Often, performance management strategies take a hit due to their complexity and hastened execution owing to their urgency. Also, broken alignment, a lack of accountability, and focus across organizational levels contribute heavily to inefficiently implementing a performance management plan.
The objectives and key results (OKR) model aids enterprises in tackling these challenges, so the company-wide workforce is focused on outcomes rather than outputs and knows precisely how their contribution impacts the outcome. This toolkit discusses the OKR and provides the guidelines for successfully setting the OKR as a strategic performance management tool in an organization.
The OKR history goes back to 1954, when Peter Drucker invented Management by Objectives (MBO). Later, MBOs were radically restructured by Andy Grove, who introduced the new idea in the 1970s.
The term OKRs was introduced as a new management methodology by John Doerr in 1999. This tool resulted from Doerr's working at Intel under Andy Grove, where Doerr learned about Grove's trendsetting system for goal setting and accountability.
This OKR framework provides a common language and framework for defining, aligning, and driving desired outcomes across all business areas.
OKR is a goal-setting framework that provides a common language to determine, align, and drive the desired outcomes across all business streams. These are categorized into objectives and key results (KRs). Its system of goal setting is simple but is the reverse of traditional Management By Objectives (MBO) systems which are typically hierarchical, annual, top-down, and compensation-linked.
OKR methodology works on the principle that people perform better by concentrating on outcomes rather than procedures. Instead of micromanaging workers by telling them precisely what to do, set them a goal and let them find their own ways to achieve them.
An objective is typically a statement of the goal or future outcome that an entity aims to achieve without describing how to get there. A solid objective statement has its own characteristics.
Aspirational: Objectives must give a sense of purpose and motivates people to aspire high.
Timebound: These may be short or long-term goals lasting quarter(s) or year(s).
Ideal Number: Ideally, three to five high-level objectives per quarter are easy to focus on.
Immeasurable: Unlike key results, objectives are not meant to be quantifiable and measurable.
Defining Key Results (KRs)
Teams use key results to track their progress toward the company's strategic goals. After defining the objectives, teams need to know how they will measure success. This gap is bridged by the Key Results (KRs) by complementing the associated objectives and taking them forward. The following characteristics contribute to effective KRs.
Outcome Over Activities: KRs describe the intended outcomes and not activities. These are designed with an underlying principle that realizing the intended outcome is the top priority over completing a series of activities.
Ideal Numbers: Ideally, each objective can have three to five measurable key results.
Measurable: KRs must be timebound and measurable, with a target metric defining what it means to meet, defer, or partially meet key results.
Short-Term Unlike objectives, KRs are not long-term based. These are outcomes to be mainly completed within a given quarter.
Best Practices For Setting Good OKRs
To be effective, OKRs must define and direct the teams' efforts toward what is to be achieved within a given quarter and how they will measure milestones on their path to attain it. This process ensures that all business areas are unilaterally working toward the same objective outcomes.
OKR framework is quite flexible and can be phrased in several ways. However, these must be set like goals that can be substantiated and measured. When done right, OKRs can be the pillar of performance management strategy.
Set achievable objectives: An objective must provide an action-oriented timebound statement, details how it will be measured, and defines what constitutes hitting, missing, or partially meeting the goal. Specific goals also lay the blueprint for the steps to reach the goal.
Limit the number of OKRs: Although the methodology does not specify any set number of OKRs, ideally, at most, ten objectives shall be established. Depending on the team(s), each objective shall have more than one supporting key result. As OKRs represent larger goals, the good idea is to set a number that can be reasonably completed in a set period, like a quarter.
As a practice, OKRs must also be set for the company and teams. For example, if your company's goal is to offer the best-in-class solution in your playfield, your marketing team's OKR might be to design a best-in-class product demo and showcase it to the targeted audience.
Link to daily tasks: As a good practice, OKRs need to be linked to the workers' day-to-day tasks. Unlike the conventional type of goal setting, where most employees are unclear about how their contributions work towards accomplishing larger company goals, OKRs provide a framework where goals and progress are visited at every milestone. Employee motivation doubles when they are in sync with the company's objectives and understand the context of why their work matters and how critical their contribution to the organization is.
Schedule periodic checks: The purpose of having goals as a part of day-to-day work is to ease the scheduling of regular checks and be sure that individual work stays aligned with the overall objective.
Assess impact: Whether completed, deferred, or partially completed, sit with the team after every deadline to evaluate what went well and what hindered the progress, and what changes are required to attain better results.
OKRs discourage the micromanagement and encourages sense of ownership in teams and individuals. The framework helps enterprises determine the constituents of success and what teams and individuals must do to reach their objectives.
The process of OKRs setting starts with defining the company's vision and mission statement. Once the company's vision and mission statements are in place, the leadership team / CEO must discuss and decide the high-level key results which might be assigned to the specific department or team.
See.What is the difference between mission, vision and values statements?
When determining high-level OKRs, it's essential to keep in mind that if the Objectives and Key Results are too limited at the top, by the time they are cascaded to the team members, individual contributors may have 'to-do lists' instead of OKRs and may feel less empowered to set their own goals.
The following steps shall be followed to set the OKRs for the individuals and teams.
Set the plot
Explain to your employees how the KRs are scored and how they affect their performance. Encourage them to set an ambitious/stretch goal and give them the confidence that it is okay to try and not succeed. This is what the stretch goals are for.
Set the stage for teams to collaborate and participate in the brainstorming process for writing their own OKRs. Each team should come up with three to five aspirational objectives. Keep in view that team OKRs must be aligned with the company goals.
Determine key results
Identify the measurable outcomes against each objective. The success will be determined by the desired outcome achieved. Keep in mind that key results are not the same as activities and tasks, they are the end results. Some KRs may be tied with other teams; get them on board. Collaborate and follow up with them from time to time to be on the same page.
Level up the targets
Once all the objectives and key results are enlisted, review the list. Introspection will help you determine whether the set KRs are too easy to achieve or are ambitious enough. Set the bar high and bring your targets a few levels up if they are too comfortable to achieve.
Work on the feedback
Ask for feedback on the execution of the OKRs. Consider the suggestions and put the best ones into practice to enhance the overall OKR experience and the results.
Evaluate and score
Scoring is a crucial component of Key Results measurement. Most organizations use the standard sliding scale of 0.0 to 1.0. The numbers indicate whether the objective is successfully met, missed, or closely reached. 0.1 means the goal is fully achieved.
Creating OKR Template
Keeping the overall structure and framework of OKRs the same, various functions and teams utilize OKRs to drive different outcomes. Each clearly defines the relevant team's aspiration objective and their measurable Key Results. OKRs can be created using software or manual templates using MS excel sheets. Please refer to the OKR template created with sample OKRs set for the content team. See. OKRs Setting Sheet
Setting up OKRs is the easiest step of all in the process of implementing OKRs. However, the challenge lies in executing OKRs while following the process through various phases throughout the year. Following is the piecemeal approach that teams will find helpful while executing the OKRs.
Annual Leadership Meeting to discuss and determine the leadership team's high-level objectives and key results. These meetings are also convened for deciding or forming the strategic teams required to take over some/all of the high-level OKRs.
Annual Teams Meetings to determine the OKRs at the individual and team levels basis the high-level OKRs cascaded down from the management.
Weekly Update on Progress meetings which managers need to initiate to have a weekly update from the individuals about the progress towards their KRs. This is to understand if individuals need any support or are facing any hurdles needing to be resolved. These catch-up calls keep managers proactive, and individuals engaged in helping them tread the path to meet their objectives seamlessly. These meetings should be at most 15-20 minutes per individual.
4. Milestone Reviews are essential to reinstate the purpose and review the teams' progress. These reviews determine whether the team is on the correct path or is deferred. Corrective measures can be taken immediately in case of deviations if any. This ensures that the miss at one milestone does not ripple its effect on the upcoming milestones.
5. Quarterly Reviews to check if the key results are missed, wholly or partly achieved. At this stage, remedial controls and measures can be taken in case of missed objectives to mitigate their effect on the company's overall annual objectives.
What Benefits Does OKR Technique Aim To Achieve?
The key benefit of OKRs is that it allows an organization to focus on metrics and key performance indicators (KPIs). Therefore, driving a cultural shift from output to outcome. Besides effectively managing performance, OKRs are a beneficial tool in many ways.
OKRs tends to set accountability and align teams and individuals vertically and laterally with centralized output, thus empowering teams to make efforts with a laser-sharp focus on the larger picture.
It should aim at binding teams by giving them a common purpose. Also, build the opportunity for teams to brainstorm.
It should strive to foster an employee engagement and brainstorming culture in which obtaining the best results is a team sport.
It should hone the organizational ability to assess the progress of each KR in relation to its associated objectives.
Tools and Related Resources
- OKRs Setting Sheet
- Aligning Performance With The Rhythm Of Business
- OKR As The Pulse Of Business
- What is the difference between mission, vision and values statements?
- Here's How Managers Can Help Employees Set Meaningful Goals
- OKR Software Value Rises in HR Programs