Why every company should introduce OKRs to their organization
How to translate the company’s strategic plans in OKRs
Objective Key Results (OKRs) was presented by John Doerr at Google in 1999 who was taught by the creator of OKRs Andy Grove at Intel in the late 1970s.
So why should we care about a Tool that is nearly 50 years old when it comes to modern leadership methods?
Companies like LinkedIn, Apple, Daimler, Zalandoo, Oracle but also mid-sized family owned organisations like Viessman has adopted successfully OKRs. However there are still many organizations ignoring this -in my opinion great- method!
Let’s talk about the main advantage of OKRs:
- They kill intransparency, minimize the risk of informal structures and reward intrinsically motivated employees and leaders.
- The OKR framework enables a top-down and bottom-up goal setting giving teams the opportunity to contribute to your strategic plan.
- Theyalign your organization behind the company’s strategy.
What are OKRs?
In short: Objective Key Results are a collaborative goal-setting tool between teams and individuals to thrive for their most ambitious goals with measurable results. Usually the objective is hardly achievable and feels uncomfortable, derived from the company’s overall targets. It is (more) a vision which connects the teams with their organization. OKRs are set quarterly and annually.
The goal is to:
- Uncover and surface the major goals of the company
- Focus efforts across the whole organization towards the same overall goals of the company
- Enabling an accurate communicate of what is important for the organisation and why
- Achieving a transparency on what teams and individuals are working on
- Beeing able to measure the progress
- Support and foster a feedback culture
What are the main characteristic of OKRs?
OKRs are not private knowledge shared only with the managers but publicly available to the entire company. This transparency encourages collaboration and accountability. The outcomes are tracked quarterly and are divorced from compensation. It means they are not directly related to performance evaluation. The later key! It is under no circumstances allowed to be linked to the compensation system.
The great thing about OKRs is that it works across all industries, can be used for non-profit organisation and as well for personal goals.
To make OKRs more tangible, I give you the probably most famous example:
Introducing OKRs at Google in 1999:
This is how John Doerr presented OKRs to the Google founders Larry Page and Sergey Brin 20 years ago.Google was one year at this time.
How does the OKR process work in 4 steps?
Step 1: Break down the Vision of the company
First of all we need to understand that OKRs can and should be applied across the whole organization and across all hierarchical levels:
These 3 different organizational levels are showing how the OKR framework enables a top-down and bottom-up goal setting where teams have the opportunity to contribute to the company’s strategic plan. However, it is important to stress that objectives have to be in relation with the corporate overall strategy and that teams should be creating OKRs within the scope of the organization’s strategic plan. This achieves commitment and a focussed work on topics which are really important for the company.
Step 2: Communicate the Objectives and get your people on board
There are two forms of options to communicate the goal setting process.
Option 1: OKRs for individuals as part of an 1 on 1 meeting
The Team Manager has an 1 on 1 with her / his employee at the beginning and end of each quarter to develop or negotiateKey Results. The Team Manager never dictates OKRs. The goal is to find the best combination of what she or he wants to work on and what the company want her / him to work on.
Option 2: OKRs for Teams
A staff meeting where the company’s’ OKRs are communicated and Team Owners identify what they will be working on as a team.
However, OKR offer also another opportunity: Employees can come up with own ideas on what they want to work on when they open occasionally new business opportunities for the company. This is a big advantage of this tool as the results and efforts can be measured on a 3 month rhythmus.
Hence, this regular and continuous feedback session enables to decide quickly if it worth to continue working on this specific project or to discuss new Key Results.
This is for example how gmail was born in 2004. Paul Buchheit – a developer at google – was not happy with the mail clients and wanted to work on a web based e-mail solution It used to be more or less a side project with no special focus on. Today gmail belongs to the most profitable lines of business at google (Source: https://www.investopedia.com/articles/markets/030416/googles-6-most-profitable-lines-business-googl.asp ; https://time.com/43263/gmail-10th-anniversary/).
Step 3: Understanding the rules behind OKRs
Let’s stress out some of the messages and meanings behind the basic “hygienes”:
- No dictating: As we already said objectives are never dictated top-down. They will be negotiated. While 60% of the agreements are related to the corporate / department or group objectives, the other 40% are representing ideas the individuals would like to work on. This supports innovation and creativity. This also how gmail has become such a strategic important area.
- No performance weapon: OKRs are not used to evaluate the employees individual performance. This means that the achieved or not achieved grades will not factored in the annual performance review. The by-product of OKRs is a much bigger one: It enables employees to summarize their impact and contribution to the company of the previous year. In very few minutes managers and employers have an overview about the activities.
- No Grading hunting: It is important to frame the grades correctly.Knowing that our goal setting is very ambitious, achieving 60-70% have to be seen as very good results. On the other hand, everything below 40% means you missed the key objective entirely. This number should force you to re-think if you want to continue working on that objective. The answer should be yes only if they are still important. In step 5, I will explain more detailed the meaning behind the grading system.
- OKRs are not written in stone: You can revise them if it turned out that they will not be true anymore. Again, the system of OKRs is about focussed work, considering only those goals that are important for the overall company’s strategy. It is about try and error and not to persist on finishing tasks that don’t bring the desired value.
Step 4: Establishing a feedback and failure culture by grading the OKRs
The Objective is usually very ambitious and it is even ok if it feels a uncomfortable in a way that you doubt whether you will be able to deliver or not. The idea behind is to push employees to come out from their comfort zone and to think big.
The Key Results are helping to make the Objective achievable by breaking it down in steps with a quantifiable outcome.
In my opinion, one of the main goals behind the grading is to foster a feedback and failure culture across the whole organisation. Once you are providing feedback on a regular 3 months rhythm, employees on all levels get used to give and receive feedback. They also feel comfortable with the grading as the scoring becomes a normal part of their job.
To better understand the grading mechanism, it is important to know that scores matter less than the process:
- High scores are unlikely but as long as we are in a range of 60%-70%, we know that we are on the right direction.
- Low Grades of 40% and less on the other hand are an indicator that we need to reassess the work and to change direction.
So grading is rather a by-product of OKRs. The actual end product is the absolute focus on tasks only that bring value for the company.
How do OKRs impact the company culture and the collaboration now?
By using OKRs, companies are giving a strong sign towards a new way of working. Being transparent with goals and tasks of each employee- including the management – fosters trust and empathy. The process of Objective and Key Result settings which comes from both direction – top down and bottom up – promotes the buy-in from the entire organization and commitment towards the company’s strategic plans.
On the one hand, reaction and actions are better understandable: When you know what’s going on at the other’s desks, it impacts your own behaviour and you approach your colleagues with more empathy. It is about more predictability and a better comprehensibility for your colleagues. You not only know what she/he is working on but you also understand how the whole organisation thrives for the same purpose.
On the other hand, OKRs are an effective method to synchronize goals and to support a focussed work. This has a positive impact on the team spirit and on a coordinated collaboration as everyone works towards the same overall goals. Dies melden