Ambitious OKRs should have a plan
Objectives and Key Results (OKR) - Introduction to the OKR method
OKR (Objectives and Key Results) is a flexible framework for companies to work on the implementation of goals. With the OKR model, you can strategically develop your company, build a bridge between long-term goals and operational doing and involve employees involved in a self-binding manner.
In this article I will introduce you to the OKR framework in detail and show you how you can use it to shape the digital transformation of your company.
OKR definition - what are OKR?
OKRs (Objectives and Key Results) are a simple goal-setting system.
OKR is an English acronym that stands for Objectives and Key Results. In today's understanding you can answer the question "What are OKR?" answer as follows:
- Format: OKR is a format for formulating and communicating goals (Objectives and Key Results).
- Target system: OKR is a target system that synchronizes long-term company goals and short-term goals of different teams.
- Process: OKR is an agile process based on the commitment of the teams, continuous learning and the pursuit of organizational excellence.
The interaction of these three central aspects makes the OKR method an effective management tool and organizational model that also works independently of existing structures.
OKRs have their origins at Intel in the 1970s. With the OKR method, Andy Grove put the stumbling chip manufacturer back on the road to success. When developing the OKR, Andy Grove was inspired by Peter Drucker’s “Management by Objectives”.
OKR on Google
The OKR method found its way to venture capitalist Kleiner Perkins through John Doerr, a former Intel employee and foster father of the OKR method. Through their participation in Google, the bridge to today's OKR model company was built. In 2013 Google presented “How Google sets goals: OKR”. Since then, the OKR model has been very popular with startups, corporations and companies of all sizes.
What OKR - do's and don'ts
Objectives & Key Results (OKR) are a framework for aligning organizations towards common goals. The ultimate goal is to give an organization a common direction and at the same time to allow maximum autonomy of the teams involved.
The following comparison should help you to assess whether the use of OKR makes sense for your company. Because the answer to the question of what exactly you want to use OKR for has an impact on the exact design of the OKR framework in your company. After all, OKR is not a rigid process, but a flexible framework that you adapt to the needs of your company depending on the objectives.
|Good reasons for OKR||OKR are unsuitable|
|✅Align companies with big / meaningful goals.|
✅Strengthen employee involvement and responsibility.
✅Focus: Alignment with a few important goals instead of doing everything a little.
✅Synchronization: Promote collaboration, overcome area boundaries and silo thinking, avoid conflicting goals.
✅ Manage complexity: make interactions and dependencies transparent and get them out of the way.
|❌ An instrument for (personal) performance assessment.|
❌ Replacement for MBO or individual target agreements, on the achievement of which remuneration and bonus systems depend.
❌A tool for operational task and project management.
Control instrument for day-to-day operations.
❌ Medicine for bad leadership culture, shifting leadership responsibility.
❌Solving organizational problems that only arise when you cultivate DEPARTMENTS.
Part 1: OKR as a format to formulate goals
Let's start with the most obvious aspect of the OKR method, namely OKR as a format for formulating goals. The exciting thing is that just by the way you talk about goals with OKR, you achieve a higher quality and clarity in the goal formulation.
A simple format for talking about goals: Objectives + Key Results
The OKR method uses a very simple syntax for this purpose. You formulate a qualitative goal (Objective), which stands for itself and calls for action. An objective is a directional goal with an emotional and motivating function for teams and employees. You attach two to five quantitative metrics to this objective (Key Results), which allow a clear and unambiguous assessment. The key results are the success drivers of the objective. In other words, if you achieve the key results, the objective is also achieved. At the same time, with the Key Results you have an evaluation standard of how close you have already come to the goal. In other words, the key results are a yardstick that you and your team have to jump over in order to achieve your goals.
|Objective||Key Results (Metrics)|
|An objective is a directional goal with an emotional and motivating function for teams and employees.||Key results are influenceable success drivers of the objective. You are the yardstick to achieve the goal.|
|➔ Simple and understandable|
➔ Provide a direction
➔ Are inspiring, motivating and encourage action
➔ Formulated positively ("Towards")
|➔ "No number, no key results"|
➔ 2-5 KR per objective
➔ Clearly measurable
➔ Finally assessable (“yes” or “no”)
The OKR formula
A first very simple stress test, whether you have formulated good and clear OKR, is the OKR formula by John Doerr:
We will [Objective] as measured by [set of key results].
With the formulation in one sentence, you have a first simple check of how coherent the formulation of your OKR is. You will notice when writing or at the latest when reading aloud if, for example, the objective is too unspecific or the key results are not suitable for assessing the achievement of the objective.
Think in terms of outcomes instead of activities
A first hurdle on the way to formulating good OKR is thinking in terms of activities rather than outcomes. Because many corporate cultures, target and performance systems are designed to reward activities. This means that employees are incentivized to complete many tasks.
OKR, however, put the effect or the outcome in the foreground. Ideally, the outcome is always linked to the customer or recipient of your service. Ultimately, this is where the effect should be achieved. If you follow this logic, then the objective is an outcome, the key results are measurable outputs. In contrast, activities are just the operational doing to achieve the OKR.
When you formulate the first OKR, you may notice that employees and teams put activities in the foreground. Here it is always a question of questioning what the associated outcome is (objective) and what the appropriate key results are. Do not let up at this point, because constant questioning and questioning is the key to good OKR. Even if it feels like chewing chewing gum that has been sucked out in between.
When Google launched its Chrome browser in 2008, Internet Explorer was the top dog with a market share of almost 70%. The then Chrome manager and today's Google CEO Sundar Pichai relied on the application of the OKR method from the start.
Build the best web browser in the world.
|➔ Pointing the way|
➔ Inspiring / activating
20 million users by the end of 2008.
|➔ Clearly measurable|
➔ Achieved yes / no
Transferred to the ORK formula by John Doerr:
We will [build the best browser] as measured by [20m users by the end of 2008].
The goal of developing the world's best web browser “out of nowhere” was very ambitious in 2008. After all, Internet Explorer was the clear top dog with a market share of over 60%. The development of the key results also shows how ambitious the project was.
Today Chrome is at home on 2/3 of all devices and Internet Explorer has disappeared into insignificance. The consistent application of the OKR method made this development possible and thus a not inconsiderable part of the steep rise of Chrome and the promotion of Sundar Pichai to Google CEO.
More OKR examples
|Objective||As measured by ... (KR)|
|Build the best web browser ..||20 million active user by the end of 2008.|
|OKR have been introduced in our company….||➔ A permanent OKR coach who is allowed to work with OKR teams for at least 50% of his time.|
➔ A target structure (corporate vision and medium-term corporate goal) that is supported by all members of the company's management.
➔ The target structure has been tested with 50 employees and we received a 90% acceptance rate in terms of comprehensibility and meaningfulness.
➔ We have identified three initiatives and teams that will enter the operational OKR process in the coming cycle.
|More high-quality leads from our online marketing activities ...||➔ Conversion on our website is 0.8% (7 days average), i.e. 8 out of 1000 visitors sent us a request for a service offered.|
➔ Adwords: Click through rate on generic search terms is 1% (7 day average).
➔ 80% of the leads are rated “high” by the sales department.
|Online is the preferred support channel for our customers ...||➔ 80% of customer inquiries reach us via our online ticket system.|
➔ 1,000 active users of our mobile support app.
➔ 90% of all online tickets are purchased within 72 hours.
➔ 90% customer satisfaction based on the automatically sent survey after the ticket has been purchased.
|Launch of the new service / product xy ...||➔ 50 customers tested the product and answered our survey|
|Strengthen sales in the DACH region ...||➔ Three signed contracts with a sales potential of EUR 250k p.a. each|
➔ 50 open leads
➔ EUR 5 million sales pipeline
Formulating good OKR takes time and practice. Above all, however, employees need orientation as to which goals are important for the organization. That is why your company needs a functioning target system into which the OKR can fit.
Part 2: OKR as a target system
OKR help you to get more clarity and stability in the target system of your company. A goal system is the structure and collective interaction of different goals in your company. The complexity of the target system depends primarily on the size of your company and the number of business areas. In a startup that develops a product and employs 10 people, you need a different OKR architecture than in a company with several business areas and a matrix organization of 3,000 employees. That is why there is no such thing as “the one right” OKR architecture.
Understanding the current target system of your company and developing an OKR architecture that fits the OKR ambitions of your company is one of the greatest challenges in the course of the OKR introduction.
Target hierarchy in the company
Regardless of the size of an organization, there are goals with a different time perspective that are of central importance for working with OKR.
Long-term goals (> 5 years)
Goals with a time perspective of several years provide a long-term orientation. Companies use different constructs and speak of strategies, purposes or visions. For the OKR method, the only decisive factor at this point is that there is a statement about where the company would like to develop in the long term. The stronger and clearer this statement, the more stable the target system and the more effective the work with OKR. The owners and the company management are responsible for formulating long-term goals; the entire organization then (hopefully) works to achieve them.
Medium-term goals (12-18 months)
Medium-term goals and strategies define the content framework for the next 12-18 months. When working with the OKR method, medium-term goals serve to further sharpen the long-term perspective and to build a bridge to short-term goals and the formulation of OKR. In principle, the development of medium-term strategic goals is the task of management. Depending on the structure, the entire organization or different areas of the company work on achieving the goals.
Short term goals (3-6 months)
Short-term goals are the actual working level within the OKR process. The aim here is to formulate goals or OKR, which in turn contribute to the medium and long-term goals of the company. As part of the OKR process, the teams are required to find an answer to the question of what the team can work on so that the company's long-term and short-term goals can be achieved as far as possible. The formulation of short-term goals is self-binding by the teams that also work on the implementation.
How OKR makes your target system better
OKR play an important role in the context of the target pyramid in several ways. First of all, by introducing the OKR method, you create a binding structure for the management of operational goals. Through the design, you also ensure that teams commit themselves to goals autonomously and that the teams' OKRs are synchronized. Second, the OKR method promotes the quality of your goal formulation. OKR thus bring even more clarity to your target system, especially on a medium-term level. Thirdly, it is a great opportunity to sharpen the long-term perspective and work out where your company would like to develop in the long term.
Teams and corporate OKR
Depending on the initial situation, it can make sense to formulate an OKR for the entire company at short notice. As I said, OKR are a flexible framework,
Teams and corporate OKR
Depending on the initial situation, it can make sense to formulate an OKR for the entire company at short notice. As I said, OKR are a flexible framework that can be adapted to the goals and needs of your company. It would therefore be legitimate to only formulate medium-term goals for the company as a whole. It can be just as useful to formulate a company's OKR for the coming cycle. For example, if you are in a crisis or the further development of the company depends on the achievement of a short-term goal that requires the focus and the employees of all teams. This also closes the circle on the question “What for” your company would like to use OKR for.
|What||Key questions||Subject, responsible|
|Long-term mission statements|
> 5 years
|Who are we, who do we want to be, where do we want to go?||Entire company,|
|What does that mean in terms of "sight range"?||Entire company,|
|What is the entire company focusing on in the coming cycle?||Entire company,|
|How can we as a team contribute to the company's OKR or the medium-term goals?||OKR teams|
KPIs in interaction with OKR
Key performance indicators (KPI) play an important role in the target system of every company. KPIs are absolute or relative performance metrics that make the (economic) success of a company, process or department assessable and comparable over a certain period of time. This means that KPIs look at the current status or a development in the past. OKR, on the other hand, are oriented towards the future. A KPI can therefore be a key result, but never an objective. Conversely, the undesired development of a KPI can be the trigger for an OKR at team or company level. The following overview gives you an initial overview of the differences between OKR and KPI. In this advanced article you will learn more about the differences and the interaction of OKR vs KPI.
|Key questions||What do we focus on?||How do we perform?|
➔ Solving problems
|➔ Measurement of performance|
➔ Assessment of the performance development
➔ Identification of optimization potential
|Temporal horizon||➔ Quarter||➔ Permanently|
|Success logic||Leading = cause, can be influenced directly and is the lever for achieving the KPI.||Lagging, i.e. often cannot be influenced directly. BUT, if OKR are met, then the KPIs are also correct.|
|What is it about?||➔ People, emotions|
➔ Sense, focus
➔ Enthusiasm, commitment
|numbers, data, facts|
|purpose||Design, “ex ante”, to proactively focus a company and set priorities.||Controlling, “ex post”, in order to evaluate performance in retrospect and identify potential for optimization.|
OKR vs day-to-day operations
In principle, OKRs are an instrument for developing companies. Therefore you shouldn't abuse it to manage your “daily business”. At least as long as there is no need for development. That means, there are scenarios in which OKR can also be relevant in the context of your "daily business". I would like to illustrate this with an example.
Imagine your company produces buckets. The most beautiful, colorful and sturdy buckets in the world. Your company manages 100 buckets a day, customers are happy, employees are full of juice and you have full order books. Producing buckets is your “daily business” and your daily KPI is 100 buckets.
Scenario 1 - Your bucket gets holes
Suddenly the errors pile up, the handles tear, buckets have holes and your daily output drops to 80. This extends delivery times and customers complain. Making buckets is still your daily business. But you obviously have an existential problem that you want to solve. That means, even if it's daily business, your goal is to be at least as good as you were before. And that's what you want to align your entire company with. So your OKR could be as follows (as a long-term or short-term company OKR):
Scenario 2 - Your backlog is growing
One of your competitors goes bankrupt, the customers are now coming to you. This leads to fuller order books that you cannot serve at all. A luxury problem, but obviously there could also be a need for action here, even if “producing buckets” is still your daily business. You talk to your colleagues in production and you decide that “brute force”, i.e. more employees, is not the solution. Instead, you are relying on a new digital production process to meet the demand in an economically sensible way.
This means that in both scenarios it is less important that “producing buckets” is your daily business. The decisive factor for the use of OKR is that there is a tension between the ACTUAL and the desired TARGET, that there is development potential for your company or a certain area.
Part 3: OKR Management - OKR as an agile process
We come to the third essential aspect of the OKR method, the management of OKR in an agile process. The OKR process defines a framework based on agile values and principles, how you deal with OKR in your daily work in order to achieve your desired goals. The OKR process and the management of the OKR are based on the following cornerstones:
- OKR activities and meetings structure the OKR process
- A OKR coach helps the teams and the entire organization to work with the OKR method
- Confidence level are a style and communication tool to talk about trust in the planned achievement of goals
The OKR Framework uses a “Plan, Do, Check, Adjust” cycle analogous to Scrum. This means that each cycle is framed by a series of events in order to give an organization a structured framework for implementing and working with OKR. A typical OKR cycle is 3 - 6 months.
|OKR cycle||The iteration cycle is formulated in the Objectives and Key Results. In Scrum that would be a “sprint”.||3 - 6 months|
|OKR planning||OKR are planned for the coming cycle.||4 hours per team, optional subsequent drifting phase, 1-2 weeks|
|OKR Weekly||Weekly synchronization of the teams||30-60 minutes|
|OKR review||Team-internal and comprehensive presentation of the OKR||24 hours|
|OKR retro||Review of team and organizational level, identification of potential for improvement.||24 hours|
At the beginning of each iteration, all teams jointly plan their OKR for the coming cycle. The teams inform each other about their planned achievement of goals in order to identify dependencies and avoid conflicting goals. Every OKR team commits itself to the achievement of its goals. If, for logistical reasons, not all teams can plan and coordinate their OKR at the same time in the same place, then you will need a period of time afterwards in which the teams give each other feedback on their OKR. This phase is also called the drifting phase.
What the daily is in Scrum, the “Weekly” is in the OKR Framework. The aim of the meeting is for the OKR team to briefly discuss the current status and possible obstacles. The meeting serves the mutual synchronization, detection and possible escalation of obstacles.
At the end of the OKR cycle, teams present their results and the associated target achievement. Depending on the setup of the teams, the review can take place in the teams and e.g. be recorded. If logistically feasible, the review can also be organized as an event in which all teams come together to present their results to each other and give each other feedback.
Finally, the entire OKR cycle is reflected in the retrospective in order to further improve the application of the OKR method and the OKR process. Because a successful OKR implementation takes time and practice. The aim of the retrospective is to gather experience with the OKR process from the previous cycle. In order to identify potential for improvement based on these insights and to make agreements about what the team wants to do differently in the coming cycle.
The retrospective takes place on two levels. Once within the team, similar to a retrospective in a Scrum team. In addition, the cross-team exchange can also be important in order to identify potential for improvement and how teams can better support each other. The more overlaps there are within the teams in the target system, the more important this joint retrospective is. Once the first OKR cycle has been completed, planning for the subsequent cycle continues seamlessly.
Your OKR coach
The OKR coach has the task of supporting OKR teams and the company in their work with the OKR method. The role of the OKR coach can be compared to a Scrum Master.
The OKR coach is a role model, process watchdog and ensures that the framework conditions are right so that the OKR are effective for the company at all. The OKR coach is the moderator and “owner” of the OKR process, but not responsible for the content. He sees himself as a servant leader based on agile values and principles. Of course, he has in-depth methodological knowledge and understanding of OKR.
The OKR coach supports OKR teams and management with the following questions and tasks:
|➔ Supports teams in formulating OKR|
➔ Moderates and accompanies OKR events and meetings
➔ Coordination of the individual team events
➔ Support of the team alignments
Assistance with questions about OKR
➔ Identification of dependencies
Elimination of impediments (obstacles)
|➔ Supports management in formulating vision and medium-term goals|
➔ Ensures that the company introduces OKR with the right intention
➔ Helps to develop the right target system and the right architecture
Escalates, moderates and eliminates organizational or structural disruptive factors when working with OKR
➔ Develops and promotes agile mindsets behind OKR
The OKR coach plays a central role in the introduction of the OKR method. This role should definitely be part of the company in order to implement OKR effectively and sustainably.
OKR Tracking - Confidence Level
The confidence level is a subjective assessment by the OKR team of how much they believe in the achievement of the key results. It is a simple stylistic device to exchange information about the progress of the OKR. The confidence level is not a status, but expresses how much trust the team currently has in the achievement of the OKR.
The design of the confidence level depends on how ambitious your company is with its goals. In a highly ambitious target system (A), you formulate very ambitious goals. Accordingly, you have more leeway for a high confidence level than in a normally ambitious target system (N). How ambitious you formulate goals should suit your corporate culture. It is nonsense and sometimes harmful to set highly ambitious goals in a conservative corporate culture “because Google does it that way”.
|Confidence level||Explanation||Target achievement|
|On track||You have confidence that you will achieve the OKR with a high level of goal achievement.||90-100%||70-100%|
|Off track||There are risks and obstacles, but you are confident that you will still achieve the OKR, even if with less goal achievement.||70-90%||50-70%|
|At risk||You have lost the confidence to achieve the OKR or you see clear “discounts” in the achievement of goals. Red means “we have to learn”.||<70%||<50%|
OKR meets Scrum
Of course, you can also combine the OKR method with the Scrum Framework. Scrum defines a set of rules for working together in teams, OKR aligns one or more teams to achieve a common goal. This means that while Scrum defines the operational rhythm in a 4-week cycle, OKRs set the direction on a quarterly basis. Both methods are based on a consistent iterative process (plan, do, check, adjust).
Part 4: Managing the digital transformation with OKR
The implementation of your digital transformation is an ideal starting point to introduce the OKR model in your company. Even more than other strategic initiatives, digital change requires cross-functional collaboration. Because without a common target image, departments digitize in search of the local optimum. The caterpillar is getting faster (or fatter), but the transformation into a butterfly does not succeed.
With the OKR method you can orchestrate the digital transformation in your company and achieve the next global instead of just one local optimum. So that the caterpillar turns into a butterfly, I recommend the following steps:
Step 1: Develop your digital target image
In the first step, you need a common understanding of your digital target image at the level of top management and the owner. In other words, an idea of how your current added value and the needs of your customers will change through the consistent use of digital technologies. Your digital target image takes into account both risks in your current business model and opportunities for new markets and business models.
At the end of the process, all stakeholders involved have a common idea of what the butterfly might look like. I recommend that you go through this process very transparently and collectively from the start.
Step 2: Portfolio and goals for the next 12-18 months
Based on your digital target image, you answer the question of which specific measures you will prioritize for your company in the next 12-18 months. You can either define the portfolio top down by management or base it on the ideas of your organization. If you want to take the collaborative path, you can organize hackathons, for example, so that employees can develop initiatives based on the digital target image. However you shape the path, you conclude the second step with concrete goals and a prioritized portfolio of initiatives that you will work on in the next 12-18 months.
Step 3: Formulate the OKR team
On the basis of the goals and the prioritized portfolio, teams then formulate their OKR for the coming cycle. The teams are either existing departments or newly established project teams that work on the implementation of the measures. At this point, you transfer responsibility to the organization and individual teams in order to formulate OKR autonomously and self-bindingly. There are no control bodies or steering committees. The OKR is managed based on agile values and principles of the OKR process.
OKR - FAQ
Finally, a few important questions that keep coming back to me in connection with OKR.
I do not find the use of OKR software necessary, especially at the beginning. You should first learn and understand how to work with OKR. As my first co-founder always says: "Before we buy expensive ice hockey equipment, let's see if we can ice skate fun." To start with OKR, the documentation of the Team OKR in Excel or Word is completely sufficient. It is only important that the OKR are transparently documented and freely accessible.
How do we best implement OKR?
First, find a good answer to the question of what you want to introduce OKR for. Then it is legitimate to first choose a few (lighthouse) projects on which you can try out OKR. In any case, you should have this process accompanied by an (internal) OKR coach, possibly in duplicate with an external OKR consultant.
The way of thinking, i.e. in outcomes instead of activities. And to say goodbye to the quality, goals and portfolios in management and to set a framework that also leaves room for autonomy and self-commitment of the employees.
At first sight, the introduction of OKR sounds like new and, above all, more effort. But that's an unfair comparison. Because the OKR process is comprehensive and takes ALL time expenditures into account. Any other approach has high implicit costs that do not appear in any calculation. E-mails, coordination efforts, phone calls, waiting times. I claim that you are faster with OKR. You will have well-founded insights into how your organization is coping with the OKR process after 6-12 months.
Of course, you can also use the OKR on individuals or for yourself privately. From a company's point of view, I would make it primarily dependent on the goals that you are pursuing with the introduction of OKR. Personally, I find OKR not beneficial at the individual level. For me the great strength of OKR is to give a team or an organization a structured framework in order to achieve common goals.
Conclusion - OKR are a very powerful organizational model and management tool
The OKR method is a very powerful tool and not only for successfully designing your digital transformation. Even if that is one of the biggest hurdles and a long process. But one of the greatest benefits is that your employees and colleagues start to think about the effects and goals of their measures, instead of just patting themselves on the back for a high level of activism. In addition, OKR only develop their full potential if you understand the OKR method as a continuous process that is supported by a high level of discipline and transparency. It's not always easy, but it just keeps getting easier. “Trust the process”.
Good luck with that.
Article for download
The book by John Doerr tells the story and application of the OKR method. Well worth reading and hearing to hear the OKR story from the mouth of his foster father. However, the book is not a practical guide on how to use and implement OKR.
Further articles and downloads:
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