Trillion-Dollar Teamwork: Goal-Setting With OKRs

OKRs: A Moment in History

Initially posited by author and businessman Peter Drucker in his book, The Practice of Management in 1954, OKRs find their roots in Drucker’s concept of the MBO, or Management By Objectives. MBOs are an individual-based goal-setting technique based on an annual calendar that required full completion and on which hinged an employee’s salary, or even their employment.

By 1968, MBOs were becoming outdated as attention turned to cost reduction in production, and the term and modern concept of OKRs was introduced by Intel co-founder and then-CEO Andy Grove in his book High Output Management. Applying the process of production to MBOs and advocating measurable, short-term outcomes, his idea became an inspiration to industry professions. This included venture capitalist John Doerr, who, after joining Google in 1999, brought the idea to the fledgling search engine company and popularized the idea throughout the company, as well as others he later invested in.

Now, OKRs are used as the standard goal-setting technique for a multitude of tech companies, including Amazon, IBM, LinkedIn, Twitter, and Adobe Systems. And, thanks in part to the visibility and actionability that OKRs bring, Google has evolved into a tech giant well on its way to a $1 trillion valuation.

The Anatomy of an OKR

The Objective

One of the primary problems that the objective portion of an OKR solves is providing a clear sense of direction that is consistently spread throughout a company and team. Objectives come from leadership, usually anywhere from 3-5 or so, and are high-level goals that should provide specific information on what the goal is (obviously) and what how the achievement of said goal ties in with and benefits the overall business plan. Time constraints for objectives traditionally extend for a quarter, although sometimes they can go for 6 months, depending on just how ambitious they are.

And objectives should be ambitious. These are not menial statements, dear reader, but the incremental building blocks that should fulfill company visions and revolutionize industries. With this in mind, those who set objectives (read: managers and higher leadership) have to be sure that they are clear and easily communicable throughout the company. Information is key, and there’s lots that can be gleaned and ultimately accomplished from a single objective.

But there is one thing that objectives, by definition, cannot do: answer the all-important how.

Key Results

When the objectives have been created, assigned, and disseminated through the proper channels to teams, employees should then be encouraged to create a number (typically 2-3) of key results (KRs), measurable undertakings that should collectively add to the achievement of the prescribed objective. Throughout the duration of the timebox (again, normally a quarter, sometimes 6 months), team members check in with each other and their various managers about the completion of each KR and measure their progress on a sliding scale of either integers (0-1, using decimals in between) or percentages (0-100%).

For this reason, it is absolutely critical that KRs be specific enough to be measurable (this is where KPIs come in), and that they contain a numerical element that makes them easier to form metrics for. In fact, one technique to ensure KR accuracy is creating KRs according to the S.M.A.R.T. method. The S.M.A.R.T. method dictates that goals should be:

• Specific;
• Measurable;
• Achievable;
• Relevant; and
• Timebound.

“Note that the objective is relatively short-range and the key results are so specific that a person knows without question whether he has completed them and done it on time or not. Accordingly, to be useful a key result must contain very specific wording and dates, so that when deadline time arrives, there is no room for ambiguity.” –Andrew Grove, High Output Management

As previously mentioned, key results are the answer to the question of how OKRs are achieved, and this is where the members of each team come into play. Objectives, from an employee’s perspective, are meant to be instructive, not dictative. Once the goals have been made clear and questions have been answered, the members of the team create their own methods of meeting the overall objective. The theory behind this encourages autonomy by making team members responsible for their chosen paths to success and fosters creativity and innovation in the challenge to meet the ambition of the expressed goal.

Flow Efficiency

Another significant difference between OKRs and MBOs is their purpose and effect on the production process, which essentially comes to resource efficiency vs. flow efficiency. In an MBO-oriented (read: traditional) system, goals are taken on individually on the basis of particular skills of each member of a team. Much like an industrial assembly line, each member of the team contributes their individual wheel, lever, or pulley to the project according to their role and the schematic they have been given.

While this way of working may still work in actual industrial assembly lines, it is long outdated in most businesses and industries. The issues are manifold, but the primary issue comes up when people are treated as resources instead of members of a team. In this model, members contributing to the project are often tunnel-visioned in their segmented portions of the project, with very little knowledge of the work of others on the team. Each individual’s already specialized knowledge becomes more exclusive with each task and project as roles become more siloed, leading to issues in production when a team member is unable to complete their portion (due to an illness, for example). This leads to a host of other problems, as individuals complete projects according only to what they have the time and knowledge to complete, leading to unfinished work and missed deadlines.

Flow efficiency, by contrast, seeks to invoke a very powerful element often spoken and promptly forgotten: teamwork. The premise of OKRs and flow efficiency is that the responsibility of achieving the objective rests not with each individual member working toward their own goals, but with the team as a whole. The objectives are shared and common amongst a team, and while each member of the team comes up with their personal KRs, those are frequently combined with the KRs of others. Going a step further, collective goal-setting becomes a possible activity. Smaller teams within the team can be formed to work collectively and tackle an objective each to complete the overall list.

Not only does this lead to greater visibility, but requests for assistance from those with other knowledge bases are more easily fulfilled. Work gets done and gets done faster. Communication and collaboration opportunities multiply. Information and skills spread and knowledge bases expand. There grows a sense of multiple people pulling the same sled instead of an loosely-linked collection of skilled individuals frantically running their own races.

Check out Johanna Rothman’s excellent series on flow efficiency for more.

Things to Note: A Word to Leaders and Teams

There are few more things about OKRs that should be remembered by each of the parties involved, but since some are more specific than one side than other, we’ll address them separately.

An Open Letter to Leadership

Dear Leadership,

The first thing you should know will probably be the last thing you want to hear: you will fail. OKRs are designed to be aggressively set; there are no mid-quarter stretch goals here. So, while it would certainly be theoretically ideal to have completion on every objective, if every objective is always met, the bar is being set too low. What’s important to keep in mind is that the structure of OKRs is team-based, check-ins with team members are consistent (though not overbearing), and visibility should be at an all-time high, so coming short of a goal is not only predictable, but sometimes preventable. Short of full prevention, OKRs make “failure” much more bearable, as teams that complete 70% of a highly ambitious goal will still have made significant progress. More importantly, their involvement in the project will provide them and you with a wealth of learning opportunities you won’t have experienced otherwise.

Secondly, share the knowledge. Your responsibility in setting objectives, from the C-suite to individual leadership teams, is to create goals that align with the overall business strategy and vision. But I don’t need to tell you that; that’s the guideline for every such paradigm. What you do need to know is that these lines of reasoning can no longer remain behind closed doors to be disseminated piecemeal to teams in obscure business-speak, if at all. Transparency is essential to effectively establishing common goals, and everyone in the company should be able to understand and articulate how and why the work they are doing contributes to the benefit of the company and the fulfillment of their objectives.

Finally, should you choose to adopt OKRs, be prepared to trust your employees. The most significant benefit of OKRs to your employees is an emphasis on autonomy that other goal-setting techniques don’t allow. They should be encouraged to create innovative and unique approaches to the goals you set and made to feel comfortable pursuing them in a way that makes the best use of their skills and knowledge. The KRs they set should be focused on the achievement, not the list of steps they need to get there. What you’ll find is that employees will invariably surprise you with their perspectives, and assume a greater sense of responsibility for and pride in their work (most motivation is intrinsic, after all).

Understand one thing: OKRs are not another abbreviated cloak to mask the same outdated goal-setting paradigms that have been implemented across industries for years. Establishing and practicing OKRs correctly can have a tremendous impact on the growth and direction of your business, the satisfaction of your employees and customers, and the valuation of your product. They provide a clear means to implement lofty goals and achieve them in a predictable and measurable fashion, and they’ll work wonders if you let them.

An Open Letter to Team Members

Dear Team Members,

Consider this your welcome letter to a new way of working and thinking. With OKRs, you will gain a greater role in the work you do, becoming designers of how your work is done with a greater understanding of why. Greater collaboration with other members of your team and shared responsibility bring a truer sense of teamwork. Consider this also your orientation with a few things that you need to know and do to perform at your best in this new environment.

The first thing you should also know will probably be the last thing you want to hear: you will fail. You may not fully meet every KR that you set for yourself to meet the assigned objective, and your 100% completed KRs may be interspersed with 50%, 75%, or 90% completion rates. While there is no “partially complete” distinction for OKRs (anything below 100% is still considered incomplete), the effects of partially complete KRs are not as absolute. Although you’ll still have a personal workload, you will be working on a team informed of and invested in the objectives and your KRs that can serve as extra resources for you to tap into. Additionally, instead of an apparent reflection of inadequacy from unknown causes, this environment provides specific measurables that can help with retracing roadblocks and development opportunities.

Relieved of any undue fears of failure, it follows that individuals should be more empowered to reach the heights of the goals communicated to them. Remember, you are in control of what path you take, and responsible for documenting and measuring them. However, just as no journey focuses on individual footsteps, nor should your KRs be written as a list of everyday, mundane or assumed tasks. An appropriate response to an objective of increasing demonstrable membership engagement is not, “Send monthly emails to prospective members.” Aside from lacking specificity and any significant measurable, there is no challenge in this statement, and thus, little value.

On a team that truly shares in the effort of achieving objectives, the blame game shouldn’t be possible. Leadership must create a certain accommodation for failure and be prepared to evaluate for development, and it is your collective duty to take ownership of meeting the expectations set forth. However, when things go wrong (as they sometimes will), the purpose of this team-driven approach becomes moot. Instead of pointing the finger at others, take responsibility.

Conclusion

Objectives and Key Results are certainly not a new technique for goal-setting, but their power lies in the implementation. OKRs, more than traditional methods of goal-setting, require a heightened level of trust, communication, collaboration, and autonomy, and these obligations between both team members and leadership are reciprocal. Armed with a clear understanding of how each of the elements in OKRs function and their implications, companies as a whole will see the positive growth effects of flow efficiency in the way their businesses operate, the quality and originality of their employees’ output, and ultimately, satisfaction of their targets and fulfilment of company visions.