Given how much our world has changed in just the past decade, it’s incredible how effective the concept of OKRs, which was popularized 50 years ago, still is. But that’s just how fundamental OKRs are.
In short, OKRs turn traditional top-down management on its head. With OKRs, your value is based on what you accomplish, not your expertise. In other words, execution is more important than ideas.
But how do you put OKRs into practice? In this post, we’ll cover the answer to that question as well as the following:
- The definition of an OKR
- The difference between KPIs and OKRs
- How Google uses OKRs to set goals
- Examples of OKRs
- How to incorporate OKRs into your management style
- A free OKR template
What is an Objective and Key Result (OKR)?
OKR stands for Objective and Key Result, which is a framework that helps you define goals and track your progress towards them.
While powerful on their own, OKRs are often used alongside other management methodologies
As Andy Grove, their inventor himself explains the meaning of OKRs in this grainy video from 1978, OKRs have two mechanisms: the objective and the key result(s). The objective is the direction. The key result is the milestone.
You can think of “objectives” as what you want to achieve and “key results” as how you’re going to achieve that objective. Objectives are typically more high level so it’s not as important that they be objectively measurable.
However, there should be minimal gray area when it comes to key results—you should objectively know if (or to what extent) you achieved your key result.
The difference between KPIs and OKRs
It’s easy to get Key Performance Indicators (KPIs) and OKRs mixed up because they are related. But they’re not the same.
KPIs measure the performance of a specific business initiative.
For example, if a sales manager decides to judge her sales team based on how many calls they make per day, “calls per day” would be the KPI. And she could use that KPI to measure day-to-day success.
An OKR is like a more targeted KPI because the key result—calls per day—would be tied directly to the business objective. However, an OKR isn’t just more targeted than a KPI, meaning it’s also more flexible because you can use it to judge performance on more long-term goals.
If you think in terms of physical health, KPIs are like a temperature check. You can use a temperature check to see if you have a fever. But just because you don’t have a fever doesn’t mean you have great long-term health. And just because you have a fever now doesn’t mean you won’t be healthy later.
Of course, like a temperature check, KPIs are useful. But it is important to understand these key differences between KPIs and OKRs.
Examples of Good (and Bad) OKRs
Atlassian provides the following example of a well-defined objective and key result:
Objective: Launch a new employee portal by the end of the quarter.
Key Result: Shipping the portal increases employee feedback scores by 25%.
If you notice, without the key result, it would be hard to tell if the launch of the new employee portal was successful or not. This OKR works because you’d have a clear milestone you can use to say whether you achieved the objective or not.
An example of a poorly defined OKR, which we borrowed from Bruce Eckfeldt, might look like this:
Objective: Improve customer service
Key Results: Improve phone system, improve call script
As Eckfeldt points out, there are many ways you could improve customer service, so this objective needs a clearer direction. A better example would be, “improve the customer experience so it reduces resolution time.”
The key results also lack specificity, which makes them impossible to measure. A better key result might be: “Upgrade the phone system and hold two webinars with staff to review new functions.”
How Google Sets Goals Using OKRs
How you use OKRs is ultimately unique to your company. However, you can learn a lot from seeing how Google uses OKRs. The image below is a high-level overview from re:Work that provides insight into how Google uses OKRs:
What’s interesting about how Google uses OKRs is its unique approach to grading OKRs and their emphasis on what are referred to as “stretch goals.”
By definition, a stretch goal is just beyond the threshold of what seems possible. So with a traditional, binary measurement approach, you’ll fail to reach a stretch goal most of the time... by design.
And that’s where the genius of the continuum-based approach comes into play.
WIth a binary measurement approach, most projects at Google would be incorrectly deemed “failures.” But by grading OKRs on a continuum—with a 60 to 70% score representing success—Google avoids demoralizing their teams while still incentivizing extraordinary performance.
By the way, if you like discovering secrets from high-performing companies like Google, you can find more in our free ebook, 10X Culture.
Incorporating OKRs into Your Management Style
As mentioned earlier, OKRs will be unique to your company. And it takes knowledge of your organizational structure, industry, culture, and much more to create a plan to incorporate OKRs into your management style.
Still, there are best practices you can build on. In fact, Atlassian offers a simple checklist for OKRs, which reads:
- Put the customer first
- Don’t skimp on ambition
- Tie OKRs to larger company goals
- Just enough Os and KRs is enough
- If you can’t measure it, it’s not a good KR
- KRs are outcomes — not tasks
- Assign KR owners
In addition to Atlassian’s advice, Alex MacCaw of Clearbit created a sample agenda template for Hugo in which he recommends managers require their teammate to center progress updates around OKRs.
The final OKR best practice is to remember that OKRs are not an employee evaluation tool. OKRs are a management tool that helps you measure the performance of an entire team or business division.
Put Your OKRs into Practice with this Template
Exactly what structure you like for setting and tracking OKRs will likely vary, but the PDF template from this playbook from Atlassian is a great starting point. You can find the link to the PDF under “materials.”
In the template, you’ll have space to define OKRs, assign KR owners, calculate expected scores, and leave notes.
Ultimately, so long as you keep best practices in mind, adjust to the needs of your organization, and ensure you understand the basic concept of OKRs, you’re ready to start implementing OKRs. As you do, don’t forget to incorporate OKRs into your meetings with this agenda template.