People Stretch Solutions is a Washington, DC-based management consulting firm with expertise in sales growth consulting, c-level advisory, and OKR consulting. We work with leaders to get organizations focused, inspired, and aligned!
We have seen firsthand how organizations spend valuable time creating a detailed strategic plan, only for it not to come to fruition at the end of the year. This gap between strategy and execution derives from a variety of factors ranging from conflicting priorities, inadequate communication, lack of alignment, and accountability. If you find yourself in this situation, ask yourself the following questions:
If you answered no to any of the above, the OKR (Objectives and Key Results) framework would remove these obstacles to executing strategy.
OKR is a collective goal-setting framework that allows organizations, teams, and individuals to set measurable goals on a regular cadence. The process of following the framework enables companies to engage in more frequent strategic conversations across the entire organization related to the goals that will make a positive impact on organizational success and growth. Implementing a framework that boosts participation in the middle and lower levels of companies improves alignment and transparency across the organization is the best way to begin closing the gap in execution.
This guide is for the curious leader who is interested in learning more about how to leverage the OKR framework to engage your organization and optimize performance. OKRs are proven to increase alignment, accountability, and growth across the whole organization. The OKR framework can remedy medium and long-term strategic issues by helping organizations establish clear priorities and engage in effective time management.
Organizations have utilized a variety of goal-setting frameworks to clarify and accomplish their goals. First, there was an interest in setting and measuring goal achievement at the individual level. Performance appraisals were suggested in the early 1800s by Robert Owen, a philanthropist and social reformer. This era brought the concept of KPIs (Key Performance Indicators), which developed as a means to define performance measurably. KPIs helped organizations pinpoint what they needed to achieve their goals, setting specific targets such as “grow revenue” or “increase the number of signed contracts.”
Then in 1954, a man named Peter Drucker adapted this framework to the business level with MBOs (Management by Objectives). MBOs aimed to cultivate a result-orientated organization by encouraging management to agree on qualitative or quantitative Objectives and set these as goals. Unfortunately, while popular in their time, KPIs and MBOs each distinctly focused on one level of the organization and did not encourage alignment and collaboration throughout it.
The pervasiveness of the gap between strategy and execution pushed Andy Grove, a businessman, engineer, and author, to adapt these concepts again in 1968. Grove’s transformation joined the KPI concept of identifying measurable outcomes for individual performance with the MBO principle of developing and communicating organizational goals, resulting in a framework that was significantly more transparent, measurable, and relatable to all levels of the organization – OKRs! As Christina Wodkte, an author, professor, and OKR connoisseur, says, “OKRs are more effective at uniting a company than KPIs [and MBOs] because they combine qualitative and quantitative goals… a strong OKR set can unite an entire company around a critical initiative.”
At the time of this transformation, Grove was working at Intel and, in 1974, was joined there by John Doerr. Doerr learned the OKR method from Grove and went on to join the venture firm Kleiner Perkins Caufield & Byers, which was one of the first significant investors in Google. Doerr helped to implement OKRs at Google, where they are still in use today! Many other successful organizations such as Amazon, LinkedIn, Adobe, and many high-growth start-ups utilize the goal- setting framework called OKRs.
OKRs help organizations drive progress by defining desired outcomes and aligning teams. As John Doerr said in his 2018 Ted Talk, “Truly transformational teams combine their ambitions to their passion and their purpose.” Using OKRs, organizations can identify what their top goals are to achieve clarity on direction, align their organization on what matters most, and drive progress through communication and collaboration. Thus, organizations everywhere are utilizing this framework to gain a competitive edge and grow faster than ever before.
Peter Drucker adapted this framework to the business level with MBOs (Management by Objectives). MBOs aimed to cultivate a result -orientated organization by encouraging management to agree on qualitative or quantitative Objevtives and set these as goals.
The pervasiveness of the gap between strategy and execution pushed Andy Grove, a businessman, engineer, and author, to adapt these concepts again in 1968. Grove’s transformation joined the KPI concept of identifying measurable outcomes for individual performance with the MBO princible of developing and communicating organizational goals, resulting in a framework that was significantly more transparent, measurable, and relatable to all levels of the organization – OKRs!
A the time of this transformation, Grove was working at Intel and, in 1974, was joined there by John Doerr. Doerr learned the OKR metod from Grove and went on to join the venture firm Kleiner Perkins Caufield & Byers, which was one of the first significant investors in Google
Doerr helped to implement OKRs at Google, where they are still in use today! Many other successful organizations such as Amazon, LinkedIn, Adobe, and many high-growth start-ups utilize the goal-setting framework called OKRs.
OKRs help organizations drive progress by defining desired outcomes and aligning teams. As Jhon Doerr said in his 2018 Ted Talk, “Turly transformational teams combine their ambitions to their passions and their purpose.” Using OKRs, organizations can identify what their top goals are to achieve clarity on direction, align their organization on what matters most, and drive progress through communication and collabration.
Andy Grove found three problems with how goals were being used back in the ’80s. If the goals were only numbers, they do not help align the team. If the goals were clearly articulated but not measurable, they cause people to miss more often than achieve the goal. Lastly, top-level goals often do not inspire employees at the team or individual level. To solve this problem, Grove came up with the OKR Framework. In this quarterly goal-setting framework, he would require the leadership team to decompose top-level goals into two parts: Objectives and Key Results. Once complete at the top level, he would mandate his executive team to have department level leaders to set OKRs called contributing Objectives which would cascade down from their own.
When possible, this process would repeat down to the frontline employees in a 2-week strategic planning period. The result was an increase in focus, inspiration, alignment, empowerment, and ultimately accountability around the areas of the company that would drive growth. The balance of the quarter was spent on execution reviewing OKRs on a team and one on one basis. Lastly, the final week of the quarter was reserved for a retrospective where success would be celebrated and failure would be learned from.
An Objective is the “what” part of your goal. At the top level, it is what all people in your organization should be able to get behind. Further than what we want to accomplish, they are about intent and direction! They also need to be inspirational, aspirational, and exciting.
Many times it is the WHY that truly inspires people, so it is a key component in the creation of an Objective. Because objectives are intended to be bigger and inspirational, we recommend having only 2-3 objectives per person.
They represent the 'North Star,' which guides with its light every team member in the same, bright direction.
John Doerr, Measure What Matters
When your team is first sits down to write OKRs, it is crucial to spend time collaborating on how the top-level Objectives are written and to ensure alignment with company priorities. Here are some examples of Objectives with an efficient version turned into a more inspiring one:
Have you ever set a goal and not accomplished it?
All too often, we set inspirational goals for ourselves or businesses, but do not clearly define what success is. We do not go on vacation without a clear destination in mind, so why would you do the same with goals for your business, team, or self?
Key Results are the outcomes by which we measure progress and success. They represent the end state which you or your organization aims to achieve. Typically, 2-3 Key Results are sufficient to quantify success for an Objective quarterly. Key Results are aspirational, so they focus on the best possible result. They are numbers that quantify the end state we want to attain, not actions (aka inputs) we take to get there and help focus efforts on what creates the most value. It is critical to have a balance of KRs so that you can be sure to achieve all the right outcomes.
When a company sets their first Key Results, it is important they are outside of people’s comfort zone but still attainable. An organization has to balance pushing for aspirational while nourishing its team sense of accomplishment. In some cases, for the first quarter or two, there could be some Key Results that measure inputs as a baseline before an organization can accurately measure a result and desired outcome.
When implemented appropriately, the OKR process assures that everyone in the organization has clarity on what to accomplish. Greater clarity and alignment in the organization occurs as each level of contributing Objective is set, so employees know what they are responsible for and how it connects to the top-level Objectives.
In this part of the OKR lifecycle, leaders need to meet quarterly to set the top-level Objectives. The most critical aspect is to involve enough people to set initial top-level Objectives that resonate with the company. In many cases, this activity will happen at a day or multi-day offsite. We recommend this as opposed to attempting OKR planning throughout a regular workday.
This part of the lifecycle comes to an end with a formal session involving the leaders where they communicate the OKRs they have committed to for the quarter. This is a powerful, motivating anchor because of peer accountability and transparency. The OKRs are stored in a central repository so everyone within the company should be able to review them unless considered confidential (i.e. M&A, HR matters, etc.)
In the beginning, this process can easily take more than 2 weeks, but with a couple of quarter’s worth of practice, this process can require less time.
In the execution phase of the lifecycle, leaders are working on their OKRs with their respective colleagues and teams. Two critical aspects that leaders need to ensure they are implementing correctly are team reviews and individual meetings.
In the case of team reviews, a leader or manager needs to review how the team’s OKRs are performing at least once a month. We recommend that a team look at it bi-weekly or even weekly in the first quarters of implementing OKRs. It is also recommended, in the spirit of transparency, to discuss individual OKR performance in a team setting. This will be particularly awkward at the beginning for an organization that does not have an open culture. In time, it will assist in the positive peer pressure created by having these open discussions.
In the case of individual meetings, managers and leaders need to leverage OKRs to improve their one-on-ones by having better conversations focused on achieving OKRs as well as facilitating more fluid two-way feedback between a manager and their direct report. In some cases, it also allows a manager to recognize when a direct report is making progress.
In the event an organization leverages an OKR software tool, additional value can be realized in one-on-ones thanks to automated reminders to update OKRs before, as well as some other features this guide will reference in a later section.
In this final phase of the lifecycle, a leadership team down to front line teams conduct a retrospective of the quarter to celebrate the OKRs achieved and learn from the ones that were missed. An organization needs to have a strong, open culture that allows employees to feel safe when talking about why they might have fallen short on a specific Objective. The key in each of these sessions is to ensure people are recognized for achievement for the successful execution of OKRS and insightful learning from falling short as well.
Now more than ever, CEOs and leadership teams need the ability to ensure alignment at all levels of their organization and pinpoint any potential gaps in accountability. Accomplishing this requires a framework that is agile enough to survive rapidly changing conditions but detailed enough to reach down to each individual employee.
Organizations tend to fall short in several consistent ways. There is a lack of alignment, and this challenge can manifest itself in different manners: There might not be alignment in the leadership team; The alignment might break down at the department level; the lower level of the company does not understand how they contribute or impact the organization’s strategic plan. Another common pitfall is despite a thoughtful strategic plan, no one is clear on who owns what aspects of the plan, and no one checks up to ensure progress, so execution varies across the organization. When ownership and how success is measured are not clear, it causes organizations to be very reactive. Inevitably, priorities vary between not being clear or there being many, resulting in time spent on things that do not make a significant impact on what matters most. Knowing that all these issues hinder our ability to succeed, organizations are turning to OKRs as a solution.
The OKR (Objectives and Key Results) framework has been executed successfully by organizations of all industries and sizes. Many top tier organizations rely on OKRs to help identify strategic priorities, improve alignment and transparency throughout the organization, and drive accountability and results. Today we find that companies who make their organizational Objectives aspirational, inspirational, measurable, transparent, and aligned to teams and individuals are succeeding at reaching the goals that they previously have not been able to.
As previously discussed, OKRs have a multitude of benefits. Here we will discuss eight key benefits that OKRs provide: Focus & Inspiration, Larger Coalition of the Willing, Cascading Drives More Conversations, Alignment & Accountability, Greater Individual Commitment, Team Transparency, Individual Acceleration, and Culture of Stretch.
OKRs are the intersection between inspiration and focus. Grove found MBO’s to be very antiseptic and lacking in purpose. He wanted his leaders to articulate their Objectives in a manner that inspired their respective teams. As John Doerr, the leader of OKRs, said, “Ideas are easy. Execution is everything.” The proper combination of inspiration and focus can fuel a workforce and point it in the right direction. OKRs allow leaders and teams to focus on making challenging but necessary choices. Rather than relying on the typical and ineffective laundry list of initiatives or tasks to accomplish, OKRs put a spotlight on the top priority for each leader, department, team, or person in a quarter. Well written OKRs at the top level and department level magnify the big picture (O) and what needs to happen summarily to measure success in terms of progress toward achieving that (KRs).
Organizations high in trust are 2.5 times more likely to function as a high-performance organization with revenue growth than lower performance organizations. Further, eighty-one percent of those working for companies with a strong mission stated their stakeholders hold trust for their leadership team, whereas that number was 54 percent for organizations without a strong mission
William Craig, Forbes Contributor
Leaders appreciate how OKRs force a focus on the inspiration part of goal setting. It becomes evident how powerful OKRs can be as a performance management tool when they share the well written top-level Objectives with their team and observe how engagement increases as people align the department’s or team’s Objectives to the high-level Objectives. The benefit of an inspiring leader and a tool that helps engagement is higher organizational trust.
In most organizations, the executive team is the only group consistently aligned on the organization’s strategic plan due to proximity, visibility, and participation in the creation. Within the plan, the C-suite sets the goals and inevitably owns the results each quarter. This leads to most of the organizations not having high degrees of accountability lower in the organization.
When each level creates OKRs that align to a level above, organizations can achieve harmony on how OKRs contribute to the organization’s bottom line and strategic priorities. This additional level of participation and understanding drives greater “buy-in” from the balance of the company. The OKR framework calls for an increase in tracking of progress on the Objectives, keeping employees at all levels stay focused on their commitments.
According to MIT Sloan Business Review (2018), only 51% of the top-level team could name the strategic priorities of the organization. This only got worse lower in the organization, with just 13% of frontline employee’s aware of the organization’s strategic priorities. These are scary numbers because people the majority of their time on the work they believe is most important. If they are unaware of the organization’s priorities, they may have a difficult time deciding what truly makes an impact.
Overall, the greater “buy-in” and higher frequency of tracking will increase alignment and accountability through the organization.
OKRs foster commitment and become social contracts for your organization. At the end of the strategic planning phase of the OKR cycle, leaders must commit to each other on what Objectives and Key Results each of them will be working towards for the quarter. This session serves two important purposes. It builds stronger commitments because the it is done in a public forum of peers and higher-level leaders, bringing transparency throughout the quarter and greater peer accountability. The other important purpose is to get leaders, managers, and employees out of planning mode and into execution mode. It is very natural for employees at all levels to want to get off to a good start of the quarter. By making it clear that planning has ended with clear commitments around OKRS for the organization, departments, teams, and individuals, the execution race has begun.
The meeting allows everyone to get aligned and cover off any remaining conflicts or crossdepartmental dependencies that can get lost in the strategic planning phase of the OKR cycle, most notably in the beginning of introducing OKRs in your organization.
It is difficult to hold individuals accountable unless they are committed to the outcomes the organization desires. Once OKRs are created to be inspiring and focused, the organization must include the team and help them align. Doing so creates awareness around everyone’s contributions, makes a public commitment to the leader and team, shares OKRs with everyone, and enlists any support needed. Throughout the OKR cycle, commitment is continuously reinforced through progress check-ins, monthly reviews, and one-on-ones with team leaders. Commitment helps to ensure that OKRs are active and that each person is working diligently to achieve them.
The CEO is the most critical example of commitment to OKRs. Most OKR implementations that fail do so because of a lack of CEO commitment. The CEO must be regularly involved and visible as a person that values OKRs. The CEO sets the tone for the entire OKR implementation and is vital to the success of OKRs based on his/her ability to demonstrate the value they see in OKRs and their commitment to sticking to the process. The CEO must be involved in the planning cycle. Further, the CEO must make OKRs a part of their daily conversations and reinforce the importance of striving for the future of the organization.
It is also important to highlight the people who took chances by setting loftier goals. In the case of the latter, employees will get more comfortable with setting more ambitious OKRs if they see that the world does not end if they fall short. The organization will value their efforts even though the KRs were accomplished.
Google’s “Ten things we know to be true.” mention ambitious goals directly: “We set ourselves goals we know we can’t reach yet because we know that by stretching to meet them we can get further than we expected.” Goal-setting theory says that goal achievement is facilitated by setting specific and challenging goals. OKRs provides you an opportunity to set more ambitious goals provided leadership has done their part in making a safe environment for employees to be ambitious and miss before they actually achieve their OKRs.
The first step to writing Objectives is defining your top-level Objectives, so the direction of the company is clear to all before they begin the process of creating personal Objectives. Top-level Objectives are the organization’s primary focus, and all other Objectives should cascade down from them.
When leaders think about writing an Objective, they need to be clear on their intent and the direction they want to head. If they know this, they should be able to answer the questions of what they want to accomplish and why it matters.
Objectives are ambitious and should feel somewhat uncomfortable.
Rick Klau, Google Ventures
A Key Result is how you measure success relative to an objective. Most organizations begin to struggle in setting KRs outside of sales, employee engagement, or other popular metrics which do not quantify organization success on a broad level. A model to follow is setting a key result that has a starting and target value, sometimes referred to as X or Y. For example, a Key Result could be a Net Promoter Score increase from a starting value of 75 and a target value of 80. You want the target to be aspirational, so think of the best possible outcome.
Key Results are typically in units of dollars, percentages, or a number, as you see in the example above. We highly recommend to avoid setting a key result on a binary basis (complete or incomplete) at the end of the quarter, even though many OKR software tools default to this setting. We recommend utilizing well-defined metrics or identifying milestone percentages.
If it does not have a number, it is not a Key Result.
Marissa Meyer, Former VP Google
We have successfully implemented OKRs in dozens of organizations and have put together a list of eight principles that we use to ensure a successful OKR rollout in any organization. Implementing OKRs is no easy task and requires a high level or coordination, co-operation, and sophistication to be successful.
Another important part of the execution phase is bringing OKRs into your one-on-ones. The purpose is to maintain focus on how each team member is working towards them. Companies adopting OKR must commit to mastering the weekly or bi-weekly check-in.
Mastering means that the leader is prepared to have a conversation rather than a status update. The leader nurtures a rich conversation around the OKRs and tactics to work towards advancing progress. It should include two-way feedback early and often as a manager should give feedback on how to progress OKRs and the employee should give the manager feedback on the effectiveness of the suggested tactics. As an employee starts to get velocity on progressing an OKR, a thoughtful leader knows when to leverage recognition. This form of motivation is the most cost-effective way of helping your people drive results. The one-on-one setting allows a leader to be more direct if an employee is falling behind or struggling with an objective that cannot be addressed in the team setting.
It is important to have some pre-work done before implementing OKRs and an OKR software tool within an organization. The sequence in which OKRs are developed needs to happen before the OKR software tool is implemented otherwise it can be tricky given the size of the initial implementation. OKR software can be broken down into one of three categories: