In this article, we will have a look at one of the most well-known goal-setting concepts that is applied today – Objectives and Key Results (OKR). 

As you may know, nowadays many big corporations such as Google, Amazon, Netflix, Adobe, Deloitte, Facebook, Linkedin, Microsoft are successfully applying OKR in their business strategies. 

The OKR concept was developed and first implemented in Intel in the 1970s. After great success, the concept was quickly adopted by many companies in Silicon Valley. Google adopted OKR during the first year after the company was established in 1999. As a result, this concept performed as one of the drivers of the company’s success and growth. Google continues applying OKRs today.

So what is the secret behind?

Why is OKR so popular? And how to implement OKR and align it with your business strategy and KPIs?

Let’s find out!

What is OKR?

Simply put, OKR is a goal-setting management framework that aims to create alignment and engagement around measurable goals. The OKR concept implies a clear focus on outcomes or desired results. 

By setting OKRs, companies ensure that everyone in the organization is working together towards the same goals.

OKR and KPI

In contrast to other traditional approaches, the OKR concept implies principles of agile methodology, namely regular tracking and review of OKRs. There is no specific rule about how often you set up and review OKRs in your company. The majority of companies review OKRs quarterly during the planning phase. While some companies are used to set annual or monthly OKRs.

In most cases, it depends on the company size and the frequency of planning sessions.

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How does the OKR framework work?

Two key elements define OKR: objectives and results. 

Let us have a closer look at them.

1. Objectives

Setting up OKR starts with defining the 3-5 key objectives on the company, department, and personal levels. In this case, objectives are catchy descriptions of what you want to achieve – your desired outcome. 

Feel free to be bold and come up with objectives that at first glance may sound impossible to achieve.

The main goal of the Objective in OKR is to motivate and challenge the team.

Tips on how to set up good objectives for OKR

  • Objectives should be ambitious, time-limited, and most importantly inspirational.
  • Make sure that your objectives are simple, engaging, and catchy. This way it will be easier to remember them. 
  • Ideally, they should fit your organizational culture. They can be informal and include internal slang. This way objectives would be more memorable and engaging for the employees.

2. Results

To make OKR work we need to include the second element – key results. 

Key result is a set of metrics that measure your progress towards the Objective. This element plays a significant role in defining OKRs since it addresses the question under what condition this objective can be considered to be achieved.  

After goals are defined under each objective it is important to come up with 3-5 measurable results for each goal.

Tips on how to set up key results for OKR

  • Define not more than 5 measurable results for each goal. Else it will be very hard to remember and keep the focus on.
  • Key results should be quantifiable, achievable, and most importantly challenging. 
  • Use numbers to define results. When setting up results make sure you make it as specific as it is possible – showing the percentage you want to achieve.

As you can see there are only two steps in defining OKRs for the company:

  1. Defining the objectives (O)

  2. Defining the measurable results for each goal (KR)

Although the OKR framework sounds very easy it can be still challenging to introduce it to your team.

OKR framework can be easily explained by using the formula, which was first introduced by John Doerr’s, a venture capitalist who introduced the OKR concept in Google:

I will (Objective) as measured by (this set of Key Results).

This formula can help to simplify the process of goal-setting by putting together both: Objectives and results. 

Doerr underlines that an effective goal needs to address both: what you want to achieve and the way you want to measure if it is achieved.

For example, if you work in digital marketing you might set the following OKRs:

Objective: Develop and flourish newsletter subscriber base

KRs:

  1. Increase the CTR to above the industry average 4,5%
  2. Increase open rate by 30% by December 2020
  3. Get 3000 subscribers by March 2020

Benefits of OKR framework

In his interview, John Doerr defines 5 main benefits of this framework that can be also represented using the acronym “FACTS”:

1. Focus

OKRs are limited in number which makes it easier for the company to stay focused.

OKR and KPI 5

2. Alignment

Companies by applying OKRs ensure alignment between different departments and teams within the organization.

OKR and KPI 6

3. Commitment

One of the main principles of OKRs is transparency. So everyone in your organization can access it and see what OKRs you have. Which makes employees more committed and motivated on their way to achieving the goal.

OKR and KPI 8

4. Tracking

OKRs concept allows you to regularly track your progress.

5. Stretching

This implies that making the goal challenging and almost impossible to achieve you will most likely achieve better results. By targeting higher you will be able to achieve greater results.

OKR and KPI 4

How to implement and use OKRs?

The OKR system is simple to use and does not take much time to implement. 

However, it is important to spend enough time when setting OKRs for the first time. 

After the process is set and the first OKRs are prepared, the further process of re-evaluating and regular reviews of OKR requires only a few hours of your time during the planning phase.

Difference between OKRs and KPIs

The main difference between OKRs and KPIs lies within its focus. 

The main focus of OKRs is business growth and development. While KPIs are more Performance oriented. 

KPIs are important to use because it helps estimate the overall company’s performance and success of ongoing activities. KPIs are achievable and in most cases predefined by top management. 

While OKRs are ambitious, often very challenging (in some cases even impossible to achieve), but inspiring and motivating. OKRs perform as drivers of a company’s growth. In other words, OKR is a bridge between current activities and the company’s longer-term vision.

OKR and KPI 2

Hence, to enable further development and growth companies need both concepts: OKRs and KPIs. Both of them play significant roles and cannot be replaced by one another. 

It is important to understand that they both are used for different purposes, but in alignment with each other, they can bring better results and higher chances of the company’s success.

Find out what are the most common mistakes companies make when tracking KPIs and what are the five marketing KPIs every marketer should track.