There are several methodologies for defining and monitoring the objectives that an organization sets for itself. The methodology I am going to talk about was initially implemented by some of the biggest companies at the time of writing this article, hence its relevance.
Objectives and Key results (OKR) is today’s topic: what they are, how they are implemented, their difference with KPIs and, of course, practical examples.
As always, we’ll go from the general to the particular, but if you go straight to the point, check out how to implement Objectives and Key Results.
What are OKRs
OKR is a methodology that consists of identifying objectives and the key results they should generate, in order to align the organization, teams and even a single individual in terms of the work to be done.
And why does it work? Perhaps the most relevant concept here is alignment. An aligned organization is an organization where every effort is directed to the same point.
Although the creation and diffusion of OKR’s is associated with Google, the first company where this methodology was used was Intel. If the history of OKR’s is of interest to you, click here to learn more.
Definition of OKR
You already know that an OKR is nothing more than an objective and a key result. Let’s review these definitions.
Objective: Objectives should answer what you want to achieve and should do so in a qualitative way. In other words, the objective describes the quality or state you want to achieve, hence its approach is ambitious, challenging and aspirational.
Key Results: Key Results are clear metrics that indicate whether or not the defined objective has been achieved. In this way, it allows you to monitor how close you are to its fulfillment. Unlike objectives, key results contain quantities. As they are disaggregated from the objective, they are usually mapped to a shorter time frame than targets.
And how is an objective integrated with its key results? Well, knowing that an objective contains one or more key results and that they are mapped to a longer time frame, you should consider the objective as achieved as long as all its key results are achieved, and of course, considering that there is coherence between the objective and the key results.
Example of objectives in OKR’s
Having defined the objectives in OKR’s, let’s look at some examples of objectives:
To be one of the best places to work in Mexico.
Optimize the conversion funnel to achieve more disbursements in less time.
To be the most listened health and nutrition podcast in Spanish.
Create the number 1 software for human talent management.
Example of key results
- Based on the examples of objectives in OKR, we have the examples of Key Results, respectively:
- Achieve a satisfaction level higher than 95% in the general employee survey.
- Decrease the flow time for opening the digital product by 20%.
- Increase the number of subscriptions by 40%.
- Obtain 95% positive reviews on Capterra.
Let’s take one of the above objectives and define its key deliverables:
Create the #1 software for human talent management.
- Obtain 95% positive reviews on Capterra.
- Optimize by 25% the number of daily cumulative steps per company (number of clicks) for operations associated with human talent.
- Increase annual customer retention by 70%.
Advantages of OKR’s
The advantages or benefits of OKRs all derive from achieving team alignment. Many of them are the effect of obtaining other advantages. In the end, the most important benefit that represents that everything is going well in the organization is the increase of profitability in the business.
Anyway, let’s review the advantages of OKRs:
- Facilitates teamwork.
- Strengthens communication in the organization.
- It facilitates the control of the work of the employees to have clarity of the key results that this should achieve.
- Time is optimized.
- Increased employee commitment by having a defined direction and having a reflection of the impact of their efforts.
- And again, increased profitability in the business.
How to implement OKR
If you’ve made it this far, the methodology is not difficult and you’ve probably noticed. You can actually finish reading and get together with your team to implement OKRs.
But then why continue? Well, the steps that I will explain here are more oriented to an alignment between strategy and tactics, that is, between the business and the teams. If you are a product owner or the leader of a process, beyond defining the OKRs of your team, you will be interested in knowing if the business has OKRs and what they are, so that when you define those of your team and individuals, there is alignment.
Without further introduction, let’s get started.
Step 1: Business objectives
The business OKRs are the ones that point the direction in which we are going to aim, hence they are built taking as input, the mission and vision of the company. It is usual that they are drawn in a time horizon ranging from 1 to 3 years. This is because the OKRs are more strategic than those defined within the teams, and therefore the changes to be generated can be seen over a longer period of time.
And while we are on the subject of mission and vision, you might be interested:
It is important that these objectives are built as a team, giving employees the opportunity to answer: what do we want to achieve as an organization? A good idea for this is to perform an information gathering stage where all employees participate. This info will be an input for an objective definition session, where specific personnel will bring in a condensed form the contributions of the members of the organization and as a team they will be discussed to define the strategic objectives. This definition should include the time horizon for each objective.
Step 2: Business KEY RESULTS
You already have the business objectives, now the question must be: what are the results we want to achieve on the way to reaching the objectives? Perform that analysis for each objective.
What you get will be the key results, which are the measurable milestones that will indicate how close the organization will be to achieving its objectives.
Step 3: The Ambassador
It is worth mentioning that this step is optional but recommended. For most companies, OKRs solve the challenge of implementing a strategy in a way that keeps all employees aligned. Hence, the OKR or OKRs under consideration should have an owner or ambassador, or in other words, a “griever”. This person ensures that the team is committed to the achievement of the OKR.
Step 4: Team OBJECTIVES and KEY RESULTS
Step 4 is a repetition of steps 2 and 3, but with a team approach.
While the organization’s objectives are strategic, those of the teams are tactical. Hence, the timelines are usually quarterly, which provides greater reaction capacity in view of the fact that it may be necessary to make course changes on the defined objectives.
The OKRs of teams and individuals set out the tactics to be followed and the results to be achieved in order to contribute to the achievement of the organization’s long-term objectives. This is why it is important that they are constantly monitored.
It is important that the team’s objectives are aligned with the company’s objectives and support the ultimate goal of the business. Hence, they should be defined once the organization’s objectives have been established. As in any objectives methodology, team objectives must be challenging. And I say challenging in the sense that, when they are achieved, there is a positive feeling in the team and in the organization. If there is no such feeling, it is worth asking, were they challenging enough?
Step 5: The INITIATIVES
Initiatives are the answer to how objectives are going to be achieved and you can define them based on the key results. The question to ask is: what do we have to do to make << Key Result >> happen?
Let’s make a small example of OKR initiatives:
If our objective is “To be one of the best places to work in Mexico” and one of the associated Key Results is “To achieve a level of satisfaction greater than 95% in the general employee survey”, the initiatives could be aimed at 1) improving employee benefits, 2) determining how is their relationship with the work they do on a daily basis, 3) increasing the environments in which they develop their work, 4) strengthening their knowledge acquisition, 5) improving the quality of the work they do, 6) improving the quality of the work they do, and 7) strengthening their knowledge acquisition.
Step 6: Align as much as you want
We have only talked about OKR at the company and team level. But you can implement the methodology at different levels of the organization, as much as you want, making sure that alignment is maintained from the top to the bottom. This will depend on how the organization is set up. Visually it would look something like this:
Note that in the OKR diagram, there is an item called “annual objective”. Some companies include in the OKR methodology an objective that summarizes what they want to achieve in the year. This objective links the current business context with the mission and vision and represents an additional input for the construction of the organizational OKRs.
What is the difference between OKR and KPI?
We have already mentioned that there are many objective-based methodologies and it is perhaps possible that OKR is very similar to KPI (Key Performance Indicator). Let’s see what the difference is.
KPIs or key performance indicators are performance metrics of the different aspects of a business, in this sense they allow us to see how effectively the company is advancing in the business objectives, for example the customer churn rate or the level of staff absence are usually KPIs of companies.
It is usual that KPIs are used to track business activities, thus providing a snapshot of the current state of the business. Consider for example the following KPIs:
- The cost of acquiring a customer is $500.
- The authentication time for a user is 3 minutes.
- The RPM of the recipe vertical is $0.4.
- The standard output per hour in the printing process is 1800 sheets.
- The amount of sugar consumed per drink is 56g.
You see, while a KPI is a metric, the OKR is a target and a key result. In other words:
GOAL: Generate the most digital credit disbursements in the market.
- Decrease a user’s authentication time to 2 minutes.
- Increase conversion in the authentication process by 35%.
- Decrease the number of drop flows to 10.
- Percentage of authenticated users.
- Percentage of drops in the conversion flow.
- Average authentication time.
With the KPI example and its relationship to OKR clear, you will see that KPIs show business performance. On their own, it is not so obvious what needs to be done to improve the results of a KPI. Instead, in constructing OKRs, you also define what initiatives to achieve the OKRs. Consequently, to the extent that you achieve the key results, the KPIs should show better results.
Mistakes to avoid when creating OKRs.
I have seen these mistakes both in my own team and in experiences with other teams, so I recommend that you keep them in mind.
- Not following up and monitoring OKRs: Or at least monitoring. I also say monitoring because there are companies that have their OKRs displayed on dashboards graphically and with neon lights, but as this is not always possible, at least they should be tracked, which is nothing more than asking how are we doing with OKR compliance?
- OKRs that are not public: OKRs are a statement of your commitment, hence they should be transparent to the rest of the company and give an idea of what each team or person is doing.
- Having too many OKRs: This is a mistake in that it takes focus away from what is really important. Between 3 and 5 OKRs is more than enough to know what is really important.
- Having OKRs that are not aligned with the business: We already mentioned this in the step-by-step. Your OKRs must be aligned with the mission and vision of the business. That is, the organizational objective.
- Unquantifiable key results: If your key results are not quantifiable in their entirety, you will not know whether or not you are meeting the objective.
- Granular objectives and key results: In other words, objectives and key results that look like tasks. This indicates that they are not challenging and that their achievement will not be meaningful and will not represent a change for the company. Remember that tasks are the initiatives you undertake to achieve the objectives and as you complete them, you will see how your key results begin to change.
Perdoo: Exposes in detail the characteristics of an objective and a key result.
Xala3pa: In spanish. Explains the OKR concept in a practical way and gives ideas to create your own system in Notion.
Acsendo: In spanish. Offers many examples of OKRs from different areas: finance, marketing, operations, etc. Although in some examples, the KRs are quite granular, they almost look like tasks.