What are OKRs and why are they so popular?
Objectives and key results (OKR) is a framework for defining and tracking objectives and their outcomes.
It was originally developed by Andy Grove in the mid 70s and then applied by Intel Corporation in the mid 80s.
It became popular in the past years, as it was successfully used by Google, upon suggestion of John Doerr, a Partner at VC firm Kleiner Perkins, starting from 1999.
This management methodology aims to "ensure that the company focuses efforts on the same important issues throughout the organization" and it is credited for Google’s success in product development.
After Google, the OKRs methodology has been in use at several Silicon Valley “majors”, including LinkedIn, Twitter, Gett and Uber, as well as thousands of start ups.
How do OKRs work?
OKRs are crucial to create “alignment” across the organization on the immediate priorities and medium terms objectives, in particular in new product development.
For this reason we have created an online tool where the organization can build, share and constantly update the OKR framework and the progress towards achieving the results.
The best way to explain the OKR framework is Doerr’s Goal Formula: “I will ________ as measured by ____________” or “I will (Objective) as measured by (this set of Key Results)”.
As the name implies, OKRs have two key components, the Objectives and the Key Results:
OKRs are set on a quarterly basis and monitored throughout the quarter. Actions and tasks during the quarter need to be aligned to the Key Results in order to make progress and achieve them by the end of the quarter.
The cycle management of OKRs is described in greater detail below.
How do OKRs relate to SWOT Analysis?
OKRs are set following a strategic assessment and a SWOT analysis, therefore a SWOT analysis is a key input to setting the Objectives for the next quarter and designing Key Results and tasks to be performed in order to achieve them.
Performing SWOT analysis at an organization or team level allows you to identify your strengths and weaknesses and set priorities on the opportunities that are available to you.
It also helps you better understand where you are and where you want to go, so the OKRs for the coming quarter become a “tool” to progress towards achieving your Company’s mission and strategy.
OKRs are shared across the organization, so that everyone knows and understands what they are working on, what their team is focused on and which are the overall priorities of the Organization, in such way that the whole Company is “rowing together” in the same direction at a progressively faster pace to achieve their objectives and get closer to their mission.
You can find more about SWOT analysis here or watch our video below.
The tricks for OKR cycle management: quarterly and weekly planning and activities
OKR planning and reviews have to be performed on a quarterly basis, with updates and short term tasks setting and monitoring, conducted on a weekly basis, to set the tone and pace of execution.
In particular, on a quarterly basis:
In addition, on a weekly basis:
How do OKRs differ from MBO (Management by Objectives) and KPIs?
OKRs are very different from Management by Objectives (MBO) which have been in use in management organizations for decades. They still use KPIs, but in a different way.
MBO has an annual cycle: it links the variable compensation of the management team to the achievement of the business targets that were set at the beginning of the year. As a consequence:
Conversely, OKRs are stretch / aspirational targets that aim to be 70-80% achieved by the end of the period and are not typically linked to the compensation of individuals, as they track operational excellence in delivery (not necessarily commercial or business success of what is produced):
How can you best start to use OKRs within your organization?
Implementing OKRs will require your organization to undergo structural changes.
Below a few tips to increase the probability of success of implementation of an OKR framework:
It now time to start to “test and learn” OKRs…
Are you ready?