Objectives & Key Results, or OKR for short, originated in the 1970s under Andy Grove at Intel, who described it in his book “High Output Management” (Grove, 1983). However, OKR came into fashion when John Doerr introduced this type of goal setting in 1999 at Google, where it is still consistently — and quite successfully — applied today (Doerr, 2018). At first glance, OKR seems deceptively simple and therefore carries a significant risk of being misinterpreted and misapplied — especially in large organizations that are traditionally monitored and managed with many key performance indicators (KPI).
Fundamentally, OKRs help to align an organization and its people towards common goals. Thus, this method has the same goal as its older and bigger brother, “Management by Objectives” (MbO), which, by the way, carried the title “Management by Objectives and Self-Control” in the original work of Peter F. Drucker from 1954 (Drucker & Maciariello, 2008, p. 258) and only over time was unilaterally mutilated into management by objectives. The successful alignment of large organizations has always been a challenge and remains so more than ever in the agile and, thus, more self-organizing organizations of today and tomorrow. The differences between MbO, as initially described by Peter F. Drucker, and OKR are rather stylistic. However, since MbO in practice has often degenerated into imposing annual goals top-down with corresponding monetary incentives to “motivate” people, it helps to take up the originally promising approaches again in a new and more agile form through OKR.
We have a strategic plan. It’s called doing things.Herb Kelleher
Essentially, OKRs provide answers to two questions: “Where do we want to go?” (= the Objective) and “How do we get there?” (= several key results to that Objective). At this time of year, a widespread example is the New Year’s resolution to lose weight. Appropriate Key Results for this could be “Exercise three times a week for at least 30 minutes” or even “Find a group of like-minded people and have a meeting once a week.”
OKRs help to implement a strategy. They describe exclusively changes and innovations; they do not and should not depict day-to-day business. Key performance indicators (KPIs), processes, and work instructions exist to help with this. A supermarket might have this KPI, among others: “Queue at the checkout is no longer than three customers.” If the line gets longer than three customers, a corresponding work instruction (or common sense) regulates how to counteract this, for example, by opening another checkout. All of this is day-to-day business. Suppose this supermarket becomes trendy, and the queues at all three existing checkouts are regularly too long. This “problem” then can lead to a new Objective in the next quarter (in the simplest case: “Build a new checkout”) for which the corresponding Key Results describe the path (for example: “Build a temporary checkout” and “Commission an architect to carry out the modification”).
KPIs thus measure the health and performance of the organization and can give rise to Objectives with corresponding Key Results (if profit declines over several quarters, one should, for instance, consider a change in product strategy). These objectives will then have a targeted effect on the respective KPIs (the new product increases profit or the reduction of the portfolio reduces costs). By no means, however, do OKRs need to cover all of the organization’s KPIs because, hopefully, the organization is not in such a desolate state that it is burning at every corner.
Even though Objectives affect KPIs, and it is sometimes suggested that the job of Key Results is to make measurable the more qualitative Objective, it is usually not enough to use the KPIs or the desired change in the KPIs as Key Results. As a rule, KPIs represent the past (e.g., sales, profit), so they are more of a retrospective (ex-post) view or, at best, a snapshot. However, good Key Results are always forward-looking (ex-ante); they describe milestones or leading indicators that make achieving the objective more likely.
Doerr, J. (2018). Measure what matters: How Google, Bono, and the Gates Foundation rock the world with OKRs. Portfolio/Penguin.
Drucker, P. F., & Maciariello, J. A. (2008). Management (Rev. ed). Collins.
Grove, A. S. (1983). High output management. Random House.
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Great to see this is shared, thank you. Would you have a simple model or template that’s useful when first implementing OKR?
Dear Jorrit, I would recommend starting small and learning on the way. The most important practice thus would be a good retrospective every cycle. Happy to catch up with you over a (virtual) coffee.