Here are some OKR FAQs, answered.
OKR FAQ 1. What is an OKR?
Objective & Key Results is a goal setting and execution framework that focuses on no more than 3 to 5 Objectives (per cycle) and no more than 3 to 5 Key Results per objective. It’s a methodology that helps align the company strategy to its goals and people. OKRs ensure the whole organisation is focused on achieving the same goals.
OKR FAQ 2. What is the history of OKRs?
OKRs were first introduced in Intel by Andy Grove and then Google adopted the framework in 1999 with the help of John Doerr. While it remained heavily used by technology companies for a long time, over the last few years many non-tech companies have started using OKR as their goal setting and execution framework. OKR provides you with a solid framework to focus on what matters most. This enables organisations to prioritise well and execute those priorities with agility.
OKR FAQ 3. What makes OKRs so effective?
OKR is fast emerging as one of the top tools for strategy execution around the world. Traditional goal setting and execution systems have relied heavily on mechanistic and outdated systems that no longer yield results. The sad part is most business leaders remain unaware of alternatives. In a landscape where businesses are experiencing change at an exponential rate, their responses to these changes remain sluggish. This renders businesses feeling vulnerable and impacts their bottom-lines not only in terms of profitability and sustainability but also leaves their employees feeling demotivated and disengaged.
Many organisations set goals as part of their Annual Operating Plans, and mesh that with an annual performance management cycle. Employee performance is rated using Bell Curves and the workforce is force-ranked to fit into a rating scale at the end of the year. OKRs on the other hand are ideally meant to be de-linked with performance reward strategies and are set on a quarterly basis. This allows teams and individuals to assess changes in the marketplace, pivot in time and more importantly learn how to fail fast. OKR encourages to move away from completing tasks to creating value and results.
Whilst using OKRs it’s a good practice to make them transparent and accessible to all employees across the organisation. Of course, there are instances where certain elements may be confidential to protect the organisation from industrial espionage. However, that being said, when employees get access to companywide objectives and how it links to the work they do, it contributes heavily to ‘job significance’ i.e. your ability to connect how your work contributes to the overall goals of the team / organisation. This is one of the most robust outcomes of OKRs that results in higher levels of employee engagement and motivation.
OKR FAQ 4. What are the benefits of using OKRs?
This is one of the most frequently asked questions on OKRs.
Laser Focus on Priorities: By virtue of the very structure of the OKR Framework, it allows organisations, teams and individuals to focus on what matters most. OKRs are the creamy layer over the ‘Business as Usual’ that allows you to prioritise on those few goals that create most impact to your team or business bottom-lines. It’s a simple 80-20 rule. By focusing on the 20% priority goals, you achieve 80% of business impact.
Higher Aspirations: OKRs are not just top-down cascades like archaic goal setting frameworks. It allows individuals and teams to also add bottom-up goals to the strategic and tactical OKRs. In principle, when Organisational OKRs are created, teams and individual can also add their own ideas and aspirations to these organisational goals. This not only helps in tapping into the collective intelligence of the organisation, but it also creates higher levels of involvement and accountability.
Greater Alignment: OKRs by their very nature need to be aligned. Borderless OKRs help foster teamwork and ensure greater alignment to the overall strategic OKRs.
Job Significance: Due to increased alignment of individual and team OKRs to the organisational OKRs, employees can clearly see how their work contributes directly to the organisation’s success. This, by far, is the most robust finding in the space of employee motivation – a clear understanding of the result of their work.
Employee Engagement & Collaboration: When OKRs help in adding personal aspirations that are aligned to the strategic and tactical goals and provide job significance and alignment, teams are naturally geared to be motivated and they collaborate better.
Increased Innovation: Using the collective intelligence of the organisation and setting the right culture of multi-directional goals setting, employees contribute more. Moreover, OKRs enforce and agile culture where rapid experimentation, a ‘fail-fast’ mindset and organisational learning is a given. This heavily contributes to the level of innovation across the board.
Ownership: More involvement means more ownership. With OKRs, teams and members are constantly involved and support by agile leadership where the leader plays the role of a coach and a facilitator allowing team members to co-create the blueprint for organisational growth.
Value Creation: Last but surely not the least, OKRs help focus on the outcome (results) and not the activity. This leads to employees spending more time in finding solutions to create better results rather than simply completing activities in their to-do lists.
OKR FAQ 5. Why is organisational culture so critical for OKRs?
Nearly 70% of OKR initiatives fail. One of the primary reasons for this is the lack of supporting organisational culture. Many a times, we are asked by CEOs if they should wait for the organisation to develop the right culture before implementing OKRs. The simple answer is – not really! It’s a bit of a chicken-egg situation. When you implement OKRs correctly, you support the evangelising of the right culture; and conversely, when your culture is constructive enough, OKRs tend to flourish. Hence, the intention is key here.
Implementing OKRs blindly without taking stock of organisational readiness is surely a colossal waste of time, not to mention the intangible impact across the system.
Starting with agile leadership practices is a good way to go. When leaders truly transform how they show up at the workplace and start empowering their teams, it provides for a good ground for OKRs to flourish.
Trying to force-fit OKRs into passive-aggressive cultures where corner offices dictate decisions and people down the line are rendered mere implementors to those decisions, is a faux-pas one must avoid. It’s quite like taking the engine from a formula-one car and fitting it into a vintage model trying to make it run. The results are disastrous.
OKR FAQ 6. Can one use OKRs in Public Sectors or Not-For-Profit Companies?
Straight answer? Yes! In fact these sectors can greatly benefit by using OKRs to show radical changes and exponential growth. Ruling parties and administrations can positively impact public health and well being through the adoption of OKRs. Social causes like corruption, education, poverty, climate change, gender equality, etc. can hugely benefit from using OKRs.
OKR FAQ 7. What is a good cadence frequency for implementing OKRs?
Organisations will continue to plan annually as its the core of any business. That said, OKRs allow you to take your QBRs (Quarterly Business Reviews) and plan you OKRs in sync with them.
However, once OKRs are set for a quarter, meeting once every week or fortnight is a good cadence. This allows teams to review what’s happening externally / internally and bring that feedforward into the cadence review. It also allows team to pivot well in time and stay responsive to the customer / market changes.
OKR FAQ 8. Can you write OKRs as part of the individual's performance goals & evaluation?
It’s best to avoid confusing OKRs with performance management (individual goal setting, performance evaluations and monetary rewards). If OKRs are connected to monetary rewards (incentives, bonuses, etc.) individuals will set goals that they are surely going to hit. This fosters stagnation and complacency.
Remember, OKRs done well will result in exponential growth and innovation. This requires rapid experimentation, a fail-fast mindset and an environment where people are not afraid to take measured risks.
OKR FAQ 9. What's the difference between OKRs and KPIs?
This is one of the most frequently asked questions on OKRs.
Objectives and Key Results is like a basket of things in that, it contains an Objective and 3 to 5 key results associated with that objective. Achieving the defined Key Results help to move towards realizing your objective. KPI is a single indicator of performance. A collection of them could make up a scorecard.
More often than not, KPIs are attainable and represent the output of a process or project already in place. On the other hand, OKR goals tend to be more aggressive and ambitious — without being unreachable.
If a KPI result indicates a need for improvement, it may become the “key result” of a new or existing OKR. For instance, if KPI results indicate sales are flagging, a company might develop an ambitious OKR focused on improving overall profits, marketing, or customer service, all of which could include key results based on meeting the existing KPI.
OKRs are typically set to bring incremental change (roofshots) or exponential change (moonshots). KPIs are typically put in place for incremental or steady state business. Ergo, KPIs are to maintain the business whereas OKRs are to bring change in business.
OKR FAQ 10. What's the difference between OKRs and Balanced Scorecards?
The BSC compels setting Objectives, Measure, Targets and Programs based on 2 leading and 2 lagging indicators. This forces organizations to create objectives and measures in four distinct, yet related perspectives of performance viz. Financial, Customer, Internal Processes, and Learning & Growth. OKRs allow more flexibility to choose Objectives, Key Results and Initiatives that may be ‘called out’ priorities for a business or team.
The BSC is used traditionally on an annual basis while OKRs are set both annually as well as quarterly. OKRs are reviewed (cadence reviews) every quarter while BSC is reviewed annually in most cases. OKRs encourage Big, hairy, Audacious Goals and teams and individuals are encouraged to experiment and ‘fail fast’. Achieving around 70-75% of the overall OKR (assuming its a true stretch) is considered healthy. BSC relies on breaking down larger goals into smaller ones which are eventually cascaded. Achieving 100% or more, of the stated KPIs and targets, is desirable within the realm of BSC. This sometimes pushes people to ‘sandbag’.
The BSC is usually cascaded down to through the organisation. OKRs typically do not cascade, they align. Once top level Strategic OKRs are set, functions and teams are encouraged to align to top level OKRs and also align across teams thereby enhancing ownership, empowerment and accountability.
The BSC define measures as KPIs, and they each have a target. OKRs consist of Key Results that are a combination of KPIs or metrics along with a target (how much and by when?).
OKRs are transparent and encourage calling out interdependencies within and between teams. BSC may not always encourage transparency and interdependence, sometimes causing silos. BSC is used to assess performance and is often connected to incentives, bonuses, etc. OKRs are typically not linked to the reward systems within the organisation.
OKR FAQ 11. Can OKRs be used by Agile (SCRUM) Teams?
Most definitely, Yes! There are some caveats to consider before you organize yourself to combine OKRs and SCRUM.
Since Agile/SCRUM is used for product development and other such complex projects, combining it with OKRs means using OKRs with the realm of such projects alone. What does that mean? It means if the organisation has OKRs beyond the product development scope, SCRUM may not fit in with other functional or divisional OKRs.
Clarity on the scope of OKRs and SCRUM for all members within the OKR/SCRUM teams is critical. So where do you begin and how do you end?
Within the nuances of OKRs, Objectives lay out the larger goal and its connection to the overall purpose & strategy. Key Results help measure progress and define success parameters. Initiatives are defined for every key result. They are essentially projects, tasks or activities that need to be undertaken in order to achieve the Objectives. Sprints are a perfect fit within Initiatives. And since sprints work mostly in monthly cycles, the Sprint Goals can coincide well with achieving outputs that deliver the overall OKR outcome at the end of each quarter cycle.
The OKR Champion/Coach may collaborate with the SCRUM Master at the start of each cycle to help them understand the larger picture and the ‘Why’ behind the OKRs. Defining OKRs for a cycle will always come first, therefore. Once the outcomes expected are clear, the SCRUM Master can then work their teams to define Sprint goals and the product backlog that integrate and help achieve the OKRs. This is what we call forest for the trees.
OKR FAQ 12. What are some common OKR pitfalls or traps?
There are several aspects of OKR Planning and Implementation that could lead you into a trap. When you are embroiled in the OKR cycle, often times one can lose focus on the larger picture – we call this forest for the trees.
It is critical that you have a checklist of ‘What to avoid’ whilst you are planning and implementing OKRs. This is one of the most frequently asked questions on OKRs. Here are 20 mistakes you could be watchful of.
- Making OKRs a part of your Reward Strategy.
- Not connecting your OKR to the organisational purpose or strategy.
- Not making Key Results measurable or outcome focused.
- Going gung-ho and setting OKRs for the entire organisation at a go.
- Having too many objectives and key results within a single cycle.
- Not being clear about why you want to implement OKRs.
- Not making your OKRs transparent.
- Not using the right software at the right time.
- Cascading OKRs top-down rather than aligning OKRs.
- Trying to force fit OKRs when your organisational culture does not support it.
- Not investing in developing leadership competencies to support OKR.
- Not being disciplined in your cadence review process.
- Not spending enough time between cadence reviews coaching your teams.
- Not encouraging people to experiment, fail-fast and share learnings openly with the team and organisation.
- Implementing OKRs without understanding the change management process.
OKR FAQ 13. What are some common OKR myths?
- OKRs are MBO (management by objective) by a different name.
- OKRs are an additional burden to existing work.
- OKRs should be linked to incentives, bonuses and other financial rewards.
- “OKRs will help our strategy.” It won’t. OKRs don’t replace your strategy, they are a conduit to implementing you strategy.
- A good software is all we need to make OKRs work.
- OKRs are the same as KPIs / SMART Goals.
- OKRs is meant for tech-companies and startups only.
- OKRs should cascade top-down.
- OKRs is the same as Balanced Scorecard.
- OKRs can be taken down up to individual levels within the organisation.