The idea of Objectives and Key Results (OKR) provides a simple yet proven goal-setting tool that has enabled companies like Google, Intel, and Oracle to fulfill astonishing growth goals.
The effectiveness of an OKR stems from providing a clear and quantifiable guiding light by which a company work towards, without ambiguity or miscommunication. OKRs make goals simple, as any action can be tested against whether it achieves the objective as measured by the key results set out in the OKR.
And from a business perspective, part of the magic of OKRs is that everyone knows what that goal is and how they will get there.
They add a great deal of structure and drive to an objective, setting not just the objective, but how success in achieving that objective can be measured.
So let's delve into OKRs, what makes them so useful, how to create them, and more importantly, how to communicate them for maximum results.
What's Covered:
- What is an OKR?
- What is the Difference Between KPI and OKR?
- What is an OKR Dashboard?
- An Example of a Good OKR
- The Benefits of OKRs
- Creating Your First OKR
What is an OKR?
An OKR or' Objective and Key Result' is a tool used to set bold or challenging goals where results are measured to provide feedback on objectives progress. OKRs are adopted by companies, departments, teams, and individuals to set inspirational and tangible objectives.
They provide a structured format for tracking progress against the goal and creating alignment for all stakeholders in the objective. An expected outcome from using OKRs is that they nurture engagement and focus on the actions needed to accomplish the objective clearly and transparently.
What is the Difference Between KPI and OKR?
KPIs-or Key Performance Indicators are performance indexes for evaluating the success of an organization. And, if you are not already familiar with KPIs and OKRs, you're probably asking yourself how that is different from what we have described above.
The main difference between the two is that OKRs inspire specific action towards a clear goal. In contrast, KPIs tell a more ambiguous story of success or failure and one that does not describe any particular action that needs to be taken.
Another significant difference is that KPIs should be grounded; attainable. They indicate whether an organization is succeeding on its current path, and failure to meet KPI targets should be seen as a sign of a problem with the current process. On the other hand, while OKRs should be attainable, they should also be bold, with lofty ambitions, and present a proverbial carrot to drive your organization forward.
In other words, a KPI tells if your plan is succeeding on its current path, whereas an OKR tells your organization what course it needs to be on.
There is no simple statement to be made about which one is better. Both KPIs and OKRs have their place, and the best solution to reach your organization's goals will depend on what those goals are and the organization's makeup.
What is an OKR Dashboard?
An OKR Dashboard is a tool that allows you to create easily digestible snapshots of OKR progress, taking in all the necessary data and displaying it in visualizations, such as graphs and charts.
Objectives can be broken down into their respective authorities, such as per employee or per department. This allows you to see areas that need improvement, as well as where things are progressing better than expected.
With OKR Dashboards, you can merge several OKRs into a single visualization, giving you an instant snapshot of the overall progress of the organization. As well as defining the timescale of your snapshot, it makes it easier to assess progress on several timeframes, such as monthly, quarterly, annually, and more.
An Example of a Good OKR
The most effective way to illustrate a concept is by providing examples of that concept in action. To that end, we thought we'd highlight a good example of an OKR to further help you understand the idea.
As we have mentioned already, an OKR should consist of an ambitious objective that can be quantified using multiple key results-often between three and five. For our example, we are going to use three key results.
Objective: Improve Brand Awareness
- Key Result: Work with influencers to drive 1,000 additional sign-ups
- Key Result: Achieve five earned mainstream media placements
- Key Result: Gain 1,000 LinkedIn followers through quality posts
In this example, you can see that the main objective is very vague in and of itself-improving brand awareness could be defined in any number of ways - but with the key results, there are quantifiable indicators of success, along with the roadmap of how to achieve that success. All of these key results provide a numerical representation (342/1000 LinkedIn followers, for example), which means the overall OKR can be represented as a numerical value, such as a percentage.
Of course, the choice of objective needs to be appropriate for your business, and the choice of key results needs to be appropriate for the objective. There would be no sense in a company that does not use LinkedIn adopting the above OKR as it is; OKRs need to be tailored to the organization.
The Benefits of OKRs
Now that you know what an OKR is and how they work let's take a moment to really spell out the benefits of using OKRs in your organization.
Improved Focus
The main advantage of having clear, quantifiable goals, is that any action can be tested against the simple question; "does this help me reach my goal?" Being able to clearly see how a given task aligns with the goals set out by the OKR not only helps keep your organization on track, it acts as a reassurance to individuals within that organization, as they can always clearly see that they are on the right path.
Improved Collaboration
We mentioned that an OKR should be public, and this is a big part of why. When everyone knows the goals your organization is striving for, it makes it easier for individuals and different departments to collaborate; since everyone knows what the ultimate objective is. In places where objectives overlap, collaboration helps to move things along (not to mention foster a healthier work environment) where blind task-based work keeps people and departments isolated.
Greater Goal Clarity
The ultimate power of OKRs is the ability to mesh personal, departmental, and organization-wide objectives together with measurable results. Seeing how an individual objective fits into the bigger picture helps people understand their role in the overall objective, bringing a greater sense of unity within the organization. Being able to visualize a direct line between a personal OKR and an organization-wide OKR helps people feel valued, as they can see exactly what they are doing to help.
Creating Your First OKR
Now that you're well versed in what an OKR is and why you can benefit from it, it's time to start creating your own. Remember, every organization is different, and OKRs from one organization will rarely be as effective if transplanted to another organization.
1. Establish Long-Term Priorities
The first step in determining an objective is understanding your priorities; this way, you can test your potential objectives against whether they help you achieve those priorities. Consider at least a three-year plan.
2. Convert Priorities into Annual OKRs
Once you know your long-term priorities, break them down into annual OKRs. It can help to break your OKRs out into categories, such as "strategic", "financial", and "organizational", etc.
3. Break Down Your OKRs
Once you have established annual OKRs, it is time to break them down into smaller OKRs. Start with quarterly OKRs, then team OKRs, and finally individual OKRs. The important thing is that each OKR builds towards the overall goal of the organization. There should be no objective that doesn't clearly and directly advance the general cause.
4. Keep Track, Constantly Tweak
This could be said to be the final step but, in reality, there is no final step. From this point on, you should be keeping a close watch of the overall picture, tweaking OKRs where their key results are not producing the desired effect, and praising where appropriate.
Finally...
OKRs are an invaluable tool in any organization's arsenal, and can be just as effective on a personal level. From small, single-owner businesses, to multi-national conglomerates, OKRs can provide clarity and focus that helps the organization at all levels avoid things like drift, feature-creep, and any number of other problems that can stem from a lack of clear objectives.
If we can stress one point again to end on, it is that no two organizations are the same, and OKRs that work for one organization might not work for another. Analyze your priorities, and come up with OKRs that will help you get where you need to go.