OKRs — objectives and key results — are a goal-setting framework used by teams and individuals to align on strategic activities. As suggested by John Doerr in his book Measure What Matters, OKRs foster a culture of innovation and have been used successfully by many organizations globally, including the likes of Google, Adobe, and various smaller startups.
The OKR framework is collaborative in nature, ensuring that employees are aligned on initiatives, encouraging internal engagement and accountability. OKRs comprise two main areas:
- Objectives: Define what you want, or need, to achieve. These can either be short-term goals or longer term, more challenging, initiatives — but must be action focused
- Key results: How you will know if you’re achieving your objective, using either tangible milestones or success metrics. Key results should be updated regularly (such as quarterly) as a project progresses
The ultimate goal should be ambitious, stretching you and your internal capabilities, but still designed with your business strategy, mission, and vision in mind. To ensure your OKRs receive adequate focus, only a few are set at a time. Priorities are clearly highlighted and outcomes are defined which removes, or alleviates, the guesswork that sometimes comes with strategy management.
Why are OKRs important?
In strategic management and execution, OKRs help to create a collaborative internal culture by demonstrating regular progress towards a goal. Clear planning and tracking objectives improves buy-in among employees, bridging the gap between daily activities and overarching strategy.
There are five key benefits to implementing OKRs to drive your strategy execution and promote internal alignment, commonly known as F.A.C.T.S.
Focus
OKRs are most effective when you limit the amount you set. For the best results, set 1-3 objectives, with 3-5 key results per objective. This will help you define clear priorities and understand where you need to invest most of your efforts. Each objective should be time-bound to ensure progress is achieved within a reasonable timeframe.
Alignment
This word is going to keep coming up in this article… A key component of OKRs is alignment. They are designed to bring together teams, or individuals, with different capabilities and expertise, to be aligned on one singular vision. In turn, this alignment can improve overall team performance.
Commitment
Shared responsibility in OKRs creates accountability. Regular tracking of progress with project stakeholders ensures there is visibility (and transparency) over roles, responsibilities, and what has been achieved so far. Tracking software can help to simplify this process.
Tracking
The structure of OKRs means that everything is trackable, using a combination of metrics and milestones. Holding frequent scheduled check-ins will enable project leaders to make sure that everything is on track and heading in the right direction. These meetings will also highlight current or potential blockers, allowing you to plan how to overcome these issues.
Stretching
As mentioned earlier, OKRs are intended to be ambitious. They push you to go one step further, and try new ideas that you might not have previously considered. Occasionally these are referred to as stretch goals.
What are the different types of OKRs?
There are lots of different types of OKR, thanks to the methodology being flexible. They can be used in, and applied to, various scenarios or organizational structures to encourage positive improvements.
Committed vs. aspirational
Think of committed and aspirational OKRs as a ‘normal’ (or SMART) goal vs. a stretch goal. Committed OKRs involve setting a goal that you know is attainable, or you’re likely to hit. Aspirational OKRs are a little harder and are intended to push the boundaries of what’s possible. For example, your objective might be to improve product quality by a specific date (such as in a year). Key results for this objective could include a 95% customer satisfaction rate or a reduction in defective products by 25%.
Top-down or bottom-up
These OKRs take slightly different approaches. Top-down are typically set by leadership teams which are then cascaded to teams throughout the organization. Bottom-up OKRs are defined by individual teams or employees which move up the internal structure, in alignment with broader objectives.
Personal
This focuses on individual growth and development, where you consider your personal goals in alignment with wider, professional objectives. Personal OKRs are similar to learning OKRs, which have growth at their core. However, learning OKRs are built around acquiring new skills or exploring different approaches.
Functional, departmental, and team
Functional, departmental, and team OKRs are specific to the needs of one part of an organization, but align to company objectives. This includes cross-functional OKRs which involve multiple teams or departments striving towards a common goal.
Project-based
Certain projects or initiatives might also require OKRs to ensure progress. These can also be time-specific for goal achievement. For example, they roll constantly, quarterly, or annually and are regularly reviewed and updated.
OKRs vs. KPIs: what’s the difference?
OKRs and KPIs (key performance indicators) are similar in nature but follow different approaches. OKRs specifically focus on being ambitious, and how teams and individuals can work together and align to achieve this challenging goal. For OKRs to be successful, they must clearly describe the desired outcome while also considering the importance of adaptability and continuous review. Using OKRs as part of strategic management and execution implies that you already have internal processes for team alignment and tracking progress.
KPIs, on the other hand, are a representation of success in a wider business context. They are simply metrics, such as revenue taken over an extended period to give a high-level overview of performance. KPIs are less adaptable than OKRs and should be used as a general assessment, rather than going into meticulous detail.
OKRs and KPIs: a hybrid approach
While OKRs and KPIs both offer something unique to organizations, using both as part of a hybrid approach to performance management can improve both visibility throughout initiatives and individual accountability. KPIs are better for tracking overall performance, but OKRs can help you to understand the efforts involved in attaining your defined success metrics.
It may be that you need to set multiple OKRs to achieve your KPIs. Occasionally, this can be a complex process as it will involve various stakeholders across the organization — depending on the types of OKR you set. Tracking software, such as Workbench, can simplify this process by enabling teams to define, cascade, and measure OKRs from one place. In turn, this enhances visibility across the different departments by allowing team members to take accountability for their roles and watch progress be made, as it happens.
Conclusion
OKRs are more than just a goal-setting framework. They create alignment and focus, enabling measurable progress for strategic initiatives across the entire organization. By implementing OKRs into internal processes, project leaders can benefit from better collaboration that brings effective change. Whether you’re seeking strategic agility, or looking to make steps towards achieving some of your more challenging goals, OKRs help to bridge that gap between strategy and execution.
If you’re looking to learn more about the power of OKRs in cross-functional collaboration, listen to our podcast with Roger Longden, founder and chairman of There Be Giants.
