By: John Doerr
30 MINUTE AUDIO / 4,000 WORDS (13 PAGES)
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How can your business make the tough choices that will ensure its survival? How do you keep your teams on track while encouraging employees to be fully engaged, even in times of stress and challenge?
The Objectives and Key Results system, pioneered at Intel and perfected at Google, gives an organization timely and highly relevant data to track their progress.
OKRs surface any organization’s most important work, focusing effort, fostering communication, and building employee performance and retention.
TOP 20 INSIGHTS
Google co-founder Larry Page calls Objectives and Key Results “a simple process that helps drive organizations forward,” and says that “OKRs have helped lead us to 10x growth, many times over.”
An Objective is WHAT is to be achieved: something significant and action oriented, the stuff of inspiration and far horizons. Key Results benchmark and monitor HOW to get to the said Objective: they are specific, time-bound, and metric-driven; measurable and verifiable. Once these Key Results are all accomplished, the objective is achieved.
A two-year study by Deloitte found that the biggest impact on employee engagement comes from “clearly defined goals that are written down and shared freely.” Most effective is when those goals are linked to the team’s broader mission.
Peter Drucker, the Father of Modern Management, coined the term “Management by Objectives (MBOs)” in 1954 . While productivity rose markedly at companies where MBOs were embraced, MBOs also have limitations: centrally-planned goals can become stagnant and slow to trickle down through the hierarchy. The OKR system builds on Drucker’s work to create meaningful connections across the organization.
When Intel was facing an existential threat to its microprocessor business from Motorola, it used the OKR system to reboot the company’s priorities in just four weeks. Dubbed Operation Crush, Intel’s battle plan to “crush” Motorola was clear, precise, and fast, allowing a near-billion-dollar company to turn on a dime.
The OKRs system is built on four superpowers: 1) Focus and commit to priorities, 2) Align and connect for teamwork, 3) Track for accountability, and 4) Stretch for amazing results.
Focusing on the handful of initiatives that can make a real difference and deferring the less important ones allows leaders to commit to those choices and makes for a successful organization. High-performance organizations focus on the work that is important and are just as clear on what doesn’t matter.
Flawed goal-setting can lead to disastrous consequences: Wells Fargo’s ruthless one-dimensional focus on sales targets led to branch managers feeling pressured to open millions of fraudulent accounts. The subsequent consumer banking scandal may have damaged the Wells Fargo brand beyond repair.
Jini Kim, CEO of healthcare data platform and analytics company Nuna, emphasizes the importance of senior executives embodying the OKR system: “Until your executives are fully on board, you can’t expect contributors to follow suit.”
Research shows that public goals are more likely to be attained than ones that are held private. In a recent survey of 1,000 workers in the U.S., 92% said they would be more motivated to reach their goals if colleagues could see their progress.
According to Harvard Business Review, companies will highly aligned employees—where their everyday activities are tied to the organization’s vision—are more than twice as likely to be top performers. But alignment is rare: studies suggest only 7% of employees fully understand the company’s business strategy.
Healthy organizations encourage some goals to emerge from the bottom up. Google has “20% time” which frees engineers to work on side projects for the equivalent of one day a week.
Intuit Chief Information Officer Atticus Tysen says the key for Intuit to succeed was for all OKRs to be visible throughout the company. For those working outside headquarters, OKRs ended the mystery of what was happening back at HQ, making the company more cohesive.
Tracking is a key part of the OKR system. Robust, cloud-based OKR management software packages allow users to navigate a digital dashboard to create, track, edit, and score their OKRs. Such platforms promote internal networking, drive engagement, and make everyone’s goals more visible.
Reflecting on successful completion of an objective is critical: a Harvard Business School study found that learning from direct experience is more effective when coupled with reflection.
Studies found that people who recorded their goals and sent weekly progress reports to a friend attained 43% more of their objectives than those who merely thought about their goals.
Bill Gates notes that people in philanthropy often confuse the mission, which is directional, with the objective, which is the set of concrete steps you’re actually engaged in. “Having a good mission is not enough. You need a concrete objective, and you need to know how you’re going to get there.”
At Google, Larry Page expects team members to create products and services that are ten times better than the competition, not just improving on existing systems but reinventing them. Aspirational OKRs are set at 60-70% attainment, meaning that performance is expected to fall short at least 30% of the time. Team members are encouraged to try and fail.
Ten percent of Fortune 500 companies have ditched the annual review. Adobe discovered that annual reviews were costing the company 80,000 manager hours a year and in 2012 dropped them in favor of continuous performance management—this combines the quarterly goals and tracking of OKRs with conversations, feedback, and recognition to lift everyone’s achievement.
The rulebook tells people what they can or can’t do, but the culture of the organization can tell people what they should do. Or, as business philosopher Dov Seidman puts it, “What we choose to measure is a window into our values, and into what we value.”
Measure What Matters shows how to implement the OKR system—Objectives and Key Results—for any team or organization. An Objective is a concrete, action-oriented thing that needs to be achieved; Key Results are the specific, measurable and verifiable steps that will meet the objective. The OKRs system is built on four superpowers. The first is focusing on the handful of initiatives that can make a real difference and deferring the less important ones; this allows leaders to commit to those choices and makes for a successful organization. The second is the ability to align and connect. OKR transparency means that not only are everyone’s goals openly shared, but individuals also link their objectives to the company’s overall game plan, and coordinate with other teams. The third OKR superpower is that they can be tracked; they are driven by data, with periodic check-ins, objective grading, and continuous reassessment. The final OKR superpower is the system’s ability to motivate people to excel by doing more than they had thought possible. Setting conservative goals stymies innovation; setting ambitious ‘stretch’ goals encourages people to go outside their comfort zones.
The OKR system
Google co-founder Larry Page calls OKRs “a simple process that helps drive organizations forward,” and says that “OKRs have helped lead us to 10x growth, many times over.” Objectives and Key Results—OKRs—is a collaborative goal-setting protocol for companies, teams, and individuals; it is a way to surface primary goals, channel efforts, and coordinate.
The OKR system has been adopted most widely in the tech industry, where agility and team work are imperative, but is also found at household names such as Disney and Exxon; at smaller start-ups where having everyone pulling in the same direction is a survival tool; at rapidly-scaling organizations that need a shared language for execution; and in larger enterprises where they function as neon-lit road signs.
An Objective is WHAT is to be achieved: something significant, concrete, action oriented, and (ideally) aspirational. An objective can be long-lived, rolled over for a year or even longer.
Key Results benchmark and monitor HOW we get to the objective: they are specific, time-bound, aggressive yet realistic, and most of all, measurable and verifiable. At the end of a designated time period, typically a quarter, the Key Result is declared fulfilled or not. Key Results can evolve as the work progresses, but once they are all completed, the objective is achieved (and if not, then the OKR was poorly designed).
To put it another way, Objectives are the stuff of inspiration and far horizons. Key Results are metric-driven and earth bound; they are the levers you pull and the marks you hit, to achieve the Objective.
Among experiments in the field of management theory, 90% confirm that productivity is enhanced by well-defined, challenging goals. Alienation saps the bottom line; engaged work groups generate more profit and less attrition. A two-year study by Deloitte found that, to build engagement, the biggest impact comes from “clearly defined goals that are written down and shared freely.” Most effective is when those goals are linked to the team’s broader mission.
In 1999 Google was the 18th search engine to arrive on the web. The company needed to make tough choices, keep its team on track, and measure what mattered; OKRs became the tool that institutionalized the founders’ “think big” ethos, the scaffolding on which Google built seven products with a billion or more users each—Search, Chrome, Android, Maps, YouTube, GooglePlay, and Gmail.
In 2017, for the sixth year in a row, Google topped Fortune magazine’s list of Best Companies to Work For. It is a company rooted in strong and stable leadership, massive technical resources, and a values-based culture of teamwork, transparency, and relentless innovation.
In his landmark 1954 book The Practice of Management Peter Drucker noted that people are more likely to complete a course of action when they helped to choose it. We can see the genesis of OKRs in Drucker’s principle of “management by objectives” or MBOs.
The results were impressive: in companies such as HP, where MBOs were embraced, productivity rose by as much as 56%. But, MBOs also had limitations…