OKR (alternatively OKRs) is an acronym for Objectives and Key Results. OKR is a framework for defining and communicating aspirational goals and measurable outcomes you need to accomplish to fulfill these goals. OKRs are used by world-renowned organizations as a way to boost strategy execution, align and inspire people around the common organizational goals.
In this article, we’ll define the OKR components, the types of OKRs and their benefits, how to roll out OKRs for the first time, and the challenges you need to be aware of.
What Is OKR?
The OKR goal management methodology is used by teams and organizations to define measurable goals and track their execution. Besides tracking the goal execution, OKRs are a helpful leadership technique to align people around a common purpose, encourage collaboration and ownership.
OKRs consist of an objective - a clearly defined goal, and key results, which measure progress toward achieving the defined goal.
Objectives should be clearly defined, concrete, and significant, but also inspiring for the organizations and teams that work toward them.
The clear measurement of key results is essential, and it is done either on a scale or with numerical values. The precise values assist decision-makers in determining whether we're moving in the right direction to achieve an impact or not.
In addition to objectives and key results, initiatives can support objectives, which are plans and activities to achieve the key results.
The OKR Model Explained
The two main components of the OKR model are Objectives and Key Results. However, you must separate the OKRs from the work activities you intend to complete to reach them. An Objective is typically supported by 2 or 3 Key Results statements.
The written statement for an OKR is as follows:
"We will (Objective - what you want to achieve?) as measured by (Key Results - how are you going to measure if you're achieving it?)."
The OKR formula
1. What Is an Objective?
The "O" in OKR defines what your organization or team wants to achieve. An objective is a specific and aspirational goal that defines a high-level impact on the business. Good objectives are challenging but attainable. They should also align with the company's strategic goals, and their execution should contribute to achieving them.
2. What Are the Key Results in OKR?
Key results are the way to measure and monitor an objective’s progress or how you are going to achieve your goal. You can think of key results as outcomes that provide evidence of whether the objective has been accomplished.
3. What Are Initiatives in OKR?
The initiatives answer one specific question - what work activities do you need to initiate to reach your OKRs - projects or other work items? Initiatives support objectives and are plans and activities to achieve the key results.
Who Created the OKR Methodology?
The OKR methodology was created by Andrew Grove during his work in Intel as a way to set goals, measure progress, and maintain focus on the most important objectives. It was developed as an alternative to traditional management practices such as annual budgets, long-term plans, and departmental performance reviews. In 1983, Andrew Grove documented OKR in his book High Output Management.
John Doerr, at the time a salesperson for Intel, attended a course by Grove at Intel where he learned about OKRs. In 1999, Doerr worked for venture capital firm Kleiner Perkins when he introduced OKRs to Google. As a result, OKRs became a part of the culture of Google as a "management methodology that helps to ensure that the company focuses efforts on the same important issues throughout the organization."
As an outcome-driven framework, the OKR framework helped Sergey Brin and Larry Page to take Google to new heights, and ever since, many companies have learned to utilize the OKR’s principles.
What Are Success Criteria in OKR?
Every organization, team, or project needs a clear definition of success. Using OKRs correctly enables teams and organizations to set standard success criteria. They define measurable objectives for achieving success. A critical part of OKR is ensuring that criteria for success are not only present but shared and transparent to the entire organization and partners. When setting OKRs, the shared success criteria concept is crucial. Every time you review your Key Results, you must ask yourselves: do these Key Results describe what success looks like?
Types of OKRs
To describe success, you can use either “moonshots” (stretch goals) or "roofshots" (committed goals) OKRs. The question is, "how ambitious should your OKRs be?".
What Are Moonshots?
Ambitious goals are also called stretch (aspirational) goals in OKR or “moonshots”. They should take you out of your comfort zone but shouldn’t be unachievable, so your team gets demotivated.
Envision stretch goals as objectives so difficult that they force the team to rethink their approach and engage in conversations they have avoided. Such goals make teams wonder just how far they can push themselves.
What Are Roofshots?
Roofshot OKRs, also called committed OKRs are hard but attainable goals. Successful roofshots are completed at 100% within one cycle. One of the best approaches is to set one moonshot key result per OKR, and the rest must be roofshots.
Moonshots vs. Roofshots OKRs
- Moonshots OKRs are slightly beyond the reach of what appears possible, and success means achieving 60-70%.
- Roofshots OKRs are hard goals but attainable, and success means achieving 100%.
Moonshots are the foundational building block of OKR, but they can easily demotivate the team. Achieving only 60% of your OKRs can be demoralizing at first.
At the beginning of your OKR journey, it’s a good practice to focus initially on roofshots. Focus on beating your goals to develop a results-oriented culture. When the culture matures, you can move on to moonshots to start asking how far the organization can go.
Types of Key Results
When creating your OKRs, try to assess:
- If you are measuring efforts or results?
- What's the focus of your OKRs? Is it the objectives, or are you focused on the means to get there?
These two questions lead us to the two main types of key results - activity-based key results and value-based key results.
1. Activity-based Key Results
Activity-based key results measure the accomplishment of tasks and initiatives or the completion of project deliverables or milestones. Activity-based key results typically start with verbs such as prepare, plan, launch, create, test, develop, release, define, deliver, make, build, and implement.
Examples of Activity-based Key Results
- Create a new SEO campaign.
- Launch the beta version of the app.
- Plan a new training program.
- Develop a new feature for social media sharing.
2. Value-based Key Results
Value-based key results measure the value delivered to the customers and the organization. They measure the results of successful activities. The structure of a value-based key result is Increase/Reduce a particular metric from X to Y. X is the starting point, and Y is what you want to achieve
Using the model “change from X to Y” is a better representation than using a percentual change as it gives more quantifiable information on what exactly you want to achieve.
- Increase organic traffic conversion rate from trials to customers by 35%.
- Increase organic traffic conversion rate from trials to customers from 100 to 135.
The second sentence tells us a lot more about how ambitious the target is.
Examples of Value-based Key Results:
- Keep new customer acquisition cost under Y.
- Improve Net Promoter Score from X to Y.
- Reduce our product’s revenue churn from X to Y.
It is not necessary that a value-based key result measures the company's end objective, such as revenue, but it can be an element of a metric correlated to generating value.
Below you can see a list of examples comparing activity-based key results and value-based key results.
|Activity-based Key Results||Value-based Key Results|
Develop a new landing page.
Increase lead conversion from X to Y.
Launch a new product feature.
Increase the usage of the fourth most used feature from X to Y.
Implement a new way for our customers to report a problem.
Improve Net Promoter Score from X to Y.
When used correctly, OKRs define success criteria for an organization. OKRs should determine whether a person or a team achieved success. They should be value-based for one main reason - you should strive to create a results-focused culture, rather than one focused on tasks, because even if you finish all the tasks, if nothing has improved, then that is not success.
An OKR Example
Let’s illustrate OKRs with an example. We have an ambitious stretch goal and three supporting and measurable key results.
Objective: Become the fastest door-to-door delivery service in the industry.
Key Result 1: Increase service desk response rate by 50%.
Key Result 2: Keep call wait time below 1 minute.
Key Result 3: Double the on-ground suppliers' network.
To define OKRs on a strategic or team level, you need to apply the same formula - describe a common objective and key results to help you measure the success in achieving your goals.
What Are the Main OKR Benefits?
Besides helping companies set measurable goals, OKRs can also help you align everyone around the same objectives. Here’s a list of the key OKR benefits for an Agile organization.
- Agility. Shorter goal cycles allow for faster adjustments and improved adaptability to change, resulting in greater innovation and reduced risks and waste.
- Engaged employees. When people are engaged with a purpose, they achieve remarkable results. OKR enables everyone to see the bigger picture.
- Reduced time for setting goals. Setting goals with OKRs is faster and easier, resulting in significant time and resource savings.
- Cross-functional cooperation and strategic alignment. OKR enables managers and employees to align all their efforts, ensuring that everyone is working together.
- Clear communication. Transparency and simplicity are key for team members to understand the organization's goals and priorities and how they can contribute to their execution.
- Focused execution. OKR allows you to prioritize only the work that has the most impact on your business.
- Teams receive clear directions and can choose how to achieve their OKRs. As a result, they become responsible for their goals, with clear success criteria known to the entire company, establishing mutual obligations.
Common OKR Mistakes
Learning how to write OKRs takes practice and time. OKRs should include feedback from within the organization and go through multiple rounds of revisions.
This is a list of the most common OKR mistakes.
- Using OKRs as BAU. The purpose of OKRs is not to replace To-Do lists. OKRs should drive change and provide a direction for your team or organization to work toward.
- Expecting quick results.OKRs require time to implement, get used to, and refine. Remain patient with the process, and do not give up before you are ready.
- Using OKRs as KPIs. OKRs provide a direction of what success is. While they should be used for measuring how far you are on your way to achieving success, KPIs indicate the current health of your team or organization's performance.
- Starting with too challenging objectives. Starting with only stretch goals could demoralize your team. Start with rooftops the first 2-3 cycles, then change to moonshots after that to give your team a chance to get used to the methodology.
- Not communicating and not checking your OKRs often enough. It's not about setting them and forgetting them. OKRs document should be easily accessible to your team. Regularly check in with your team and grade middle OKRs to stay on track and resolve any challenges as soon as possible.
- Setting OKRs top-down only. At least 50% of OKRs should be set by each team and member. OKRs are not meant to be used as a method of setting goals behind closed doors. The process should be collaborative, and your teammates should determine how they can contribute independently.
How Do You Grade OKRs?
When it comes to grading OKRs, Andy Grove uses a simple "yes" or "no" approach. Were your OKRs met? Were they not? It's common for organizations to grade OKRs based on a "Red, Yellow, Green" system, where red means "we failed," yellow means "we made progress," and green means "we met our goals."
Using a percentage scale (0.0 - 1.0), Google grades each Key Result with a number at the end of the cycle. The key results are averaged to determine the overall score for that Objective.
The Importance of Regular OKR Check-Ins
A common misconception is that OKR only works with quarter-to-quarter cycles. OKR reviews allow organizations and teams to track their progress, identify and address impediments and improvement opportunities.
Different objectives tend to change faster than strategic goals, which is why most mature OKR implementations understand that objectives have different rhythms. Each organization may set its own OKR cadence, but there are some models adopted by the majority of organizations using OKRs.
- Annual strategic cadences with high-level and long-term OKRs for the organization.
- Tactical quarterly cadence with short-term OKRs for the teams.
- A follow-through cadence with periodic monthly or weekly check-ins to monitor progress.
How Do OKRs Compare?
Some similar to OKRs strategic planning frameworks are Objectives, Goals, Strategies, and Measures (OGSM) and Hoshin Kanri's X-Matrix. OKRs overlap with other performance management frameworks such as KPI and the Balanced scorecard.
What’s the difference between OKRs and KPIs?
A KPI is a business-performance indicator, while an OKR is a method of setting goals for improving performance and driving change.
Thus, KPIs provide you with information about what you have to analyze to create the baseline for your OKRs. OKRs and KPIs are both measurable and reflect the performance of the team.
What’s the difference between OKR and MBO?
Objective and Key Results (OKRs) evolved from Management by Objectives (MBOs). Both OKR and MBO are frameworks for setting strategic goals. The main difference between the two frameworks is that while MBOs goal-setting focus on the what (objective), the OKRs goal-setting goes beyond by including a way to measure progress (objective + initiatives and tasks).