What Is an OKR? An Introductory Walkthrough With Examples
Oct 13, 2021
OKRs are one of those things that get thrown around in company chats to get people excited. Yet, when everyone gets the hang of them, things truly get interesting. OKR stands for "objectives and key results," and contrary to what many people think, they aren't just a way to structure your organizational goals.
In this post, we'll discuss what OKRs are and how you can start making use of them today in your organization.
What is an OKR?
What OKRs bring to your organization (Why OKRs matter)
Crafting OKRs that work
Rolling out an OKR program
Best practices for OKR implementation
What Is an OKR?
I like to think of "OKR" as a word that serves two purposes. The first is OKRs as a structure for setting more powerful organizational goals. And the second is OKRs as a framework of rules and best practices to manage goal setting within an organization.
This framework was initially introduced by Intel in the 1960s. However, it was popularized when Google implemented it in the '90s. Today, companies big and small use OKRs to set goals that give direction and drive impact across the organization.
Structure of an OKR Goal
At this juncture, I'd agree if you say that what an OKR is still isn't very clear. So let us look at a concrete example. Imagine two founders who decide to raise a round of funding. After discussing it, they decide they are good to go, and their goals look something like this:
Start the process of raising a round of investment
At least $100,000 committed, one month from now
Even though these look straightforward, it's still not very clear which is the most important to do and why. Does having $100,000 committed mean the funding round has started? Or is it the other way around?
An OKR answers this ambiguity, which is more often than not a result of poor framing. With an objective and key result approach, this is what we get.
Now, starting the round of investment has been designated as the objective, with the key result being to have at least $100,000 committed one month from now. Clearly, we have much more clarity with this OKR approach. Hence, spending the time to frame goals this way benefits everyone. This is the reason why many successful companies like Adobe, Amazon, and Baidu all implement OKRs.
What OKRs Bring to Your Organization
As mentioned earlier, OKR is also a framework, which in itself is fine, because we don’t mind a thousand of them existing if we don’t have to implement them. But the questions that arise are "What is peculiar about it?" and "Why should it matter for my organization?" To answer these questions, we have to, first of all, understand the problem the framework is designed to solve: strategy implementation.
Executing strategy is one of the most difficult challenges companies face. In fact, statistics show that only one in 10 organizations successfully get their company objectives to transcend the whole organization. In the majority of cases, the reverse is true. That is, there is a lot of misalignment between objectives at different levels of the organization. Hence, strategy execution is almost guaranteed to fail.
This is where the OKR framework thrives because of its inherent execution-focused nature to drive results. The way it achieves this is by promoting accountability, transparency, and strategy alignment within the organization.
When an organization clearly defines its key results, it can attribute these to team leaders and teams without explicitly telling them how to go about it. This allows them to be autonomous and take their own initiatives to realize company goals. As a result, employees engage more proactively, creating a healthy work culture.
It's important to know that OKRs are set at different levels of the organization. A very popular approach to this is to have the key results from a higher level act as the objectives for the lower level. This creates a nice coupling effect across the organization. And in that way, there's assurance that every entity is working toward the direction set out by top management.
Now that we understand what an OKR is and the challenges it solves, we need to know how to make good ones.
Crafting OKRs That Work
When working with the OKR framework, it's important to design good OKRs. A good OKR is ambitious yet practical, and most importantly, it's measurable. As you're coming up with one, three simple questions serve as guidelines.
Where do I want to go?
This defines your objective. This is the direction you want to go, and it should not be measurable. Example: Start a round of investment.
How do I know I'm getting there?
This defines your key result(s) and makes you put in a precise number. It has to be measurable. Example: At least $100,000 committed, one month from now.
What do I need to do to get there?
This defines initiatives to achieve your key results. This is where all the action happens, and initiatives are what complete OKRs. Example: Attend 10 conferences.
Example of a Good OKR
This is a good OKR for several reasons:
The objective (to get more Instagram sign-ups) is clear and not measurable.
Initiative 1 (to post new content daily) is ambitious yet possible.
Initiative 2 (to post three videos weekly) contains a number to measure.
Example of a Bad OKR
This is a bad OKR for the following reasons:
The objective (to double company valuation) is not supposed to be measurable.
Initiative 1 says to sign up “multiple accounts,” which is vague.
Initiative 2 (to capture 100% market share) is unrealistic.
Rolling Out an OKR Program
Let's now take a look at the things you need to roll out an effective OKR program.
Company Mission and Vision
When a company is set up, its mission and vision define its goals, purpose, and values. This is why company OKRs start with the company’s mission statement and vision for the future. Without those, there is no clear foundation on which to build an OKR program. It's not uncommon to see start-ups or smaller organizations rethink and sometimes change their mission statements when carrying out this exercise.
With a clear mission, vision, and business strategy that OKRs can support, you have the very first piece, since these usually span decades and can serve as a basis for yearly company OKRs.
As you move downstream in your organization, the frequency between setting and evaluating OKRs reduces. In most cases, top management defines company OKRs on a yearly basis, while smaller teams should do so weekly or quarterly. This is mainly because teams are the driving force behind the execution of business strategy via the initiatives they set out.
This shorter cadence is also to make sure that teams function in a more agile way. That way, they're able to use their learnings to stay on top of their OKRs, which translate to the company OKRs.
When creating our OKRs, we saw that making the initiatives and key results measurable was important. Well, they won't be that important if there's no way to track them. This is why organizations use platforms that bring end-to-end visibility like Plutora to follow up on software development process metrics. This helps to facilitate the transition to outcomes thinking by providing dashboards that display and track specific OKRs.
Best Practices for OKR Implementation
Like any new concept, software, or methodology you throw at people, it's key to do so gradually. Here are some best practices to facilitate effective OKR implementation.
Don't set too many of them.
Make them transparent by getting everyone involved.
In contrast to other measurables like KPIs, create new OKRs frequently and update progress regularly.
Use tools to track your OKRs.
As you can see, just knowing what an OKR is doesn't suffice. The real transformation comes from using this execution-oriented and focused goal-setting framework. And with a dedicated platform to track the OKR progress such as Plutora, you're set up for success with this methodology.