OKR methodology: setting ambitious goals in business

Half of success in any business is determined by proper goal setting, and this is by no means an easy task. Today, businesses use various techniques to help them achieve their goals. However, for example, when using SMART, KPI, Agile or SCRUM such a result is achieved mainly due to optimisation of work processes and increasing the importance of horizontal connections.

A distinctive feature of OKR, however, is the synchronisation of team activities with strategic goals. As a result, employees put as much effort as possible into achieving OKR business goals. Initially, the concept of OKR goals originated at Intel, and then it was adopted by John Doerr from Google. Today, OKR is actively used by well-known companies such as LinkedIn, Uber and many others.

What is OKR

OKR – Objectives and Key Results – is a management and goal-setting system that enables the harmonisation of actions at different levels between departments, teams and employees. It is achieved through transparency and a clear hierarchy. Objectives do not refer to examples of goals, but to directions in which to move – guiding stars. They can be abstract and represent an image of the future to which the company aspires. At the same time, Objectives can be concrete. What they will be depends on the chosen strategy and vision of the organisation. Key Results – measurable indicators that allow you to know whether the objectives have been achieved or not. Most often metrics and numbers are used for this purpose. Ideally, key indicators should be SMART, i.e. specific, measurable, achievable, justifiable and time-bound.

This method helps to focus attention during planning on the most important things. OKR allows you to set clear priorities for goal achievement and manage the actions of employees. Encourage staff to look for out-of-the-box solutions, to work together and to communicate. OKR works like a hierarchy in an organisation. The strategic goals of the company determine the direction of the individual departments and teams, from which the individual tasks of the employees will emerge in the future. The hierarchy is both vertical and horizontal, which helps to increase team involvement and the efficiency of teamwork;

OKR is a way of goal setting that consists of two elements. The company should set targets for growth. It is considered a success if the set “targets” are achieved by 70-75%. If 100% is achieved, then this condition may be due to the fact that the targets are set low on purpose. Objectives – super-objectives. 

You can use one or more Key Results to monitor progress, but no more than five. The best option is to work with 2-3 metrics. The fewer there are, the better, as it is easier to keep tasks in focus.

Where to start

Setting OKR is a two-way process, so all employees are involved in the discussion and goal-setting phase. During OKR work, communication takes place in three directions:

1. Top-down. Global strategic objectives descend on the OKRs of departments, teams and employees. This scenario may involve setting objectives based on needs.
2.  Side-by-side. Divisions and teams come together to set common OKRs, complementing top-down goals. This is a scenario of defining OKRs through collaboration.
3. Bottom-up. If someone has a valuable idea, it can be proposed as an OKR. Suggestions from employees turn into goals that can be used at any level of the hierarchy. This rarely happens in practice. This option involves goal setting from decisions.

It is assumed that 50 percent of the objectives will be created top-down and the other 50 percent bottom-up. During the OKR setting phase, a key task for management is to get a shared understanding of the prioritised objectives. Some ideas may be more important than others, and understanding this will save a lot of time. If workers are aware of the key targets, it will be easier for them to drop lower priority things and focus on the really important ones.

Don’t expect every department to support global initiatives. Departments have their own specificity and specialisation, which affects the adoption of certain business goals. For example, the marketing department is unlikely to support the goal of reducing production costs, as this goal is outside their area of responsibility. In addition to strategic objectives, teams and departments should have their own localised objectives. Firstly, at each level of the hierarchy there are opportunities for growth and OKR adjustments. Secondly, focusing only on global aspirations can cause misunderstandings and disruptions in the field;

OKR principles

Focus. In contrast to classical goal-setting methods, OKR suggests focusing on what is most important. In a given time period, such as a quarter or a year, there can be as few as two to five goals with a maximum of five key results for each. With a limited number, it is much easier to achieve a single direction for all, and efforts are focussed on what is most important to the business.

Ambition. Benchmarks should be ambitious and inspiring. If you met the plan 100%, it means you set low expectations, and if less than 30%, they were too high. Your results should be between 60-70%.

No tie to salaries and bonuses. This aspect echoes the previous one. By tying goals to financial bonuses, you may run into a situation where most team members purposely underperform in order to get it. OKR requires independence from salaries and any kind of bonuses. But it does not mean that you should cancel the very possibility of bonuses for good performance of staff. The manager should reward without being tied to metrics.

Synchronisation and transparency. OKRs, departments and teams should be made publicly available to the organisation’s staff. Transparency will help improve team communication, and it will be easier to harmonise work and set common goals. Synchronisation will keep the company moving in the same direction. If a goal is no longer a priority, the organisation can quickly realign itself. The link between the work of an individual employee and the business strategy increases the productivity of the entire company.

Monitoring. Regular joint meetings should be held and the progress of OKRs monitored. Monitoring can quickly identify a range of problems that need to be corrected. It is also worth paying attention to feedback, both positive and negative, to help colleagues better understand their strengths and weaknesses and make more accurate predictions about performance.

Simplicity. Formulate goals and key metrics in a simple and straightforward manner.

Flexibility. Unlike KPIs, OKRs imply greater flexibility in management. If you realise that an objective or key result is no longer relevant or has been formulated incorrectly, adjust it immediately. You don’t have to wait for the end of the reporting quarter or year, remove objectives and set new ones

Step-by-step plan

1. Staging

Objectives come from the company’s strategy, so the first step in setting setting a strategy based on the organisation’s vision and the results of the situation analysis. One to three key objectives should then be formulated.

2. Agreement

The process of harmonisation takes place both vertically – with management and horizontally – between departments. The formulated goals should reach the staff, and they should provide feedback and make adjustments if necessary. At least half of them are formulated by employees themselves.

3. Definition of key indicators

Once the goal setting process has been completed at all levels, from top management to individual teams, examples of Key Results should be identified. Most often Key Results are measurable rather than abstract, but sometimes a key indicator can be an individual project.

4. Measurement and evaluation

Check your quarterly goals every month and your annual goals quarterly. If you haven’t met the goal, it may be worth revisiting key results. The more often you refer to ROCs, the better

5. Corrections

If you realise that a key result does not allow you to assess progress towards the objective, it should be replaced. You can also remove an objective if you realise that it is no longer a key objective, or if more important objectives have emerged and the organisation’s resources need to be reallocated.

Who OKR is suitable for

OKR implies setting ambitious goals, but does not give an answer to the question of how exactly to achieve them. This approach makes the team more flexible and allows them to move from linear thinking and process optimisation to the creation of new ones. In addition, OKR differs from other technologies, such as KPI and SMART, in that it sets itself the task of not only defining missions, but also developing strategies and tactics for achieving them. This approach allows you not only to set ambitious aspirations, but also to consciously approach their fulfilment, taking into account the available capabilities and resources of the company.

OKR methodology is useful:

Large Businesses. In large organisations it is quite difficult to keep in touch with employees and maintain focus on key tasks. ROC allows you to show how staff and their actions affect the company’s results and keep them motivated. The methodology helps to create a friendlier atmosphere in the team and encourages colleagues to co-operate and communicate. 

Mid-sized businesses. A sustainable business in a mature stage that has found an effective business model can stay in the same place for many years. ROC allows you to find new ways to grow;

Startups. Help you focus on the most important tasks that will help the business grow and properly manage limited resources. 

Executives. OKRs can be a good tool for new leaders who have little experience and are not yet “in the know”. It can help you understand whether your team is moving in the right direction and what support they need.

It is important to emphasise that OKR methodology is not suitable for line managers, operational workers and routine tasks – in such cases it is better to use a KPI system. However, if you are the OKR leader of a team or department, implementing OKRs can significantly improve performance. Keep in mind that OKR is a way of goal-setting that aims to achieve better results, not a panacea for all company problems. If you need to optimise your workflows, a better solution is to implement a CRM system or learn Agile principles.

When working with OKRs, remember

1. Your goal should be a super goal. Don’t try to immediately think about how and in what way to achieve it.
2. For each goal, you need to identify its measurable key indicators.
3. Constantly check in with your goals and monitor their progress. Without control, the OKR system can be detrimental to the business.
4. A well formulated goal does not have to be met 100% of the time. Achieving 60-75% of key indicators is already considered a success.
5. Lack of result is also a result. Not achieving a goal is quite normal. The main thing is that you have to keep moving in this direction;