OKRs (Objectives and Key Results) challenge companies to achieve ambitious goals. OKRs were designed by Andy Grove of Intel, and Google was quick to incorporate OKR planning into its quarterly and annual planning. Google now considers annual OKRs instrumental to the company’s success. This success has encouraged many organizations to adopt OKR best practices for their own planning purposes.
The ABCs of OKRs
OKRs have two components. The first is the objective, which sets a high but measurable goal for the company. The second is a set of 2-5 key results, which provide the means of measuring progress toward the objective. A common way to describe an OKR is that the objective demonstrates where you want to go, while the key results illustrate how to get there. An OKR might look something like this:
- To increase social media engagement with our target audience by 40 percent this year.
- Identify the three most popular social media platforms used by our target audience.
- Update status on the identified platforms twice a day.
- Attend six social media webinars hosted by industry experts.
- Respond to all social media comments or inquiries within two hours.
- Increase Twitter followers by 25 percent.
An OKR differs from other goal-setting systems in several key ways. Perhaps most importantly, OKR planning revolves around aggressive objectives that, while obtainable, require exceptional effort to attain. Setting an easily achieved objective misses the point of OKRs.
Failure to meet an OKR objective should be a likely outcome, and not cause for recriminations or negative consequences. In the example above, the OKR should not be considered a failure because social media engagement only increased by 25 percent — that’s still more engagement than the company had at the start of the year. Think of OKRs like setting exercise goals. if you set a goal of running a marathon but only manage to run a half-marathon, you’re still in better shape than when you started.
This brings up an important consideration for managers. The results of an OKR should never be used to influence performance reviews. OKRs only produce results when employees feel free to take risks without fear of consequences. As soon as you start penalizing employees for “poor” OKR results, you’ll lose them.
Annual and quarterly OKRs, surprisingly, are not usually mandated from the top down. Instead, 60 to 70 percent of OKRs should come from the bottom up. As each new quarter approaches, ask employees to submit OKRs on where they think their team or department should focus. A collective staff meeting then selects two or three OKRs, developing and aligning them with larger company goals.
While often seen as company- or department-wide endeavors, OKRs also help individuals push themselves to new heights. No matter what the organizational level, an OKR is always based on the company’s missions or values. An individual’s OKRs should benefit his or her team, the team’s objectives should benefit the department, and department objectives should support big-picture company OKRs.
Annual OKR Best Practices
Annual planning should consider the following OKR best practices (as indeed should any OKR planning session, whether designed to challenge individuals or entire companies):
An OKR should be ambitious: if you’re always meeting your OKR objectives, you’re not pushing yourself far enough. Think big when developing OKRs. Google actually sees failing to reach an OKR as a better result than exceeding OKR objectives. It’s a cultural shift, where aiming for the stars is more important than reaching them.
OKRs should be public: Your staff should have access to and an understanding of all OKRs, from company-wide objectives down to individual goals. Transparency is an important aspect of OKR planning, promoting both accountability and inter-departmental collaboration. Everyone needs to know what everyone else is working towards.
OKRs must be quantifiable: In order to determine how an OKR objective has or has not been met, it must be measurable. There’s a big difference between “we will increase productivity this year” and “productivity will increase by 20 percent by the end of the third quarter.” Objectives and key results should always have a numerical goal attached, so you have something to measure progress against.
Check-ins are important: Regular check-ins with managers and team members help guide OKRs, providing opportunities for feedback. Team sessions, 1:1 meetings, and company-wide meetings all provide a chance to review progress and revisit OPR planning. OKRs are not written in stone. If you realize you’ve made a misstep with one, change it.
Grading OKRs: At the end of the time period allocated for OKR completion, grade your progress. Google uses a “0-1” grading system, with “0” indicating failure to make any progress, and “1” indicating target objectives were met or exceeded. You don’t want to see zeroes, but neither do you want to see too many ones; that suggests your OKR planning failed to think big enough. Grades of 0.6-0.7 are ideal, indicating hard-won progress.
One final note on OKR best practices. Don’t initiate too many OKRs at once. Limit yourself to no more than five OKRs per quarter, with each OKR including three key results or less. Any more, and you risk your employees becoming overwhelmed, missing focus, and disengaging from the project.
Ideally, an OKR is a challenging project that makes team members slightly concerned they won’t reach their goals but keeps them determined to try nonetheless. When used properly — as Google and Intel know — OKR planning drives companies forward, challenging them to be more successful than they would normally imagine.