This is the first article of a 3-part series of articles all about OKRs.
Check out Part 2: 7 Common Mistakes in OKRs and how to avoid them
Employees with clearly identified goals are 3.6 times more likely to be committed to their organization. That’s because well-thought-out business objectives provide a clear direction and purpose for the organization and align efforts and resources toward achieving specific outcomes.
There are many management frameworks to help you set clear goals, and one of the most popular ones is Objectives and Key Results (OKRs for short). In this article, we cover how OKRs work, and how they can benefit organizations.
What are OKRs and who invented them?
OKRs (Objectives and Key Results) is a collaborative framework for goal-setting that enables teams and organizations to achieve their objectives through quantifiable outcomes. It was created in the 1970s by Andrew Grove, a former CEO of Intel. Grove understood the need for a goal-setting framework that would tie personal and group ambitions to the organization's overarching strategic goals. He thought that having a defined set of goals and important outcomes could help the organization stay focused, hold people accountable, and produce quantifiable results.
Several tech pioneers have improved and promoted OKRs over time, including John Doerr, who presented the concept to Google in 1999. The strategy supported Google's rapid growth into one of the hallmarks of organizational effectiveness globally. Since then, more companies started relying on OKRs as a framework for setting organizational goals. As a matter of fact, 83% of companies that have applied OKRs agree that they have a positive impact on their organization, and 78% of employees who use OKRs are satisfied with their jobs.
OKRs are broken down into the following:
1. Objective: a memorable qualitative description of what you want to achieve. An objective should be short, inspirational, engaging, challenging and ambitious.
E.g. Set new records for revenue and profitability.
2. Key Results: A set of metrics that measure your progress toward the objective. These should be quantitative, measurable, and limited to 2 to 5 key results per objective. There are two types of Key Results:
Activity-based key results measure the completion of tasks or certain milestones. They usually start with verbs such as: launch, create, develop, release, implement, etc... E.g. key result for the previous objective: Launch in 2 new cities.
Value-based key results measure the outcomes of activities in terms of value to the company or its customers. They are usually structured as increase/reduce/maintain/improve this metric from X to Y or under Y. E.g. key result for the previous objective: Increase yearly revenue from 10 Million SAR to 15 Million SAR.
3-Initiatives: A third component that complements OKRs is Initiatives. To achieve the OKRs set, teams come up with a list of initiatives and/or projects that determine how they will achieve their key results. These are monitored and reviewed regularly to make sure they contribute to the OKRs.
Benefits of using OKRs
Implementing OKRs in your company can drive performance, and create a culture of accountability among many other benefits. Here are just a few:
Agility: Because OKRs are usually set quarterly and reviewed regularly, they allow for quick modifications and improved adaptation to change making the goal-setting process faster and easier.
Alignment and Cooperation: All teams work together to set OKRs and initiatives that contribute to the company’s vision and objectives by solving interdependencies and unifying competing initiatives. In turn, this aligns the entire organization toward a shared goal.
Transparency: OKRs are public to everyone in the company. This means all employees know the goals and priorities of the organization as well as how each individual is contributing to them.
Higher Employee Engagement: OKRs increase employee engagement because of the bottom-up approach for goal setting. Employees are directly connected to the company’s objectives, and where it is headed.
Autonomy and accountability: Teams feel autonomous when they are free to choose how to achieve their OKRs, and take part in setting their initiatives.
Focus and discipline: OKRs allow people to focus their thinking and set a few clear goals that serve the company’s objectives. The reduced number and clarity of goals create more disciplined efforts and initiatives to achieve them.
Bolder goals: OKRs are designed to enable the team to set ambitious, challenging goals even though they may not achieve 100% of them. This motivates them to work harder and come up with creative ways to achieve bolder goals.
OKRs are now universally acknowledged as a potent instrument for promoting growth, focus, alignment, and quantifiable results. Several high-growth businesses, such as LinkedIn, Twitter, and Airbnb, have adopted OKRs as a common framework for creating their goals. OKRs framework demonstrated its adaptability and efficacy in a variety of circumstances and across different company scales and sizes.
If you need help in your OKR setting process, book a 1-on-1 consultation with us today.