Following last week’s article on Sustaining Value in the Transformation Life Cycle, a colleague, Shamik Ghosh, asked if I think ‘OKRs help in anchoring teams through transformation’. The short answer is yes, the long answer is also yes — but OKRs (short for Objective and Key Results) are devilishly difficult to implement, often leaving a lot of unrealised value on the table.
The good news, as it would not be much of an article without some form of a solution, is that there are methodologies that will help to solve for the inherent difficulties. But first, a brief history of OKRs so we can see how we got here.
Behind the Acronym
Those familiar with the history of OKRs will likely cite Andy Grave working at Intel back in the 1960s and move on to name check Google, Adobe, or the Gates Foundation as other notable examples of how OKR can benefit the practice of management. While this is true, the term ‘practice of management’ should conjure up the even earlier work of Peter Drucker and his book by the same name from 1954 in which he developed the process of management by objective and self-control (MBO).
Drucker’s central thesis, as those familiar with this blog may recall, was that a manager reviews organisational goals, sets worker objectives, monitors progress, evaluates performance and gives rewards. In other words, they set the organisational objective and then let their team get on with implementing it (this is the self-control or autonomous work component).
OKRs are ostensibly a derivation of Drucker’s MBO approach and were designed to help teams:
- Identify objectives.
- Establish SMART (Specific, Measurable, Achievable, Relevant, Time-Bound) results.
- Ensure that outcomes relate to broader business goals.
So effective can the OKR process be, when properly implemented, that Larry Page credited much of Google’s growth to OKRs:
OKRs have helped lead us to 10x growth, many times over. They’ve helped make our crazily bold mission of ‘organizing the world’s information’ perhaps even achievable. They’ve kept me and the rest of the company on time and on track when it mattered the most.Doerr (2018), p. 31.
A great plug for the potential outcomes of OKRs, but limited in terms of providing insights into what an OKR is. So what, I hear you ask does an OKR look like and how, when I write my own, will I know if it is fabulous or flawed?
Let us begin with an example of an OKR, for which I will pluck from the book of Google:
Example Objective1: Design products and services for circularity and reuse materials at their highest environmental and social value.
Example Key Result: 100% of Made by Google products launching in 2022 and every year after will include recycled materials, with a drive to maximize recycled content wherever possible.
Seems simple, on the face of it. But dig a little deeper and common problems start to emerge — even in this textbook example.
Managing the Objective
Turning first to the writing of objectives, problems or mistakes can take the form of:
- Vague, woolly, or weasel words. While these may sound mellifluous to some ears or ‘strike the right chord’ with stakeholders, they fail to clearly define what it is we are seeking to improve.
- An objective is not an objective. An example of this may be ‘launch our new branding’. While this is an activity or milestone, as an objective it begs the question, what is the launch trying to achieve? Is it to improve the organisation’s reputation? Or to increase business revenue? If any of these, then that is what the objective should be — a declaration of the outcome or expression of the problem for which we are trying to solve. An objective is not the place we outline the methods employed or name the solution to the problem.
- Too many objectives. This is generally apparent when you start to see prepositions and conjunctions (words such as ‘and’, ‘for’, ‘or’, ‘while’), or commas. Keep an objective to one, clearly obtainable thing.
Two effective methods that can be used to avoid the above pitfalls are:
Haak (2021), p. 74.
- Verb + adjective phrase + noun + adverb phrase. For example: “Grow high quality leads for Product X,” “Acquire new customers at no expense,” or “Boost daily watch time.”
- Sometimes Objectives can be more powerful when they start with a noun. When starting with writing Objectives, it can be easier to think about the subject of the goal first. Measurement expert Stacey Barr has a different recipe for formulating a measurable goal: Noun + linking verb + adjective phrase or adverb phrase. For example, “Retail customers promise eternal loyalty,” “Leads are doubled for product X,” or “Daily watch time grows exponential.”
When effectively deployed, this will lead to objectives that are
- Controllable (by your team, department, or organisation);
- Written (amazing how many teams fail to put pen to paper);
- Inspirational (motivates the team member).
This last aspect, often overlooked because OKRs are not intended to establish a team or organisational vision, is nonetheless vital. Because without a motivational, aspirational, or visionary element, OKRs may be enacted but will either fail to achieve transformation or leave much of the latent value on the table because individuals or teams are playing it safe.
Managing the Key Result
Key results (KR) benefit from being specific. To the extent, that if you want to see something measurably achieved, name it in the KR. For example, if you want to see your revenue grow by $20k per month, your KR may take the shape of ‘grow our revenue by $20k per month’. There is, as always, a ‘however’ to this rule. Which is that if alignment with other teams or departments is required, then more detail will be needed for the KR to be impactful.
For example, simply stating ‘grow our revenue by $20k per month’ may beg questions such as does this mean all revenue or a revenue segment? Or by when do you aim to achieve this? In short, because we need alignment and cooperation from other teams, it is important to give them context to the result.
For these reasons, the original KR of ‘grow our revenue by $20k per month’ can be improved by reframing it: ‘Grow our revenue from bequests by $20k per month from University alumni by September 2024’. Yet we can improve upon this further. This is done by employing milestones or making the KR progress based. An approach with creates nice synergies with The Effective WIP as it gives managers and employees something practical to talk about, creates accountability, and goes some way to resolving a persistent misgiving senior leaders often have about OKRs — how they can monitor and control the process.
Some exponents of OKRs love KR granularity and like to push it to an extreme. Often seeking weekly or even daily updates on progress. Depending on the type of objective this may be appropriate, for example if a team member is responsible for the objective of migrating all customer contacts to the new database by next Wednesday. In such a context, daily reports on velocity and progress are needed for assurance the objective is on track. But if the objective is to be carbon neutral within ten years, a daily check in on how this is going is unlikely to show much progress. Instead, longer term milestones will be more appropriate.
The final KR element I will touch upon is confidence scores as these can either telegraph if a team thinks it unlikely the result will be achieved and in turn the likelihood the objective remains feasible, or lead managers and boards into a false sense of security. This latter outcome often occurs when confidence scores are treated as hard data rather than a quantifiable approach to stakeholder sentiment.
Because confidence scores will change, often on a daily basis, as additional information becomes available, we may begin an objective with a high confidence score (90%) because we have achieved a similar objective in another setting or with another organisation, but as time progresses, we learn that certain assumptions made about processes or systems are false. It may be that team members lack the necessary skills to solve for the problems and new hires are required. Perhaps the ‘we know our customers’ claims by key managers are misguided, and they do not know their customers at all. Any of which invalidates our ability to reliably express confidence about achieving the objective set.
This means the value of a confidence score is not in the score itself, but in the process the team or organisation goes through to set and reset the score over time. When transparent and honest processes are engaged, we unlock latent value — which can be the difference between failed commitments and adjusting expectations to ensure growth is delivered and transformation achieved.
There is one final ‘gotcha’ to the confidence score process, and that is ensuring we preference honesty over convenience in the process. Given responsibility, ownership, and accountability are often challenging concepts to invoke, a degree of scepticism from managers is needed in the OKR process. This ensures that teams are not demoralised by being given impossible objectives or results, but also in ensuring objectives are so certain to be attained that they do not stretch individuals, teams or organisations. For this, a fine line needs to be walked in ensuring accountability is taken by all participants in the process. Even if it means restructuring the organisation to attain these goals.
Opinions differ as to the types of KRs that abound. For example, Ben Lamorte and Paul Niven argue for a tripartite categorisation of Baseline, Metric (expressed as positive or negative), and Milestone, while Felipe Castro argues for only two categories of activity-based and value-based KRs. Yet most practitioners are consistent in advocating for the increase/decrease of a measure from a baseline to a target by a specific date. Returning to our earlier, ‘Grow our monthly revenue from bequests by $20k per month from University alumni by September 2024’. This could be further improved and shortened while adding a baseline:
Grow our alumni bequest revenue from $200k to $220k per month by September 2024.
When effectively deployed, this will lead to results that are focussed on outcomes that are:
- Few in number (maximum of four results per objective);
- Controllable (avoid results you cannot influence);
- Aligned (if they rely on other teams);
- Owned (by a named resource);
- Aspirational (something to reach for or a stretch goal).
As with the inspirational aspect of objectives, the aspirational element of a result is key because it is human nature to play it safe and minimise the possibility of failure. But to do this is also to fail to reach for the stars — which my father always counselled me to do even if I only hit the chimney tops.
The above only scratches the surface on effective OKRs, but I hope begins to unlock some of the latent potential in the approach and has strengthened the case for the superiority of OKRs over KPIs in organisational or team planning.
I also hope that the essential element of not only OKRs, but any organisational artefact has been made clear; it is always about the process. The OKR, Strategic Roadmap, WIP document, OCM Plan, or another artefact is not the outcome. These are only the tools and techniques in the process used to achieve the outcome — Sustaining Value in the Transformation Life Cycle. By adopting this approach, we will not only end up writing good, albeit not perfect, OKRs, but also take that vital step in the practice of management; taking individuals or teams outside their zone of comfort to learn, improve, and explore — ultimately achieving meaningful transformation that unlocks value for the organisation.
Good night, and good luck.
Doerr, John E. Measure What Matters: How Google, Bono, and the Gates Foundation Rock the World with OKRs (New York: Penguin Random House, 2018).
Drucker, Peter F. The Practice of Management (New York: Routledge, 1954).
Haak, Bart den. Moving the Needle with Lean OKRs: Setting Objectives and Key Results to Reach Your Most Ambitious Goal Portfolio and Project Management Collection (New York: Business Expert Press, 2021).
Niven, Paul R., and Ben Lamorte. Objectives and Key Results: Driving Focus, Alignment, and Engagement with OKRs (Wiley, 2016).
Steiber, Annika, and Sverker Alänge. “A Corporate System for Continuous Innovation: The Case of Google Inc.”European Journal of Innovation Management 16, no. 2 (2013): 243–264.