OKR - Objectives and Key Results

Every organization has different objectives when carrying out a project, program or portfolio and these objectives have to be aligned throughout the whole organization, involving all levels of an organization is an explicit of the approach. This article will present a collaborative goal-setting tool which allows to set both individual and team challenging goals with measurable results. OKRs, Objectives and Key Results, are how organizations track progress, create alignment and encourage engagement around measurable goals .

No one individual – or company – can “do it all”. OKRs are really helpful in the context of goal definition process, and for leaders, they give a lot of visibility into an organization. In case of complex circumstances, the catalogue of objectives consists of different characteristics that are usually of different importance, so it is of great importance to prioritize the different characteristics in the goal definition process . With a select set of OKRs, we can highlight a few things – the vital things – that must get done, as planned and on time .

On the other hand, Key Results monitor how we get to the objectives, so they must be measurable and verifiable. At the end of the designated period a regular check and grade of the key results should be done. If an objective is well framed, three to five Key Results will usually be adequate to reach it.

OKRs were created at Intel by Andy Grove and taught to John Doerr by him. Since then, the most innovative and best managed companies in the world have adopted them, such as Google, Netflix, Twitter, Uber, etc.

Big idea

John Doerr, in his first slide at his presentation to Google, defined OKRs as “a management methodology that helps to ensure that the company focuses efforts on the same important issues throughout the organization” . OKR is the acronym for Objectives and Key Results, and it is based on the principle of breaking down the vision and goals of organizations into concrete objectives and formulating several measurable results .

OKR as a planning tool helps the setting and division of objectives from top to bottom through the whole organization, while supporting the adaptation of short-term goals to current needs and ensure usable results in shorter intervals. Usually, OKRs are thought in a timebox of 3 months.

OKRs stand out for its simplicity and are used to track progress, create alignment with the strategic objectives and encourage engagement around measurable goals. For this reason, it is of great importance to apply OKRs through the different levels of an organization, and all of them must have a correlation between them. This methodology gives a solution to many of the usual problems in a company, such as improving the communication between the different departments involved in the project or ensuring the liability and motivation the employees by increasing the company’s transparency.

Objectives: What is to be achieved, no more and no less . By definition, objectives are significant, concrete, action oriented and inspirational; and what is more, unmeasurable.

Key Results: Benchmark and monitor HOW we get to the objective . Key Results are the marks you hit to achieve the goal. Effective KRs are specific and time bound. Most of all, they are measurable and verifiable. Key results typically include hard numbers for one or more gauges: revenue, growth, active users, quality, safety, market share, customer engagement, etc. You either meet a Key Result’s requirements or you don’t; there is no gray area. At the end of the designated period, typically a quarter, the key result is declared fulfilled or not. Where an objective can be long-lived, rolled over for a year or longer, key results evolve as the work progresses. If an objective is well-framed, three to five Key Results will usually be enough to reach it, and once they are all completed, the objective is necessarily achieved .

OKR Example

Objectives	Key Results
Create the lowest carbon footprint in our industry	KR1: Supply chain and shipping infrastructure 100% zero waste.
	KR2: Pay 100% carbon offset for calculated carbon dioxide emissions.
	KR3: 25% of material is compostable.
	KR4: 75% of material is biodegradable.

Planning and tracking

It is recommended to set both annual and quarterly objectives and track them with that periodicity. Managers should review all the progresses in each of the OKRs. However, it is also recommended that both the time frame and monitoring are set according to the type of objective, project, urgency, etc., as well as establishing a measurable scale for each Key Result, like for example a scale from 0 to 1 . When scoring OKRs, it is of great importance to mark what we have achieved and address how we might do it differently next time, as a low score forces reassessment: Is the objective still worth pursuing? If so, what can we change to achieve it?

Moreover, OKRs do not expire. OKRs are a positive force for more, but they also stop us from persisting in the wrong direction. As in any data-driven system, tremendous value could be gained after the completion of the work from evaluations and analysis .

How it works?

As aforementioned, OKRs are composed by Objectives and Key Results. The first step is to set the different targets of the organization. There are different objectives for each level, and it is recommended to set more than just one objective. The objectives will define what the organization aims to reach, and they must be aligned with the strategical level. These objectives must be ambitious and challenging, but there is no way of measuring them. Subsequently, as second step, different Key Results for each objective should be arranged. Every Key Result allows us to know if we are in the good direction to achieve our goals. The Key Results can be measured, what makes them easier to focus on .

It is of great importance to align all the OKR in the same organization in cascade from top to bottom. Cascading forges unity, it makes plain that all the project team is in this together. This way we ensure that all the organization contributes to the strategic goals.

Cascade organization.

Application

When fulfilling a project all people involved should have the same objectives, all elements should be related to one another. The effectiveness of projects is stick to objectives. Inside programmes, it is recommended to have small projects which are all aligned in the same direction and with a strong relationship between them . All individual deliverables create value, and programmes’ benefits should be converted into tangible goals. In the same way as in a portfolio, all programmes must be run with the same aim. However, there is a higher degree of independence in terms of relatedness, thus the structure for what goes in and what goes out is really clear.

Many project managers become involved in a project from its initiation through closing. However, in some organizations, a project manager may be involved in evaluation and analysis activities prior to project initiation. These activities may include consulting with executive and business unit leaders on ideas for advancing strategic objectives, among others, in which a methodology such as OKR could be helpful .

The management tool of Objectives and Key Results can be used in many different application scenarios. We have seen their broadest adoption in technology projects, where agility and teamwork are absolute imperatives .

Application scenario: Performing integration

Integration is a critical skill for project managers, and as it was mentioned before, it is one of the main purposes of OKR methodology, to make the whole team feel participant on the project. The role of the project manager is twofold when performing integration:

• Project managers play a key role in making the strategic objectives understandable for the project team and ensure the alignment of the project objectives and results with those of the portfolio, program, and business area .

• Project managers are responsible for guiding the team to work together to focus on what is really essential at the project level. This is achieved through the integration of processes, knowledge, and people .

Project management may be seen as a set of processes and activities that are undertaken to achieve the project objectives. Some of these processes may take place once, at the initial creation of the project charter, but many others overlap and occur several throughout the project. It is evident a project has a small chance of meeting its objective when the project manager fails to integrate the project processes where they interact. Therefore, it is important to make use of the OKR methodology in order to organize all key results that must be achieved to accomplish the different objectives .

Application scenario: Bracket around several project portfolios

The larger the organization and the higher the number of projects and portfolios, the greater the risk of losing clarity. In addition, conflicts of objectives arise between projects. OKRs can use Objectives at the corporate level to ensure a common focus on goals. When using OKRs, a direct link between the projects could be established and the formulation of project assignments and milestones improved. It becomes easier to understand why the project exists. A functioning OKR cycle in quarters also helps to synchronize projects and portfolios. Because instead of managing a several individual projects, OKRs are one level above, focusing just on the really important and value-creating issues .

Application scenario: Operationalizing a new strategy

Once in a while, organizations develop new strategy processes that could affect the ongoing projects. How should the organization move in the direction of the new vision and how do they determine whether they are actually moving in that direction? Individual employees often cannot see the impact for themselves and have no idea of their own contribution. Therefore, the project manager is responsible for what the project team produces, and without OKRs, top management could lack an idea of the necessary intermediate steps and the alignment between those involved . OKR-based program planning has proven its worth in order to give a new direction as quickly as possible. Once the Objectives have been specified in concrete terms and Key Results have been agreed, the necessary discussion begins in the management team and between management and employees. The leader must review the vision, mission and objectives of the organization and ensure the alignment with the project and its completion . Both the management team and the employees must be involved at an early stage.

Benefits of applying OKR

Many of the biggest companies in the world such as Google, Facebook or Zalando are using OKRs, what proves the great benefits they have. The unmistakable advantages of OKRs, also called the four OKR “superpowers” are focus, align, track, and stretch .

• Focus on key Objectives. High-performance organizations home in on work that is important and are equally clear and what does not matter. OKRs impel leaders to make hard choices. They are a precision communication tool for departments, teams, and individual contributors. In order to measure what really matters, managers have to begin with questions such as: What is the most important for the next X months? What are our priorities for the coming period? Where should people concentrate their efforts? By standing firmly behind a few top-line OKRs, they give their teams a compass and a baseline for assessment. As Steve Jobs understood, Innovation means saying no to one thousand things. In most cases, the ideal number of quarterly OKRs will range between three and five, only the ones that really matter should be set .

• Transparency for all parties involved and thus the possibility of mutual assistance. With OKR’s transparency, everyone’s goals are openly shared. Individuals link their objectives to the company’s game plan, identify cross dependencies, and coordinate with other teams. By connecting each contributor to the organization’s success, top-down alignment brings meaning to work. By deepening people’s sense of ownership, bottom-up OKRs foster engagement and innovation. Research shows that public goals are more likely to be attained that goals held in private. In an OKR system, the most junior staff can look at everyone’s goals, and critiques and corrections are out in public view. Contributors can weigh in even in the goal-setting process itself if they consider so. OKR’s transparency knit each individual’s work to team efforts, department projects, and the overall mission. OKRs are the vehicle of choice for vertical alignment .

• Short cycles in which the goal and desired results are reviewed. OKRs are driven by data. They are animated by periodic checking, objective grading, and continuous reassessment. As we track OKRs, there are four options at any point in the cycle: Continue if the goal is still on track, update in case the goal is broken, launch a new OKR whenever the need arises or drop the goal when it has outlived its usefulness. More and more organizations are adopting OKR management software, in which users can navigate a digital dashboard to create, track, edit and score their OKRs. These platforms make everyone’s goal more visible while driving engagement, promote internal networking and, last but not least, save time, money and frustration .

• So-called stretch goals help an organization to continuously challenge itself. OKRs lead projects to excel by achieving more than what would be thought possible, setting in more creative solutions.

OKR VS ancestor, MBO

In 1954, in his book The Practice of Management, Drucker started developing the principle of MBO, Management by Objectives. It became Andy Grove’s foundation and the genesis of what we now call the OKR . However, MBO’s limitations arose immediately. MBOs centrally planned the objectives and distribute them down through the hierarchy, they lacked frequent updating and they were tied to salaries and bonuses. The MBO system’s main objective was getting the highest efficiency from the employees, and it was used as an evaluation system to set rewards. Moreover, it was not transparent at all, and employees just followed their leaders. On the other hand, OKRs are focused on aligning the whole organization with the strategic objectives and all employees know the OKRs for all the company.

OKR vs MBO

MBO	OKR
“What”	“What” and “How”
Annual	Quarterly or monthly
Private and siloed	Public and transparent
Top-down	Bottom-up or sideways
Tied to compensation	Mostly Divorced from Compensation
Risk Averse	Aggressive and Aspirational

Limitations

Goal-setting cascade

Cascaded goals corral lower-level employees and guarantee that they are all working on the project’s chief concerns. In moderation, cascading makes an operation more coherent. However, when all objectives are cascaded, the process can degrade into a large, slow-pace exercise, with adverse effects.

• A loss of agility. Even medium-size projects can have different levels. As everyone waits for the waterfall to trickle down from above, and meetings and reviews come up bit by bit, each goal cycle can take weeks or even months to administer. Implementation is so complex that quarterly OKRs may prove impractical.

• A lack of flexibility. Since it takes so much effort to develop cascaded goals, people are reluctant to revise them mid-cycle. Even minor updated can burden those downstream, who are scrambling to keep their goals aligned. Over time, the system grows onerous to maintain.

• Marginalized contributors. Rigidly cascaded systems tend to dismiss input from frontline employees. In a top-down ecosystem, contributors will hesitate whether to share promising ideas or not.

• One dimensional linkage. While cascading fosters vertical alignment, it is less effective in connecting peers horizontally, across department lines.

Strategy map as an alternative

So, there are many plus points to OKRs. However, there are also some errors that could be fixed by the use of a strategy map :

• OKRs are just list of objectives with their corresponding key results, but they do not reflect on the relationship between different objectives and how one objective might feed into another. However, a strategy map approach shows the relationship between objectives and helps to ensure everyone is moving in the same direction.

• There is a great risk of setting too many OKRs. OKR system has a very simple list format, there’s no structure to adhere to. The possibility of adding limitless objectives can lead to objective overload. As it was mentioned before, with OKR less is more, and it is far better to stick to top priorities only. Whereas a strategy map would only focus attention on the very top strategic priorities .

Goal-setting failure

There is a great risk of setting inadequate objectives for a project. The more ambitious the OKR, the greater the risk of overlooking a vital criterion. The severity of this hazard can be perfectly explained with the history of the infamous Ford Pinto.

In 1971, Ford came up with the Pinto, a budget-priced subcompact car. Safety checks were skipped by the product managers in order to meet CEO Lee Iacocca’s demands. This way, the gas tank was placed 15 cm in front of a weak rear bumper. Therefore, the Pinto was a firetrap, and Ford’s engineers knew it. But the company’s heavily marketed, metric-driven goals were enforced by Iacocca. When a crash test revealed that just a one-dollar plastic bumper stopped the puncture of the gas tank, it was thrown out as “extra cost and extra weight”. Pinto’s project plan cited three product objectives: “True Subcompact”, Low Cost of Ownership and “Clear Product Superiority”, but safety was completely neglected .

Hundreds of people died after Pintos were rear-ended. In 1978, Ford was obliged to recall 1.5 million Pintos. The company’s balance sheet and reputation took a justified beating. Putting everything into perspective, it was not a lack of objectives or key results, but a flawed goal-setting process .

Annotated bibliography

• Doerr, J. (2018a). Measure What Matters: OKRs: The Simple Idea that Drives 10x Growth. Portfolio Penguin.

- Measure What Matters shows how to implement the OKR system—Objectives and Key Results—for any team or organization. This book contains the history of OKRs, several case studies, and a nice combination of OKR theory and a focus on people. I would suggest the book as a must-read for anyone who is interested in learning about OKR. The book is especially interesting as the author tells its personal experience with OKR and how he introduced it to Google, besides of many big companies’ cases which have been really successful by using OKRs. The book considers OKRs especially at a company level, however it is easy to extrapolate it to a project, program and portfolio management approach.

• Wodtke, C. R., & Cagan, M. (2016). Radical Focus: Achieving Your Most Important Goals with Objectives and Key Results. Cucina Media LLC.

-This book introduces the concept of Objectives and Key Results and could be recommended as a starter for anyone who has no previous knowledge on the topic. A really straightforward reading book told as a short fictional “fable”, 100 pages including images, which follows the case of a struggling start-up that turns things around by embracing OKRs.

• Castro, F. The Beginners Guide To OKR. https://felipecastro.com/resource/The-Beginners-Guide-to-OKR.pdf

-This guide was written by OKR Trainer, Felipe Castro, and it contains all the information needed to understand OKRs and how to put them into practice. It is a complete and clear practical how-to guide for OKRs, it covers from how to write them to how to track them.