The OKR Method: How to use Objectives & Key Results
OKR has been the trend in business management for several years now. It is supposed to make companies more agile, transparent and participative. Especially in Silicon Valley, OKR is one of the secrets of success for many tech companies, such as Google, LinkedIn and Uber. But what is behind this concept? And why do so many companies rely on OKRs?
What is the OKR Method?
OKR stands for Objectives and Key Results. It describes an innovative and transparent management approach. The OKR Methodology defines clear, measurable goals (objectives) and links them to concrete results (key results). Companies and organizations use the OKR framework to focus and prioritize. It is also used to optimize progress and monitor success. Incidentally, the OKR approach has been around since the 1970s; it dates back to former Intel CEO Andy Grove.Download Whitepaper
How does the OKR Method work?
Companies that use the OKR Methodology define sets of Objectives and Key Results for each cycle. A cycle is typically a quarter. Each set of OKRs consists of a maximum of five objectives and a maximum of four key results, i.e. there can be fewer, but not more.
Objectives are the primary goals. They are qualitative and describe a self-contained state to be achieved at the end of a quarter or a benefit to be realized at the end of a quarter. They should also be manageable and motivating. The key results define the most important success drivers that contribute to the achievement of a goal. They are measurable and guide action. The trick is to identify specific drivers of success because they significantly increase the likelihood that the desired state expressed in the goal will be achieved. Key results should also be “stretch goals” or “moonshots”, which means they should be challenging and ambitious, but still achievable. In general, the following applies to the OKR method: Achieving 70 percent of the goal is considered a good result.
An important aspect is that there are OKR sets that are set by management and therefore at the strategy level. Those make up 40%. The other 60 percent of the set is operational and formulated from the bottom up, by individual departments or teams. This makes both corporate and team goals transparent to the entire organization. OKRs are stored in a central location so that all employees have access to them at all times. OKR tools are available from several different vendors. There are different roles and responsibilities within the framework. Set Leaders have primary responsibility for a set. They are also responsible for publishing and updating key results. The company set is the sole responsibility of management. The underlying sets may be the responsibility of department heads or team leads. It is important that the roles are clear and well defined.
Who uses the OKR Method?
The OKR method is primarily used by agile organizations. However, it also works in the corporate landscape and for traditional mid-sized companies across all industries. Depending on the structure, it can be used throughout the organization, in individual departments or teams, or by individuals. Ultimately, who uses OKRs and to what extent depends on the needs of the company and its organization.
Managers can use OKRs to define and track their own goals and those of their teams.
Teams can use OKRs to set common goals and monitor the progress of their work.
Departments can define OKRs to clarify objectives and responsibilities at department level.
Employees can formulate OKRs to define their individual goals and responsibilities in the context of the corporate goal.
What are the advantages of the OKR Method?
Every organization has different reasons for adopting the OKR-Method. The bottom line, however, is that organizations hope to become more efficient, more successful, and more likely to achieve their goals. Ultimately, OKRs bridge the gap between strategy and day-to-day operations. Teams work together toward common goals and can reach out to other teams for support when an issue crosses departmental lines.
Overview of the OKR benefits
OKRs help companies and their employees identify and prioritize the most important goals. The main focus is on what needs to be accomplished in the short term with the resources available.
The method specifies a certain number of objectives (1 – 5) and key results (1 – 4). This limitation is not without reason. Rather, it helps companies and teams to focus on the most important goals and tasks instead of dwelling on secondary tasks.
The method makes goals and responsibilities visible to everyone at all times. At the same time, progress and achievements can be tracked. The transparent process helps ensure that information is shared across departments and prevents silo thinking.
Employee Involvement and Motivation
OKRs involve employees directly in the goal-setting process. They also help them understand their goals and responsibilities in the context of the company’s goals. Employees also see progress on individual key results, which can be motivating and lead to greater commitment. Another benefit is that teams are motivated to organize themselves, which in turn gives them a degree of freedom.
Controlling and Feedback
The OKR cycle always follows a set sequence (more on this in the next chapter). As a result, the process provides regular review opportunities to measure the progress and success of each objective and key result. In this way, obstacles or problems can be identified and avoided at an early stage. At the end of a cycle, it is possible to check very precisely whether the objectives set have been achieved.
Sometimes internal or external influences can prevent progress or achievement of an OKR. Because the method is flexible, it adapts to changing circumstances, needs or conditions. As a result, it enables organizations, teams, or individuals to achieve their OKRs by taking targeted action.
How do you define a good set of OKRs?
What makes a good Objective and a good Key Result? The following overview will help:
A good Objective…
- is qualitative and not measurable
- is motivating and inspiring
- is ambitious and challenging, yet realistic and achievable
- is precise and understandable
- is short and concise
- always refers to the entire quarter and describes a self-contained, clearly definable state
- can be achieved with the department’s resources
- is not a permanent goal
- is understandable to everyone (even outside the department)
- contributes to the strategy or overarching set of OKRs
A good Key Result…
- has a direct link to the objective
- is measurable with a clearly defined metric
- contains concrete success drivers that increase the likelihood of achieving the objective
- is independent of other key results
- is not a milestone
Examples of OKRs
What makes a good Objective and a good Key Result? The following overview will help:
Objective: We want to expand our online business
- KR1: Increase in online sales by 20% compared to the previous year
- KR2: Doubling the number of monthly website visitors
- KR3: Improve the conversion rate by 15%
- KR4: Increase the satisfaction of our online customers by 20%
Objective: We want to host a successful B2B event
- KR1: Creation of a detailed event concept that includes a schedule, important milestones and tasks
- KR2: Registration of at least 500 participants
- KR3: Generate at least 20 new leads through the event
- KR4: Increase sales by 15% in the three months following the event compared to the same period in the previous year
How can the OKR Method be implemented in an organization?
The OKR method cannot be implemented overnight. Implementation is complex and needs to be structured and systematic. Many companies rely on professional external support, as internal discussions may arise at the beginning of the OKR implementation. There are also a number of factors that are important to consider when implementing OKRs.
Create an understanding among employees
OKR cannot be “prescribed” from the top down. Instead, management should create an understanding among employees in advance. To do this, it is necessary to develop an internal communication strategy. For the OKR method to be implemented sustainably in the company, the commitment and engagement of all those involved is required. Employees should not have the feeling that they are being monitored by the new method. Instead, they should be given a positive feeling that OKRs help them to work more efficiently and improve performance.
Plan with enough time
As mentioned earlier, OKR cannot be introduced quickly. It is important that companies give themselves time to implement. Allow at least one year from the start until the method is understood and “lived” by everyone in the company. On the one hand, this first year is about training processes. On the other hand, you need enough time to teach and train people. For example, explain how the OKR Weekly works. Also, train people on how to set good objectives and key results.
Define processes and tools
Once an organization has decided to adopt OKRs, it must decide where and how to store its OKRs digitally. It is important to note that OKRs need to be managed and reviewed on a regular basis, so they should not be stored in a document that is quickly created and poorly maintained. Out-of-the-box cloud-based solutions are ideal for companies that want to try things out first. Others, however, choose to purchase dedicated OKR software. Often, companies already have software in place that has been used for other purposes and can be used or upgraded for OKR. Ideally, the software has functions for creating OKRs and visualizing dependencies. The cplace software with its associated Objectives and Key Results Solution Template is ideal for this. It contains an information and collaboration hub where companies can clearly communicate their strategic goals and at the same time record the tasks and projects of the teams. cplace also allows the integration with the operational (project) work of the teams, so there is no need to introduce another specialized tool that would lead to another information silo. Common collaboration tools such as Miro are ideal for conducting OKR workshops at the beginning of a new OKR cycle.
The OKR Champion or OKR Master plays an important role in the OKR method. Depending on the size of the company, there may be several champions or masters. They help to guide the change process and provide guidelines. The OKR Champions provide support in the workshops during the planning phase when writing the OKR sets so that they meet the relevant criteria (see previous chapter). The champs also provide coaching sessions to managers and help them develop their OKR sets. They also moderate the OKR workshops to ensure that discussions run smoothly.
Launch a pilot project
It is advisable for the company to start with a pilot project in which the OKR method is used for the first time. This could be a specific department of the company where the process is first tested and important feedback is gathered. Other departments in the company can then benefit from this pilot project and the learnings. This in turn promotes employee acceptance and creates understanding.
Whitepaper – The OKR Method
Everything you need to know about the OKR method – definition, benefits, examples and more – is summarised in our free Whitepaper.