If we had a penny for every time a HR person came to us and said “Our CEO read ‘Measure what matters’ by John Doerr and wants us to start using OKRs” we wouldn’t even need to be in the software business. Clear Review could retire to sit on the beach and sip on margaritas.
Doing a quick search on GoogleTrends really brings this OKR boom to life. Over the last five years, search frequency for ‘OKR’, has been climbing steadily – worldwide.
So it’s no surprise that HR is being asked to implement this new way of objective setting by their senior leaders. This article will break down all the basics of OKR’s so you can confidently assess and implement a new way of objective setting in your organization.
Background and understanding the basics:
What does OKR stand for?
OKR stands for Objectives and Key Results. Objectives are overall goals and Key Results are the measurements or milestones you need to achieve in order to hit the overall objective. It’s a way to break down a larger goal into its smaller components.
Example:
Objective: Implement OKRs into our organization
Key Results:
1. Research and understand how OKRs work
2. Test OKRs in HR team for 1 month
3. Find technology that supports OKR setting and tracking
4. Train and roll out to the wider organization
Who invented OKRs?
OKRs were invented by Andy Grove, co-founder of Intel in the 1970s using the base model of MBOs (management by objectives, created by Peter Drucker in 1954). It wasn’t however until the book ‘Measure What Matters’ by John Doerr, published in 2017, that OKRs really became mainstream. Doerr himself was taught the OKR methodology by Grove and was the person who introduced it to Google.
What is the point of OKRs?
As with any goal or objective setting methodology, the point of OKRs is to be able to increase the chances of achieving what matters to your organization. OKRs are particularly strong at focusing and aligning people as well as introducing — right at the setting stage— a clear way to measure success.
What is the OKR methodology?
At the most basic level, OKR methodology breaks down large objectives into measurable milestones. However, there are three things that make OKRs different from ‘normal’ objective setting.
- They need to be set and reviewed regularly, Doerr suggests monthly or quarterly at least.
- OKRs should be mostly divorced from compensation with the focus being on driving performance itself, rather than on the measurement of performance to drive reward.
- OKRs should be aligned and translate company goals into team and individual goals.
What is the difference between KPI and OKR?
KPI or Key Performance Indicator is usually a pure measure that is used for forecasting. An example of a sales KPI might be ‘Number of Meetings Scheduled’ which is an indicator of future revenue. KPIs tend to not explicitly attach themselves to the overall objective ‘Revenue goal’ and are used to measure rather than to set out actions.
OKRs start with your Revenue goal as the objective and then set Key Results, which would be the actions or milestones that need to happen to reach that goal. OKRs are KPIs with a wider context.
Setting and measuring OKRs:
How do you write good objectives and key results?
A simple structure should help with writing good objectives and key results. There are 4 key areas to consider when writing objectives and key results.
- Objective – This is the goal itself. It should be easy to understand and should feed into an overall company or team objective.
- Key Results – Key results come in two forms. They are either deliverables or milestones. A deliverable is something that needs to be done/delivered in order to reach the objective and a milestone is an indicator of progress.
- Deadlines – OKRs have to be time-bound. Most organizations that we know set and complete their OKRs on a quarterly basis, so your deadlines for each Key Result and the overall OKR need to reflect that. You can choose if you want one deadline for the overall OKR or if you would like to add in deadlines for Key Results too.
- Collaborators – Is this goal something you can achieve yourself? Writing down the people/departments that you need to involve to achieve the OKR is essential at the planning stage. This helps to create transparency and buy-in ahead of starting on the objective.
How measurable should OKRs be?
If at the end of the month or quarter (when you review your OKRs) you aren’t sure if the OKR was achieved, your OKR was not specific enough. In the creation stage ensure that you know how you will be able to measure the success of both the objective and the key results. There are cases where objectives might not be measurable so this means the key results have to be, either in milestone or deliverable forms.
How many OKRs should you have?
OKRs are there to help organisations focus their efforts in short 1 – 3 month sprints. John Doerr recommends to keep things simple and to have 5 – 7 objectives with 3 – 5 key results. More could mean you’re either biting off too much or are being too granular, and less could mean that your objectives are not specific enough.
Team vs individual objectives?
If you are truly rolling out OKRs on a company-wide level, then there will be three levels of objectives to consider — organization wide, team-wide and individual. Some teams may not need individual OKRs as they are the collaborators on the key results. The need for individual OKRs is often dictated by the type of work the person does.
HR specific processes and OKRs:
How do I keep people accountable when it comes to their OKRs?
OKRs should be part of a wider continuous performance management approach and represent actual priorities. If you set your OKRs well, they will become a part of everyday work. OKRs shouldn’t be an end of quarter tick-box exercise, they should be discussed regularly in check-ins so you can identify blockers and also re-evaluate if they are still relevant. Using technology to track progress and gain visibility will increase accountability.
Lastly ensuring that senior leaders buy into the methodology, follow-up and respect the OKRs that are set will inevitably increase the take-up and accountability across the organization.
What is the best OKR software?
Don’t get carried away with the pseudo-science of OKR-specific software. The benefits of OKRs come from setting clear objectives and actually being able to take action and measure progress.
We like Clear Review for the objective setting functionality, but there are lots of technologies out there you can use — Word, Trello or more specialised tech. Remember the best technology is a technology that people want to use. It needs to be simple, something that you can log into and just use and one that is flexible enough to meet what your teams need.
Should OKRs be tied to pay and reward?
Extrinsic motivators i.e. pay, have historically taken precedence in workplaces because they appear easier to control and influence. Dangle a carrot of more pay and prospects if people perform well and productivity should increase. Right? Sadly not. Research (and bitter experience) has shown us that this rarely happens.
We need to look to intrinsic motivators. Dan Pink’s 2010 best-selling book “Drive” set out an approach to intrinsic motivation based on three elements:
- Autonomy – the desire to direct our own lives
- Mastery – the urge to get better at something that matters
- Purpose – the yearning to do what we do in service of something larger than ourselves
Increasing these will be far more effective than tying OKRs to Pay and Reward. Luckily OKRs themselves already work quite well to those 3 elements and you can use OKRs themselves to create more autonomy, mastery and purpose.
Should we cascade down or align up objectives?
When looking at OKR methodology you can easily think that the answer is cascade down. In reality, OKRs are more of an ‘align up’ system where the company is transparent about its objectives to teams. Teams, therefore, create OKRs to contribute to the company objectives and individuals contribute to the team. Individual team/company circumstances will have to be taken into consideration here, however, it really doesn’t matter if it’s top-down, bottom-up or sideways as long as it works for what you need.
Who OKRs are not suitable for?
One thing that OKRs are not is a task list. OKRs are generally more suited to people whose work is more project or campaign-based. Think marketing/creative teams, product, engineering. If your work is a never-ending hamster wheel of tasks i.e. inputting data into a system OKRs might not be as appropriate.
You might set sales targets for the quarter and break them down into milestones per month but that is hardly an actionable objective. It is an outcome rather than an action. In sales, you could break this down to ‘talk to x people’, ‘book x demos’ etc. But the last thing that you want is to create arbitrary OKRs for individuals just because.
In our experience, it is different in many ‘messier’ (than tech) sectors such as hospitality, retail, professional services and the public sector. OKRs adoption in these sectors has been more limited. And, we find, where they have adopted “OKRs”, they have done so with a sleight of hand, using a more liberal definition of OKRs for the departments that do not lend themselves to total objectivity. We applaud this nuanced approach; performance management is an art, not a science, and we think it is appropriate for a company to fit a methodology to their modus operandi and company culture.
Want to see how OKRs work in Clear Review?
We incorporate OKRs into a wider performance management system that includes feedback, coaching conversations and engagement.