How do you adapt fast to an ever-changing market and build great products? Lots of companies like Intel, Google, and many others are faced with this question, and when going through their answers, a particular pattern appeared around the term of OKRs.
Focus and prioritization, alignment between team members, accountability, and goal awareness throughout the company are some of the reasons why it proved to be the right answer for many of them.
So what are OKRs?
The term comes from “Objectives and Key Results” and it appeared initially at Intel, where Andy Grove developed this concept during the time where the company was facing one of their biggest challenges in the battle with Motorola around microprocessors.
To explain the beauty and simplicity of the framework I will use an excerpt from the hands of their creator:
Now, the two key phrases . . . are objectives and the key result. And they match the two purposes. The objective is the direction: “We want to dominate the mid-range microcomputer component business.”That’s an objective. That’s where we’re going to go. Key results for this quarter: “Win ten new designs for the 8085” is one key result. It’s a milestone. The two are not the same. . . .The key result has to be measurable. But at the end you can look, and without any arguments: Did I do that or did I not do it? Yes? No? Simple. No judgments in it. Now, did we dominate the mid-range microcomputer business? That’s for us to argue in the years to come, but over the next quarter we’ll know whether we’ve won ten new designs or not.
If you want to find out the whole history around the creation of OKRs and the challenges that Intel was facing at that time, I recommend checking out the book “Measure What Matters” by John Doerr. You will also find many other success stories and examples of ambitious and inspiring objectives from companies like Google, Youtube, Adobe and many more.
Examples of OKRs
Objective: Develop the next generation client platform for web application Key Result: Chrome reaches 20 million seven-day active users
Objective: We own product delivery and we learn every time Key Results:
100% of releases have a retro
0 customer-reported bugs
0 repeat production bugs
Objective: Continue to build a world-class team Key results:
Recruit 10 engineers
Hire a commercial sales leader
100% of candidates feel they had a well-organized, professional experience even if we did not extend an offer
Objective: We attract, retain, and enable the best people to operate at their best
Every team has OKRs and achieves 85% of key results
80% of people feel we value their growth and development
We achieve 90% of our hiring plan and all roles have a defined ramp plan
100% of employees have 360 reviews
Now, coming back, let’s take a look at the main qualities of OKRs.
Ambitious – Inspiring objectives help align the team around a common purpose.
Qualitative – Instead of being measurable or quantitative, qualitative objectives give freedom to interpret. Remember, they represent the direction, not the amount of results that your team had.
Time-bound – Objectives should take at least one month to complete; otherwise, they are not ambitious enough and relate more to daily or weekly tasks. The most common durations are a quarter, a half, or an entire year. My personal preference is quarterly for extra flexibility.
Actionable by the team – There is a high level of frustration when an objective cannot be completed, because the ball is in another team’s court and/ or out of their priorities. Tip: I recommend building cross-functional teams that have a mix of skills so you can always achieve the required progress and reduce the chances of getting blocked.
Objectives are always accompanied by key results that are:
Measurable and quantifiable
Make the objective achievable
Lead to objective grading
Difficult, but not impossible
MBO vs OKRs
A big difference from the classic MBOs (management by objectives) is that OKRs are driven bottom-up. Each team member is asked to define what in his opinion represents the right objective for his team. Managers will also have prepared one or two objectives, but in the end the whole team discusses and agrees on what will be the next OKRs that they will strive for.
When defining them, objectives must be “uncomfortable existing ones,” as a top manager at Google likes to call them. This means that by default, they are challenging goals, and from the beginning, the team should feel that they have a 50% chance of achievement. When they are ambitious and inspiring, they can put forth the best of themselves and think outside of the box to come up with smart and unique solutions.
After creating and setting the OKRs, the next phase is the execution. Christina Wodtke in her book “Radical Focus” shares valuable advice along with a great execution framework. She explains that there must be a system where every week the team checks progress, prioritizes and does only the right things.
She talks about two main meetings: The planning meeting on Monday morning and the Weekly Wins Meeting on Friday evening. She recommends this routine to enforce focus only on work that has an impact on the quarterly OKRs. This prevents the team from chasing “golden apples.” She uses this term to define other useful ideas or actions that do not help in achieving the primary purpose of the company.
OKRs must not be connected to performance evaluations, bonuses or other kinds of financial compensation. This is one of the most common mistakes that companies fall into, and it has negative consequences on their people and their results. We want all team members to “reach for the stars.” When people have their OKRs connected to bonuses, some of them will start “sandbagging” them or playing defensively or negotiating with their managers to make them “more realistic” to a level that the results are nothing out of the ordinary. Intrinsic motivation becomes extrinsic motivation, and the pursuit and the drive to achieve incredibly great things quickly fades away.