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The Ultimate Guide to OKRs

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What is OKR?

OKRs are clear vessels for leaders’ priorities and insights.
- John Doerr, author of Measure What Matters

OKR, or Objective and Key Results is methodology that can be implemented to set and track ambitious goals by aligning organizational performance and nurturing collaboration.

Google attributes its growth story to OKRs which enabled them to prioritize their goals, work on metrics that mattered, and monitor their progress effectively since Day-1. Google was able to think big and achieve the unimaginable by setting stretch goals and following these up with practical strategies. The process ensured employee commitment through collaborative goal setting and collective buy-in.

Through the Google case study, it is evident that they have been successful at rapidly scaling up from their early years into the digital behemoth that it is today while still fostering a culture of innovation and growth.

That’s the magic of OKRs- it can be implemented by organizations of any size, any industry to achieve ridiculously ambitious goals. Successful implementation of OKRs results in a strongly aligned team that is committed to drive performance and scale sustainably.

But first, let’s try to understand what do OKRs stand for as concept.

What are Objectives and Key Results?

Andy Grove (former CEO at Intel) has boiled down about how to think about OKRs in business in his book ‘High Output Management’ as follows:

  • Objective: The answer to ‘Where you want to go?’ helps you define what is objective for your organization. It needs to be ambitious and qualitative such that it would set defined directions for your company.
  • Key Result: The answer to ‘How will I pace myself to see if I am getting there?’ helps you chart out milestones or key results. The outcomes designed here are measurable and quantified to track progress and understand impact respectively.
  • Projects: The answer to ‘What are the next immediate tasks I need to perform to get there’? helps you create a focused to-do on the tasks needed to be undertaken to accomplish your objective.

The best way to understand OKR is by completing the below statement:

I will (Objective) as measured by (your list of Key Results) for which our next steps would include (your list of Projects)

Example:

Objective: Increase annual recurring revenue by 200%

Key Results:

  1. Scale strategic business development partnerships with communities and deal websites from 2 to 30
  2. Increase landing page conversion by 20%
  3. Launch a reseller program starting with 10 active affiliate marketers

If one is to write Projects for the OKR example shared under each Key Result, it would be like this:

  1. Create a database of potential communities and websites for strategic partnerships
  2. Hire a landing page consultant and draft out a plan of action
  3. Design a proposal for the reseller program

We will dive deeper into understanding each in subsequent sections. Let’s see what makes an OKR successful.

How successful OKRs look like?

OKRs are known to work on ‘stretch goals’ as a basis, where the goals are ambitious, but still realistic enough to be achievable and measurable as per the organization’s resources.

  1. How Ambitious should your OKRs be?

While moonshot goals attract the best talent, working on them should be practical as a failure could result in a waste of time and resources., Your OKRs should drive impact while stretching individual as well as organizational limits.

  1. Why Measure what matters in OKRs?

OKRs need to be measurable in the form of Key Results so that an organization can track progress and tweak objectives based on the results achieved by its Projects. By measuring, one can narrow the focus on the metrics that matter and how they get impacted due to other organization activities. This is especially helpful for startups who tend to spread out and lose focus during the early stages.

  1. Why is OKR transparency important?

Impactful OKRs are designed in a collaborative manner with all teams being aware of what the others are working on. This allows for setting priorities and allocating resources effectively in order to achieve a common goal.

This ensures each team understands the impact of their work on others while making them accountable by sticking to the plan and deadlines.

Comparing OKR with other management frameworks

With the availability of multiple frame works for organizational design aimed at helping improve organizational effectiveness and employee performance, it could become a task to understand the applicability of each.

We have compared OKRs to 3 popularly used management frameworks - Value Chain Analysis, Balanced Scorecard, and 4DX.

The major advantage OKRs have over these is the fact that it

  • Is simple to understand
  • Is flexible to implement in terms of time scale, company size, and departments
  • Creates a company-wide collaborative culture

Whether it’s a large corporation, an early-stage startup, or even a small team, the same OKR framework can be implemented to grow your organization in a manner that is aligned and collaborative.

What is the difference between KPIs and OKRs?

Frameworks that are outcome and value-driven, like KPIs and OKRs, tend to be great to adopt if you wish to drive a result-driven organization.

KPIs (Key Performance Indicators) are business health indicators designed to measure your usual business activities that are validated and adopted across your company. This method helps you measure success for your employee performance and over all organizational performance for ongoing activities.

On the other hand, OKRs are designed as a bridge between your ambitious goals and the business reality that your KPIs measure.

How do OKRs and KPIs work together?

Consider an example of an organization aiming to improve brand awareness via social media.In this case, your increase in followers, mentions, engagement rate, etc. would be considered as KPIs that help you track and optimize your efforts. While your OKR would be:

Hence, if you were only tracking KPIs, you would never know if you have reached your desired brand recall. While if you only track OKRs, you wouldn’t know if your efforts are creating an impact.

That’s the relationship between KPIs and OKRs - they complement each other to turn ambitious goals into real outcomes.

Here's a detailed article to clear all your confusions between OKRs and KPIs with a framework for making them work together for best results.

Checklist for avoiding OKR writing mistakes

OKRs are for giving direction to your organization towards ambitious goals that could be in territories your business is not used to sailing. If you fail to write OKRs that are as per best practices, it could disturb your organization’s execution capabilities due to misplaced priorities and misaligned teams.

Avoid the below mentioned traps for OKR writing:

  1. Do not write ‘Business as usual’ OKRs: As explained before, OKRs are for creating or reinventing ambitious goals, not to achieve what is already achieved. Your OKRs need to push your team to new heights as each quarter passes.
  2. Do not write ‘Low-Value Objectives’: Your objectives need to make a significant positive impact in your organization’s growth and provide the business value it deserves. Identify low-value objectives and rewrite them to provide substantial value.
  3. Do not write insufficient Key Results: Your Key Results should fully achieve the objective stated. Ensure you have covered every aspect to be optimized and measured to ensure your objectives get realized within time and resources available.
  4. Do not neglect team bandwidth: Being ambitious is great, but you need to have the necessary resources and employee strength to achieve your objectives. Track resources to ensure no one is hoarding or slacking off with their OKRs.
  5. Do not miscommunicate your OKRs: Your objectives should be clearly understood by your employees and shouldn’t take them by surprise. Use ‘Stretch Goals’ and allow some room for mistakes.

To learn more about avoiding OKR mistakes, click here.

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