The OKR Model – Leadership with Objectives and Key Results
The OKR model is an innovative leadership method for agile organizations. Some of the most successful companies of our age refer to it as the “secret sauce” to their success. At OKR Academy we have researched the field of leadership with OKRs and the efficient implementation of the seemingly simple framework for more than 6 years.
OKRs: THE AGILE MANAGEMENT METHOD USED BY GOOGLE, LINKEDIN AND CO.
The OKR model is a management method, which interconnects the goals of a company with those of each and every employee and establishes a clear focus on goal setting for the next three months.
OKRs help a organizations to:
Clarify the critical tasks for the company
Find the right focus for the next three months
Decide on the proper utilization of scarce resources
Achieve transparency for employees allowing them to focus on the right tasks
Establish better communication
Implement success tracking indicators
Connect vision, mission and strategy with short term operational planning
THE TWO CORE ELEMENTS OF THE MODEL: OBJECTIVES AND KEY RESULTS
The objectives (O's) are motivational, challenging and for the most part, not fully achievable. Key Results (KR's) describe very concrete and measurable steps on the way to reaching the objectives. You decide how progress in reaching the goals is measured and how the results are evaluated.
THE FUTURE CORE ELEMENTS OF MANAGEMENT ARE DEPICTED TRANSPARENTLY.
Future generations of managers will focus first and foremost on clarity, transparency and feedback. Unlike before, outcome becomes the focal point of analysis. OKRs offer the ideal system not only for clear communication of goals, progress and results, but also of assistance needs and lessons learned.
A STRUCTURED GOAL SETTING PROCESS IS THE KEY to AN EFFECTIVE MANAGEMENT SYSTEM.
Identifying and formulating the right goals are the alpha and omega of modern management. The OKR method collects 60% of the objectives from the operational level, and harmonizes them with the remaining 40% of objectives from management. This process ensures that no important aspects for the near future are forgotten.
PROGRESS Needs AN AGILE MODE OF OPERATION and RAPID Execution.
Adapting to constantly changing conditions is one of the main challenges of modern companies. Therefore, businesses need a model that leaves enough room for the creativity and pressure for change of modern markets while guaranteeing a disciplined implementation of the next steps at the same time. Objectives are set, achieved and evaluated in three-month cycles.
OPERATIONAL EXCELLENCE IS ALL THAT COUNTS DURING Execution.
In the world of OKRs, decisions about the allocation of resources and the next major issues to be addressed are taken in quarterly goal setting meetings. After that, it's time for implementation - no time to lose! Operational excellence leads to an improved cohesiveness of team and employee goals, an increase in the interconnectivity of goal systems and a significant improvement of the ability to quantify progress.
THE ORK MODEL is part of the Organization’S DNA.
Management systems only work when they are executed unconditionally. The entire management team must wholeheartedly back the implementation, and the OKRs must fuse into every part of the businesses' bloodstream. Goals are handled transparently and find their way into the systems used on a daily basis. They provide an on-going agenda for meetings and set the framework for assessment of progress and success.
OKR GUIDANCE: AN OUTSIDE PERSPECTIVE supports the efficient implementation of OKRs
In order to maximize the potential of Objectives and Key Results, it is advisable to gather all outstanding goals, projects and tasks and assess their importance. That way you can pinpoint, which goals are truly important and which are not. In this measure, it is often best to have a neutral outside perspective. Once all issues are on the table it really just boils down to separating the important ones from the unimportant ones and to find the right focus. An experienced OKR Champion supports an efficient and successful implementation of OKRs. For the process, it is important that the OKR Champion is fully integrated in the business during the first OKR period.
How it works: HOW TO USE THE OKR MODEL
A successful entrepreneur needs to know two things:
Where the business should be in five to ten years
What is to be done over the next three months
The first point is achieved with a clear vision, a strong mission statement and shared values.
The second point ensures that the vision is broken down into concrete steps and that understandable and achievable objectives are formulated.
THE OKR MODEL
The OKR (Objectives and Key Results) model offers an outstanding goal setting frameset for this very purpose. John Doerr from Kleiner Perkins Caufield Byers, first implemented the model at Google in 1999. In the meantime it has been adopted by a number of businesses such as Twitter and LinkedIn.
The great advantage of this framework is that goals on every operational level can be broken down into goals for a lower level. The company goals thus give you the big picture. Deriving therefrom, the respective departments and their employees have OKRs, which contribute to the Key Results of the superior level. In doing so, tasks over several levels can each be feeding into an overarching objective.
With absolute transparency every employee knows what he or she is working for, and how that contributes to the overarching objectives through the achievement of a specific and concrete goal. This means every employee always has an answer to the "Why?" and can thus take better decisions.
Distributing goals on different levels throughout the company allows for the workload to be effectively compressed throughout the company. Key Results in the higher levels serve as targets for the following levels. That way, the target system is always constructed pyramidal. However, it also leaves room for adjustments and reformulations, as the milestones often have to be transferred between different departments. The company objectives allow the management level to lead the business into the right direction. Team goals set priorities for teams and individual OKRs determine what each employee is responsible for. Thus team goals are not a complete representation of the sum of all the individual employee's objectives, but rather a list of priorities.
HOW TO USE OKRS
The model limits itself to the formulation of a maximum of five objectives, each with four key results. Through the artificial limitation of available goals one is forced to focus on the main objectives when agreeing on targets. No more than five objectives are allowed. If another goal is deemed to be relevant, the prioritization of other issues needs to be discussed and possibly changed.
In a nutshell, the model is based on two key messages:
The objectives (O) are ambitious and feel somewhat uncomfortable
The key results (KR) are quantifiable. They are easily measurable using a percentage to quantify their level of completeness.
The model is completely transparent. Every employee can view all the OKRs of every other employee.
FORMULATING OBJECTIVES AND KEY RESULTS
The goals should be set high so that the achievement sweet spot lies around 75%. If goals are consistently reached with 100% completeness the bar has not been set high enough. If goal achievement is too low, that should be taken into account for the formulation of the next OKRs.
First and foremost, when using this framework, objectives must be defined clearly. Objectives are not to be mistaken for simple headlines, but have to be concrete descriptions of a state to be achieved. The more concrete, the better; always within the frame of the level concerned, of course. However, at this point, goals must not be confused with individual tasks.
In teams, goal setting presupposes a common understanding of an issue. The model is a tremendous aid in developing this understanding. "Going on a summer vacation together" is a desirable goal. It is quite vague though, and just deciding on one out of the suggested destinations can already jeopardize the project. "Crossing the Atlantic in a sailboat together this summer" on the other hand projects an image to the mind of the involved parties, and milestones can be derived immediately. Obviously a sailboat is required, the route has to be determined, etc.
Thus, formulating objectives isn't always easy. Winning a championship, for example, is an ideal, clear-to-understand and achievable goal. However, improving individual processes within the company is more difficult. If the improvement is aimed at a specific problem, the problem can be used as a specification. Processing time of tickets, response time in customer service or reach of a marketing campaign are examples of such specifications. If no clear objective, in the sense of achievement or non-achievement (corresponding to percentage from 0 to 100), can be formulated, the gaugeable Key Results will at least help to describe the target in qualitative and quantitative terms so that concrete progress becomes measurable.
Defining concrete goals goes hand in hand with a concrete definition of success. A project's expected return needs to be valued, in order to determine whether to tackle it at all and why. Therefore, the question about which outcome is actually considered a success arises in advance. So you first decide on a scale for success and failure for each individual key result. That is the only way to retrospectively assess, whether an action's result was above or below expectations. A result without a predetermined scale to rate it inevitably leads to arbitrariness, allowing for its interpretation to go in any direction. For example, five responses on a mailing campaign with 1,000 recipients can be rated as a poor result. However, if the expected outcome and the calculated break even point lie at three answers, then the action can unequivocally be regarded as a success.
The concrete formulation to increase an indicator by the factor x from y% to z% for example, often fails because of the operational measurability of indicators. Firstly, the problem often lies in the identification of suitable indicators. Secondly, the technical collection of necessary data is often difficult and requires considerable effort. But it's worth doing it. The identification of appropriate indicators first and foremost tells you what the driving force behind success is! Knowing and understanding what actually fuels success, lets you exercise a different kind of influence on your success. The technical realization of the measurement often leads to KPIs that are crucial for a metrics-driven control of the company anyway. If one agrees that financial success in the form of sales or profit is always only the derivation of another qualitative success, then it is always worth identifying what constitutes a success and to describe it quantitatively!
The development of common goals works in two ways:
By the team, working from the bottom up, and through the leadership circle, from the top down. As a general rule, 60% of OKRs should be brought from the bottom up. The remaining 40% are the strategic objectives set by the management circle, which controls the fate of the business. This approach ensures that objectives are not imposed from above, and are therefore accepted. Furthermore, the know-how to improve existing products or processes is fed directly from the company's departments into a bigger picture. Nobody knows the products and processes better than the employees themselves.
Once all of the OKR drafts are put on the table, negotiations begin. The manager negotiates with his employees. The employees negotiate with their manager. Departments negotiate with one another. Priorities are agreed upon, always keeping a three-month focus in mind. Overarching goals require a common agreement on priorities so that they can be achieved. The thus generated awareness that achieving one objective often leads to not achieving another one, allows for conscious decisions on priorities in advance.
REVIEW & START OF THE NEXT PERIOD
The retrospective analysis in review provides an evaluation of one’s own goal achievement. This is not considered as an evaluation method for the performance of employees and departments and should not be linked to pay models. Rather, the analysis of the elapsed period provides valuable data to improve processes, thus leading to better planning for the coming quarter.
Despite their limited number, OKRs will undoubtedly not be fully achieved at the end of each quarter. Thus the question arises, whether these goals should be transferred to the next quarter. Invariably, the continuation of previously unachieved goals should only take place if the goal is really important! Otherwise, it should be cancelled without replacement, even if valuable work time had already been invested. It's all about answering the question of whether reaching this goal will make an important contribution to the overall result in the future or not. If, for some reason, a project did not receive sufficient attention in the last quarter, it should be carefully scrutinized. It's better to abandon a bad project midway than to keep wasting valuable resources on completing it. It's about as rewarding as reading a bad book cover to cover.