What is OKR?
OKR (Objectives and Key Results) is a goal-setting methodology. It was developed by Andy Grove for Intel back in the 1960s. Now, many small companies and Fortune 500 companies are using this methodology. OKRs help companies to identify key business objectives, set realistic targets, determine timeframe, and track progress. These objectives are focused on growing revenue, increasing customer retention, upgrading internal systems, improving marketplace positioning, and increasing market awareness.
In a company, OKRs are set at individual, team, and company levels. All OKRs have two components: an objective and three to five associated key results. These key results are measurable targets. They are used to track the progress of the objective.
What are the types of OKRs?
There are three types of OKRs. These are committed, aspirational, or learning OKRs.
- Committed OKRs: These types of OKRs are goals given to the teams to complete within a given cycle that is quite demanding but still achievable. In this type of OKR, the key results need to reach 100% completion within a set timeframe.
- Aspirational OKRs: They are called moonshots. They are more visionary, innovative, and experimental. They are set to prove a hypothesis or go for a completely new opportunity. They are long-term goals and sometimes live beyond the OKR cycle.
- Learning OKRs: These OKRs encourage the teams to explore. They are best for defining success when the outcome is uncertain or undefined. If the team is not sure how to proceed, they can set learning OKRs.
Benefits of OKRs
Focusing on priorities: OKRs allow the team to focus on objectives based on priorities. It divides the objectives sequentially and helps the employees to understand which tasks to perform first to achieve the goal.
- Organisational alignment: OKRs allow the employee and teams to collaborate to work towards the same company-level goals.
- Ownership: Each team or individual has OKR. They are held responsible for these specific objectives. This sense of ownership increases the likelihood of accomplishing the goals.
- Tracking Progress: OKRs help to track the progress of tasks. This monitoring can help to identify the potential issues so that an early solution can be kept ready.
- Faster goal setting: OKR is a goal-setting framework. It helps the companies in faster goal setting so that much time is not wasted on this.
How to create OKRs
The leadership of the company should take feedback from the employees and teams to create OKRs. The company objectives should be flexible enough to let the teams and individuals create their OKRs. Here are eight steps that you can follow to create OKRs:
Select Tool
Select an OKR software for writing them effectively. With this platform, you can make use of OKR templates, and automate OKR grading and progress tracking. Also, it provides a centralised place where you can give feedback on key results and progress. OKR tool helps to sync OKRs with performance review and career development framework.
Collaboration
The leadership of the company should collaborate on the company-level OKRs. It drives alignment and provides transparency. Then the team leads and managers should set OKRs for their teams.
Use company values and goals
Use the company values and the goals of the current year to set OKRs for the next year. Leadership of the company is responsible for deciding on the objectives, values, and initiatives they want to focus on.
Identify long-term business goals
Identify the long-term goals that you want to focus on. It may be expanding into a new geographic area or providing new products. Then you can convert some of these high-level strategies into more specific objectives for the year.
Write OKR statements
Think of the specific results and time you need to achieve the objectives. Then write the OKR statements. For example, preparing a business plan for potential clients by the end of Q1.
Provide training
You have created your company-level objective statements, but make sure everyone in your organisation has received enough training and has had a chance to practice and experiment with the OKR framework before you begin setting up team OKRs.
Set individual and department OKRs
After receiving the training on the OKRs basics, collaborate with department leads and teams to set individual and department OKRs. These OKRs should be more specific, for example, the HR department may set an objective to increase employee retention by 25% in the next year.
OKR monitoring and review
After setting the OKRs, create a process for continuous monitoring and revision. Weekly or fortnightly meetings can be helpful in tracking the progress.
Best ways to create OKRs
The main purpose of OKRs is to convert a company’s high-level strategies into goals for teams and individuals. Here are the best practices to create OKRs effectively.
- Set challenging but attainable objectives: The objectives set in the OKRs should be challenging but achievable at the same time. Objectives should not be unrealistic, as OKRs are created to encourage employees. The success rate of the OKRs should be kept at 70%. A lower rate demotivates employees, and a higher one is too easy to act as a stretch goal.
- Prioritise leading indicators: When writing the key results for OKRs, give priority to the leading indicators. These indicators predict future performances and help to progress with the objectives.
- Define two or three OKRs: Setting too many OKRs can be overwhelming for the teams and the employees. Set two or three OKRs so that employees remain motivated and focus on the tasks assigned to them.
- Testing OKR: Before the final implementation of OKR, conduct a small test to see what issues arise. This approach will help the teams to learn from their experiences and improve the process.
- Create awareness: It is important to include everyone in the process of OKR setting. It will help to create awareness among the employees and give them a sense of ownership. Provide training to ensure employees have the skills to carry out OKR responsibilities.
Examples of OKRs
A few key strategic goals should be the center of the company’s OKRs, and all employees should work together to achieve them. Here are some OKR examples:
Objective: Reduce the carbon footprint
Key results
- Reducing the supply chain and shipping infrastructure to zero waste
- Pay 100% carbon offset for calculated carbon dioxide emissions
- 25% of the material is compostable
- 75% of the material is biodegradable
Objective: Improve brand awareness
Key results
- A 40% increase in media attention
- Increase the score for brand awareness from 31% to 55%
- Raise the voice share from 14% to 30%
Objective: Improve company profit
Key results
- Raise the typical gross profit margin for new customers to 40%
- A 20% rise in the average revenue per client
- Raise the percentage of business customers from 35% to 45%
Common OKR mistakes to avoid
Setting good OKRs is crucial for the success of your business, thus, some mistakes should be avoided. Some common mistakes are:
- Setting unrealistic and unachievable objectives can demotivate the employees, and they can lose focus.
- Setting only top-down objectives can create confusion.
- Not allocating adequate resources to the employees can discourage them.
- Do not create vague OKRs. It creates confusion on what needs to be done and when.
- Not monitoring the progress of the objectives can create many issues while working.
- Having too many or too few objectives may derail the alignment of the teams.
As we discussed, OKRs help to set objectives for companies at many levels. Setting the right OKRs motivates the employees and helps them remain focused. Companies should understand how to choose the right OKR according to the values and mission of their company. With the right OKRs in place teams and employees can link their goals and understand the impact of their work. Right goal-setting is a powerful tool and it leads the business to success.
