Having an effective way to measure business performance and growth is essential to manage the business. What you measure matters to the growth of the business. Objectives and key results (OKRs) are a method to structure goal setting and quantify achievements within an organization. OKRs help businesses measure what matters to the growth and improvement of the business.
Measuring Business Performance
Many businesses want to achieve exponential growth and improve their performance significantly. But do they have a system to manage the focus, alignment, and accountability of the business goals and performance? This is where OKRs can be of immense help.
The concept of OKRs was introduced by Intel and become a raging trend in the year 2014 when Google revealed its internal work processes to the world. From start-ups to established businesses, OKRs can be used as a collaborative goal-setting protocol for individuals, teams, and companies. The objectives and key results approach promote focus, accountability, alignment, and ambition throughout the organization.
A business objective defines “what is to be achieved”, while key results benchmark and track how the objectives are achieved. Setting clear objectives avoids fuzzy thinking and improves the clarity of purpose. KRs are time-bound, aggressive, specific, measurable, and verifiable. Each objective will usually include 3-4 KRs. Achieving all of the KRs will mean that the objective has been achieved.
OKRs do not require daily tracking, but weekly check-ins and monthly meetings are required to monitor and track their progress. During these meetings, the progress is reported, challenges are identified, and key areas are refined (as needed). OKRs help businesses measure what matters for business improvement and growth.
Measure What Matters – A Brief Review
John Doerr, a legendary Venture Capitalist at Silicon Valley, in his book “Measure What Matters” has explained how the OKR goal-setting system has helped tech giants like Intel and Google achieve exponential growth. The book also gives valuable suggestions on how businesses can use OKRs to thrive.
An “OBJECTIVE” According to John Doerr is simply “what” is to be achieved no more and no less. By definition, objectives are significantly concrete and action-oriented and are mostly aspirational.
KEY RESULTS on the other hand monitor the progress and measure how we reach the objectives. Effective key results are specific, time-bound and aggressive, and yet realistic. According to Marissa Mayer, “it is not a key result unless it has a number”
In this book, John Doerr speaks about how it started with MBOs and how Andy Grove, Father of OKRs compares it with OKRs. By the 1960s Management by Objective process has been adopted by most forward-thinking companies and also MBOs brought an increase in productivity and level of commitment. But they also had limitations as they constantly measured the output and got caught in the activity trap. Andy Grove in Intel brought in a simple system which he called iMBO and was very different from MBOs.
Having an effective way to measure business performance and growth is essential to manage the business. What you measure matters to the growth of the business. Objectives and key results (OKRs) are a method to structure goal setting and quantify achievements within an organization. OKRs help businesses measure what matters to the growth and improvement of the business.
Dr. Groves Basic OKR Hygiene
- Less is more
- Limit 3 to 5 OKRs per cycle
- Tie 5 or fewer Key Results per objective
- Set Goals from the bottom up
- Promote engagement by letting the team create their OKRs
- Stay flexible, if the climate changes key results can be changed
- Dare to fail
- Set goals that are extremely important and if you want to peak the performance
- Set stretched goals that push the organization to the new level
- okay as a tool, not a weapon this encourages continuous performance management
The book outlines 4 superpowers of OKRs. Focus, align, track, and stretch are identified as the 4 superpowers.
The first superpower focus and commit 2 priorities.
successful organizations start with a question of what is important for the next 3 months? They focus on an initiative that makes a difference and commit to the choices they made. Focus and commitment set disciplined thinking and they choose where to spend the time. It’s a red flag when the CEO says all my team goals are my goals. As a CEO or a founder of a company, you got to say what we’re doing publically.
The leadership must invest and energy to choose what matters most. Measure what matters most in the next 6 or 12 months is the guidance issued to the leadership.
A clear-cut time frame gives focus and commitment to win a marketplace. the organization needs to be more nimble than ever before. In John Doerr’s experience quarterly, OKRs are the best suited to keep pace with today’s fast-changing markets. AOKR quarterly OKR curbs away procrastination and leads to real performance and pushes people to get out of their comfort zone.
The second superpower is aligning and connecting for teamwork.
Some Companies today keep the goal secret but the research shows that public goals are more attainable than private ones. Publicly tracked progress helps in taking support and also providing support. This increases the working relationship and collaboration among the team members. Also according to Harvard Business Review companies with highly aligned employees are more than twice as likely to be top performers. To avoid soul-killing over alignment, organizations encourage some goals to emerge from the bottom up. Another important factor with alignment companies is quicker and has a competitive advantage when people across the organization know what’s going on it becomes easy to prioritize and contribute accordingly.
Align talks about how teams must identify ways to contribute to the mission. The individual OKRs must be aligned to the overall organizational goal.
The third superpower in the book is the Track for accountability.
Unlike business goals, OKRs can be tracked, revised, or adapted as per the need. Everyone can monitor the progress of OKRs, hence, each individual is accountable for them.
OKRs are adaptable by nature as we track and audit. There are 4 things that we need to look at while tracking.
1. If we are at the Green Zone the goal isn’t broken.
2. Look out for updates and modify in the yellow zone
3. Start and launch new OKRs in the mid-cycle whenever there is a need.
4. Stop when there is a red zone that indicates that you are at risk
As Stephen covey rightly said “if the ladder is not leaning against the right wall, one every single step, gets us to the long wrong place faster”
The last superpower is about stretch for amazing.
OKRs push you out of your comfort zone. Leaders get a broader vision between abilities and dreams. Innovation is like oxygen and you cannot win without them. We often set ourselves uncomfortably tough objectives and we eventually meet them. The truth is that stretch goal are possible
Continuous performance management and OKRs
Annual performance can be very exhausting and time-consuming. Very few HR leaders feel that this process is effective in driving value and culture. Today performance management is continuous and feedback-driven. The results are team-based and not individualistic. This is the very driving force and the alignment between Performance and OKRs.
There is a need to develop confidence and work together as a group. Not everything can be measured. To reach goals and the vision people have to think out of the box to achieve them. While OKRs break down the Annual process to quarterly objectives which give clear focus and alignment to goals. With the hybrid and the dynamic workforce in place, there is a need for continuous performance management.
Conversations, Feedback, and Recognitions (CFR) makes becomes the key to driving continuous performance management. OKR and CFR together drive transparency and empowers teams. They help you to measure what matters to the business.
Conversations: continuous exchange of conversation among the manager and the contributor aims in driving performance.
Feedback: Feedback are enabled bidirectionally and guide in future improvements
Recognition: Appreciation and recognition promote motivation.
Google divides its goals into committed and aspirational (stretch) goals. Committed goals are associated with critical projects, while stretch goals are associated with the bigger picture, high risk, and futuristic goals. Choosing stretch goals wisely can give significant payoffs. This book provides illustrates how Google and Intel have gone about setting their OKRs and achieving them.
There are a couple of areas where the book seems to have got it wrong.
One is confusing outputs with outcomes. The problem with measuring outputs as key results is that they do not measure things that matter to the company.
The second area is considering key results as objectives. John Doerr turns key results into objectives in his book.
Pros and Cons of OKRs
In recent times the use of OKRs has come under criticism for various reasons. Let us compare the pros and cons of OKRs so we are clear about where they can be most effective and where their usage doesn’t benefit the business.
Pros of OKRs
OKRs encourages businesses or individuals to set ambitious goals
OKRs can be reviewed regularly to track progress
OKRs are quantitative measures of business growth/performance
OKRs engage the employees and bring about more ownership
OKRs are not connected to compensation or payments
Cons of OKRs
Since OKRs are DIY, it needs guidance before setting up
Getting an executive buy will take time, and OKRs should be started only after buying
People end up upsetting too many OKRs
In a nutshell, when used in the proper manner OKRs can benefit an organization in achieving long and short-term goals effectively. OKR software from Datalligence helps businesses plan and execute OKRs effectively and measure what matters most. Make OKRs simple and achievable with our software.
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