Updated: 4 days ago
What's better than a high performing team?
A team that makes an impact.
The real challenge is understanding what does an impact look like? It's certainly not the volume of things they get done. There's plenty of teams who are always busy but never move the needle.
What if we shifted our mindset? Placeless value on being busy, and focus on only the most important things. What if we could align the focus all of our teams on what's most important? Imagine the unstoppable wave of energy which would propel your teams forward. This is the power of Objectives and Key Results (OKR).
OKR is a management framework which aligns teams, creates focus and shifts mindset to that of outcomes. It propelled Google, Facebook, LinkedIn, AfterPay and many others into the stratosphere. Before we get to how it works, a quick history lesson!
Brief history of OKR
For a lot of people, although this may sound like a brand new thing, they've actually been around since the 1960s! Here's a brief history:
OKR was created by Andy Grove, Intel Chairman in 1968. It was a new iteration of the MBO (Management By Objective) Framework.
In 1974, John Doerr joins Intel and learns about OKR.
John Doerr moves into venture capital in 1980. He'd give the young companies he invested in much-needed focus and structure with OKR.
In 1999, John Doer advised Google during an early-stage investment round. He proposed the OKR framework which propelled Google's growth. They still use the framework to this day!
Finally, in 2017, John Doerr wrote the book "Measure what matters". This created a surge in awareness and adoption.
Today we see businesses all over the world embedding OKR within their business. Its popularity has only increased thanks to the rapid value it creates. In fact, in our State of OKR 2020 Report, we found that 100% of businesses using OKRs were satisfied with how they help create valuable outcomes.
What are OKRs?
Objectives and Key Results (OKRs) are a management framework which helps to ensure that the company focuses efforts on the same important issues throughout the organisation by taking a quarterly valuable slice out of our strategy. OKR adherents include Google, Dropbox, LinkedIn, Oracle, Slack, Spotify, and Twitter.
They connect teams with their purpose and the why behind their work. It draws them into a bigger picture.
Let's say our purpose and mission is to get to Mars. Our flight plan there is going to be our strategy. The very first step (getting into the stratosphere), that's our OKR. It's the very first outcome we need to achieve on our way to Mars.
An OKR is broken into the following 2 elements:
Objective - A simple and inspiring statement of what we need to achieve to create a valuable business outcome. What’s important to note, is that the outcome is not what’s created or delivered, it’s the value that is derived by way of a happier customer or a better business.
Key Results - 2-5 measures indicating how we know we’re making progress on delivering the Objective. We know we’re making valuable progress as they are results-based, rather than activity-based.
They are distinct from KPIs as OKRs are solely about creating change and outcomes. By design, they focus teams on critical priorities and cut the noise that might not be most pressing right now.
You can read more about the differences in our blog and video exploring OKRs vs KPIs.
How do they create value?
OKR is your unfair advantage. The pace of change is an ever-increasing reality of business. With continuous changes in customer needs and shifts in the regulatory environment mean it's more important than ever to adapt to these challenges in an aligned and focused manner.
1. GROW BY TURNING YOUR STRATEGY INTO ACTION
Create the structure and focus for teams to link their current priorities to business strategy. Teams are empowered to change the game through directional autonomy and a clear measure of progress.
2. CREATE OUTCOMES WITH LASER LIKE FOCUS & ALIGNMENT
Create RADICAL momentum with cross-functional teams aligning on organisational priorities. OKR brings transparency and collaboration which enables teams to collectively focus. This is how you create an unstoppable wave of outcomes.
3. SEE & FEEL PROGRESS
OKR enables you to see how you're progressing and validate your decisions as you go. They act as a north star which directs you down the right path. Even better is they tell you when you're off course. Your OKR gives you the blueprint to make an impact.
What's an example?
In short, OKRs can be framed as I will achieve this (objective) as measured by (this set of key results). Here's an example of what a good OKR might look like.
Objective: Secure our future by becoming profitable
KR1: Increase the reorder rate from 45% to 70%
KR2: Customer first call resolution from 75% to 90% maintaining our per customer case rate
KR3: Increase Marketing Qualified Leads from 60 MoM to 200
Most important of all, Key Results are measurable and verifiable, therefore we aspire for them to be a metric we’re moving the needle on, rather than an activity or plan. Where we are today, this may not always be possible, but it’s where we need to be. Key Results which show the current measure and the desired target create clarity. It helps the team understand where we currently are, and moves doubt around what the measure actually is.
OKR vs KPI
The biggest question is how do OKRs differ from other goal-setting methods.
At its core, OKR is about the focus on change. We like to ask the question, "If nothing were to change except one thing, what would it be?" This is the essence of OKR.
Going a little deeper, we aim to have an objective which links to our purpose. However, it must be time-bound and generally achievable within the time we set our OKR. Generally, this is either quarterly or over 6 weeks. The measures reflected by the Key Results are leading indicators.
With a clear connection to purpose with leading indicators, we now have a powerful tool for focus across the business. It connects and aligns everyone on what matters most.
This is the closest thing you can get to a crystal ball. Leading indicators predict a given outcome or result. This is where a lot of thought goes into understanding what we're focusing on, and how this will act as a measure of success throughout the OKR cycle.
KPIs on the other hand generally focus on maintaining the business. As long as our indicator stays within a certain range, then we are happy. While some businesses use KPIs to measure strategic execution, the measure tends to get lost in the noise. It fails to align and connect teams, meaning it's a weak strategic execution tool.
We cannot just throw them away. KPIs are a fantastic measure of business and operational health. In this way, KPIs complement OKRs. It ensures that while we are executing our strategic activities, we are not compromising the underlying business.
How do I get started?
The best place to start may not be so obvious. A lot of people start by introducing OKRs to their team. This usually involves education and influence - and if you're up for the challenge, go for it!
If you'd like to start a little slower, why not try experimenting with OKRs yourself? It could be your personal goals for the quarter or could be as simple for capturing goals for an upcoming birthday party.
We have a heap of free research, templates and quick guides to get you started on our Resources page and you can also access our OKR related articles in our Blog section. Check it out and let us know what you think!
Where can I find out more?
At SKILLFIRE we have harnessed OKRs since our early inception to help create radical outcomes for our customers and people. We've learnt a lot initially embedding OKRs within our business, and since this time helping countless clients apply the framework themselves.
We've built up a vibrant OKR community throughout Australia from our home base in Melbourne and Sydney, and we're always keen to chat, so contact us at any time!
We've surveyed the best top-performing businesses how they're driving success during this challenging time.
To uncover their secret, check out the report here.