Are you seriously contemplating a management framework that will allow you to manage many firms at the same time? Are you looking for a framework that will put you in charge of your business while still providing prospects for growth? Today, Sunbytes will introduce you to a business management strategy that has become the defining feature of Google’s success: The OKR methodology.
What does OKR stand for?
OKR is an acronym that stands for “Objective and Key Results”.
OKR methodology is a management approach based on Objectives and Key Results. OKRs are a simple, efficient, and conclusive approach for teams and individuals to define ambitious goals with measurable outcomes.
John Doerr, the man credited with spreading the OKR methodology around the world by publishing his book “ Measure what matters”, states that OKRs are “A management methodology that helps to ensure that the company focuses efforts on the same important issues throughout the organization.” And here is his definition of OKR:
I will (Objective) as measured by (Key Results)
An OBJECTIVE, I explained, is simply WHAT is to be achieved, no more and no less. By definition, objectives are significant, concrete, action-oriented, and (ideally) inspirational.
KEY RESULTS benchmark and monitor HOW we get to the objective. Effective KRs are specific and time-bound, aggressive yet realistic. Most of all, they are measurable and verifiable. You either meet a key result’s requirements or you don’t; there is no gray area, no room for doubt. At the end of the designated period, typically a quarter, we declare the key result fulfilled or not. Where an objective can be long-lived, rolled over for a year or longer, key results evolve as the work progressed. Once are all completed, the objective is certainly achieved. (And if it isn’t, the OKR was poorly designed in the beginning)
Normally, each organization or individual will have 3-5 Goals (O) and for each goal (O) there will be 3-5 key results (KRs).
Take a look at an example of OKR that John Doerr put for his work in 1975 when he started at Intel:
The origins of OKR methodology
The root of the OKR methodology started when Peter Drucker introduced the MBO (Management By Objectives) system of management in 1954. MBO’s guiding principle was that setting goals could very well lead to increased productivity for both employees and businesses. MBO, however, has two weaknesses:
- Goals are set from the top down (still in the “Waterfall” model), resulting in a lack of initiative and innovation among workers.
- MBO, as a long-term goal, may place staff under unwanted and unnecessary stress, discourage them, and drive them to try and negotiate a lower goal, decreasing the company’s overall efficiency.
Andy Grove, Intel’s renowned CEO, invented OKRs based on the MBO concept in the 1970s to solve the company’s challenges. The OKRs technique has an advantage over MBO in that the objectives must always be related to the major outcomes. Andy Grove effectively implemented and validated OKR’s potential, returning 40% of yearly revenues to business stockholders during his career.
Fast forward to 1999, Andy Grove’s close associate John Doerr departed from Intel and, with his newfound independence, started to develop OKRs functionality for his next tech venture, Google. The application of OKRs into this multinational corporate domain proved instrumental to their phenomenal success.
Since the start of using the OKR methodology, Google developed a more flexible means of measuring performance than Intel. OKRs are graded by Google on a scale of 0 to 1.0, rather than merely pass or fail as in the initial version.
0.7 – 1.0: Green indicates completed OKRs.
0.4–0.6: Yellow means work progress but not OKRs
0.0 – 0.3: Red, showing no development, no effort at work, or unrealistic goals.
The advantages of OKR methodology
When being implemented, in fact, OKRs result in many benefits, which helped Google to grow from a startup to one of the biggest Tech giants in the world today. However, Andy Grove pointed out the below key advantages of OKRs compared to other methods of management:
Concentrate on key priorities
OKR model sets 3-5 objectives for each level of the organization, allowing the firm and its staff, from accountants to dedicated team members, to focus on the most critical business objectives.
Assist organizations in closely connecting internal teams and committing to successful execution
OKR ties individual and departmental performance with the company’s overall objectives. The management team can then ensure that everyone is on the same page. Furthermore, OKR will create a transparent culture for the organization, allowing workers to understand the work and plans of each person and department, as well as motivating staff to achieve the proper objectives.
Tracking fosters accountability
With OKR, each key result is a quantifiable and measurable outcome, and the assessment of the results is based on a monthly score ranging from 0-1.0, ensuring that the evaluation of employees’ work is appropriate.
Scaling is the mature stage of a business after it successfully embedded OKRs into its DNA. And as John Doerr himself explained in his book, an organization is ready to scale up after everyone is familiar with the OKR model.
OKRs push us far beyond our comfort zones. They lead us to achievements on the border between abilities and dreams. They unearth fresh capacity, hatch more creative solutions, and revolutionize business models. For companies seeking to live long and prosper, stretching to new heights is compulsory. As Bill Campbell liked to say: If companies “don’t continue to innovate, they’re going to die—and I didn’t say iterate, I said renew.” Conservative goal-setting stymies innovation.
And innovation is like oxygen: You cannot win without it.
What are the essential components of a good OKR?
Building poorly prepared OKRs is a waste of effort and a meaningless managerial action. Effective OKRs must be motivating management tools that help the team understand what’s essential, what to optimize, and what to compromise during their day-to-day job.
Below are the criteria that John Doerr stated in Measure What Matters:
1. Objectives are the “Whats.”
They express goals and intents; are aggressive yet realistic; must be tangible, objective, and unambiguous; should be obvious to a rational observer whether an objective has been achieved. The successful achievement of an objective must provide clear value for your company
Key questions to ask when you write an objective:
- Is it meaningful? Is the Objective a top priority? Does it help you know where you want to go?
- Will its outcome help us change from the state where we are today?
- Is it influential? Is it energizing and easy to remember for the employees?
2. Key Results are the “Hows.”
They: express measurable milestones which, if achieved, will advance objective(s) in a useful manner to their constituents; must describe outcomes, not activities. If your KRs include words like “consult,” “help,” “analyze,” or “participate,” they describe activities. Instead, describe the end-user impact of these activities: “publish average and tail latency measurements from six Colossus cells by March 7,” rather than “assess Colossus latency”; must include evidence of completion. This evidence must be available, credible, and easily discoverable. Examples of evidence include change lists, links to docs, notes, and published metrics reports.
Key questions to ask when you write key results:
- Are they detailed and time-bound? Is it apparently stated what needs to be done and when it needs to be achieved?
- Are they ambitious while being realistic? Are they too creative to be practically accomplished?
- Are they measurable and verifiable?? Is it specifically stated when the success criterion will be met?
- Can they be measured and verified? Is it apparent when the success criterion will be met?
OKR examples for information technology and software developers
Product Manager OKR
Successfully launched the beta version of the product
• Collect feedback from the first 50% of customers
• Get published product reviews in at least 5 publications
• Get at least 50% new signups
UX/UI Designer OKR
Design new product vision
• Get internal feedback from the product team (preferably on a scale)
• Get feedback from at least 50% of potential customers
• Get maximum usability score on UX models from potential customers
Data Security OKR
Improve data security procedures
• 100% data recovery with daily backup
• Conduct tests using at least 2 external software
Project Manager OKR
Maintain an agile process
• Create a knowledge-based documentation system
• Design and implement workflow diagrams
• Install new migration fields
Quality Assurance Officer OKR
Improve the quality of features in the new version
• Less than 5 major bugs in production
• Increased unit test coverage from 40% to 70%
• Implement new QA process
Business Analyst OKR
Properly analyze the product needs of the customer
• Have at least 1 face-to-face conversation with customers per week about product needs.
• Complete research on product features for version 2.0, completed before the end of April.
• Building product design documents version 3.0, completed before May.
Front End Developer OKR
Deliver great user experiences via UI components
• Build 3 visual experiments for client projects or OS hub
• Explore 5 CSS techniques
• Get 10 JS code reviews
Back End Developer OKR
Improve software application performance
• Reduce API response time to 4 seconds.
• Reduce average application response time to <450 ms.
• Reduce code review time in half compared to current.
Measure what matters by John Doerr – Download the book here