When it comes to setting organizational goals, KPIs (key performance indicators) usually come to mind. OKR (Objectives & Key Results) are a less-used term, yet highly effective approach to defining measurable goals and tracking outcomes. This methodology is generally attributed to Andy Grove who introduced the concept during his tenure at Intel, which was subsequently picked up by Google in 1999.
OKRs, or Objectives & Key Results, is a tool for building specific and measurable goals, or objectives, in order to successfully communicate, monitor and achieve the desired outcomes. This framework is utilized by many high-achieving tech companies, such as Google, LinkedIn and Intel.
OKRs, as the name suggests, consists of two main aspects. Objectives are short but specific definitions of what the company wishes to achieve within a period of time. Depending on the company, there could typically be around three objectives per quarter. It essentially dictates the direction and resources that the organization should take in order to achieve these targets.
Key Results are an indicator of the progress or success of an objective. Each objective generally has three to five key results. These have to be measurable and clear so that companies will have a idea of whether or not they have achieved a specific goal.
According to John Doerr, who worked with Andy Grove at Intel, the way to structure OKR is by using the formula:
I will (Objective) as measured by (set of Key Results).
In the business environment, a more commonly-heard term when it comes to goal setting is KPI. Key Performance Indicators are essentially a type of quantifiable performance measurement that tracks the progress of a company in regards to a specific objective. Revenue per month or new customers acquired are some popular business metrics that enterprises keep track of using KPIs. These KPIs are defined by a period of time, which could be hourly, daily, weekly, monthly, quarterly or yearly. The main objective of having KPIs is to keep an eye on past performance in order to make data-driven decisions and predictions about future activities and performance.
On the other hand, OKRs are a much broader, strategic goal-setting framework to define the goals of the organization moving forward. This sets a precedent for areas of focus, company direction and business activities that work together to achieve the desired outcome. In other words, OKRs help to define what KPIs are worth looking at. For instance, an organization could set an objective to increase their target audience by incorporating more product offerings. Thus, they will look at key results like their number of new products and the go-to market date. KPIs, such as revenue growth or customer engagement, can be used to support the project.
The first step to utilizing the OKR framework is often one of the most challenging parts. It’s crucial to note that the objective will set the direction for all business activities in that quarter. This can be a stressful step for leaders and teams, which is why it can be helpful to use an OKR Template.
Here are some benefits of using an OKR Template.
Setting OKRs is a regular activity that happens every quarter. Using a template will help to ensure that there is a standard quality and format that everyone adheres to when writing OKRs, so that it does not differ from employee to employee. By keeping things the same throughout, new hires will also be able to quickly familiarize themselves with the procedure.
Mulling over what goes into an OKR framework can be time-consuming. By having a pre-written OKR document, the process is made simple and straightforward. All that needs to be done is to fill in the blanks on the OKR document. This can also help to cut down on unnecessary details or the risk of missing crucial components.
An OKR template is written in a clear and definitive way, to provide clarity to the reader. Having a confusing and hard-to-comprehend framework can lead to confusion and even mistakes, which are detrimental to hitting targets. On the OKR template, it should be clearly outlined what the objective is, along with three key results.
It is vital to business success that all stakeholders are aligned on the same objectives. An OKR template creates focus on a single priority (or multiple, depending on the organization) by communicating the objectives for the quarter. This way, everyone who has access to the OKR template can be pointed in the right direction.
Setting OKRs is an enterprise-wide strategy, so it is important to be as detailed and comprehensive as possible. We’ve put together a sample OKR template (see the top of this article) for easy and specific goal-setting. We also included some examples to help you get started. But do note that they’re not set in stone, and can be modified based on business strategy and goals!
Since OKRs are built on a fundamental concept of measurable goals, it is important to know how to score OKRs. More specifically, you have to know what counts as success for Key Results. There are a few ways to score OKRs. Originally, the Andy Grove method would just rely on a simple yes/no as a way to track progress. For instance, based on the template above, it would say:
Doerr, however, further developed the OKR scoring method at Google which led to its proliferation, using a 0 to 1.0 scale. This is a more advanced scoring scale, which measures results by using:
This method, however, may not take into account intangible achievements. For instance, the objective to increase revenue may have fallen into the 0.4 to 0.6 (yellow) range, but one of these leads may be a large spender who generated profits that were worth over fifty clients. In a way, the objective to hit sales targets was increased but not in a way that was necessarily expected.
For the OKR framework to actually work, the objectives have to be effective. One way to achieve this is by using SMART goals. SMART goals have to be:
Applying the SMART concepts to your objective setting will help you create feasible and attainable goals that leave no room for interpretation. It can be helpful to ask questions like: what will help the company vision? What is the goal and how can we get there?
As much as it helps to be ambitious and detailed, a long-winded OKR framework will only set out to confuse the reader. You don’t want your organization to be spread out over multiple objectives and burnt out by the end of the quarter. The general rule of thumb is to have one company-wide objective and one for each team, so that everyone has a priority to work towards. Then, assign two to three key results to each objective.
Highly-effective business tools are only as useful as the people who use it. Promoting a growth mindset among teams will help them be closely aligned to OKR concepts and use it as a motivation for their work. By encouraging employees to take on a goal-driven work ethic, they can constantly find ways and new ideas to make the company better.
Companies which encourage their employees to actively contribute and participate in OKRs can benefit from the flow of knowledge and different perspectives. When employees are given a say in what the company’s objectives are, they will in turn want to do better to achieve the key results and make meaningful contributions. Using a company-wide knowledge management platform like Kipwise can make it easier for teams to collaborate on OKRs.