Aligning People's Objectives With Organizational Goals.
Have you ever sat through your CEO's "state of the nation" presentation and come away from it thinking, "How does that apply to me? What is my role in helping us to achieve that vision?" Or, perhaps you've struggled to set goals for your team members because your own objectives are frustratingly vague.
Every organization, team and team member should have meaningful goals and objectives. After all, how can you set direction, make informed decisions, evaluate future strategy, or discuss progress in an effective way without them?
You might be familiar with renowned management expert Peter Drucker's technique of Management by Objectives (MBO), which seeks to align employees' objectives with their organizations' goals. In this article, we explore a refinement of MBO – a powerful goal-setting tool called Objectives and Key Results (OKRs). We look at how OKRs can bring greater transparency to an organization's objectives, and how they can connect individuals' roles to those objectives in a clear and practical way.
What Are OKRs?
Grove wrote: "A successful MBO system needs only to answer two questions:
- Where do I want to go? (The answer provides the Objective.)
- How will I pace myself to see if I'm getting there? (The answer gives us milestones, or Key Results.)"
And so a new management tool was born: Objectives and Key Results (OKRs).
OKRs received a real boost in 1999 when U.S. venture capitalist John Doerr introduced them to a small, up-and-coming tech company called Google, and they've been used there ever since. Other high-profile organizations that use OKRs include LinkedIn®, Twitter®, Sears®, Oracle®, DropBox™, Coursera™, and GoPro®.
What's Needed to Make OKRs Work
OKRs are underpinned by a handful of core concepts:
- Focus: when you're using OKRs, you need to set clear priorities and focus on your organization's objectives. So you need to decide what goals are important for achieving those objectives, and concentrate on these.
- Numbers-driven: as with any effective goal-setting tool, progress must be measurable. This allows results to be analyzed accurately, and shows your people how close they are to achieving their objectives. It also makes discussion and feedback more factual and less emotional, as numbers can be clearer statements of success than subjective evaluations, such as opinions and feelings.
- Transparency: the point of OKRs is get everyone pulling in the same direction to meet your organization's overall mission and vision. So it's important that everyone can see everyone else's OKRs. For example, Google includes OKRs in its staff biographies. This allows you to see how another employee's role may impact your own OKRs and this helps you to work together more effectively, because you understand the other person's motivations. This transparency can also break down "knowledge silos," where information or data that could be useful to many people is held by a few.
- Culture: OKRs have to become part of your organization's culture, and be embedded into your team's routine. Tracking OKRs regularly is key to achieving their desired results (we explore this further in Step 4 of How to Use OKRs, below). Getting your team members to discuss their OKRs with one another openly will help to make the concept a natural part of their work.
Rick Klau, a partner at GV, the venture capital arm of Google's owner Alphabet, Inc, explains how Google uses OKRs to improve results, in this video presentation.
How to Use OKRs
OKRs are designed to connect all layers of an organization, and to flow up and down between them.
Your boss's OKRs should trickle down to yours, and yours should feed into your team members' OKRs. This is known as "cascading." Then, as your people achieve their objectives, that helps you to achieve yours, and so on back up the line.
You can see how cascading OKRs work in the example outlined in the next section, Cascading OKRs – Working Through an Example.
This step-by-step guide shows you how to use OKRs within your organization.
Step 1: Set Objectives
OKRs start from the top of an organization. If you hold a senior position, then you will likely agree your objectives with your boss, based on the business plan or OGSM. If you are further down the organization, your objectives will be agreed in collaboration with your department head or manager.
Say, for example, that you're a manager in a marketing department. You will agree your objectives with your department head. Then you have to define your team's objectives.
To do this, start by gathering your team members together to develop the objectives that you need to achieve as a team. You need to come up with goals that reflect your organization's objectives and strategies. For example, one of your objectives could be to increase social media engagement by 20 percent in the first quarter (Q1).
Next, you and your team members need to set personal objectives together. These need to pinpoint what each individual will do to achieve the team's objectives. For example, to help achieve the team objective above, one of your team members' goals could be to gain 20,000 new Twitter followers in Q1.
Developing objectives like this is a great exercise in teamwork and building trust. Rather than merely telling your team members what they must do, you've asked for their insight to contribute to the goals they need to achieve. Ideally, 60 to 70 percent of OKRs goals should result from this mutual discussion.
You need to set objectives that are clear and achievable. The most effective OKRs are:
- Aspirational and engaging (to motivate and challenge your team).
- Time-bound (set a deadline).
- Memorable. (The key here is to keep it short and simple, so it is easily remembered.)
OKRs can be either operational or aspirational, and each has its own success criteria. Operational objectives, for example, "redesign the company website," are the more achievable of the two and a simple complete vs incomplete measurement is sufficient.
Aspirational objectives are all about reaching for the stars – which is why they're also known as "moon shots." For example, an aspirational objective might be, "To have the most popular industry website in the world." Moon shot success is considered to be hitting 60 to 70 percent of the key results. (A 100 percent success can mean that your moon shots were not ambitious enough.)
For more help on setting objectives, see our articles on SMART Goals and stretch goals. And to learn more about how to turn your organization's strategy into actionable goals, read our article, OGSM Frameworks.
Be bold when setting objectives. If a team member achieves close to 100 percent of his or her target, he's either doing exceptionally well or the objective may not have been challenging enough. The best OKRs objectives are within an employee's grasp, but are not easily achieved.
Discuss the objectives you set with your team members to make sure that they understand what's expected of them.
Step 2: Set Key Results
For each objective that you set, establish two or three key results to measure it by. This keeps things manageable for both you and your team members.
Discuss the key results that you are expecting with your team members, to make sure that they are aware of what they need to achieve. This also gives them the opportunity to ask for the extra resources or training needed to deliver those results.
Your key results will show you whether you're achieving your objective. They should include:
- Quantitative data (every key result should be measurable).
- Success criteria (to show if you are progressing).
- Metrics or milestones.
- Focused targets.
The type of key result you set will depend on the objective. For example, if your objective is to increase subscription revenue from your website by $2,500,000 by the end of the first quarter, one of your key results could be a quantitative one to increase the number of subscribers by 20 percent over that period. For less quantifiable objectives, it may be better to set a milestone as a key result. For example, a development team objective to deliver a new website homepage may not have a monetary measure, but a key result could be that the team builds a prototype by a certain date.
Step 3: Monitor Progress
Carry out quarterly progress reviews to keep things fresh and moving forward, rather than relying on a more traditional annual or six-monthly review.
In addition to quarterly reviews, check in on your team's progress every week as part of your one-on-one. A great deal can change over a working week! Regular OKRs "health checks" mean that you can identify and address any issues before they turn into major problems.
As your objectives and key results are measurable, you can review success in terms of a percentage success rate or, if you prefer, grading between zero and one (where 0.7 is equivalent to 70 percent). For example, if one of your objectives is to deliver four industry webinars in a six-month period, and you deliver three, then your rating is 75 percent, or 0.75.
A low success rate in OKRs is not always a performance issue. If one of your team is achieving only 30 to 40 percent of her key results, ask yourself if the OKRs that you've set are flawed. Is the objective something that's worthwhile to the business? Are there any obstacles that can be removed? Or is this, as you might initially think, a situation where performance needs to be addressed?
Step 4: Repeat the Cycle
Using OKRs is an ongoing process – they don't come to an end when the time frame that you set for your objectives expires, or when you've produced your key results. For example, once you've been through the three steps above over the course of a quarter, you start again.
As you move into the next quarter, look at what objectives and key results you were able to deliver, and think about what improvements you can make if you missed any of them. Discuss the results with your team, then define your next set of OKRs.
Cascading OKRs – Working Through an Example
OKRs encompass goals at all levels of business – organizational, team, individual – and how they interconnect or "cascade." Here's an example of how it works, using just one objective to keep things simple:
Company CEO's Objective: to Grow the Business by 20 Percent This Financial Year
The CEO has an organization-level goal, so it is very broad. To make sure that it is measurable and achievable, she needs tangible metrics in her key results:
- KR1: Strengthen marketing with a 10 percent increase in marketing qualified leads by the end of Q1.
- KR2: Grow sales team by 10 percent by the end of Q1.
- KR3: Achieve 10 percent growth in the business by the end of Q2.
One step down the hierarchy is the Chief Marketing Officer (CMO). One of his objectives contributes to the CEO's KR1 above:
CMO Objective: to Gain an Additional 400 Leads by the End of Q1
With this objective in place (which equates to the 10 percent increase in the CEO's KR1), the CMO's key results can now be set:
- KR1: Gain an additional 200 qualified leads from AdWords™ by May 1.
- KR2: Gain an additional 200 qualified leads from mass-mailing by June 1.
- KR3: Deploy new content marketing strategy by the end of Q1.
His KR1 then cascades down, feeding into one of the marketing manager's objectives:
Marketing Manager Objective: to Improve AdWords Campaign
To achieve this objective, the marketing manager's key results might be:
- KR1: Gain an additional 125 qualified leads via AdWords by April 25.
- KR2: Gain an additional 75 qualified leads via AdWords by May 10.
These key results then would feed into her team's objectives.
You can see the cascading effect here. The key results of the hierarchy cascade down to become the next layer's objectives.
We're keeping numbers consistent in this example so that you can see the trickle-down effect in action. In reality, managers at each level may want to set higher targets to compensate for other targets that may not be met. In the example above, the CMO may want to set the marketing manager's KR2 to deliver 125 qualified leads by May 10, just in case there's a problem achieving KR1.
Benefits and Risks of OKRs
There's no "one-size-fits-all" way to use OKRs. You adapt them to the needs of your organization, teams and individuals, creating unique versions.
One of the main benefits is that OKRs use a shorter goal-setting cycle (usually every quarter), rather than a traditional annual appraisal and strategy planning process. This makes your organization and team more flexible and agile.
Also, assessing people's progress four times a year, and carrying out weekly checks, allows you to build on successes and tackle any problems when they arise.
As a goal-setting tool, properly-set OKRs are easy to understand, and the limit on the number of key results per objective makes them manageable and achievable. Because they are shared across the organization, an individual can see how her role contributes to the overall organizational strategy.
One issue with OKRs is finding the right balance when setting objectives. You want to stretch your people, but you don't want to set goals that are unattainable. As we said earlier, with aspirational OKRs, it can be considered a success when people hit 60 to 70 percent of their key results. Not achieving 100 percent is not a failure when using this tool. Remember, if you hit 100 per cent, chances are your objectives weren't ambitious enough.
Sometimes it can be difficult to set a key result for objectives that are less quantifiable – not all objectives can be measured in dollars or percentages.
Objectives and Key Results (OKRs) is a powerful goal-setting tool based on Peter Drucker's model, Management by Objectives.
OKRs are used at all levels of an organization and are intended to align individuals' goals with the overall objectives of the organization. They are shared, so that everyone knows how their roles and objectives are connected. This transparency adds to a sense of a shared vision and of everyone in the organization heading in the same direction.
OKRs should be either operational or aspirational. Operational objectives should be challenging but within reach. Aspirational objectives are sometimes called "moon shots," and they are intended to encourage your people to "think big."
Objectives should be measured against only two or three key results. This makes them simple to manage. Progress should be reviewed in detail every quarter, supported by weekly check-ins with team members.
Implementing them involves a four-step process: set objectives, set key results, monitor progress, and repeat the process.