What Are OKRs, and What Are Their 3 Elements?

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OKRs are used extensively by everyone from Google and LinkedIn to Adobe and Spotify, and they’re made up of 3 elements. The OKR model was first popularized by John Doerr, who adopted it after seeing how successfully Andy Grove was using it while they were working together at Intel. Grove himself had developed it from Peter Drucker’s seminal ideas around Management by Objectives (MBO). Doerr took the model with him when he left Intel to branch off as a venture capitalist and, in 1999, he brought OKRs with him to a start-up he’d just invested in called Google. Today, the success of most large enterprise organizations has been built using them. OKRs have, according to PwC, not two but three “critical components”:  

Objectives are set by managers and team leaders and are qualitative. They need to be both challenging and ambitious and should help inspire individuals to push themselves. So that, even if you don’t achieve a specified objective, your efforts to do so will produce an improved performance.

Key results are the three to five specific goals that you set yourself to achieve whatever the objective is, and are quantitative. These goals are not intended to evaluate your performance, and should not be linked to renumeration. Rather, they are your means of assessing how well you’re progressing towards your objective. Each goal should be achievable, even if delivering on all of them might prove ambitious.  

Feedback is the third and critical component. Regular weekly, monthly and quarterly meetings will allow individuals to share progress and ask for any help that might be needed. As a team, you are all working towards the same broad objectives, and these feedback sessions will help you all get there. The main difference between OKRs and the more traditional KPIs (key performance indicators) is that OKRs are focused on outcomes rather than output. A KPI might be to make 100 phone calls a week. An OKR would be to convert three of the calls you make into sales, regardless of how many calls you make.  

Measure What Matters is how Doerr sums up OKRs and it’s the title he gave the book he wrote about them. In 2015, Sears published the results of the quantitative survey they’d conducted to measure the effectiveness of OKRs.They spent 18 months monitoring the performance of 20,000 of their employees in what amounted to a series of A/B testings. They looked at those 20,000 employees in terms of before and after, or of those who were or weren’t using OKRs, and the results they got were decisive.,/p>

“For the group who used OKRs we saw an increase in their average sales per hour from $14.44 per hour to $15.67, or an average increase of 8.5%”

Chris Mason, Sears

Which is why OKRs are used so extensively today by the likes of Intel, Adobe, Gap, LinkedIn, Spotify and of course Google.

 

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One of the things that OKRs do is to help strengthen an organization’s communication structures, because they give everybody on the team a better idea of what each individual is working towards and what their contribution is. As Doerr sums it up in his book, “transparency seeds collaboration.”This strengthens the relationship between managers and their team members, and between senior management and their business units, departments and the managers overseeing them. Cora PPM facilitates this by centralizing all your communication channels, and by streamlining and consolidating all your systems and processes, so that they are all orchestrated through the one, central hub. Everyone works off the same facts and figures and is kept permanently up to date, in real time. All your data and documents are organized through the one, central system. Find out more about Cora PPM

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