How Does OKR Work?
As many as 70% of all employees agree they do not feel engaged at work.
However, research from Gallup indicates that employee engagement results in “earnings-per-share growth that is more than four times that of their competitors…[Organizations] in the top quartile of engagement realize substantially better customer engagement, higher productivity, better retention, fewer accidents, and 21% higher profitability.”
This is why so many companies are adopting an OKR framework – to improve business outcomes by engaging their entire organization in the processes of setting and executing strategy.
An Overview of OKR
The OKR Cycle is the quarterly process of an organization translating its strategic plan into department, team, and individual Objectives and Key Results that align teams and drive execution.
OKR follows a top-down approach. Strategic planning is initiated at the top level, progresses to the team level, and finally down to each employee. When there is a well-defined route for the information to flow, teams and employees align themselves better to the set goals and contribute positively to achieve them.
An OKR consists of two aspects:
Objectives
Objectives provide clarity on the intent and direction of the organization. They answer the question, “What do you want to accomplish, and why is it important?”
– Communicate the 2-3 things you want to achieve this quarter.
– Declare the big idea and “why” – not numbers.
– Inspire and motivate people with a sense of purpose, so they want to be on board
Key Results
Key Results are the outcomes by which we measure the success of Objectives. They answer
the questions ‘What would be great?’ and ‘What will you have more or less of if you
accomplish the given objective?”
– 2-3 Results that quantify success for each Objective that quarter.
– Define the best possible results – not the most probable.
– Number quantifying an end state, not action items or opinions
– Where you will focus your efforts because it creates the most value
– Balancing key results helps achieve the right outcomes.
The Typical OKR Cycle
The main goal of an OKR cycle is to promote teamwork and communication and meet the strategic goals. A typical OKR cycle can be divided into three phases:
Part 1: Strategic Planning
The Strategic Planning phase of the OKR cycle takes place the two weeks at the start of the quarter, where executives set quarterly top-level objectives while departments, teams, and individuals align their work for the quarter.
1. Leadership team collaborates and sets top-level objectives.
2. Leadership team architects OKRs.
3. Leadership team works together to rationalize, deconflict and adjust OKRs.
4. Leadership team commits and publishes OKRs for the entire company to see
Part 2: Execution
By the start of the Execution Phase of the OKR cycle, everyone has aligned aspirational objectives and metrics for success. It is now time to put in the work to accomplish what you set out to do and remove any roadblocks to progress
OKR Check-ins
Conduct OKR check-ins and evaluate the performance of employees. Identify the areas where the employees fell short. Create a framework to deal with the challenges to accomplish the objectives for the quarter.
Team Reviews
OKRs are successful only when they are tracked regularly, as frequently as every week. Teams should conduct weekly reviews to keep a tab on progress, identify any roadblocks, and propose solutions related to OKR progress.
Part 3: Retrospective
When your OKR cycle is near completion, it is essential to conduct a reset and rinse session. This is the time to celebrate your wins and identify your shortcomings. Retrospective sessions help you face reality and mentally prepare you and your team for the next quarter.
The Benefits of OKR
Implementing an OKR framework is a tremendous undertaking. However, once implemented correctly, it improves an organization’s business outcomes by keeping employees engaged, aligned, and committed longer. Here are some of the additional benefits that OKR offers:
Agility
Long-term goals are often rigid. Since OKR runs quarterly with weekly and monthly check-ins, it ensures departments, teams, and individual’s work stay aligned to the organization’s strategic Objectives.
Employee Engagement
When employees know their goals, they are more likely to work actively and stay engaged. Visibility into how an individual’s performance impacts the entire company’s performance keeps them motivated and boosts their productivity.
Company Alignment
OKRs are first set at the top-level by executive leaders. Through a series of dedicated workshops at the beginning of the quarter, departments, teams, and eventually individuals rationalize their own Objectives which ultimately contribute to the top-level. In this way, teams work together to achieve the companywide goals and ensure the entire organization is working in unison.
What to Avoid
Unachievable Goals
While defining goals is necessary, they must be realistic. Goals that are achieved too easily mean that they are not ambitious enough. However, if you set them too high, it can reduce the morale of the employees.
Absence of Communication
The absence of communication creates a lack of alignment and accountability within any organization. Employees get stuck and feel confused, thus impacting the progress adversely. We recommend the following cadence to ensure the right conversations take place through OKR one-on-ones and team reviews.
Goal Negligence
The main goal of an OKR is to set and achieve Objectives. When goals are ignored, they are not achieved well. To combat this, individuals should update progress on objectives weekly through a dedicated software tool.
Conclusion
If your employees are not engaged in the workplace, an OKR framework may be the answer to boost your company’s productivity and keeps your employees engaged. If you would like to learn more about implementing an OKR framework in your organization, click the button below to download our ‘Executive’s Guide to OKR.’
