OKRs

OKRs Methodology: The Complete Guide

Since their inception, OKRs have been used to promote transparency and growth in companies. They are one of the best options for teams or individual contributors to track progress, create alignment and encourage engagement around measurable goals.

OKRs are not just a goal and performance management framework but a habit that helps bring teams together to achieve their company vision.

However, there have been cases where some teams and organizations didn’t achieve success with OKRs and considered them as not the right fit for them. This is mostly tailored to one widespread problem: poor understanding of the OKRs framework.

This practical guide will help do OKRs correctly. It’s a step by step approach to understanding and practicing OKRs in your team or organization.

What are OKRs?

Definition

Objectives and Key Results (OKRs) is a methodology to manage the goals of your business so that you can effectively realize your vision. They are generally established for a quarterly period. Some companies will also set annual or monthly OKRs. They involve setting ambitious and qualitative goals at all levels, depending on the structure or organization of your business.

O – Objective

KRs – Key Results

Objective (O) – it is simply the goal thoughtfully defined.

Key results (KR) – are the quantifiable and measurable data linked to each Objective to measure its progress. They typically include hard numbers like revenue, growth, active users, quality, safety, market share, customer engagement.

Each goal is essential, and all levels of the company must work to achieve the company OKRs. It is, therefore, crucial that all objectives, at different levels, be aligned to bring together the forces necessary to achieve the top-level Objective of the company, and thus the company vision.

A large part of OKRs is making sure everyone knows what’s expected of them at work.

Quick OKRs History

OKRs history can be traced back to 1954 when Peter Drucker invented MBO (Management By Objectives), which he popularized in his book titled The Practice of Management. MBO systematic approach was based on six major processes:

  1. Set Organizational Objectives
  2. Cascade Objectives to Employees 
  3. Monitor
  4. Evaluate Performance
  5. Reward Performance
  6. Repeat Process

In 1968, Andy Grove co-founded Intel and, while CEO at Intel, developed these MBO processes into the model of OKRs which we use today. In 1974, John Doerr joined Intel and learned OKRs during his time there. And in return, he made some significant contributions to the OKRs methodology.

John became a Google investor alongside Kleiner Perkins Caufield and Byers (first major investors in Google). He presented the methodology to Google founders, Larry Page and Sergey Brin, who adopted it straight away. That was in 1999 when Google was still in its infancy. Google used OKRs to support its growth from fifty employees to thousands.

The methodology became more famous in 2013 when Rick Klau, partner at Google Ventures, made a presentation on How Google defines its Objectives: OKRs.

Nowadays, the OKRs methodology is popular and used by many startups and companies such as LinkedIn, Netflix, Moz, Atlassian, Slack, and Twitter.

Companies Using OKRs - Happierco

Characteristics of OKRs

OKRs have five (5) main characteristics. To have a significant positive impact, they must be:

1. Ambitious

Your goals must be ambitious but realistic, hard to reach but not impossible. They must also be precise. This is very important because it represents the main philosophy behind OKRs, which says if the company is always reaching 100% of the goals, the goals are too easy.

Ambitious goals motivate us to excel by doing more than what we thought possible. When the goals push us beyond our limits, they release our most creative, ambitious selves.

Google’s “Ten things we know to be true.” mentions that: “We set ourselves goals we know we can’t reach yet because we know that by stretching to meet them, we can get further than we expected.”

Here are some examples questions you can ask yourself to define ambitious goals:

  • When is the time to set these goals?
  • Have we written them down?
  • Are our goals SMART?
  • Do they take us out of my comfort zone?
  • Are our goals daring?
  • Which of our goals is short-term and long-term?
  • Do they look like a repetition of things we’ve done in the past?
  • Are our goals aligned with our company vision and mission?
  • Are they solving the present problems that matter the most?

These are the kinds of questions that help set ambitious, fearless, and intriguing goals that foster innovation and high impact in your company.

2. Measurable

They must be measurable in the sense that the key results must be quantifiable by a number or percentage from 0 to 100% or 0 to 1.0.

Google uses a scale of 0 to 1.0 to rate each key result. 1.0 means the Objective is fully achieved. You either meet key result requirements, or you don’t. There is no gray area, no room for doubt.

Key results also depend on the type of metric you’re measuring. For instance, if your KR says, “Increase revenue from $X to $Y through Facebook ads,” the metric you measure here is revenue. Other metrics include sales, users, points, campaign, NPS, signups, or even percentage (%) or money ($). 

Sound OKRs software should be flexible and customizable. You can try out the free version of Happierco to get exposed to numerous possibilities.

Measurement is why key results exist; they are quantitative, while objectives are qualitative. Hence for every individual, team, or organization, key results are how you measure your achievement rate of the objectives. Similarly, Peter Drucker noted that a manager must be able to measure performance and results against the goals.

3. Public

In an organization, OKRs are a shared language for execution. It is a communication pipeline of goals across every team or department. Everyone’s goals, from the CEO to individual contributors, are openly shared. They must be transparent for everyone to see. It keeps everyone on the same page, and everyone knows what everyone is working on. Similarly, it promotes employees’ collaboration, alignment, and accountability.

When introducing OKRs to your organization, you should be clear about what they are, why they will be helpful, and how they will be used. This is precisely what John Doerr did when he introduced OKRs to Google in 1999, which got everyone adapted to the method as quickly as possible. So it is crucial to get everyone on board.

4. Aligned

Once the company’s game plan has been defined, individuals and teams must coordinate with other teams and link up their objectives in accordance.

Top-down means individual goals should reflect team goals, team goals should reflect department goals, and department goals should reflect company goals. So, the result would look like threaded objectives connected vertically and horizontally.

Connecting everyone’s objectives brings meaning to work. Every individual’s effort furthers a collective vision and contributes to the company results. Enabling individuals to define and link up their OKRs to the organization’s success, deepens people’s sense of ownership. It sparks engagement and innovation.

5. Short-term and long-term

OKRs should be defined quarterly or annually. By quarter, we mean short term goals that run in the span of 3-months or per month, while annual OKRs are long term goals set to run for a year.

Many OKRs users prefer to go for short-term OKRs, but there are some use cases for annual OKRs. For example, an organization can decide to define yearly OKRs that can serve as a blueprint for the quarterly OKRs.

Things to keep in mind when setting quarterly OKRs include:

  • In the last quarter, did we achieve OKRs? If not, how close were we now?
  • Is there a support system/infrastructure in place before setting OKRs?
  • Was the quality of achievement better or worse? Did individuals underachieve or overachieve?

The purpose of this management style is to regularly evaluate performance. Goals not assessed before the designated time frame are bound to be questioned. Sometimes, they will undergo further improvement or adjustment to run for the next quarter or even cleared off if they weren’t so important. 

The “public” and “aligned” characteristics of OKRs can be easily done with a dedicated performance management tool such as Happierco. Its intuitive and straightforward interface allows you to keep a history of your objectives, communicate with everyone on difficulties and blockers, follow the progress of individual objectives through frequent reports.

Structure of OKRs

OKRs structure is simple. For each objective, there are three to five (3 – 5) key results. You can set individual OKRs, team OKRs, and company OKRs but never forget to align them. This alignment ensures that you’re on the right track to achieving success during a quarter.

OKRs structure
OKRs structure

Benefits of OKRs

The main benefit of using OKRs is a unified organization where everyone knows exactly what they need to get done and they feel motivated to do it. Although, Using OKRs has so many positive impacts as an individual, team or company.

Here are some of the benefits of OKRs:

They contribute to the success of world-class companies

Having clear goals is important for building good companies and, without a doubt, the OKRs methodology, since its inception in 1970, has been an essential key for some of the most successful businesses.

Several large companies such as Google, Netflix, and Twitter have adopted them to increase their revenues and keep their employees more involved in their various tasks. This methodology has definitely contributed to the success of these large companies. 

Similarly, some of these companies weren’t world-class before OKRs came into their lives, meaning OKRs is a great suit for startups and sustainable growing companies that care about growth and productivity.

They bring clarity and transparency in business

When goals and expected outcomes are clear and precise, everyone knows what to do. Thus, everyone takes care of priorities with less distraction and high engagement.

Everyone has access to all the objectives of the company, which gives them a better view of individual contributions and collective ambitions. You know what to do clearly and how to measure success.

They represent an excellent lever to improve management

As a manager, you need to organize and direct employees to the vision of the company. OKRs allow you to get employees to work efficiently and follow their progress. You should frequently give feedback on their progress. The OKRs methodology helps you become an excellent manager and allows you to be closer to your employees, which is great for the business.

They promote good communication

Within the company, it is crucial that employees work together, set goals, and achieve results individually and collectively. OKRs help you build a strong communication pipeline. It will enable you to collaborate effortlessly and work in a pleasant atmosphere.

They enable innovation

The ambitious nature of the objectives allows you to go beyond your limits. It puts on you some much necessary pressure to not settle for the low hanging fruits.

Besides, when an employee works in a pleasant environment, and business executives trust them, allowing them to define their personal and team goals, this is undoubtedly a real factor for innovation. They feel useful for the company, and it’ll make them go above and beyond.

They prevent crises

In a company with many employees, some crises or frustrations will undoubtedly occur. By visualizing and following where employees are in terms of reaching their objectives, and helping them resolve blockers, getting their regular feedback about their work environment, you can anticipate and prevent issues.

They promote the commitment and performance of your employees

OKRs are an essential asset to stimulate and make your employees work better because they know what you want them to achieve and what they need to do to get there. They will be more determined and focused.

OKRs allow all levels of the company to have one direction; everyone focuses on what matters and follows up adequately.

How to write OKRs

Some issues prevent many companies from successfully implementing OKRs and reap the rewards. Defining good OKRs can be very difficult. Sometimes people write key results like objectives, or like tasks. They don’t know what to put in each part.

However, writing OKRs should not be as complicated as a Rubik cube. With the right guidance, you can easily set efficient OKRs. If you want tips on how to write OKRs and avoid common mistakes successfully, continue reading.

What do you want to accomplish?

The answer to this question is the Objective. It must be definite and time-bound.

For example, if we take an objective written as: “Make our web application better,” it is not definite. To improve it, you should be specific. Another example: “Improve marketers’ ability to write a blog post” not “Improve marketing team.”

Your objective needs to be measurable. A bad objective is “Make much money” while you can say “Grow revenue by 15% “.

How are you going to get that done?

The answer to this question is the key results. Key results need to be quantifiable and measurable by a specific metric. As Marissa Mayer, a former Google’s Vice President said: “If it does not have a number, it is not a key result.”

Your key result can be an activity like: “Reduce revenue churn from X% to Y%.” This type of key results usually starts with keywords like create, develop, increase, improve, deliver, build, make, implement, define, release, reduce, test, prepare, or plan.

Most of the time, your key results are a specific metric and a value to reach. For example:

  • Get 50 new paying users
  • Increase user retention from 40% to 75%
  • Reduce churn rate by 2%.

Examples of OKRs for all levels of the company

Company OKRs

Objective: Increase company revenue by 10%

Key Results:

  1. Bring in 70 new prospects
  2. Get 20 new customers by the end of Q2
  3. Reduce churn rate to 2%

CEO OKRs

Objective: Increase company revenue by 10%

Key results:

  1. Launch two new products that will impact our brand in Q3
  2. Interview 20 customers and get feedback
  3. Increase customer retention to 90%

Marketing OKRs

Objective: Double website visits

Key Results:

  1. Write 30 good articles to promote
  2. Generate 75% of website traffic through organic search
  3. Appear on the first page for 10 top keywords
  4. Exchange 10 links each month

Sales team OKRs

Objective: Get our first customers

Key Results:

  • Reach $100k in revenue
  • Have $1M in the pipeline
  • Reduce code email bounce rate from 60% to 10%

Product Management OKRs

Objective: Launch version 2 of our main product successfully

Key Results:

  1. Get 10.000 new signups
  2. Get product reviews in over 20 publications
  3. Achieve sign-up to a trial ratio of over 23%
  4. Achieve trial to a paid ratio of over 50%

Objective: Increase customer retention by 10%

Key Results:

  1. Achieve a positive Net Promoter Score (NPS)
  2. 25% pre-registrations come from existing customers
  3. Get 1 referral for 3 clients

Human Resources OKRs 

Objective: Improve our performance management process 

Key Results:

  1. Organize 4 training sessions on the implementation of the OKRs methodology
  2. Implement our continuous feedback initiative for at least 75% of employees
  3. Increase 90% of positive feedback with anonymous surveys

Objective: Make the office a very attractive place to work 

Key Results:

  1. Collect feedback from at least 80% of employees on ideas for improvement
  2. Organize monthly office events
  3. Find a better food and beverage supplier for the office.

Finance OKRs

Objective: Successfully raise capital for growth needs

Key Results:

  1. Email and phone outreach to 200 VCs and seed funds
  2. Get at least 3 term sheets of our minimum required terms
  3. Seal an investment round with a minimum of $10 million pre-money

Engineering OKRs

Objective: Reduce time to onboarding completion by half

Key Results:

  1. Implement a new onboarding system before the end of the 2nd month
  2. Reduce the number of configuration steps from 15 to 6
  3. Reduce to 2 minutes at most the registration of customers

These were some examples of good OKRs. Now go make your own.

How to implement OKRs in your business

Implementation is everything. Fluffy objectives lead to fluffy execution. Hence, you must carefully implement OKRs in your business to achieve your vision.

Communicate about OKRs

Your staff must know what OKRs are. Before you even want to put them into practice, you should organize meetings or workshops to explain them to the entire company. This is essential if you want your team members to understand their importance and commit to their achievement.

Choose an OKRs tool

After the communication step, you need to choose a tool to manage your OKRs. You might prefer a dedicated software like Happierco or a simple spreadsheet. The choice of specialized software is more recommended. The software allows you to view, track, and manage your OKRs easily. You have the history of your previous OKRs, historical information to improve with time. Everyone will have access to the software, which promotes and facilitates communication.

Organize your OKRs

For each period, OKRs must be defined at the company, team, and individual levels. 

Start with the company objectives. They are like a blueprint for all the team’s OKRs and individual OKRs. Have the leaders of the company write them. Organize a general meeting to remind everyone of the company’s vision and mission, including what recently changed (if any).

Most times, this is led by the CEO or any of the top executives. In some big companies, the task could be assigned to a senior manager or the HR leader.

Afterward, the objectives are shared across the managers of each department so they can define department and team OKRs.

Finally, individual contributors can define personal OKRs that aligns with their team’s OKRs. 

Note: Objectives can be modified or improved as needed. Each team member must understand and believe that the OKRs at all levels are achievable.

Evaluate your OKRs

At the end of the quarter or a similar period you have adopted, you must evaluate your OKRs to measure your success.

Between 60 and 70% of achievement for each Objective, you can have a feeling of success. If you achieve less than that, it may not be a failure; maybe the goals were too high. Review them. If you reach 100% all the time, the goals may not have been ambitious enough.

If a goal has not been achieved, you can continue working on it in the next period, only if it is still important.

Celebrate the achievement of the OKRs

After great victories, do not forget to celebrate with your employees. It will encourage them to persevere and improve. Recognize every little success and give rewards. A collision of all small efforts amounted to a big victory.

Sometimes, some parts of the company might outperform others. It isn’t wrong to celebrate them but also support the underperforming teams by encouraging them. Recognition is one of the most important things to empower collaboration, development, and engagement.

OKRs mistakes to avoid

Defining good and smart OKRs is a significant asset. However, some errors in their application, usually due to lack of information, jeopardize the efforts you are making in moving your business forward. Let’s discuss some of them.

Before the OKRs cycle

1. Listing too many goals

It’s not by listing a bunch of goals that you make your business grow, but by actually reaching the ones you set for yourself. Little things matter.

2. Setting incomprehensible and imprecise objectives

Keep the language as simple as possible so that everyone in the company understands your OKRs. Vague objectives will also lead to wrong decisions. Make sure your objectives are well detailed and precise.

3. Setting goals that are not ambitious

One of the specificities of the OKRs methodology is the ambitious nature of the objectives. You have to aim high so that you end up with a pretty glowing record.

4. Setting unrealizable objectives

It’s true that you have to be ambitious and aim high, but that should not make you unrealistic. You can not set unrealistic goals and hope to achieve them.

5. Defining non-measurable key results

Not incorporating measurement into your key results is one of the most severe mistakes in OKRs. Key results must be a way to measure your goals. For this purpose, your key results need to include numbers to help you achieve your goals.

6. Not aligning objectives with the vision of the company

How do you go upstairs without taking the stairs or the elevator? Goals are the stairs leading you to your big vision. It would be a mistake to define goals that do not fit your vision.

7. Confusing OKRs with tasks

Goals are not tasks. Key results are not tasks either. You must be able to tell the difference between a goal, a KR, and a task. An objective is what you want to achieve. The key result is a measurement of the objective. But the task is what you do to achieve the key result and, therefore, the goal. If “satisfying customers on your blog” is the goal, the task would be to “write good articles”.

8. Setting only downward goals

Downward goals are one-sided. Empowering only the higher authority figures to determine the goals that will filter to the lower-level employees. Sometimes only senior leaders are closely connected to the company’s top-level goals. This is unhealthy and does not reflect the spirit of the OKRs methodology.

Another side-effect of this error is that employees may feel disconnected from the company mission and values since they were not involved in defining the outcomes for the business. This is one of the major causes of employee turnover.

9. Having poorly allocated resources to complete the OKRs

Please, do not make the mistake of assigning goals to your employees without the resources to achieve them. There is no point in defining goals that employees are unfortunately not able to meet due to a lack of resources.

During the OKRs cycle

10. Keeping OKRs secret

One of the characteristics of OKRs is that they are public. But some managers are sometimes tempted to hide important OKRs from their subordinates. Transparency is very important when it comes to people management, especially when your employees are the most important resource for your organization.

11. Not following progress every week

After establishing OKRs, some employees will wait for the end of the quarter to analyze their progress and level of success. Doing so will make you realize too late that you weren’t able to follow the original objectives, and you didn’t make progress in the right areas of the business.

12. Not appointing a person responsible for monitoring OKRs

When clear responsibilities are not defined, nobody will take them. In the case of OKRs, it would be a mistake not to appoint a person responsible for monitoring progress.

At the end of the OKRs cycle

13. Determining the compensation and performance of employees from OKRs

It may happen that certain obstacles beyond their control, such as a misallocation of the resources needed to implement the OKRs, force them to be unable to reach the OKRs. So, if you determine employee compensation from the OKRs, you will create frustration and disengagement.

The OKRs they will define in the next cycles won’t be ambitious enough because the employees won’t want to get bad performance reviews due to not meeting the objectives.

14. Not evaluating the achievement of OKRs at the end of the period

It’s a mistake to begin another period without an evaluation of the previous one. At the end of the period, you must evaluate your OKRs to measure accomplishment.

What you should never do is define your OKRs and forget them.

Conclusion

The OKRs methodology is a process that allows you to increase productivity, growth, promote better communication and transparency in the daily tasks of your company. It is structured in two parts: ambitious and qualitative objectives, and quantitative or measurable key results for a quarterly period.

They can be hard to implement, but OKRs remain unavoidable today in the business world, and all the companies that use them testify to their importance. Want to set your OKRs? Get started for free today with Happierco.

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