At first sight, “OKRs” may sound daunting or make you roll your eyes — after all, if you don’t yet know what an OKR is, you may take it for an empty buzzword. However, once you understand the meaning and the potential of this goal-setting framework, you’ll find that OKRs are something to embrace, not fear.
Setting the right goals is the most challenging part of rolling out OKRs. In this blog post, we’ll answer the question, “What are OKRs?” and share best practices for OKR development and alignment. We’ll also empower you to use this tool to propel your organization and employee engagement forward.
What are OKRs in business?
OKR is a management framework that stands for Objectives and Key Results. Its essence is quite simple: to break down ambitious objectives into clear, manageable, measurable results, setting out a path to success that advances employee engagement to boot.
The framework’s design is attributed to Andy Grove, Intel’s third employee and former CEO. In 1983, Grove laid out the term in the book “High Output Management.”
Another influential OKR authority, John Doerr joined Intel in the mid-1970s. Doerr sees Grove as a teacher and “one of the greatest managers of his, or any other, era.” Doerr describes the OKR framework as “deceptively simple, but also the polar opposite of the conventional management by objectives (MBO) systems, which tend to be top-down, hierarchical, annual, and linked to compensation.”
Now a venture capitalist, Doerr further explored OKRs in the 2017 book “Measure What Matters.” In an interview with Harvard Business Review, Doer revealed he presented the system to close to 100 organizations since 1980. Still, it wasn’t until recent years that OKRs gained tremendous traction; they’re now used by fast-scaling startups and large corporations like Google and the Bill & Melinda Gates Foundation.
Objectives, Key Results, and their role in employee engagement
McKinsey’s research points out that strong results orientation is one of the most important qualities of a top leader. What some leaders don’t take into account is that defining the right goals is as essential as working hard on them. The type of objectives and key results you choose will provide a bedrock for your team’s ambition, out of which creative and effective work can flow.
Doerr describes the OKR framework as “deceptively simple, but also the polar opposite of the conventional management by objectives (MBO) systems, which tend to be top-down, hierarchical, annual, and linked to compensation.”
Where to begin
For starters, don’t conflate OKRs and KPIs (Key Performance Indicators). While KPIs evaluate how effectively your company performs a particular activity, the key results in OKRs are guided by objectives anchored in an overarching mission.
KPIs and key results should be quantifiable and might even speak to the same achievements (e.g., number of qualified leads in a quarter). However, unlike OKRs, KPIs aren’t necessarily guided by a broader vision — and it’s this vision that’ll help you keep your team aligned and focused.
As we’ll discuss, it’s also essential to narrow objectives and key results down to three to five elements each.
In brief, objectives are your vision. They’re bold and ambitious, yet not make-believe. They’re qualitative and have the power of uniting team members. Objectives make the idea of “working toward the same goal” palpable across entire organizations.
You can have plenty of objectives for your business. To achieve them with this framework’s support, they must be clear, concise, and straightforward. On top of that, we recommend working with quarterly cycles for your OKRs. At the start of each quarter, you should go through the planning exercise to define your OKRs at each level: company-wide, team-wide, and individual.
An objective is an ambitious goal, but not a treatise nor a pipe dream. Yet, it should be groundbreaking — not a mere expansion of something you’ve already mastered. What’s more, if you end up reaching a goal easily or faster than expected, you should consider setting stretch goals that exceed initial expectations. This way, there’ll always be something exciting to work toward.
Key Results are the milestones you pass on the way. They define how you’ll hit your goals and track progress.
Quantitative and tied to a timeline, key results are pieces of the bigger picture: the objective to which they’re attached. Like signposts, these desired results tell you if your team is headed in the right direction and how far you still have to push.
As measurable pieces of your vision, key results require balance: they should guide, fuel, ease, and not compromise your audacious plans. Key results shouldn’t be too easy to reach but should be meaningful enough to warrant a good team celebration if achieved.
Objectives are your vision. They’re bold and ambitious, yet not make-believe. They’re qualitative and have the power of uniting team members. Objectives make the idea of “working toward the same goal” palpable across entire organizations.
The role of OKRs in employee engagement
One trillion US dollars. According to Gallup, that’s the revenue businesses are losing each year, in the United States alone, due to staff resignation. The main reason is that the cost of filling out positions can be up to two times the allocated annual salary — an estimate presented as conservative.
On top of massive financial loss, losing employees affects team morale and overburdens colleagues. It may also imply rebuilding customer relationships and could mean losing top talent that’s hard to replace.
Voluntary turnover is often preventable with increased engagement. In fact, 52% of employees say something could have been done to keep them at the organization. Surprisingly to some, listening to your staff, nurturing their professional development, and making them feel their work has meaning is more effective than investing in nap pods and unlimited ice cream.
On that note, OKRs are a sure path to transparency and making work more meaningful. Carefully chosen OKRs can give purpose to tasks that might otherwise seem like items to tick off an endless list.
When someone understands that their contribution is impactful and can see themselves growing with the company instead of just filling someone else’s pockets, they feel more motivated. They’ll likely challenge themselves, adopt a team player’s attitude, and think of creative solutions to help their teams achieve OKRs.
Granted, there’s an art to choosing the most fitting objectives and key results, but anyone can master it if they want to.
How to set the right Objectives and Key Results for your business [7 steps]
1. Keep it simple: choose 3 to 5 objectives (and key results for each)
Between three and five objectives for each OKR period is a realistic amount to keep teams stimulated without feeling overwhelmed. With any fewer, goals may feel limiting. With more, you risk focusing on too much at once and not achieving anything.
Depending on its essence, an organization may work better with OKR periods different from our recommended quarter. Still, bear in mind that a 13-week timeframe allows you to aim for 10% progress each week, with a handy 2-3 week grace period to get going.
Speaking of numbers, Google advises setting around three key results per objective; other experts say that up to five key results are fine. Consider your team’s size, the complexity of your OKR system, and your objective’s scope before determining how many key results to put in place. You don’t want to set more key results because it looks more challenging — remember that simplicity is essential.
Essentially, key results should cover enough ground to allow for objectives to be reached, whether they’re company-wide, team-specific, or individual goals. If the fulfillment of key results makes for only 40-50% of your objective, you know those key results are insufficient. Don’t forget that key results exist to serve your goals — otherwise, they won’t have the intended impact.
2. Be specific and don’t fear numbers
A common drawback of ambitious planning is being too imprecise. That’s why, as pillars for your objectives, key results must be measurable. For instance, you could set the vague objective of “having amazing social media reach” or the specific objective of “reaching 1,000 followers.” At first, they might appear to mean the same thing, but unclear objectives make it difficult to pinpoint your progress.
Imagine this: the same day your company gains 400 new followers, you have lunch with a colleague interested in your OKR progress. Can you give them a definite answer? If your objective was vague, probably not. However, if your objective was to get 1,000 new followers, you’ll be able to firmly say you’re 40% of the way to your objective. This leaves no room for confusion.
3. Aim high and use challenges in your favor
Make your OKRs ambitious. Despite what many people believe, easy work isn’t more motivating than challenging work. Harvard Business Review research states that “in some situations people perceive higher goals as easier to attain than lower ones — and even when that’s not the case, they still can find those more challenging goals more appealing.”
Feeling some discomfort is usually a healthy sign that your objective is challenging enough to make it worth your while. On the other hand, if your OKRs seem terrifying, you may have gone too far. Such far-fetched goals could harm your team’s motivation — perhaps keep them as stretch goals if you exceed expectations with your ambitious, but realistic OKRs.
Moreover, objectives should never boil down to maintaining something you’re already doing. If they include words like “keep doing,” “continue to,” and the like, you’re shying away from setting audacious objectives that would test your efforts and take your organization to the next level.
Like objectives, key results should require some elbow grease to accomplish. If they’re too easy, they won’t make a noticeable impact on the OKR progress. Hitting 70-80% is a good indicator of a high-impact key result, whereas fulfilling 100% without difficulty shows that the key result was unambitious.
Remember: key results should push your team to go the extra mile, stimulating employees to draw on their resourcefulness and innovation capacity. What’s more, be mindful that teams and companies change. What may have been challenging and exciting last year may make for low-hanging fruit this quarter.
4. OKRs are teamwork
Engage your workforce by asking them how they can contribute to objectives, rather than simply assigning top-down responsibilities to teams and individuals.
Ask yourself — and your teams — several questions. Is there a need or space for a special project? Does a team want to tackle a particular aspect of the objective? By asking employees for their input instead of presenting a fixed plan, you encourage stakeholders to take the initiative and work with (and on) their strengths. As a consequence, transparency and trust in your team’s capacity give room for thriving OKRs.
Besides, remember that the OKR framework can also boost individual work and development. Nurture engagement and a sense of purpose by empowering everyone to have a say in their individual goals. Should someone’s manager decide against an individual-level OKR, reasons should be laid out and not seem arbitrary.
5. Communicate, listen, and foster a feedback culture
Even if you’ve involved your team in the OKR development process (good on you!), teamwork isn’t finished. You’ll need your team’s understanding and cooperation to ensure the established OKRs make sense in practice and benefit the organization.
If an OKR is linked to another team’s objectives, you will benefit from understanding how they set and manage their goals, as that will affect the way you manage yours. Bear in mind that, if your company is setting OKRs for the first time, it may be wise to focus on setting company-wide objectives first. That way, smaller-scale team objectives can fall in step with the organization’s purpose, aligning goals on every level.
On a related note, make sure wording is always clear and unambiguous. Of course, that’s a best practice for all internal communications; still, especially when it comes to implementing OKRs, the last thing you want is for growth to be hindered by easily avoidable misunderstandings.
But that’s not the finish line for transparent communication. More than sharing one-directional information, listening to employees and fostering a feedback culture is one of the cornerstones of successful OKRs. We’ve explored how OKRs can sustain employee engagement, but this goes both ways.
Invest in engagement surveys and keep communication open while ensuring that your employees feel psychologically safe to express their opinions. That’ll also empower your team to seek advice from their management when facing roadblocks. This way, obstacles will still be learning opportunities, but they won’t hold OKRs back if addressed fast enough.
6. Track progress, focus on the outcome, and celebrate success
A surefire approach to keeping your OKRs in shape is to monitor progress and recognize every accomplishment. Praising your team for their achievements — no matter how big or small — is an excellent way to have everyone engaged and keep the potential of OKRs top of mind.
At this point, we hope the need for quantifiable key results is clear to you. To-do-list tasks have no precise endpoints, and that’s where key results thrive as a strategy. As finite milestones, key results support accountability and call for focusing on the outcome.
As we’ve already covered, vague examples make it hard to provide evidence of accomplishment. When negotiating a salary raise, would you rather hear your employee say that one of their feats was “researching software,” or that they examined all options and pitched the most fitting software to management on a specific date? Undoubtedly, the latter would be more impactful.
Focusing on gaugeable results doesn’t contradict the process. With no work done, key results can’t be magically achieved (unless they were unambitious), but the OKRs framework helps you envision the intended outcome and know how far you are from it.
Remember that objectives don’t have to be fully completed to be celebrated. If teams always achieve 100% of their bold objectives, there’s room to think bigger.
We recommend scheduling regular OKR check-ins to discuss roadblocks, find solutions, align expectations, and to use this time as an opportunity for employees to know that their progress is recognized and valued by their managers. Appreciation goes a long way.
7. Know when it's time to readjust and don't beat yourself up
We’ve argued that 100% fulfillment isn’t what you should focus on when establishing OKRs. If you’ve set the right OKRs (in a sweet spot between challenging the status quo and a “pie in the sky”), hitting 80% of your target should already validate your efforts and courage. Be proud of yourself and your team.
Yet, things change unexpectedly, as the 2020 pandemic proves. We’ll all fail at some point (most likely many) in our lives, and as much we should use losses as opportunities to learn and evolve, they don’t feel good, do they? But this isn’t the time to abandon your OKRs.
Chin up. Reassess your situation. Be conscious of what you can’t and try to make peace with what you can’t control (easier said than done, we know, but we must keep trying). Make the necessary adjustments to your key results — decrease numbers? Break down key results into smaller parts? Extend time frames? — and keep walking. Well-structured OKRs will help you bounce back.
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— If you’d like to learn more about how Leapsome can help you manage your OKRs, book a demo with one of our product experts.