Objective – Key Results (OKR) is a way to align teams to move towards a common goal. OKRs are result-oriented: It’s not prescriptive how to do something as that’s left to the implementing team. There’s a clear connection between objective and key results.
KPIs (Key Performance Indicators) and goals which come down from management on the other side give you numbers you should reach. The “why” is not relevant.
It might seem that “result” and “KPI” are the same: If you do reach your KPI, you get the intended result. However that’s more a hypothesis and it’s often wrong. If you have a metric of what you want to get done, you can try several approaches of how to do it. While it might match the method you’d do via KPI, you might change your approach if you see that it does not work. In a KPI world you simply continue down the (wrong) path: KPI is the goal.
A quick summary of OKRs how I understand it
- Have a vision: define where you want to go. The boss usually does that.
- Define key results and metrics which show that you move in the right direction. Done by boss and employees. This is where the alignment happens: Everyone must agree here that this is what matters and this is how we measure it.
- Define tasks which will likely make the key results move into the right direction. Done by whoever is the expert in this area.
- Confirm once in a while (daily, weekly) that the metric looks good resp. better than before.
Common Problem: Defining Key Results
Regarding the key results, the main problem I see is that instead of providing key results, often simply tasks are listed here with the implicit assumption that doing this task will help the objective. And if you can count this, it’s a great key result. Well, it ain’t like this.
The Awesome Notebook-Shop
You own a small computer service shop which among other things builds custom notebooks for your clients. This is your main income generator. Your average is 10 per week. You’d like to afford a cruise holiday next year. It’s quite expensive.
Objective: Go to a cruise next year
What’s the key result? One answer could be:
Key result: Build 20 notebooks per week.
Easy to measure. Nice metric. Or is it?
The fallacy is that the unspoken assumption is that building more notebooks means more can be sold and thus you can go on the cruise next year. But do you have staff to build that many notebooks? Maybe you have to hire people. Or pay overtime. And can you even sell 20 per week? How about:
Key result: Sell 20 notebooks per week.
This includes building them. But if you have to lower the price in order to sell 20 per week, you’d not be able to go to your cruise.
Why don’t we instead measure directly what matters? This seems to be better:
Key result: Increase profit by 20%.
Key metric: Net money earned
You now have more options available: You can do advertising or you can offer trade-in’s. Selling 20 instead of 10 notebooks per week might be an option too, as would be buying from a cheaper vendor or selling for higher prices by adding some extra services. By measuring what actually matters, you always know you are on track. No assumptions needed.
Side note: You might want to add some key results to ensure that shortcuts are discouraged.
Constraint key result: Keep customer happy
Key metrics: User retention rate, Customer satisfaction
Otherwise you get a short term increased profit, but if the quality goes significantly down or you are overcharging your customers, you will hurt your long term objective. If you own a shop, you might do this automatically, but if you don’t measure it, how do you know your customers are happy with your work?
Why I like OKRs
It’s a chance to focus on something (the hand full of objectives) to improve by everyone marching in the same direction. Teams who don’t usually care what the other teams do, suddenly work together because they have a common objective and a common metric. Employees understand why they do something. OKRs are transparent, removing potentially duplicate work done by different teams. Metrics show where you are instead of you making up status reports which main purpose is to make you look good. Results are rewarded. Effort is not. (Those who put in more effort, usually get better results.)
More Info About OKRs
Some good links in no particular order:
- WhatMatters by John Doerr (John made OKR popular)
- How Google Sets Goals: OKRs
- 10 Examples of OKRs
- 5 Ways Your Company May Be Misusing OKRs
- The Beginner’s Guide To OKR especially the Common OKR Mistakes
- 9 Initial Mistakes To Avoid When Starting To Do OKR Goals
- Goals Gone Wild
- OKRs: A Tool To Engage Your Employees