Understanding why you would want to adopt OKRs
A five-part series: 1. Introducing OKRs, 2. Preparing for the OKR Journey, 3. Crafting Great OKRs, 4. Driving OKR Alignment, and 5. Managing Effectively with OKRs
Summarized by Bill Gelbaugh from Objectives and Key Results by Paul R. Niven and Ben Lamorte. With additional material from Measure What Matters, Lattice OKR 101 and Perdoo.
Why a series of blog posts about Objectives and Key Results, or OKRs? After all, aren’t OKRs just a goal-setting methodology? Well, yes, kind of, but more than that, they are a strategy-to-execution tool. When Silicon Valley startups discovered OKRs were behind the meteoric rise of companies such as Google, LinkedIn, Twitter and Amazon, a plethora of companies decided to adopt OKRs, hoping to catch even a fraction of that success.
This first post will share how the best companies use OKRs to create focus, alignment, contribution, and velocity. To capture the magic of OKRs, we will start by covering the basics; the OKR framework, the philosophy behind OKRs, the four goals of OKRs, and the incredible benefits your organization may be missing out on by not adopting OKRs.
Good questions inform. Great questions transform.
—Ken Coleman
LET’S START WITH A QUESTION – FOUR, TECHNICALLY!
During our OKR journey here at Outhouse, we have discovered four great questions that help us set successful OKRs:
What do we want most to achieve?
What is the right Objective for our current goals and challenges?
How do we want to measure success?
What measurements would best show our progress and success?
What initiatives would get us there?
Are we working on the right Initiatives to achieve this Objective?
What is the most efficient way to accomplish this?
Are we getting these initiatives completed as efficiently as possible?
Is your Objective to create a thriving business? What do you mean by thriving? Is it growing your user base? By how much? Might it be climbing revenues? By how much? Retention? For how long? Combining an aspirational objective, quantitative results, and focused initiatives creates inspiring, measurable, and achievable goals.
A great goal is a powerful tool; however, it’s not enough. A leader needs a way to ensure that their organization lives that goal. The real power of the OKR system is figuring out how to live that goal every day as a team. OKRs are best achieved if they are baked into the daily, weekly, and quarterly cadence of a company, from planning meetings and status updates to celebrating accomplishments along the way.
Ready to begin implementing OKRs at your company? Let’s get started with the basics!
FRAMEWORK
OKRs are built around three elements:
Objective: Where do we want to go?
Key Results: What are the results we need to get there?
Initiatives: What do we need to do to achieve those results?
The Objective is the goal of the company, team, or individual. Key Results are the measurable results needed to accomplish the Objective. Initiatives are the tasks you need to perform to achieve your results (i.e., the “to-do list”). This framework is repeated from the top of the organization on down. Starting with an overall company Objective, each group or team sets their OKRs, and individual employees often have OKRs as well. This cascading interplay of goals is what keeps a group of people aligned.
PHILOSOPHY
OKRs have a unique belief system around set goals that distinguishes them from other goal-setting methodologies.
Ambitious
Objectives are meant to be inspiring, set just beyond the threshold of what seems possible. Achieving less than 100% is not considered a sign of failure. The goal is to achieve as much as possible.
Measurable
Key Results are tied to tangible milestones and outcomes.
Transparent
OKRs are viewable across the organization, from the CEO down to the Intern.
This unique approach to goal setting was developed by Andy Grove at Intel and passed down to John Doerr, who brought the company strategy to Google. Today, thousands of organizations from Spotify to the United States Navy use OKRs as one of their main management tools.
Today, thousands of organizations from Spotify to the United States Navy use OKRs as one of their main management tools.
GOALS
Developing a focused strategy and making certain everyone is rowing in the same direction and are contributing play key roles in OKR goal setting. Another prominent feature is organization-wide transparency.
Focusing efforts
OKRs are not, and should never be, considered a master checklist of tasks that need to be completed. They are designed to be far more strategic. The model aims to identify the most critical business objectives and to gauge accountability through quantitative key results. Strategy pundits are fond of noting that strategy is as much about what not to do as it is about what to do. So it is with OKRs. You must be disciplined in determining what makes the final cut.
Ensuring employees work together
OKRs must be structured and used to maximize employees working together in focused collaboration and alignment. One of the ways this is facilitated is through the inherent transparency of OKRs, which are shared widely so that everyone, from top to bottom, can see objectives and key results throughout the organization.
Making measurable contributions
Key results are typically (and almost exclusively) quantitative in nature. Whenever possible, we want to avoid subjectivity and note with precision how the business is advancing based on the achievement of our OKRs.
Driving the company forward
The ultimate arbiter of success is the achievement of your goals.
BENEFITS
A popular saying is, “the simpler, the better,” and that is the key to the tremendous benefits that come from implementing OKRs.
OKRs Are Easy to Understand – Increasing Buy-in and Use
Consider OKRs the “In-N-Out of managing your performance.” One of the most significant benefits of the framework is its sheer simplicity, and that begins with the taxonomy—of just three elements: objectives, key results, and initiatives. Other approaches to managing performance and executing strategy tend to be awash in jargon. This can confuse employees already under siege from missions, visions, core values, KPIs, etc.
OKRs Demand You Focus on What Matters Most
OKRs demand that you isolate the most fundamental priorities and dedicate your focus to that limited subset of potential variables involved in running the company. OKRs are a great way to help everyone understand what’s important and how you’re going to measure what’s important. It’s essentially a great way to communicate strategy, measure strategy, and accomplish strategy. By putting a spotlight on your absolute priorities, you’re winning on two fronts: Identifying what matters most, and by default, providing yourself with the appropriate ammunition to say no to the many initiatives that, while tempting, are not in line with your goals.
OKRs Shorter Cadence Fosters Agility and Change-Readiness
While there is room for customization with every implementation, most OKR practitioners will set goals quarterly. This frequent establishment of priorities is vital. As the pace of change within and outside businesses accelerates, new information must be captured, analyzed, and transformed into knowledge that can be used to innovate and potentially alter the strategy or business plan. Doing so is immensely difficult if you’re only setting annual goals.
OKRs Transparency Promotes Cross-Function Alignment
An effective OKR program works on several levels: There are corporate-level objectives and key results in place. Departments or business units have OKRs, and individuals may have OKRs. The composition of OKRs at each level is not confined to their provincial interests. On the contrary, a well-developed set of OKRs should include objectives and key results that foster (and demonstrate) collaboration with other teams on whom they rely, or conversely, depend on them to drive results. OKRs should ideally be transparent throughout the organization, meaning everyone can see what others are measuring and provide feedback and input. This transparency fuels collaboration, alignment, and, ultimately, the execution of strategy.
OKRs Facilitate Conversation and Drive Engagement
An essential distinction of the OKR model is its focus on inclusivity. They are not a top-down exercise with goals handed down, as if on stone tablets, to lower-level units and departments who are expected to execute dutifully, regardless of their opinion. It is expected that individuals will have a legitimate say in the objectives and key results chosen, reflecting a mix of top-down and bottom-up goal setting. Having the opportunity to meaningfully contribute to what you will be held accountable for goes a long way in enhancing engagement. Moreover, when results are tabulated later, the chance to engage in a meaningful discussion, conducted in a spirit of inquiry, boosts morale. It may also demonstrate to superiors an employee’s readiness for the next level on the corporate ladder.
OKRs Promote Visionary Thinking and a Growth Mindset
Carol Dweck, a Stanford professor, known for her work on motivation and, more specifically, mindset, posits that people can be divided into two camps. Some individuals believe their success results from innate ability and are said to have a “fixed” mindset. Others feel success is a result of hard work, tenacity, and determination. They are said to possess a “growth” mindset. Fixed mindset individuals fear failure because they feel it’s an assault on their basic abilities. Those with a growth mindset embrace failure and recognize it as an opportunity for learning and improvement.
Organizations may be similarly classified using this distinction. Those who “suffer” from a fixed mindset will often forgo opportunities that involve risk, motivated primarily by a fear of failure. OKR organizations, on the other hand, embody the growth paradigm, relish failure, embrace a spirit of failing fast, and learn quickly. We believe that to compete in today’s global economy, all companies must adopt a growth mindset. Doing so means stepping out of any predefined comfort zone and creating audacious goals.
IN SUMMARY
With so many visionary, intelligent, and creative people here at Outhouse, there has never been a shortage of great ideas. What we realized over time is we needed a better way to organize, prioritize and execute. With renderings, virtual tours, animations, visualizers, and other interactive platforms for home builders constantly evolving, it is easy to fall into a pattern of starting too many projects. OKRs allow employees to continue to push the envelope on innovation while forcing us to choose, strategize, and focus our collective efforts on executing those ideas that will have the greatest impact on our company and our clients. We believe your company will benefit from implementing OKRs as well.
Next up… PREPARING FOR OUR OKR JOURNEY!
Bill Gelbaugh is one of our Senior Partners here at Outhouse and champions our OKR efforts.
