Having clear goals is essential to business growth. These goals establish priorities within the company, so everyone knows where to focus, and where not to. They help teams that may not otherwise interact with one another to engage and collaborate cross-functionally. And they help outside stakeholders, including investors, forecast where the business will be in the near future.
One way to articulate and score progress against these goals is through “objectives and key results,” known as OKRs. Popularized by tech giants such as Intel and Google, OKRs are commonly used by companies of all sizes and at all stages of growth. Here’s more about what they are and how to implement them in the workplace.
What are OKRs?
The definition of OKR is “objectives and key results,” but OKRs are more broadly used as a management tool and corresponding strategy for businesses to achieve measurable and concrete ambitions.
WeWork Labs encourages businesses to think of OKRs as a pyramid. Objectives are at the very top, and key results are underneath as a supporting structure. For example, a top-level objective is an overarching, ambitious, company-wide goal—a north star for the entire organization. The key results are the supporting goals that will help the company get there.
Why are OKRs important?
OKRs are important because they are ambitious, north star goals that get everyone in a business aligned.
For business leaders, OKRs help them focus the direction of the business. That allows them to prioritize the most important initiatives and tasks and delegate or outsource the others. For managers, OKRs offer an objective way to measure progress against goals and assess their team members’ contributions and performance. For employees, OKRs establish a path so they understand how what they’re working on contributes to the larger business.
The difference between OKRs and KPIs
A key performance indicator (or KPI) is another common tool for evaluating performance among employees and teams. One main difference between KPIs and OKRs is that KPIs measure the outcome of tasks that have already been performed. They are generally more granular.
OKR goals are forward-thinking and tend to be more ambitious. While they shouldn’t be unobtainable goals, their purpose is to push a company or team forward to perform at a higher level.
How to write OKRs
The most effective OKRs are set frequently, evaluated often, and measured carefully. Here are the components of an effective OKR:
Objectives are goals an organization works toward. They should be ambitious, clear, concrete, and most important, company-wide, so that everyone is working toward common goals, according to WeWork Labs. They should be inspiring and motivating to employees. To set them up effectively, leaders should employ a collaborative process. Engaging employees and being transparent about strategies has many positive knock-on effects, including higher staff retention rates.
Key results are metrics that measure progress toward the objective. They must be quantifiable. If one of your key results is to secure 20 partnerships, you either achieve that or you don’t. To set them up effectively, you should add time constraints to them as well. In how many weeks or months do you aim to achieve those 20 partnerships?
Four tips for setting effective OKRs
OKRs can be introduced at all points of a company’s life cycle. Whether a company is an early-stage startup just getting off the ground or a legacy company, all businesses need to plan for future growth and establish processes to get there.
1. Don’t have too many
Don’t set too many OKRs. Your top priorities, the ones that you want teams to rally around, should have OKRs. Having too many of them changes their purpose to be simply a task list rather than north star goals.
Neil Shah, former head of strategy and innovation at UrbanStems and a WeWork Labs mentor, advises that as a company, it’s wise to have two or three objectives. “If you have more than three, you’re going to be going in more directions you can handle,” he says. “At the same time, you don’t want one because that’s a little too much focus, and there’s more as a team that you could be accomplishing.”
2. Set time frames
Objectives can be set quarterly or along an even longer term—over six months or a year. Key results should have shorter timelines and be evaluated frequently. Two-week deadlines are the most detailed you should get, according to Shah. If you plan on a less-than-two-week basis, there will be too many other tasks that pop up in the meantime that will distract you from achieving your goal, he said.
3. Use them as communication tools
As a business grows, employees tend to become more and more siloed from each other and from management. OKRs can be a way to facilitate dialogue between managers and employees on the front lines of business. By soliciting feedback from employees, leaders can have a view into the day-to-day operations. Being open and transparent about larger business goals is also an effective way of gaining employees’ support and motivating them toward those goals.
4. Don’t make them too achievable
You’re doing it right if you’re not hitting all your OKRs, since objectives should be stretch goals. They should challenge all members of the business to innovate and to think big. According to Google, OKRs should be achieved 60–70 percent of the time. Any more and your goals are not ambitious enough.
OKR examples from Google and Uber
Businesses, from the smallest startups to the largest companies, have utilized OKRs. Here are two well-known examples of their implementation:
Google has used OKRs since its founding in 1999, when John Doerr, a venture capitalist who has invested in Google and Amazon, introduced them. Since then, OKRs have been used in all departments as Google grew from its humble search engine roots.
The role of OKRs in Google’s astronomical success can’t be overstated. Google cofounder Larry Page has publicly stated that “OKRs have helped lead us to 10x growth, many times over. They’ve helped make our crazy bold mission of ‘organizing the world’s information’ perhaps even achievable. They’ve kept me and the rest of the company on time and on track when it mattered most.”
Uber used OKRs to be clear and specific about its business goals. Uber’s strategy looks like this, which can also serve as a handy OKR template:
- Objective: Increase drivers in system
- Key result: Increase driver base in each region by 20 percent
- Key result: Increase driver average session to 26 hours/weekly in all active regions
- Objective: Increase geographic coverage of drivers
- Increase coverage of SF to 100 percent
- Increase coverage for all active cities to 75 percent
- Decrease pickup time to < 10 mins in any coverage area during peak hours of usage
- Objective: Increase driver happiness
- Define and measure driver happiness score
- Increase driver happiness score to 75th percentile
OKRs are ambitious goals that help businesses of all sizes find direction. They are not meant to be set and forgotten about. The best ones are continually optimized and reevaluated. When a company begins to adopt OKRs, there will be a transition period for them to become part of the company culture. During this time, it’s imperative to communicate clearly and transparently. Following an OKR framework can lead to successful growth for leaders and employees in any business.