Imagine a CEO is walking right next to a building site and he sees three stonecutters there. The CEO wanted to know what they were doing so he approached them and asks.
“I’m making a living,” the first stonecutter replies.
The CEO walked past him and asks the second stonecutter what he was doing.
“I’m doing the best job of stonecutting in the entire country,” stonecutter number two says.
The CEO then went along and asks the third stonecutter the same question.
“I’m building a cathedral,” the third stonecutter responds with confidence.
In this example, the first stonecutter is just making a living, and the third one is connected to the entire vision of the company; he knows what’s being done. The second stonecutter—the one who’s doing “the best job of stonecutting”—is the problematic one.
While you do need employees who are experts in their respected fields, they need to understand why they do what they do. If they don’t, your company becomes riddled with silos, and talented folks who work great on their own transform into a nightmare for coworkers and the company’s bottom line.
Solving the problem with OKRs
Objective and key results (OKRs) were created by management guru Peter Drucker and later refined by Andy Grove, the longtime CEO of Intel, in the 1990s. At Intel, an employee showed two other guys the system. Those two guys happened to be Larry Page and Sergey Brin, the founders of Google, and lo and behold OKRs entered the spotlight.
Page and Brin used OKRs in Google to achieve 10x growth rates many times over. Per Page, OKRs kept him and the rest of Google “on time and on track when it mattered the most.” Thanks to Google’s impressive growth over the last two-plus decades, a number of marquee companies have followed in the company’s footsteps by implementing OKRs, like LinkedIn, Trello, Twitter, and Uber.
Let’s take a step back: What exactly are OKRs?
The why, how, and what of OKRs
OKRs is a system that measures performance by results. According to authors Paul Niven and Ben Lamorte, an OKR is a “critical thinking framework and ongoing discipline that seeks to ensure employees work together, focusing their efforts to make measurable contributions that drive the organization forward.”
An objective is a goal that the organization, team, or individual wants to accomplish. Objectives ask the question What do we want to do?, are qualitative, and are measurable by time.
On the other hand, a key result is a description of how you will accomplish your objective. Key results ask the question How will we know if we have met our objectives?, are quantitative, and are concrete.
The objective is the what and the key results are the how, who, and when.
How do you come up with OKRs?
To determine you organization’s OKRs, ask yourself these two questions:
- Where do we want to go? (This is your objective.)
- How will we make sure we are getting there? (These are your key results.)
When setting OKRs, these guidelines can be particularly helpful:
- OKRs should be set on a quarterly basis
- For every objective, you should have around three key results
- Objectives should be quantitative, ambitious, and inspiring
- Key results should be qualitative, concrete, and clear
- You should aim to get to 70%. If you hit 100%, it wasn’t ambitious enough and if you accomplish just 50%, it was a bit too ambitious.
What are some examples of OKRs?
To give you a better idea of what OKRs look like, consider the following examples.
Objective: Improve employee engagement within the company
Key result: Host one company-wide team-building activity
Key result: Reduce the performance review cycle time from 60 to 14 days
Key result: Increase the number of micro surveys from three to five per month
Objective: Increase productivity in the HR department
Key result: Create and offer one new benefit to the HR department
Key result: Interview everyone in the department to learn about their needs, problems, and fears
Key result: Reduce absenteeism by 30%
Objective: Increase the employee retention rate
Key result: Decrease the onboarding process time from 30 to 15 days
Key result: Increase the number of manager-team member 1-on-1 meetings to two per month
Key result: Implement a clear salary raise structure for 80% of your employees
Word to the wise: Don’t think that OKRs is just another system. The case could easily be made that it is the system to implement at your company. The benefits are endless, and we’ll explore the main ones next.
6 benefits of OKRs that will take your business to the next level
OKRs take you out of the status quo. They give you guidance on how to achieve a new future. OKRs are the missing link between results and strategy. While key performance indicators (KPIs) are there to measure the day-to-day, OKRs are there to break the mold, help you innovate, push you to grow, and help you turn your dreams into reality.
With that in mind, here are six main benefits of OKRs that will help you move the needle:
As the KISS adage says, keep it simple, stupid. OKRs are simple and easy to understand for everyone inside the company. One of the biggest problems is that 70% of employees want more clarity on goals and strategy; OKRs support those desires. Employees know what needs to be done and they are all focused on the same goal.
OKRs are set quarterly. They’re not something done randomly once a year at a retreat and then forgotten about. It’s a live and active process that not only plans what needs to be done but keeps everyone accountable for its goals. And since you come up with OKRs multiple times a year, you are up to par with the industry innovations, disruptions, and shifts.
Priority used to mean only one. You couldn’t have multiple priorities because then you wouldn’t be able to achieve any of them. With OKRs, there is only one objective and just three key results that show you if you hit the objective or not—nothing more, nothing less. This keeps everyone pointed in the same direction, toward your objective, which is your single priority.
Once set, OKRs are transparent and everyone can see them no matter what department they are in. This helps you break down any remaining silos in the company; you’re actively sharing the organization’s objectives with everyone. Using TINYpulse Coach, our performance management software, will keep everyone on the same page by aligning personal employee goals with the overall company’s objective.
OKRs have both a top-down and a bottom-up function. Most are set bottom-up—something like 65% of them come from team members. This creates a culture where employees are encouraged to making meaningful contributions to the company which, in turn, boosts engagement. When employees feel as though they have a say in what the company’s goals are, it’s one of the biggest motivational drivers, and it boosts engagement like nothing else.
Goals that you set with OKRs are there to stretch people—to help them reach their full potential. It’s not about staying in their comfort zone, but pushing beyond it to grow. OKRs are all about stretching yourself to new heights and fostering an environment where a growth mindset can develop.
Traditional goal-setting fails over and over again. That’s part of the reason venture capitalist Peter Thiel focuses on creating a 10-year plan—and then making it happen in six months. The R in SMART goal-setting would tell you that it’s unrealistic, but visionary entrepreneurs constantly break the mold and achieve things most would deem unrealistic.
Just try to think about how a Google, Facebook, or SpaceX would look if they were realistic. Nowhere near as impressive as they do today, that’s for sure.
FREE OKR template to get you started
Thiel famously believes that the biggest growth happens when you go from zero to one—creating something that’s never been built before. The same holds true when you start implementing a new system.
It’s always hard to start something new (i.e., from zero) and immerse yourself in change. That’s why we’re providing you with a free template for creating OKRs to make it as easy as possible to start implementing them.
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