“OKRs” stands for Objectives and Key Results.
OKRs are a tool for guiding and executing the strategy of the organization. They happen through the deployment of business Objectives throughout individuals and teams.
In some respects, they follow the same logic as traditional goals, based on the Balanced Scorecard, Hoshin Kanri, or Management by Objectives, but they have their own agile flavor which makes them more useful to the business challenges of modern companies and professionals.
An OKR is a set of one Objective and n Key Results.
The Objective is the business result that needs to be achieved and should be written in qualitative terms.
The Key Results are S.M.A.R.T. (an acronym for specific, measurable, attainable, relevant and time-bound) goals based on specific key performance indicators.
Key Results must help “prove” if the Objective was achieved.
A good OKR should be built in such a way that if the Key Results are all achieved, you should feel comfortable that the Objective has been reached. They must serve as proof of the attainment of the Objective. Alternatively, if you feel that your Objective hasn’t quite been achieved even though all Key Results were achieved, there was a problem with your Key Results to start with.
You can use a very simple statement to help form an OKR:
”We will ______________ , and we will know if we were successful if we can _____________ , ______________ , ______________.”
The first space is filled by your Objective, and the second to the fourth are filled by the Key Results.
Let’s use an example to illustrate our definition:
- Objective: Increase the profitability of the company
- Key Results: i) Grow the company’s net income to $100 million, and ii) Reach a net profit margin of more than 7%.
Since OKRs belong to cycles, if they don’t have an explicit end date, you must automatically assume that they must be completed before the end of the cycle. Cycles of OKRs generally last 3 months, a period within which the OKRs are established, monitored, and evaluated, and from which a new cycle begins, ad eternum.
Back to our example. If we fill in the gaps above, we will have:
“We will increase the profitability of the company, and we will know if we were successful if we can grow the company’s net income to $100 million and reach a net profit margin of more than 7%.
Andy Grove’s High Output Management
If you’ve read Andy Grove’s High Output Management, you’ve probably noted a few differences: we don’t use Key Results as “milestones.” If we were to write our profitability OKR above using Grove’s method, it would probably look like a Project, where the Objective is the goal, but the Key Results are milestones we need to achieve in order to make progress towards that goal. Let’s look at an example:
- Increase profitability
- Map out areas for cost-cutting across all divisions
- Present findings at the management committee
- Cut workforce by 10%
The literature out there doesn’t help
As you can see, most of the literature available out there about OKRs doesn’t help eager professionals to learn how to implement them. One of the leading OKR SaaS provider cites the following example: “Put a man on the moon by the end of next decade” as an example of an Objective. I know, I know. It’s figurative. But it’s also confusing. That’s clearly not an Objective for OKR purposes. It’s not something achievable in a 3-month or even 1-year cycle. It’s more of a multi-year company-side Objective.
To help achieve this understanding goal, I would kindly ask you to limit your objectives to the cycle length you prefer to adopt. The longest the cycle (i.e., more than six months), the more I would encourage you to face Key Results as chronological milestones to reach those goals. If you use shorter cycles (from one to six months) you can choose if you want to use KRs as milestones or as objective components.
Table 1: Four different approaches to understanding OKRs