John Doerr is a well-known venture investor who has backed some of the world's most successful technology businesses, including Amazon, Intuit, and Google.
Andy Grove, who eventually led Intel to international domination in the 1980s, taught him a crucial lesson while he was at Intel in the late 1970s.
At Intel, Grove said to him:
"It almost doesn't matter what you know. It's what you can do with whatever you know or can acquire and actually accomplish [that] tends to be valued here. Hence the company's slogan: "Intel delivers.""
The formation of Objectives and Key Results (OKRs), which are the subject of this book, resulted from this unrelenting focus on achieving results.
It's a process that's been used by some of the world's most successful businesses, including the most well-known, Google.
Join us for the next 10 minutes as we learn about OKRs, how they vary from MBOs, and how you can utilize them to improve your company's performance.
Doerr had made the biggest gamble of his career as a venture investor in the fall of 1999. He had put up $11.8 million of his company's money for a 12 percent interest in Google, which was still a startup started by two Stanford dropouts at the time.
Doerr had repeatedly seen that ideas were the easy part; the execution was crucial. While Google had a fantastic concept and business model, he wanted to ensure that his large investment paid off.
So he began his case for Google to embrace the OKR framework while standing in front of a ping-pong table surrounded by Sergey Brin, Larry Page, Marissa Meyer, and approximately 30 other early Google workers.
His first slide outlined what OKRs were truly about:
"A management methodology that helps to ensure that the company focuses efforts on the same important issues throughout the organization."
Then he discussed the methodology's aims and key findings, which are the two most important components.
An aim is a goal that must be met - nothing more, nothing less. They are specific, actionable, and, perhaps, inspiring. They reduce fuzziness in thought, which leads to fuzziness in execution.
The how which is related to a time-constrained, aggressive, and realistic figure is a significant outcome. As a consequence, the results are quantitative and verifiable.
As he was wrapping up his presentation, he provided them with an illustration of what it may look like in terms of his own.
His goal for the day was to create a planning model for their business. His main objectives were to:
- Finish the presentation on time.
- Generate a sample set of quarterly OKRs for Google.
- Secure management approval for a three-month trial of the OKR system.
As they say, the rest is history. According to Eric Schmidt, who was later brought in as professional aid for the new firm, this method changed the path of the company permanently.
Before we go any further, here are a few key lessons from Andy Grove, the expert himself, on making a solid OKR system.
- Less is more in this case. Each cycle should have between 3 and 5 OKRs (usually a quarter).
- Goals should be set from the ground up. In cooperation with their supervisors, half of the OKRs should be determined by the teams and people themselves to promote participation in the process.
- Keep your options open. Remove any objectives or key results that no longer appear to be relevant.
- Allow yourself to fail. When goals are created that force people to expand beyond their existing capabilities, they achieve more.
- Patience is required. This is a process, and trial and error will help you along the way. You're going to do it badly before you do it well.
Now that you know what OKRs are, let's look at what they can accomplish for your company.
Superpower #1: Focus & Commitment to Priorities
The first benefit of OKRs is that they will assist you in focusing on your most important goals.
The first step in the process is determining what is most essential for the next three months. The lesson here is that you can't "do it all," no matter how big your firm is.
You'll naturally focus on efforts and projects that will make a genuine impact right now if you decide what can be accomplished in a set amount of time.
However, a word of caution: this is a process that will need the involvement of the entire business. Leaders, you must put your words into action. Make a public commitment to your OKRs. It's crucial to highlight positive behavior and make it visible to the organization.
The ultimate end result is that it will lead to real performance gains.
Superpower #2 - Align and Connect for Teamwork
In bigger companies, it's normal to discover numerous employees working on the same project unintentionally. According to a study of worldwide CEOs, the most significant barrier between strategy and execution is a lack of alignment.
OKRs expose unnecessary efforts and save time and money by using clear Objectives. All the way up to the CEO, the most junior employees can see everyone's goals in an OKR system. Critiques and revisions are on display for all to see.
Collaboration is sparked by transparency. Colleagues can detect when someone requires assistance and give assistance. 92 percent of working individuals in the United States stated they'd be more motivated to achieve their objectives if their coworkers could witness their progress.
Objectives set in public are more likely to be met than goals set in secret. People can contribute more meaningfully to the company's performance and see the broader effects of their activities when they recognize how their objectives are linked to their colleagues' ambitions.
Some objectives originate from the bottom up in healthy businesses (bottom-up OKRs inspire involvement and creativity). In contrast, others are specified by the company's management (top-down alignment brings meaning to work, authority, and long-term vision).
To put it another way, a good OKR ecosystem achieves a balance between alignment and flexibility, a common goal, and creative freedom.
"Connected goal-setting is critical to enabling employees to do the best work of their lives." – Brad Smith, Intuit CEO.
Superpower #3 – Track for Accountability
"In God we trust; all others must bring data." – W. Edwards Deming
OKRs, unlike typical "set and forget" corporate goals, are live, breathing creatures that can be tracked, amended, and altered as circumstances change.
Who would have the patience to seek links or alignment if all OKRs are available in a general-purpose program (say, Google Docs)? It can't be scaled up.
Goals become worthless without frequent status reports, too. We're left with on-paper, meaningless OKRs at quarter's end (or, worse, year's end).
Fortunately, an increasing number of organizations are implementing comprehensive, specialized, cloud-based OKR management software. This allows users to create, track, update, and grade their OKRs and view their relationships with others' OKRs via a digital dashboard.
These platforms increase the visibility of everyone's goals, increase involvement, encourage internal networking, and save time, money, and irritation.
Above all, regularly recorded OKRs testify to a significant concept: the inherent worth of the work itself. People want to know how they're doing and see their progress displayed graphically, down to the percentage point.
Check-ins regularly, preferably weekly, is also necessary. Without them, the CEO cannot determine what is important and what isn't.
Keeping track of OKRs might help you avoid going on the wrong path. Feel free to drop an out-of-date Key Result or Objective in the middle of a project. Just make sure everyone who relies on it is informed and that you reflect on what you've learned.
Finally, rigorous grading, continuous evaluation, and self-reflection will assist you in revealing insights that would otherwise be hidden within the numbers.
Superpower #4 – Stretch for Amazing
OKRs inspire us to achieve our goals by pushing us to go above and beyond what we believed was possible. Aspirational objectives make use of all of the OKR superpowers:
Targeting goals that make a genuine impact requires focus and dedication.
Only a transparent, collaborative, aligned, and connected organization can go above and beyond expectations.
How will you know when you've accomplished that fantastic stretch goal if you don't have quantitative tracking?
Google teaches us a lot: their OKRs are divided into two groups.
Committed Objectives: They're linked to Google indicators like product launches, bookings, recruiting, and customers. Employees establish them at the departmental level, while management sets goals at the business level. These committed objectives (sales and revenue targets) must be met in full (100%) within a specific time frame.
Aspirational Objectives: They express more big-picture, higher-risk, and future-oriented concepts. They might come from any level of the organization and attempt to mobilize the entire organization. They are difficult to attain by definition. Failures, which occur at a rate of 40% on average, are unavoidable in this environment.
Leaders are obliged to consider themselves, "What kind of organization do we need to be in the coming year?"
Should we be more agile and bold, or more conservative and operational, to strengthen our current position to break into a new market?
Employee engagement is critical while pursuing high-effort, high-risk goals. It may break if you push your team too hard and too far. Leaders must communicate two things: the significance of the plan and the conviction that it can be achieved.
Starting small, teams and individuals develop expertise with OKRs as time goes on. Their Key Results become more specific and aggressive.
Continuous Performance Management and Culture
Individuals are too valuable to be reduced to numbers. You lose context when a conversation is confined to whether you've met your aim or not. To investigate crucial questions, you'll require continuous performance management:
Was it more difficult to reach the objective than you anticipated when you set it?
Was it the proper objective to begin with? Was it energizing?
Is it time to explore a pivot, or should we stick with the two or three things that worked so well last quarter?
Continuous performance management is implemented using CFR, a tool that gives OKRs a human voice:
Conversations: a genuine, fully nuanced discussion between management and contributors to increasing performance.
Feedback: bidirectional or networked communication between peers used to assess progress and steer future developments.
Recognition: expressing gratitude for contributions of all sizes to deserving persons.
Conversations between managers and contributors reveal five key areas:
- Setting goals and reflecting on them. The debate focuses on how to effectively connect individual Objectives and Key Results with organizational goals.
- Updates on the status of the project. Check-ins on the employee's real-time progress are quick and data-driven, with problem-solving as appropriate.
- Coaching in both directions. It enables contributors to attain their full potential and managers to improve their performance.
- Progression in your career. It improves employees' abilities, finds chances for advancement, and broadens their view of the company's future.
- Reviews of lightweight performance. A process for gathering feedback and summarizing what the employee has done since the last meeting.
Workers now like to be 'empowered' and 'motivated' rather than told what to do. They don't want to wait a year for feedback from their bosses; therefore, they wish to provide it right now.
They want to talk about their objectives regularly, share them with others, and keep track of how their peers are progressing.
Individuals in Adobe want to know how they're doing while they're doing it, as well as what they need to change. At least once every six weeks, contributors receive detailed performance evaluations. In this manner, everyone understands where they stand and how they contribute to its success.
Performance-based and horizontal recognition are the hallmarks of modern recognition. Here are some examples of how to put it into practice:
- Peer-to-peer recognition should be implemented. When peers constantly recognize employee accomplishments, a culture of appreciation emerges.
- Create a set of explicit criteria. Recognize employees for their activities and outcomes, such as finishing special tasks, meeting business goals, and demonstrating company values.
- Share your honorable mentions. Newsletters or corporate blogs can provide the backstory to the achievement, giving it extra meaning.
- Make it a point to be recognized regularly. Smaller achievements should also be celebrated: additional effort to fulfill a deadline, extra polish on a proposal, and the tiny things that a manager would overlook.
- Connect employee appreciation to the company's objectives and initiatives. Whether it's customer service, innovation, teamwork, or cost-cutting, any organization's objective may benefit from a timely shout-out.
To summarize, OKRs are transparent containers for a leader's goals and insights. CFRs aid in the transmission of such priorities and understandings. However, plans cannot be achieved without a medium: an organization's culture.
Culture is defined as "a set of values and beliefs, as well as familiarity with the way things are done and should be done in a company."
An OKR culture is a culture of accountability. You don't work toward a goal just because your supervisor has given you orders. You do it because each OKR is clearly vital to the firm and your coworkers who rely on you. It's a social compact, but it's self-governed.