In the majority of companies, the CEO’s harp on about the vision that they have for the business. However, this vision is an abstract entity that needs to be put into action.
The onus, therefore, lies on the individuals on the lower rungs of the organisational hierarchy to come up with actual executables to turn the vision into reality. Enter OKR’s.
OKR’s – objective and key results – are a form of setting goals for a company so that everyone knows what exactly they are supposed to do and the result of that action. This ensures that in these small steps, the overarching key result – the vision – can be realised just as top management envisaged.
In this piece, we go deeper into the meaning of objectives and key results, how they work and how they can be implemented. Read on.
What are OKR’s?
As we have stated earlier, these are objectives and key results that are used by a company’s management as a way to set goals for the employees of the organisation. Since everyone knows what they’re supposed to be doing, it enables them to pull in the same direction so that the company achieves that key result.
In many instances, this concept can be confused with KPI’s. Key Performance Indicators are more on the retrospective side of things. They assess an employee’s or team’s completed mission. On the other hand, OKR’s are prospective – guiding the team’s performance from the get-go.
This concept was introduced by Andy Grove in the 70s when he was CEO of tech giant Intel. With a company of that size, it was inevitable that the organisation bureaucracy would significantly hinder the efficiency of the organisation.
With this novel idea, deliverables could be parcelled out so that everyone knows their role in achieving a certain key result.
With the success of the concept, John Doerr – a former sales executive at Intel – introduced it to Google in the late 90s when he became an investor.
Currently, the concept is diligently applied all over from large companies in Silicon Valley to small businesses as well as not-for-profit organisations.
Principles governing the use of OKR’s
If a company is to use objectives and key results as a way to orient their ambitions and goals – and they should – there are a few key principles that they should adhere to so that they efficiently put the concept into practice.
These fundamentals include:
- Simplicity: The concept fares well on simplicity. What we mean is that goals or objectives should be set for relatively small periods. For example, many companies set OKR’s for each financial quarter of the year. This simplifies the number of tasks that need to be done to achieve the objective.
- Clarity: Earlier, we talked about everyone pulling the same direction. The objectives and key results are passed on to everyone in the company. Consequently, everyone knows what they are supposed to do and work together to achieve the same goal, leaving behind a model of everyone working as a sole entity.
- Cooperation: Related to the above, when everyone is clear on what they are supposed to do, there is cooperation from everyone to ensure that they get as many of the key results that will lead to the attainment of the objective.
- A two-way street: In some instances, the different teams or employees will set their objectives to meet certain key results that contribute to the overall objective for that quarter. This means that when general objectives come from top management, the lower rungs can also set their own as they see fit, making the whole process a two-way thing.
To achieve the organisation’s vision for a year, there need to be smaller steps leading to this larger achievement. That’s where objectives and key results come in.
For each quarter of the year, set an objective that the company can achieve. This can be quite difficult because they need to be ambitious and at the same time motivating to the employees. Additionally, being ambitious needn’t stretch your employees’ ability to breaking point.
Nevertheless, the objectives shouldn’t be too easy to achieve either. They should be challenging enough so that the staff feels fulfilled when they eventually get to achieve them.
So, set about 3 to 5 objectives that can be completed in a quarter. Make them clear and available throughout the organisation to ensure everyone knows what the company is driving towards that given quarter. Furthermore, make the objectives challenging enough to bring the best out of the employees.
Management and the employees should be able to track the progress of the work being done to realise the objectives. This tracking is done by examining the key results. These are measurable and ensure that everyone knows where they are on the journey to meet the objective.
Let’s take a look at this example of OKR’s being implemented.
A supply company wants to increase its sales by, say, 100 per cent in the coming quarter. Management passes on this objective to the employees and this is the goal for the quarter. Doubling a company’s business is quite a challenging thing to do in a quarter, but not impossible.
The key result is the deliverable that is needed to achieve this objective. So, to get to this goal, the company needs to partner with 20 new businesses to deliver goods to.
Tracking the progress of the objective is done by seeing how many new partnerships have been acquired. Even if less than 20 partnerships are brought on board, it’s fine. It isn’t a must to fully hit a goal. If you do, chances are that the objective was too simple.
OKR’s are a vital way for management to set goals for the company and keep track of how they are faring. Not only does it break the organisation’s vision into manageable chunks, but it also ensures that everyone is working in tandem.
Don’t forget about OKR’s once their set period has expired. Rather, refine them and make them more relevant to the business’ overarching vision as the situation changes, ensuring that the company is still on track to hit its targets.