Author: John Doerr
Measure What Matters: How Google, Bono, and the Gates Foundation Rock the World with OKRs John Doerr 2018
OKR is a goal-setting technique used by stars (Measure What Matters)
Measure What Matters: In today’s world, success is achieved by those who are not only strong but also flexible. The environment is changing so fast that companies can no longer afford to stick to a rigid plan of action and rely on outdated annual performance appraisals.
In his book, John Dorr, a “graduate” of Intel, offers a special project management system – OKR (Objectives and Key Results – goals and key results). The essence of the methodology is to set several rather complex and ambitious goals, determine a deadline for them and assign a certain number of measurable key results to each goal.
The main feature of OKR is that the methodology allows you to synchronize efforts at all levels of the organization and direct them towards achieving the super goal. Which goal this will be – a priority or an ambitious one – depends on the current state of affairs in the company. If you need to survive and actively conquer a niche in the market, the OKR system will help you correctly set goals and lower them from top to bottom; and if you’ve already secured a stable market position, don’t be afraid to think big, and OKRs will spark creativity and innovation in your employees.
The most active use of OKR technology is in the field of IT, where responsiveness and teamwork are a prerequisite for success (AOL, Dropbox, LinkedIn, Oracle, Slack, Spotify, Twitter). OKRs are a great tool for startups whose survival depends on how transparently they can communicate to investors what kind of product they are going to create and how to bring it to market. However, this system is also used by such giants as BMW, Disney, Exxon, and Samsung.
Still, the main player in the OKR field is Google. In 1999, the then young, start-up company implemented the system proposed by John Doerr, and thanks to this, it achieved outstanding results. Properly set and measurable goals greatly simplify the decision-making process, promote a culture of transparency and help resist chaos. The tool answers the two most important questions when setting goals: what do we want to achieve and how do we do it. John Dorr argues that a great idea is a good start, but a practical and reliable implementation system will get you to the top.
What is OKR
OKR (Objectives and Key Results) are the goals and key results that the company, teams, and employees set for themselves. It is a management and goal-setting methodology that allows the company to direct efforts towards common important goals throughout the organization. OKRs link the various stages of production together and give cohesion and meaning to the work.
Goals are what need to be achieved. They must be important, specific, and doable. Ideally, they should also inspire employees to work and the company to do great things. Goals help to concretize thinking and reduce the number of abstract, thoughtless actions.
Well-defined goals should:
- reflect key aspirations and intentions;
- be bold but realistic;
- be measurable, objective, and unambiguous;
- have a clear value for the company in case of successful achievement.
In the 1970s, OKR inventor Andy Grove summed up Intel’s goal: “We want to dominate the midrange microcomputer market.”Measure What Matters
Key results are metrics and a system for assessing how the company is going to achieve its goals. Key deliverables are specific, time-bound, ambitious yet realistic.
Correctly formulated key results:
- reflect measurable intermediate points on the way to the goal;
- describe outcomes, not actions;
- contain accessible and reliable evidence of task completion (list of changes, links to documents, published reports, etc.).
The short-term key result for Intel’s stated goal was “Achieve ten new 8085 customer agreements.”Measure What Matters
Sample OKR Implementation Cycle
Essentially, OKRs are a common execution language. They form expectations: what needs to be done and who is working on it. They help bring employees together both vertically and horizontally. In larger organizations, OKRs are a kind of roadmap: they rally employees and ensure synchronization of actions, especially in the context of geographic remoteness of company divisions and offices from each other.
How the OKR system works:
- There should be three to five OKRs per cycle. The fewer tasks, the more concentrated efforts are made. On average, each goal should be linked to five key results.
- It is important to encourage employees to self-formulate at least half of their OKRs. When all goals go downhill, people lose motivation and engagement.
- OKRs don’t have to be “carved in marble.” Even after formal discussions are over, employees and teams should have the right to adjust goals and synchronize them with each other. The same applies to the market situation: if something changes and the goal loses its relevance, you can modify the key results or completely abandon further movement in the chosen direction.
- Don’t be afraid to have high expectations. High-priority and survival-critical OKRs need to be 100% met, while over-the-top OKRs can seem nearly impossible to achieve. Exaggerated goals push the organization to conquer new heights.
- OKRs should not be tied to the system of rewards and rewards for employees, otherwise, they will behave too carefully. And achievement requires risk.
- Implementing OKRs takes time. It may take several years before an organization learns to really set goals and tie reasonable key results to them.
The four “superpowers” of OKRs are:
- Prioritization and commitment. OKRs help separates the wheat from the chaff and focuses on what really matters. increase the efficiency of interaction between departments; provide a basis for decision making.
- Synchronization and transparency. The OKR system assumes that all employees know and see each other’s goals, including the CEO. The goal-setting scenario involves both top-down movement, which gives order and meaning to the work, and bottom-up movement, which stimulates the responsibility and independence of each employee individually, as well as develops involvement and stimulates an innovative approach.
- Monitoring. OKRs are based on concrete data. Such goal-setting implies constant checks, adjustments, and re-evaluation of the chosen path.
- Striving for outstanding results. Big goals and a clear path to achieve them push the boundaries of the possible, motivate for continuous improvement, and release creative energy.
Prioritization and Commitment
Successful organizations usually focus their efforts on a limited number of initiatives that can significantly change the state of affairs in the company and in the market. Ask yourself: what do we definitely need to do during the next quarter (semester, year), and what can we postpone as less urgent matters? With OKRs, you set direction and give your employees a guideline for decision-making. No individual or organization can do everything at once. The OKR system, on the other hand, implies a clear plan and deadlines.
To begin with, senior managers must personally define the main mission of the company.
Google’s mission is to organize all the information in the world and make it available and useful to everyone.Measure What Matters
The mission is the sieve through which all OKRs are sifted.
The most important tasks should be clear to the entire organization. Leaders must convey to employees not only the “why,” but also the “what” to do. Employees must understand how their private goals are related to the mission of the company. Moreover, it is important to set up a notification system in such a way that colleagues remember the main OKRs not only at general meetings but at every possible opportunity.
However, setting common goals for the company is not enough. Leaders must formulate both their own goals and key results and present them in the public domain since it is impossible to force a goal-setting culture into an organization. All employees should see the example of their leaders and know what they are striving for.
Key results are more specific and down-to-earth metrics. They include factual data on one or more parameters: revenue, growth, active users, quality, safety, market share, customer engagement, etc. Don’t be afraid to set ambitious goals – if the result is easy to achieve, it is unlikely to seriously advance the company forward.
Ideally, short-term OKRs should contribute to annual OKRs and long-term strategies. It is short-term goals that stimulate work and help to fulfill annual plans.
Don’t forget about deadlines. Nothing improves efficiency like a well-defined deadline. If you dedicate a year to OKRs that could have been achieved in three months, you are likely to experience procrastination and a drop in performance. That is if you set a goal for a year, the deadlines for obtaining key results should be at least quarterly, and even monthly.
However, keep in mind that the more ambitious the OKR, the higher the risk of missing something. Sales managers can make 100 calls to customers per day, but if none of them transforms into a deal, this is an empty indicator. To increase the quantity and not lose quality at the same time, you can combine pairs of key results – measure both action and reaction.
Three new features per month is a quantity goal (action). Less than five bugs per feature during QA – quality goal (counteraction).Measure What Matters
Another important piece of the puzzle: OKRs must be meaningful. A list of goals should not become a wish list, just as it should not be a list of daily tasks. It should be a set of carefully selected goals that deserve special attention and move the company forward.
Transparency and synchronization
A special study by Betterworks ( www.betterworks.com ) covering 100,000 goals shows that public goals are achieved more often than hidden ones. The more transparent the work process, the more employees are motivated to achieve their goals.
According to the OKR system, the youngest employee must see the goals of all colleagues, including the CEO. Criticism, corrections, discussion of the goal-setting process itself – everything is put on public display. This helps not only to stimulate each individual employee but also to synchronize the work of departments. If the sales department does not agree with the line proposed by the marketing department, their representatives should not silently resent – this does not solve the problem and only aggravates the situation.
In addition to open criticism, OKRs also launch a support system. If colleagues see that something is not working out for one of them, they will have the opportunity to join the process and help get the ball rolling.
Synchronization is a direct consequence of transparency. Companies with a strong workforce are more than twice as likely to become market leaders, according to the Harvard Business Review. In large organizations, transparency helps to avoid duplication – employees from different offices often work on the same thing, not knowing about the efforts of colleagues. Thus, synchronized OKRs will save people from unnecessary work and save the company money.
In addition, when employees work in different offices, on different continents, and in different time zones, it can be difficult for them to prioritize tasks. Everything seems important and urgent. OKRs, on the other hand, promote vertical synchronization: they weave the work of each employee into common projects that are consistent with the overall mission of the organization.
However, in order to achieve a common goal, it is possible to skip over a multi-level hierarchy. Healthy organizations encourage the emergence of goals from below. Sales representatives are sometimes the first to see and feel changes in the market, and financial analysts are the first to know about changes in business fundamentals.
The optimal system gives staff the opportunity to independently formulate at least a certain number of personal OKRs. When a person chooses a goal for himself, he knows exactly why he is doing it, which means that he copes with the task faster than if it were lowered from above. The ideal ratio of autonomous and organizational goals is 50/50.
One of the main advantages of OKRs is that they can be tracked and then reviewed and adjusted. Cloud platforms tailored specifically for OKRs can help with this. The list of their components usually includes a mobile application, automatic updates, analytical tools, and the ability to integrate with Salesforce, JIRA, and Zendesk. It is with the help of such software that OKRs become as clear as possible, and employees do not have to spend time searching for the necessary documents and emails.
As a Harvard Business Review article pointed out, measurable success is more motivating than public recognition, money, and goal achievement itself. Regular checks and tracking of results help you stay on track.
Four options for action at any point in the cycle:
- Continue if everything goes according to plan and the goal remains relevant.
- Update OKRs if internal or external conditions have changed (maybe it’s time to reconsider).
- Launch new OKRs even in the middle of the cycle, if necessary.
- Stop if the end no longer justifies the means.
It is only important to remember that if you refuse certain OKRs, you must notify everyone whose work was related to them.
The frequency of checks depends on the needs of the business, the difference between the predicted results and reality, and the location of the project participants (the farther they are from each other, the more often there should be to contact).
For best results, review OKRs several times a quarter and do this at individual and/or team meetings of employees, teams, and their managers.
Meetings should have three parts:
1. Objective calculation of the result. On modern OKR platforms, everything is automated and the system itself calculates the necessary indicators. You can independently calculate the effectiveness of OKR using the average value of the percentage of work completed. Google uses a scale from 0 to 1.0:
- from 0.7 to 1.0 = goal achieved;
- 0.4 to 0.6 = there is progress, but the work is not completed;
- 0.0 to 0.3 = no progress.
Say, if the goal is to prepare five benchmarks, then the readiness of three out of five gives a result of 0.6.Measure What Matters
2. Subjective self-assessment. Objective data must be supported by deliberate, subjective conclusions of the author of the problem. Sometimes low numbers hide hard work and a lot of effort, and high numbers do not reflect real results. Recall the sales manager example: the number of customers called doesn’t mean anything.
3. Analysis. At the end of the cycle, be sure to pause and analyze the results – and only then proceed to a new cycle. Experience without analysis is no experience. Ask yourself the following questions:
- Have I achieved my goals? If yes, what helped me to be successful?
- If not, what difficulties did I encounter?
- If I could reformulate the goal I achieved, what would I change?
- Based on what I’ve learned, how could I change my approach for the next OKR cycles?
After careful analysis and working through mistakes, focus on achievements. Throw a party, celebrate with colleagues. This will raise both your personal and team motivation.
Commitment to outstanding results
A modern company cannot succeed without innovation. In order not only to survive but to live long and prosper, you must constantly conquer new heights.
Edwin Locke, a structured goal-setting guru, has read dozens of studies on the quantitative correlation between task difficulty and performance, and here’s what he found out: the harder the task, the better the performance. The test subjects who were faced with difficult tasks achieved the goalless often but regularly showed higher results. At the same time, ambitious employees are not only more productive but involved in the work process.
Google divides its OKRs into two categories:
Priority goals are associated with key Google metrics – product release, recruiting, customers. Management formulates them at the company level, while employees formulate them at the department level. Such goals must be achieved 100% within the specified time frame.Measure What Matters
Ambitious goals are risky ideas focused on the future. They can appear at any organizational level.Measure What Matters
The ratio of the number of priority and ambitious goals depends on the goals for the next year: whether you are striving to capture a new market or want to strengthen your current position, whether you are in survival mode or are willing to take risks for the sake of a large reward.
But even an ambitious task should not be presented as a “road to nowhere.” Leaders must be able to convey two things to employees: the importance of achieving a specific result and the conviction that it is achievable.
CFR: the concept of continuous performance management
Traditionally, performance management has been done through an annual performance appraisal. This is an archaic system that requires huge time costs from managers and does not give truly adequate results. It should be replaced by a modern alternative – a continuous performance management system.
The tool underlying it is called CFR, where:
- C (Conversations) – discussion. Sincere and structured communication between the manager and the employee is designed to increase the effectiveness of work.
- F (Feedback) – feedback. Two-way communication between colleagues to evaluate progress and identify ways to improve.
- R (Recognition) – recognition of the merits of employees for their contribution to the common cause.
OKRs and CFRs are mutually reinforcing. If you look at things exclusively binary and evaluate everything only by the criteria of “yes” or “no” (have you achieved the goal or not), then most likely you will miss the context – whether the task was set correctly, whether the achievement of the goal turned out to be more difficult than it seemed first, whether it is worth re-working out the intended goals or it is time to change the strategy.
Flexibility is one of the basic conditions of the modern world, and the CFR method just helps companies make adjustments to work as quickly as possible throughout the year, while synchronization and transparency become daily requirements.
A good transitional solution could be a combination of old and new approaches: annual performance reviews are combined with continuous management and regular communication. For those companies that decide to go full-time to continuous performance management, the first step should be to separate financial rewards from OKRs. Do not abuse goals and determine the amount of compensation based on them, otherwise, the value of employees will be measured by the number of “dragged bricks”.
If employee A set himself ambitious goals and achieved 75% of them, should his bonus be less than that of employee B who achieved 90% of the goals, most of which were simple and did not affect the development of the company? That is why the author claims that everything depends on the context.
At Google, OKRs make up a third or less of performance scores. The main thing remains the personal feedback of the manager and cross-functional teams, as well as taking into account all the accompanying circumstances. In this regard, individual meetings between managers and employees are of particular importance.Measure What Matters
Critical areas of discussion between manager and employee:
- Forming an OKR plan for the next cycle. Align individual goals and key results with organizational priorities.
- Continuous monitoring of intermediate results and achievements with the solution of emerging problems.
- Two-way feedback to help employees reach their potential and managers improve the quality of their work.
- Career growth and expansion of the employee’s vision regarding his future in the company.
- Analysis of the achievements of the employee since the last meeting in the context of the needs of the organization.
In today’s world, employees want not only to receive regular feedback from managers but also to give it back. They want to discuss their goals, share with others, and track the accomplishments of colleagues. In any case, feedback can only be considered constructive if it is specific and to the point.
In addition to face-to-face meetings, there are now many anonymous feedback services, from short survey platforms to anonymous social networks. Feedback between colleagues (according to the “360 degrees” method) can be both anonymous and public. All this helps to develop inter-team connections, provokes horizontal communication, and strengthens teamwork.
Recognition of the merit of employees is a powerful incentive for engagement. Here are a few ways to inject this component:
- Establish a peer-to-colleague recognition method. This may be a Friday general meeting, which ends with voluntary remarks of praise from all comers.
- Formulate clear criteria for recognition and praise for specific actions and results.
- Show gratitude publicly, such as posting employee accomplishments on a blog or corporate magazine.
- Praise even small accomplishments.
- Link recognition to company goals and strategy. You may want to specifically reward merit in the areas of customer service, teamwork, or cost-cutting.
The achievement of any goal requires a suitable environment. Within the framework of the OKR and CFR concept, organizational culture is a pillar that reflects the most important values and beliefs. However, a healthy culture and structured goal setting are interdependent, because team cohesion while working on common goals and the inevitable informal communication is the key to a positive environment.
The OKR system assumes collective responsibility for achieving goals because, with transparent and truly important goals, no one wants to slow down the team. It turns out a kind of social contract on the terms of self-government, which provides a powerful and energetic culture of development.
Top 10 Ideas
1. OKR is a technique for setting the main goals and identifying key results that mark their achievement. This tool can be applied at all levels: companies, teams, and each individual employee.
2. Goals answer the question of what needs to be done. They must be ambitious, but doable; specific but inspiring.
3. Key results answer the question of how you are going to achieve the goal. They must be specific, time-bound, and measurable. A key result cannot be claimed without a numerical indicator.
4. There are two types of OKRs: priority and ambitious. The first must be completed for the survival and stable functioning of the company (expected score – 1.0); the second reflects how you see your future, even if at the moment you do not have the necessary capacities and resources to achieve them (expected score is 0.7).
5. There should be no more than 3-5 goals per cycle. Too many OKRs only disperse work. Each goal should have an average of 5 key results.
6. The first superpower of OKR is that the system helps to prioritize tasks at all levels of the company and encourages employees to take responsibility for their implementation.
7. The second superpower is that OKRs synchronize the efforts of all employees both from top to bottom and back, and horizontally, and also provide maximum transparency of the workflow for all its participants.
8. The third (and one of the key) benefits of OKRs is that they can be tracked and then reviewed and adjusted. It is a flexible system that offers equally flexible monitoring. In addition to numbers, always pay attention to context.
9. Finally, OKRs help employees and companies achieve truly outstanding results, as they are based on ambitious goals with a clear plan for moving towards their implementation. Having set an ambitious goal for yourself, do not be afraid of the lack of a 100% result and give the employee the right to make mistakes.
10. CFR – the concept of continuous performance management – allows you to provide the necessary support to employees and resolve the issue before it develops into a problem. Decouple OKRs from monetary rewards and move away from competitive ratings, replacing them with transparent tiered performance criteria.