Objectives and Key Results (OKR)

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Hong Sun
Management Consultant, Canada

Objectives and Key Results (OKR)

Introduced by Andy Grove to Intel and documented in his 1983 book "High Output Management," Objectives and Key Results (OKR) is a popular framework for defining objectives and tracking the implementation of the strategies to achieve them. The concept of OKR is not new and similar to Drucker's Management by Objectives and Critical Success Factors (CSFs) and Key Performance Indicators (KPIs). It has gained popularity in modern organizations as the framework is more in line with agile methodologies, proven by its adoption by some highly prosperous agile organizations such as Google, Linkedin, Twitter, and Uber, etc.

The goal of OKR: The goal is for the entire organisation, from key stakeholders and leaders down to team members, to understand the objectives of the company through a set of defined, specific and measurable actions.

The benefits of OKR: It's easy and simple; it helps an organisation to greatly focus on metrics and KPIs, which enables a cultural shift from output to outcomes; and it greatly improves employee productivity and performance.

The two components of OKR—Objectives and Key Results:
- Objectives are memorable qualitative descriptions of what the company wants to achieve; they should be motivating and inspirational. An example might be "Create an extraordinary customer experience."
- Key Results are a set of metrics that measure the progress towards the objectives. Each objective is usually matched with 2 to 5 key results, all of which have to be quantitative and measurable. For example, to achieve the objective in the above mentioned example, key results could include metrics such as: "Increase Repurchase Rate from 50% to 100%;" and "Keep Customer Acquisition Cost under $100/customer." Note that the second metric is to ensure that no one is abusing the first one by making customers (especially new ones) happy at unreasonable cost.


The OKR Framework:

1. Company Mission: A brief description of the company's vision and purpose that should hold for about 5 to 10 years.

2. Mid-Term Goals: Also called Moals. They link the OKR to the company mission, and translate the mission into somewhat more tangible gaols that are usually defined for a time span of one year.

3. The Cycle Of The OKR Framework:
Each cycle offers a number of opportunities for improving teamwork and progressing towards the goals. Objectives and key results are usually not changed during the cycle, unless something significant happened unexpectedly, to which the organization must respond. One cycle takes about 3-4 months, therefore several cycles are carried out each year to attain the mid-term goals.
Very similar to the agile project method Scrum and intended to be a flexible performance management tool for teams, the cycle is composed of four critical elements:

• OKR Planning: At OKR Planning, objectives and key results are defined for the entire cycle at all levels of the organization. This is done both top-down and bottom-up: strategic OKR set at the corporate level serve as a guideline for front line teams to draft their own tactical OKR. In a typical company, around 60% of the OKR are set at team level, aligned with the strategic OKR on top.
• OKR Weekly: The OKR Weekly is a solid ritual meeting (that lasts about 15 minutes) designed to synchronise the implementation of the framework by giving an overview of the current status of the OKR.
• OKR Review: A review meeting is held at the end of the cycle to reflect on and determine the degree of achievement towards the goals.
• OKR Retrospectives: During Retrospectives, the cooperation and the process are discussed and analysed by the team from a systematic point of view. Typical questions would be raised such as "What did we learn as a team?" "What should be improved in the next cycle?"

4. OKR Coach: Sometimes called OKR Masters, OKR Coaches are experts and change agents responsible for the smooth implementation of the OKR framework by facilitating the teams with their regular OKR cycles.

It's important to emphasize that just like agile methodologies, OKR's benefits cannot be fully leveraged if the teams are not autonomous or not allowed to make mistakes in order to learn and improve on a continuous basis; it's also crucial to separate OKR from compensation and promotions to avoid gaming the system and enable ambitious goals.

Sources:
Gonçalves, L. (2019, July 18), "OKR Framework, A Summary Of What You Need To Know".
Castro, F. (n.d.), "What is OKR?".

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