A huge 61% of leaders feel that their organization fails to bridge the gap between strategy and implementation.
One strategy to combat this is to implement the popular OKR methodology. This helps you set clear objectives and create an action plan to implement this strategy.
It’s gaining popularity for good reason, so how do you utilize OKRs in your business? Welcome to our OKR guide for beginners. Read on to find out how to lead your business to success.
What is OKR methodology?
OKRs (Objectives and Key Results) is a popular management strategy for setting goals within organizations. The purpose of OKR methodology is to unite your team to work towards a common objective with measurable results. It’s all about connecting your company, leadership team, and employee goals. Usually, you would use specialized software to manage your OKRs.
An integral foundation of OKR methodology is to make sure that everyone knows ecatly what is expected of them. They are public, so everyone is working towards that common goal and they understand their role in that objective.
Intel President Andy Grove originally implemented OKRs in the seventies, spreading to numerous companies. It really took off in the nineties when John Doerr introduced Google to OKRs and now the methodology is used commonly in companies from SMEs to the Fortune 500.
KPIs vs. OKRs
“What about KPIs?” I hear you ask. Aren’t they just the same?
It’s not an uncommon question but the main purpose of these two measures is different. Both are helpful for tracking performance but let us take a closer look.
KPIs (Key Performance Indicators) are key metrics used for evaluating how a team is fulfilling its goals. They are usually quantitative matrics and they reflect exactly where the output stands at a current moment.
If we look a little more closely at OKRs we can see that these are linked to broader organizational goals instead of individual performance. KPIs can be sued to monitor daily operations and to track the performance of a particular activity.
That’s why the OKR methodology is a high-level strategy. What are your priorities at a strategic level? Now, what are your ways to get there? Use KPIs to quantify goals and track performance at a lower level.
Why IS OKR Popular?
OKR methodology is lightweight and doesn’t take up a lot of time or resources to put into place. It’s a lean strategic tool and if there is one team management practice you should put into place it’s probably this one.
OKRs provide your company and team with the core benefits of productivity, focus, and a clear company culture. It’s popular with tens of thousands of companies including Google, LinkedIn, Intel, Oracle, and Twitter.
How Does OKR Methodology Work?
Your OKRs should consist of a list of three to five high-level objectives. Under each objective there should be three to five measurable key results. Each key result can be measured in one of two ways. You can measure them on a score of 0-100% or 0 to 1.0. For example, Google uses 0 to 1 and if you are hitting 1 then your objectives are too easy. You can see the example OKRs below for some examples of how OKRs look in the wild.
Your OKRs should be incorporated into your planning process on a quarterly basis. This does differ between companies and you will see some organizations setting annual or even monthly OKRs.
Let’s take a little look at what OKRs might look like for a number of departments:
Objective: Improved the quality of features in the next release
- Less than 6 major bugs in production
- Increased test coverage from 50% to 70%
- Implement a new QA process
Objective: Improve data security procedures
- Review security policies of the top 5 competitors
- 100% data recovery with a daily backup
- Conduct testing with at least 2 external software
Objective: Launch website for freelance consulting
- Research and buy the best domain name by July 1
- Choose and implement the best CMS by July 10
- Publish the first blog post by August
Objective: Make our customers happy.
- Conduct a monthly survey to get customer feedback
- Increase retention rate by 80-90%
- Reach an average NPS score of 9
Objective: Raise revenues by 20% this quarter
- Offer 30% discount for two weeks
- Join at least 4 local markets this month
- Reduce distribution costs by 15%
- Re-calculate product cost and markup
Objective: Establish a friendly, open company culture
- Achieve a 95% score in monthly employee survey
- Expand employee recognition program
- Launch a monthly meeting where employees can openly talk about their concerns and ask questions
- Celebrate small wins and progress each Monday
Objective: Improve the training process.
- Centralize training process for all departments and teams
- Create a new training playbook by the end of the month
- Assign an L&D representative for each department
Tips for Writing OKRs
Now you know all about OKRs let’s run through our best tips for implementing the methodology.
1. Keep It Simple
First things first you need to prioritize your objectives according to what your business needs most. You are not limited to the number of objectives as this should depend on the complexity of your business and time available.
It is crucial that you focus on objectives that you can achieve in the time-frame. There is no point setting your sights on something unachievable as it will make you feel like a failure from the outset.
2. Be Specific
When working on your OKRs you need to have concise objectives, and clearly defined key results. Brainstorm different ways to reach your objectives and think about how your team will evaluate performance. The more specific you are the easier it will be for the team to understand the expectations and next steps.
You don’t want to leave room for ambiguity or misinterpretation as this can undermine your methodology.
3. Level Your Objectives
If you’re an employee in a company it could be really difficult to understand how you are contributing to organization OKRs. Especially if they are related to company growth. So you need to cascade your OKR methodology down through different levels.
Determine organization level OKRS. Once they’re set you then move to departmental OKRs and finally to an individual level. Your employees will have a clearer line of sight to contribute to the company objectives.
You still need to make organization level OKRs public so your employees are aware of the wider company vision. That helps them unite as a team and work towards that purpose.
4. Make It Measurable
When brainstorming your key results you should know that they need to include a unit of measurement. Whether you want to hire 15 employees or make $2000 in revenue, you need something that allows you to state when you have achieved your goals. That’s much more difficult for non-quantifiable goals.
If you have to have a key result that is not quantifiable then there are steps to ensure you can make this work. Have a 1-to-1 session with the manager to negotiate how success will be defined and measured. You need to know where the goalposts are.
5. Don’t Stress About Stretch Goals
Some managers will set stretch goals for their teams as a way to motivate them. However, you need to be careful about how many stretch goals you set. If you set the majority of your goals as stretch goals and they keep missing them you will demotivate the team.
It can also be managed in a counterproductive way. Some managers incentivize stretch goals with financial rewards such as bonuses. However, rewarding your team for the end result rather than the behavior needed to reach them might have the opposite effect. Your goals should be challenging but also be realistic.
Motivate your team to work hard and be ambitious but don’t make them feel like they can’t reach the objectives from the outset.
6. Turn Your Key Results Into Bitesize Goals
Once you have determined your key results you can break them down further into mini-goals. This is useful because knowing how to achieve your key results will make your objectives more specific.
Align your methodology with a clear and specific action plan. Mini goals can also help you set milestones and keep the team on track and accountable. Mini goals can be action items, for example:
Objective: Increase sales revenues by 10% for this quarter
Key Result: Get 5 new clients.
Mini-Goal: Writing one blog post per week as inbound marketing
Your mini goals are the ways in which you can achieve your key result.
7. Celebrate Your Wins
Reward and recognize your team and yourself when you hit a milestone. The more you hype up the team’s behavior and results the more you will encourage the process of OKRs. We all enjoy recognition for our work and positive reinforcement is key.
If you wait until the main objective has been achieved you are failing to recognize the behavior leading to that achievement. Reward people for incremental progress as that is what will help you reach the tipping point.
Time to Close Ranks
Did you know that 30% of leaders cite failure to coordinate across units as the biggest challenge to executing their company’s strategy?
Now that you know all about OKR methodology that puts you one step ahead of that 30%. Set clear, specific and achievable objectives and create a pathway to success for your team.