Companies are always looking for new ways to drive performance, boost results, create objectives and deliver on them. So it’s no surprise that many have turned to the OKR (Objectives and Key Results) framework - especially since it's being used by billion dollar companies such as Google, Twitter, and Linkedin. But what is an OKR? Why are they becoming so popular? How can they benefit your company?
If you’re looking to improve performance in every aspect of your business, then OKRs can help make this happen.
But first, let’s start with the basics.
What is an OKR?
An OKR is a management framework. An OKR can be assigned to an individual, a team, or a company.
Objective: The ‘Objective’ is the overall goal to be achieved (think: the bigger picture). For example, ‘Increase revenue on last year's results’.
Key Results: The ‘Key Results’ are the measurable mini-goals that need to be completed in order to achieve the overall goal (the Objective).
In essence, the Objective is what you want to achieve, and the Key Results are how you are going to achieve it.
Where many companies struggle, and how OKRs can help them:
Many companies struggle when setting objectives because they have an idea of what they want to achieve, but not how to achieve it. OKRs provide a structured path and a breakdown of a large goal into manageable steps to ensure that you have a solid plan of action to achieve the goal.
If you've heard about OKRs but been put off by them after hearing they're too 'complicated' or 'time-consuming', why not check out our myth busting article: 7 Myths about OKRs and why you shouldn't believe them.
It’s all well and good to say that you want your company to achieve £250,000 in investment by the end of Q4. But how are you going to do this? What do you need to do to be in a position where you can win that type of investment money? What steps do you have to take to ensure you achieve this goal? OKRs are designed to answer all of these questions.
Example of a good OKR:
Objective: Increase company profit margin by 17%
Key Result 1: Sell 5000 product packages in Q3
Key Result 2: Reduce cancellation rate from 20% to 15%
Key Result 3: Raise product prices by 2%
Key Result 4: Increase employee retention from 82% to 90%
What makes this a good OKR?
All of the Key Results are quantifiable and easily measurable. The success status of a Key Result should be binary: you should be able to say about a Key Result that either yes, it was achieved or no, it wasn’t achieved. There shouldn’t be any room for uncertainty. The objective is clear, specific, and motivational.
An example of a poor Objective would be for your business to ‘Make more money’, because it's so vague. Avoid vague goals like these by sticking to the clear cut OKR framework.
What’s so special about the OKR framework?
There are four features of the OKR framework which make it more appealing and effective than other success-measuring systems.
- The structure of OKRs is simple.
- The logic is as follows: If all Key Results are completed, then the overall Objective will be completed.
- Given that so many aspects of running a business can be complicated, why add to this with unnecessarily intricate management systems? Instead, apply the clean and effective framework of OKRs to achieve your aims.
- OKRs are designed to be lithe – in contrast to many bulky models of success management, which focus on static objectives.
- OKRs are typically set monthly or quarterly, which allows for adaptation to business goals.
- The framework of OKRs allows them to respond adeptly to changes. Allowing for flexibility is important, as not everything can always go to plan.
- OKRs drive company alignment by transparency. All OKRs (including individual, team, and company) are publicly visible to everyone.
- Transparency ensures that all employees are moving in the same direction towards one overarching goal.
- For example, if the Objective is to ‘Increase profit by 17%’ this will require effort and Key Results from every single team within the company, such as Marketing, Finance, HR, etc.
- Each person’s Key Result will be different, but they'll know that their work is contributing to an overall aim and having an impact.
- This encourages a company atmosphere of collaboration and unity.
4. Performance and ambition driving
- Hitting around 70% (as opposed to 100%) of your OKRs is the ideal percentage to achieve.
- Why is this? The logic is that if a company is achieving 100% of its OKRs, their objectives are not ambitious enough.
- Setting an ambitious goal is far more effective in encouraging people to achieve and push past their potential, as opposed to an achievable goal which will require less effort.
- This system allows a business to get the best out of their employees, but more important for employees to get the best out of themselves.
Sounds good! What's next?
OKRs allow companies to drive alignment and boost performance. They enable a business to focus on the how and the why of their goals, not just the what. Business goals are only an effective way to drive performance if there is also a plan to achieve them.
If you want to drive business success, employee engagement, employee satisfaction, and performance at every level of the company, then OKRs are the optimum framework for you.