If you’ve heard anything about Objectives & Key Results, you probably already know how powerful they are. Research shows that goal-setting has a positive impact on employee effectiveness, thus improving overall effectiveness within organizations. And OKRs are being used more and more by all kinds of multinational companies, from Spotify and Slack, to Deloitte and Dropbox.
So when did OKRs come about? And how did they come to be viewed as an indispensable organizational tool?
The story of OKRs begins in 1954. In that year Peter Drucker, often regarded as the founder of modern management, published a book called The Practice of Management laying out the priorities he envisioned for future managers. Drucker recognized the tendency of managers to get caught in an “activity trap”, whereby preoccupation with current activities distracted them from their company’s wider vision. So he highlighted management by objectives (or MBO) to be a top priority.
But over time the weaknesses of MBO were revealed. Drucker himself acknowledged that they were “just another tool” that still didn’t solve the problem of actually knowing your company’s objectives.
Furthermore, as Harry Levinson would write decades later, objectives often ignored employee subjectivity and the elusiveness of motivation, assuming that company goals automatically aligned with the goals of its employees. Even if “the effort to come to common agreement on what constitutes the subordinate’s job is highly desirable,” Levinson criticized the MBO approach as being overly concerned with quantity and not quality.
Eventually, the term MBO became more or less obsolete.
And then in the 1970s, Intel CEO Andy Grove took the idea of objectives, brushed it up and coupled it with key results to form what we now know as OKRs. For Grove, the role of key results was to facilitate the achievement of one’s objectives - and to make that journey, well, more objective! Amongst his team at Intel was John Doerr, who later went on to become a billionaire venture capitalist and Google investor. It was Doerr who would introduce OKR management philosophy at Google.
OKRs are being used more and more by all kinds of multinational companies, from Spotify and Slack, to Deloitte and Dropbox.
Doerr is the staunchest of advocates when speaking about OKRs. Adamant that they were the key to Google’s continuing success, he recounts giving the gift of OKRs to Google’s founders, Larry Page and Sergey Brin, in 1999. “They loved the notion of laying out what mattered most to them — on one or two succinct pages — and making it public to everyone at Google,” Doerr writes. Two decades on, he describes OKRs as “the scaffolding” for Google’s brilliant projects, and credits them with enabling innovative, ultra-flat hierarchies where managers can sustain as many as 20 direct reports.
Doerr acknowledges that OKRs won’t fill in for excellent leadership or an inspiring workplace culture. Alongside these qualities, however, “OKRs can guide you to the mountaintop,” he argues. Today many dominant companies agree: multinationals using OKRs include Google, Facebook, Netflix, Spotify, Gap, Lear, Deloitte, and Adobe. And in the words of Bono, OKRs “giv[e] us an environment for risk; for trust; where failing is not a fireable offense.”
So think about OKRs the next time you want to achieve big things — and to read more about OKRs, check out our other blog posts!