Why do OKRs support business agility?

What are OKRs?

OKR is an abbreviation for Objective & Key Result. OKRs were created by Andy Grove of Intel in the 1970s, however, they started their rise in popularity when John Doerr, his protégé, introduced them at Google in 1999. OKRs are now widely used amongst the biggest technology companies in the world including Google, Linkedin, Uber, Twitter and Bono’s One organisation.

They are a framework for defining and tracking objectives and their outcomes. Their main goal is to define company and team "objectives" along with the measurable "key results" that define the achievement of each objective.

OKRs are about the company’s goals and how each employee contributes to those goals. Performance evaluations, which are entirely about evaluating how an employee performed in a given period, should be independent of their OKRs.

What is an Objective?

An objective describes what you want to achieve and should be ambitious. Objectives should be significant to the company and personally meaningful, they should promise clear business value, as well as being aspirational. The purpose of setting an objective is to write out what you hope to accomplish such that at a later time you can easily tell if you have reached, or have a clear path to reaching that objective.

Objectives should be:

• Significant

• Concrete

• Action orientated

• Inspiring

What is a Key Result?

Key results articulate how you are going to achieve the objective. They should be measurable and limited to 3-5 key results per objective. The important element here is measuring success.

Key results should be:

• Specific and time-bound

• Aggressive yet realistic

• Measurable and verifiable

How are OKRs implemented?

Approaches vary but it is helpful to first define organisational objectives, so teams and individuals can set their OKRs to align and contribute to those larger organisational goals. This can help to create alignment through the organisation, giving teams and individuals a clear understanding of how their work contributes to the bigger picture.
Depending on the size of your organisation you then need to decide how many levels of “team” OKRs will best serve the organisation – e.g. does each department, function, or sub-group need their OKRs?

Typically the OKR cycle begins at the start of each quarter with the CEO setting 3 to 5 OKRs for the whole organisation. These OKRs should be ambitious and transparent to the whole organisation. Once these have been set it is then possible for other levels of the organisation to set their own and ensure they are aligned with overall strategy and direction. Throughout the life of the OKRs, progress is made transparent and monitored by management. Midpoint check-ins to see how well the team is doing are common. At the end of the quarter, a formal review takes place. With the emphasis on transparency, it is possible to see whether any OKRs are out of alignment with those of the organisation.

Communication is key

All OKRs, regardless of the level they are set, should be visible and transparent to everyone across the company. Progress of the OKRs should be tracked and regularly updated in a way that is visible to all.

OKRs help with motivation

Since OKRs focus on measurable outcomes rather than how the objective is to be achieved team members have an element of autonomy to self-direct towards their solution. Inspiring objectives provide a purpose as to why an individual should work towards something. Having autonomy and purpose have been identified as significant components of motivation popularised in Dan Pink’s “Drive”.

Why do OKRs support business agility?

Typical approaches to management by objectives (MBO) have become poor substitutes for the active managing of individuals, often with an emphasis on form filling and process following. For the majority of organisations following MBO is an annual cycle where once a year employees set objectives for the year and then file them until the year's end when there is a flurry of activity to justify their efforts over the year. The OKR approach reduces the feedback cycle from setting once a year to quarterly alongside midpoint reviews. Reducing the feedback cycle enables a business to achieve agility by allowing a refined direction to be set based on observations of how it is performing. Making observations and adjusting direction (setting new OKRs) is supported by making clear and measurable outcomes fully transparent.