OKR? What's that?
Glad you asked. It's a goal setting framework. It stands for "Objectives & Key Results". Here is an example:
Grow company revenues
- Hit global annual revenue of $150 million
- Achieve 100% YOY sales growth in North America
- Increase the average deal size by 25%
Notice how it has two key elements?
Objective: Your goal, your dream, your vision. Its What you want to get done
Key Result: A very specific, measurable way to show How you are going to get it done
That looks like an MBO! I've been doing them for a while and I don't think I like them. I'm outta here!
Wait. It is built on MBO's and KPI's but there are important differences. Tweaks really, but very key ones tuned to suit contemporary management and product development practices
But first, some history
OKR's were first implemented by Andy Grove at Intel. He built upon the concept of MBO (Management by Objectives). Then John Doerr, who watched Andy use it at Intel to great effect, introduced it at Google, and helped Google become Google. And that's how OKR's became famous. A lot of companies use them now. And Google still uses them.
So, how are OKR's different from MBO's?
They differ fundamentally in three ways - Purpose, Transparency and Cadence.
A method for employers/supervisors to manage their subordinates by introducing a set of specific goals. The goals must be achieved 100%. Used to review/reward the employee during the performance review
A system to prioritize, communicate and get everybody to contribute to what matters most. The goals are stretch goals and employees are not penalized for not meeting them 100%. OKR's are typically not the basis for a performance appraisal
MBO's are confidential. They are between the manager and the employee
OKR's are public. Everybody can and should see everyone else's OKR's
Set yearly. Very waterfallish in nature
Set monthly/quarterly. Lean/agile in nature
Okay. Why should my company or team have OKRs?
Here are 10 Reasons:
- It's a communication tool. It's a system to communicate what's important to the company (or team) and what's not. Now, if you are the CEO or leader of team, you know that effective communication is one of the hardest things to do. This helps. A lot
- It promotes transparency. Ever wondered what matters to your CEO, company, a key executive or team? Now you know - because everyone's Objective, Key Results and grades are visible to all.
- It empowers. Now that you can see everyone's OKR's, you can choose to help. Especially if it's in your area of expertize. Your objectives don't have to be handed down Top Down anymore. You can add your own. And sometimes, your objectives are so cool, that they may become a department or company objective in the near future. How empowering is that? You just made a difference!
- It's aspirational. OKR's are stretch goals. Achieving 65% of the impossible is better than 100% of the ordinary. Even if you fail on a stretch goal, you are bound to have learned something valuable. They are like little moon shots..
- They promote innovation. Sure, you can have "business as usual" objectives. But you can have aspirational OKRs too. They give you permission to fail. And if you haven't failed recently, you haven't tried hard enough
- It engages your team. How? Just like you can have individual OKR's, you can have team OKRs too
- It sets direction. You can tell where your company is going. It's like a North Star, a beacon - constantly guiding you.
- It prioritizes. You know what matters and what doesn't. Prioritization is key to execution.
- It sets alignment. Now that you have direction and priorities, you can all work on the same thing. This leads to better outcomes
- It's data. Good OKR's provide objective, quantifiable data points about what's being done and how well it's being done. If you are a Data Driven company, you wouldn't want to miss out on this key metric
And they solve world hunger. OK, now I'm exaggerating. But if we do want to solve hunger, we should start with OKRs.