Often, planning is done on a one-year basis and the goals are lost sight of over time. This goal setting is rigid, costly, extremely time consuming and directs money into the wrong channels. OKR is a flexible framework for teams and organizations to work together to achieve goals. This framework helps you to shape the digital transformation.
Who invented OKR?
Peter Drucker laid the foundation with his Management by Objectives (MBOs). Co-founder Andy Grove first introduced OKR at Intel in the 1970s.
There are so many people working so hard and achieving so little.
Andy Grove
John Doerr, a former Intel employee, brought the method to venture capitalist Kleiner Perkins. They had a stake in Google and so the framework found its way to the search engine giant. In the meantime, besides Google, Linkedin, Netflix, Spotify, Airbnb and Intel use this method.
What is OKR?
It is an agile and practical planning and management method in companies. OKR stands for Objectives and Key Results. The method is based on qualitative goals (objectives) that show everyone in the team the direction in which things should go. And on measurable key figures (Key Results) that make it visible whether progress is being made along this path. The OKRs can be viewed by the entire company) because they also have a transparency function. For this purpose, a list is needed in which all OKRs of the company are written down and constantly updated.
It links the individual tasks of teams and employees with the strategy, plans and vision of the company.
The central idea: a company, as well as departments and individual employees, set themselves a maximum of five goals for each quarter – each with no more than four core results.
In each case, the day-to-day business as one of the largest task blocks must be taken into account in the individual goals. The challenge therefore lies in identifying the relevant success drivers that need to be positively influenced in order to move day-to-day business forward and improve it at the same time.
What are the advantages?
- Breaking strategy down into smaller goals to better implement them.
- More focus by always formulating and setting new goals on a quarterly basis.
- More transparency for employees so they can work on the right things and communicate better with each other.
- Motivating employees to achieve a common goal as well as their own goals.
- OKR is easy to understand and can be implemented without complicated technical infrastructure.
Process and components
Similar to Scrum, the process consists of Plan, Do, Check, Adjust. An OKR cycle is 3 – 4 months.
OKR Planning (4 hours per team)
All teams plan their OKR together in the beginning. Afterwards, all teams inform each other about the planned goals in order to identify dependencies and avoid conflicting goals. If not all teams are present at the same time, there is still the “drifting phase” (max. 5 days after creation) to give each other feedback.
OKR Weekly (30 – 60 minutes)
Weekly, the team exchanges information about the current status and possible obstacles. The goal is mutual synchronization as well as possible escalation of obstacles.
OKR Review (2 – 4 hours)
At the end, the teams present their results and the achievement of goals to each other. If this is not possible, the individual reviews can also be recorded.
OKR Retrospective (2 – 4 hours)
Finally, the results and findings are reflected upon in order to further improve the application and the process. The goal of the retrospective is to collect the experiences with the OKR process from the past cycle and to identify potential for improvement.
Once within the team, as well as possibly sharing across teams to improve support and collaboration. Once the first OKR cycle is completed, planning for the subsequent cycle continues seamlessly.
All OKRs with a lower target achievement level than 70% have to face the discussion what the reasons for the poor performance were. Subsequently, it must be evaluated whether the still open targets should be pursued accordingly or not.
What is the OKR Coach?
The OKR Coach has the central task to support OKR teams and the company in working with the OKR method. He is the facilitator and “owner” of the OKR process, but not responsible for the content.
- Supports teams in the formulation of OKR
- Facilitates and accompanies OKR events and meetings
- Coordinates the individual team events
- Assists with OKR related questions
- Supports management in the formulation of vision and medium-term goals
Characteristics of the method
It is important to formulate a maximum of five goals (Objectives), each with four milestones (Key Results). This forces you to focus on the essential goals. The Key Results are the success drivers of the Objective. When the Key Result is achieved, the Objective is automatically achieved. In addition, the Key Results allow you to see how close you are to achieving the Objective.
In the OKR method, 40% of the objectives come from “above” (Top-Down) and 60% of the objectives come from the staff (Buttom-Up). Thus, the goals are broken down from each level to a level below. Thus, the target system is always pyramidal. The respective departments and their employees have their own OKRs, which pay off on the Key Results of the superordinate level.
The OKR formula of John Doerr represents an assistance for the formulation of good and clear OKR: We will [Objective] as measured by [set of Key Results].
With this sentence you have a simple guide to how coherent the formulation of your OKR is. You will notice when writing or at the latest when reading aloud, if e.g. the Objective is too unspecific or the Key Results are not suitable to evaluate the achievement of the Objective.
Hierarchy of goals in the company
Regardless of the size of an organization, there are goals with different time perspectives that are of central importance for working with OKR. The long-term mission statement, the corporate vision and mission, forms the framework, the short-term so-called moals the common thread. Both are still specified by the top management of the company in order to give the employees an orientation for their own goal setting.
Mission statement (validity: approx. 3-5 years)
The company’s vision and mission are presented in the mission statement to provide a framework for formulating the Moals and OKRs. However, mission and vision usually remain unattainable. They resemble an ideal conception, which must be approached as closely as possible.
For the OKR method, the only decisive factor is that there is a statement about where the company wants to go in the long term. The stronger and clearer this statement is, the more stable the target system and the more effective the work with OKR. Management is responsible for formulating long-term goals.
Medium-term goals / Moals (12-18 months)
These are derived from the company’s mission statement, but break it down into shorter-term goals that make the vision and mission more tangible. The Moals provide guidance on which medium-term goals are important for the company in the near future in order to move closer to the mission and vision in the long term.
In principle, the development of medium-term strategic goals is the task of management. Depending on the structure, the entire organization or different business units then work on achieving the goals.
Objectives
Objectives must be clearly defined. Objectives are not to be understood as mere headings but as a concrete description of a state to be achieved. The more concrete, the better. Objectives should not be confused with individual tasks.
- Qualitative
- What.
- Directional
- Simple and understandable
- Inspiring, motivating, and call to action
- Positively formulated (“Towards”)
- Self-explanatory Targets should be set high. OKRs are considered to have been met from 70 percent goal achievement. This means there is always room for improvement. This provides an incentive to overachieve and creates room for emerging opportunities. If targets are constantly achieved at 100%, they are not ambitious enough. If the target achievement is in the lower range, they should be used as an aid for the formulation of the next OKRs.
Key Results (Milestones)
The key results should summarize the targeted key results in measurable figures. Each objective should have three to five key results that are developed jointly by the team.
- Quantitative
- How.
- Metrics to achieve the goal.
- “No number, no key results”
- Clearly measurable
- Can be evaluated conclusively
- Can be evaluated with a percentage in terms of their degree of achievement
Tracking – Confidence Level
The Confidence Level is a subjective assessment by the OKR team of how much they believe in achieving the Key Results. How ambitious you formulate goals should fit your company culture.
- On track (70% – 100%)
You have confidence that you will achieve the OKR with a high level of goal achievement. - Off track (50% – <70%)
There are risks and obstacles, but you are confident that you will still achieve the OKR, albeit with a lower level of achievement. - At risk (<50%)
You have lost the confidence to reach the OKR or see significant “discounts” in the target fulfillment. Red means “we have to learn”.
OKR Examples
Formulating goals is one of the most difficult exercises in the whole process. After all, almost everything in a company can be optimized, improved, or defined. Therefore, the most important thing is that the objective describes a state to be achieved and does not merely serve as a heading for a topic to be dealt with.
Example: Customers can use a scooter at all subway stations at any time (Objectives = Goal)
Increase number of operational scooters to an average of 1200 per day
Improve prediction probability of movement profiles by 25 percentage points
Increase range of scooters by 7 kilometers per battery charge
Reduce maintenance time per scooter from 90 to 35 minutes
Example: Online is the preferred support channel for our customers (Objectives = Target)
- 80% of customer inquiries reach us via
our online ticket system. - 1,000 active users of our mobile support app.
- 90% of all online tickets are resolved in 72 hours.
resolved. - 90% customer satisfaction based on the automatically sent survey following ticket resolution.