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Explainer

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Synopsis

András István Gróf survived the Holocaust, fought his way out of Communist Hungary, and came to America as Andy Grove. He spoke barely any English and had even less money. After he joined the company Intel, he oversaw the organization's move away from memory chips to microprocessors. How did Intel grow from $1.9 billion in revenue to $26 billion under one man's leadership? How do you keep your teams on track while encouraging employees to be fully engaged even in times of turmoil?

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The answer to both is the Objectives and Key Results (Part 3) framework. Pioneered at Intel and perfected at Google, the OKR tool gives teams and organizations timely and highly relevant data to track their progress towards key objectives.

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Outcome

So what tools do you need to learn to implement the process that helped Google Co-founder Larry Page lead the company to 10x growth, many times over? We'll cover OKR levels, aspirational vs operational OKRs, how to use an OKR Dashboard and annual OKR scoreboards. Don't forget, you can download the tools featured in this video and customize them to your needs with the link in the description.

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OKRs may sound easy in theory, but organizations dedicate full team-wide workshops to the topic. We're going to explain how the OKR framework works and how organizations like Google, Intel, Adobe and the Gates Foundation use OKRs to focus effort, foster inter-team communication and build higher employee performance to achieve their goals.

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Tool highlights

OKR levels

Grove created the OKR framework based on Peter Drucker's Management by Objectives system. At his previous job, he realized the value of execution versus expertise, so he turned the classic management system on its head to allow workers to set their own goals and be graded on their execution. While Andy Grove invented OKRs, it wasn't until John Doerr introduced the system to Google in 1999 that it really took off. Doerr later wrote the book Measure What Matters on the subject, where he also detailed how Intuit survived a series of competitive threats with a transparent culture that enabled it to be more openly connected via the OKR framework.

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Before Chief Information Officer Atticus Tysen introduced OKRs to his 600-member IT department, Intuit was busy pivoting in several directions at once as it moved to the cloud. Tysen said Intuit's key success was that all OKRs were visible throughout the company. OKRs consolidated the company's far-flung IT department and opened it horizontally across teams.

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This was particularly helpful in the cloud era so "the data and analytics team could see from the start what the financial systems team had in mind. The teams linked up their objectives in real-time, rather than after the fact, which Tysen said was a sea change from their historical way of doing things. For those working outside headquarters, OKRs ended the mystery of what was happening back at HQ, making the company more cohesive. When a new project came up for discussion, everyone asked how it fit into the OKR template.

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OKRs are laid in a pyramid-level structure. At the top are senior management and their objectives and key results. As you can see, for every objective, you have a few key results. For example, if the objective is to generate revenue from newsletters, one key result could be to gain a higher click rate, while another could be additional sponsors per newsletter. The teams under upper management also have their own objectives and key results. (Slide 11)

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Risk register

Now that you have established all the contributing components of a brand with your team, you'll need to conduct an audit to determine where you stand now. OKRs are great for team alignment and prioritize each stakeholder's task in a way that creates transparency across hierarchy. Everyone in the team knows their responsibilities and expectations, and how each team measures its success. To make sure you set your company's OKRs right, we also have an OKR checklist to help you. Execs can follow the drafting checklist when they create an initial OKR, while the practitioner checklist can be used for OKR checkups. (Slide 8)

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Aspirational vs operational OKRS

Now most stakeholders should be aware that 70% progress towards an objective should already be an impressive result. That's because OKRs are designed to be more aspirational than KPIs. Shoot for the stars and then land on the moon. At Google, Page expected team members to create products and services that are ten times better than the competition. This means not just improve on existing systems but reinvent them. Aspirational OKRs are set at 60 to 70% attainment, so performance is expected to fall short at least 30% of the time.

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Google divided its OKRs into two categories: operational goals, which are tied to product releases, hiring, and customer-related metrics, and aspirational goals, which are bigger-picture, higher-risk ideas mentioned above. Both have different thresholds for success. Operational goals are to be met 100% within a set time frame and any score under 100% would be deemed a failure. Aspirational goals are typically set at a 60 to 70% completion rate to encourage employees to aim high. This draws on all four OKR superpowers—they can only be met by a transparent and connected organization that has focus and commitment, and that tracks progress toward the objective.

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In practicality, OKRs amounted to a third or less of performance ratings at Google. More important was feedback from cross-functional teams and context. One-on-one meetings with managers allowed for goal setting and reflection, ongoing progress updates, two-way coaching, and light-touch performance reviews. For your own reviews, a progress bar at the bottom of the slide can track progress made in quarters or across teams and stakeholders. (Slide 12)

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OKR dashboard

OKRs build an accountable, transparent and vision-based culture. The OKR rulebook tells stakeholders what they can or can't do, but the culture of the organization tells people what they should do.

In philanthropy, stakeholders often confuse the mission, which is directional, with the objective, which is the set of concrete steps to engage in to know how you're going to get there. At its launch in 2000, The Gates Foundation was a $20 billion startup. Within two years it scaled to the point that it needed a more structured form of goal-setting. The Foundation implemented OKRs with its grant reviews, which allowed the team to judge whether a proposal had clear goals and fit the Foundation's objectives. For instance, the Foundation set an ambitious objective to eliminate Guinea worm disease, then set quarterly and annual key results to prove they made progress against the goal. After a series of grants from the Foundation, programs have reduced the incidence of Guinea worm disease from 75,000 in 2000 to just 22 in 2015.

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To consistently check in on your own OKRs, execs should check in on a monthly or even weekly basis. For monthly reviews that provide team-wide transparency, use a traditional dashboard visualization to track your organization's most important components, whether that's sales team numbers, team-specific metrics vs company-wide metrics, or completion rate towards the objective in question. (Slide 26)

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A team performance visualization can be used as a dashboard for meetings with a focus on operational vs aspirational OKRs. These OKRs can then be tracked across individual team members.(Slide 27)

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For the most detailed tracking on a week-to-week basis, utilize a breakdown that tracks multiple objectives with the key results listed underneath. These include the status, priority, and timeline to completion for each result.(Slide 28)

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Annual OKR scoreboard

To reap the full benefit of OKRs, feedback is critical for continuous performance management. OKRs are great for continuous recognition from managers and peers tied to company goals and strategies and could replace the annual review. For example, 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.

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Adobe discovered that annual reviews were costing the company 80,000 manager hours a year and dropped them in favor of continuous performance management in 2012. Combined with quarterly goals and built-in tracking of OKRs, Adobe uses conversations, feedback, and recognition to lift everyone's achievement.

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Managers, employees, and peers joined in multiple check-in conversations a year that focus on quarterly OKRs, feedback, and career development. The result? More engaged employees who want to stay with the company. For annual and quarterly OKR reports, this annual scoreboard visualization can be used either for internal team-wide reviews or individual performance reviews. (Slide 29)

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