What Is OKR?
What Is OKR?
Objectives and Key Results (OKR) is a framework used by organizations and individuals for collaboratively setting ambitious goals, tracking progress, and aligning action with an organization’s strategy to achieve measurable results. Often associated with technology companies (such as Google, Twitter, Spotify, Airbnb and LinkedIn) or those that focus on Agile methodologies, the OKR model can be used by any sized organization in any sector. OKRs create an analytical basis for decision making and help focus attention on what matters most.
Components of an OKR
In the OKR Model:
- Objectives capture what you want to accomplish (a broad goal) in a qualitative sense
- Example: Improve the Customer Experience
- Key Results capture/measure what you hope to accomplish in a quantifiable sense
- Example: 10% increase in our Net Promoter Score by the end of the quarter
- Everyone in the organization sets their own OKRs, from leadership down
- OKRs can be set individually or on a team basis but should be aligned with strategy
- All OKRs are shared transparently and reported on a regular cadence, typically quarterly
- It is often useful to also track Initiatives, or the actions/projects implemented to improve objective and key result performance
Benefits of Implementing an OKR System
Organizations implement OKR systems to:
- Establish a shared vision of desired outcomes
- Assess progress
- Help employees understand what the purpose is for their efforts
- Provide strategic context to help overcome obstacles
- Identify resource and budget needs based on desired results
- Implement strategy in a more agile manner
Typical OKR Challenges
Organizations that struggle with OKR implementation see many common challenges:
- Relationships between objectives are not always well-defined or clear
- OKRs are impossible to achieve, creating frustration
- Inconsistent process leads to chaos
- OKRs designed from the bottom-up lack alignment to organizational strategy
- OKRs are too vague
- Too many OKRs
- Not enough follow up or regular review
- OKRs that are really to-do lists, actions or milestone/deliverable measures
- Employees game the system to always achieve their goals
How Does OKR Compare with Key Performance Indicators (KPIs)?
KPIs and OKRs are similar in definition and purpose. Key Performance Indicators (KPIs) are the critical (key) indicators of progress toward an intended result. They help you understand if you are achieving your goals. KPIs create an analytical basis for decision making and help focus attention on what matters most. Like OKRs, KPIs are used to improve performance and achieve goals, focus attention on what matters, and provide evidence to inform decision making.
The primary difference is the way they are implemented. KPIs tend to be tracked continuously on a dashboard, while OKRs tend to be scored quarterly in a yes/no fashion depending on whether not a particular OKR was achieved. When used together, OKRs often detail short term improvement goals related to KPI performance. For example, an organization might track a product quality measure on a dashboard for years and years. A short-term OKR might be to improve that quality measure by 10% by the end of a particular quarter. A personal example might be to track one’s weight as a KPI, along with numerous other health measures (e.g. blood pressure, etc.) on a health dashboard. If that person goes on a diet and decides to lose 10 pounds (5 kg) by the end of the year, that could be thought of as an OKR.
How Does OKR Compare with Balanced Scorecard (BSC)?
The Balanced Scorecard is a strategic planning and management system that organizations use to communicate strategy, create alignment, prioritize, and improve strategic performance across different perspectives. It is similar to OKR in that it is a framework used to define desired strategic outcomes, measure progress, and drive change. It is different in that it more holistically and systematically communicates how strategy works by connecting the dots between objectives within the system. It is also different in that the time frame tends to be longer (years, versus the typical quarterly OKR schedule).
When developed using a disciplined framework like Nine Steps to Success™, a balanced scorecard connects the dots between big picture strategy elements such as mission (our purpose), vision (what we aspire for), core values (what we believe in), strategic focus areas (themes, results and/or goals) and the more operational elements such as objectives, measures (or Key Performance Indicators), targets (our desired level of performance), and initiatives (projects that help you reach your targets). (Read more about balanced scorecard).
Can OKR Be Used with Balanced Scorecard?
Using OKRs to manage employee activities and accomplishments is great for most of the organizations, but only if those activities and accomplishments are aligned with shared vision and strategy. Luckily it is easy to use the two frameworks together, adding to Balanced Scorecard the principles that make OKRs so effective, such as a regular cadence of iterative strategy adjustment and a focus on individual accountability, target setting and action planning. To take advantage of the strengths of both tools, Balanced Scorecard should be used to frame and operationalize high-level strategy. Mission, Vision, Values, Goals, Objectives, Measure, Targets, and Initiatives should all be organized and aligned so that individuals and teams creating their OKRs understand what the organization is trying to accomplish. Alignment is created by connecting Objectives at each level and is managed in an iterative, bidirectional manner.
The OKR framework is an evolution of the Management by Objectives (MBO) methodology created by Peter Drucker in the 1950s. Andy Grove adapted the MBO model at Intel, first calling his adapted approach Intel Management by Objectives (iMBOs) and then later OKR. John Doerr worked with Grove at Intel and then later introduced the methodology to Google. Google’s well documented success with the methodology has inspired a surge in popularity of the model.
Learn More About OKR Implementation
BSC-KPI-OKR: The Alphabet of Strategy Management
Using OKRs With Balanced Scorecard
OKR Professional Certification
OKR, KPI and BSC: What is the Difference?
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