
- To have a full picture of why objective was a success/failure, we need to have both – leading factors and lagging results.
Have a look at the “create a perfect website landing page” objective in the example above. One of the key results was “Adjusted bounce rate <= 30%”. That’s an expected result, but how are we supposed to get there? The bounce rate for the website depends on many factors, for example, a content quality; a content should resonate with the auditory, so in this case it is a good idea to pair “Adjusted bounce rate <= 30%” key result with leading factors:
- Leading factor: analyze website visitor behavior; find 5 topics that are of most interest for the visitors;
- Lagging factor: rewrite content using insights about visitor behavior
The final OKR might look like this one:
Objective: Create a perfect website landing page! Where “perfect” means:
- Key result 1 (leading) Find 5 topics that are of most interest for the visitors; rewrite content using insights;
- Key result 2 (lagging): Adjusted bounce rate <= 30%
Hack 2. Linking objectives with a strategy
During the discussion step, teams were supposed to do their best to come up with objectives that resonate with the company’s strategy. While the challenge of alignment between objectives and strategy is clear, OKR framework doesn’t suggest any explicit way to address this challenge.
A good approach in this case would be to link objectives from OKR system to the objectives from strategy scorecard, like for example K&N Balanced Scorecard.
- A strategy map in this case will work as a first level filter for possible ideas.
The link between OKR and strategy scorecard might be conceptual (“this objective supports that strategic goal!”) or it might be a hard link by the OKRs of various levels (e.g. OKR cascade).
In both cases the use of automation software helps. For example, BSC Designer can visualize a company’s strategic objectives on a strategy map, link the performance of the goal to the specific key results, and cascade OKR if needed.
Toolkit: Building an OKR System That Works
A toolkit designed to cut though all the hype about the OKR framework. It provides you with a quick reference guide that explains the most important OKR ideas, processes, use principles, and templates you need to successfully implement it in your team or organization.
How to cascade OKR?
In many examples of OKR, the results are binary. Something like “ABC feature added” with possible scores “yes” or “no.” That works fine on a small scale, but it doesn’t look like an effective approach for some longer-term challenges.
For example, adding new feature in the software is not just about programming according to the new requirements, it’s about analyzing user behavior, understanding how things can be made easier, testing some hypothesis and so on.
In this case, I would suggest supporting “ABC feature added” result with more specific sub-results, like “A/b tests analysis,” “Unambiguous requirements written,” “Unit tests added.”
- This approach will provide an owner of the OKR with a much better action plan.
- Other team members will have a better sense of where they can contribute.
That’s a straightforward way to cascade OKR naturally, especially when automation software is used.
Automation tools for OKR
Here is a road map that I suggest for the implementation of an OKR automation tool:
- Start with a simple grading system that doesn’t require automation tools
- Ensure that OKR are accepted emotionally and practically
- Ensure that OKR are public within the organization
- When the OKR process is well defined, consider using specialized software
BSC Designer software, is an interesting choice in this case, as historically it is strong in managing performance metrics and building strategy maps. OKR framework can be automatized with a native support for leading/lagging metrics (key results), building a map of the objectives, and linking OKR to the strategy scorecards.
Finally, here is a checklist for OKR framework. Here you will also find its live version automated with BSC Designer software.
- In a single OKR there are 3-4 objectives
- Objectives are hard, but not impossible
- Achievement of 100% of objectives is a sign that they were not ambitious enough
- Objectives are filtered by strategy map and are aligned with some strategic goal
- There are 3-5 Key Results for each objective
- Key Results are quantified
- There are binary results for short initiatives
- For long initiatives binary results are divided into shorter ones
- Key Results are smart (both leading factors and lagging results are considered)
- There are OKR for personal, team, and company levels
- There are owners of OKR, but there are also OKR that represent goals of project or a company (not linked to a specific person)
- CEO and top managers have their OKR and are supporting the idea
- OKR system is public within an organization
- OKRs are reviewed regularly (quarterly is the most popular option, but not the only one)
- OKR system is not linked to the performance reviews or incentives (at least performance reviews are not determined by OKR scores only)
- Automation software is used when the process below is well defined
OKR framework is not just another way to quantify goals as it might look like from the first sight:
- It facilitates discussion and communication of the goals and helps to keep teams focused on what’s important;
- The best OKRs are aligned with a company’s strategy; they consider both expected results and leading factors.