What are OKRs?
Objectives and Key Results (OKRs) are an effective way for organisations to set what needs to be done and how they will achieve it. They were born in the 1980s by a man called Andy Grove, a computer giant at IBM. OKRs put the customer first, tie to a larger company goal, and are measurable. OKRs differ to KPIs in the sense that they flow down through the organisation, as well as being recrafted back up from the teams. They are designed to work together for a common goal, as opposed to competing against one another, as can be seen with countless KPIs.
Objectives – The thing to be achieved. No more, no less
Objectives are intended to be significant, concrete and action-oriented. Alongside this, they ideally are inspirational (empowering; promotes collaboration and cross-functionality), and aspirational (sound hard). They answer “what am I working on?”, without focusing on the tasks that might get you there. Objectives describe the desired outcome.
Key Results – The ‘how do we know’ we have achieved it
Key results are all about how we know we have achieved the outcome. For each objective, think about the results you would see if you reached it. Your key results must be qualifiable using quantifiable metrics. How will you measure the outcome of the key result to know if you have achieved the objective? Use the SMART method, making sure they are aggressive yet realistic. Include a baseline measurement, and what the target is you are trying to reach for the key result. If you do not have any baseline data, start capturing it now! Remember, if it is not measurable, it is not a realistic key result.
What to consider when setting your OKRs
Tie OKRs to a larger company goal or north star.
Put your customer first. Set your OKRs for customer success.
The OKR should only be the WHAT, not the HOW. Let the team leverage their collective creative license to identify appropriate ways to deliver on the objectives.
Make your OKRs ambitious. They are supposed to be uncomfortable. If the team feels totally confident they can hit a key result, increase the target and create a plan to try and hit it.
Consider a mix of input and output key results. Input key results might be things like opening a number of new stores, where output key results might be the sales from those stores. They may drive different activities and behaviours, so assess which are right for you.
Key results are typically set on a quarterly basis. It is ok for an OKR to be restated in the following quarter.
Look to have a maximum of 5 objectives and 3-5 key results for each.
Set up a cadence to review progress of the key results. If you find they are no longer working or relevant, change them.
OKRs should be transparent and visible to the whole organisation. Both throughout the drafting process and once they have been set.
OKRs are intended to be regularly reviewed. It is not a set-and-forget exercise. Create a cadence to review your OKRs. This may be weekly, monthly, or even quarterly, depending on how your team or organisation is working with OKRs. An OKR review may even be part of the team’s sprint review.
Track your progress by grading each key result. OKR grading is between 0 -1. This means that a 0.7 is viewed as a great achievement! You should set those big, audacious goals and not feel like a failure if you end the quarter without a perfect score.
At the end of the agreed timeframe (typically a quarter), run a retrospective to reflect on your OKRs as a whole. Start by giving each key result one final score.
Discuss such areas as:
• Were the objectives ambitious enough?
• Were our key results measurable?
• Did our OKRs keep us focused on delivering value to our customers?
Think about what you have learnt and will take into the next OKR setting.
OKRs work because
• They EMPOWER teams and individuals to work on the most meaningful things, creating ownership
• They ALIGN everyone and CONNECT teams across the organisation
• They provide TRANSPARENCY, so everyone knows what is important, and who is working on what
• And they MOTIVATE teams by providing stretch goals, providing the freedom to fail, but also be their most creative to achieve AMAZING results
We have used OKR’s to help many of Australia’s largest companies, build their strategic objectives and put in place the metrics and method to deliver.
If you would like to know how your organisation can benefit from OKRS or need support implementing them, reach out to us at: www.epicagile.com/contact/