Understanding the OKR formula

Short for Objectives and Key Results. It is a collaborative goal-setting protocol for companies, teams, and individuals. Now, OKRs are not a silver bullet. They cannot substitute for sound judgment, strong leadership, or creative workplace culture. But if those fundamentals are in place, OKRs can guide you to the mountaintop. KEY RESULTS benchmark and monitor HOW we get to the objective. Effective KRs are specific and time-bound, aggressive yet realistic. Most of all, they are measurable and verifiable. (As prize pupil Marissa Mayer would say, “It’s not a key result unless it has a number.”) You either meet a key result’s requirements, or you don’t; there is no grey area, no room for doubt. At the end of the designated period, typically a quarter, we declare the key result fulfilled or not. Key results evolve as the work progresses when an objective can be long-lived, rolled over for a year or longer. Once they are all completed, the objective is necessarily achieved. (And if it isn’t, the OKR was poorly designed in the first place.) Employee expectations have never been higher. Top talent can write their ticket and choose where they work.

Let's dive into the mystical world of OKRs (Objectives and Key Results) with the same zest as embarking on a quest in a realm of dragons and wizards! OKRs are like the magical map and compass that guide you and your valiant team towards the treasure trove of achievements. 🗺✨

Objective: The Quest 🏰🔍

Imagine your Objective as the grand quest you're embarking on. It's bold, inspiring, and should get everyone's hearts racing with excitement. This isn't just any quest; it's the kind that bards will sing songs about for ages to come. It’s your rallying cry! "To conquer the Dark Forest of Market Share" or "To forge the Legendary Product of Customer Satisfaction." Make it grand, make it audacious, and most importantly, make it inspiring.

Key Results: The Milestones to Treasure 🚩💎

Key Results are the magical milestones, the markers that show you're on the right path through the treacherous terrain. They are specific, measurable achievements that, when combined, unlock the treasure chest of your Objective. Think of them as collecting the three sacred gems that open the gates to the enchanted castle.

1. Defeat the Minotaur of Market Resistance: Increase user base by 25%.
2. Navigate the Labyrinth of Product Development: Launch three new features with a user satisfaction score of over 4.5 stars.
3. Broker Peace with the Elven Kingdom of Customers: Achieve a customer retention rate of 95%.

Setting Your OKRs: The Enchantment Ceremony 📜✨

Crafting your OKRs is like performing a sacred rite that sets the destiny of your team. Gather your council of wizards (your team), and embark on the journey of defining your quest (Objective) and the magical milestones (Key Results) that will lead you to victory. Remember, the power of OKRs lies not just in setting them but in the journey they propel you on — a journey of focus, alignment, tracking, and, ultimately, triumph.

Following the Stars: The Review Rituals 🌟🔮

Just as navigating by the stars, regularly review your OKRs to ensure you're not veering off into the Dark Woods of Distraction. These review rituals are essential to keeping your quest on track, adjusting your course as needed, and celebrating the milestones you've achieved. Share tales of your adventures, learn from the challenges, and let the victories fuel your journey forward.

The Magic of OKRs: Uniting Kingdoms and Building Empires 🏰🌌

The true magic of OKRs lies in their ability to unite your team under a common banner, focus your efforts on what truly matters, and drive you towards achieving remarkable feats. They transform the ordinary into the extraordinary, turning daily tasks into steps on an epic journey towards greatness.

So, brave adventurers, set forth with your OKRs as your guide, and may your path be lit with the fires of ambition and the stars of achievement. Onwards to glory! 🚀🌈

Who should care about OKRs? The short answer, of course, is that everyone should care about OKRs at your company. From the executives and division heads to every team of teams, team, and individual team members. And if you do it right, OKRs can be a lightweight way to align key strategies at your company from the very highest level, defining who you are as a company down to how every single team will help the company achieve its short and long-term objectives. In 1968, when Intel opened shop, a psychology professor at the University of Maryland cast a theory that undoubtedly influenced Andy Grove. First, said Edwin Locke, “hard goals” drive performance more effectively than easy goals. Second, specific challenging goals “produce a higher output” than vaguely worded ones. In the intervening half-century, more than 1,000 studies have confirmed Locke’s discovery as “one of the most tested, and proven, ideas in the whole of management theory.” Among experiments in the field, 90 per cent confirm that well-defined, challenging goals enhance productivity. Similar benefits accrue in the not-for-profit world. At the Bill & Melinda Gates Foundation, a $20 billion start-up, OKRs deliver the real-time data that Bill Gates needs to wage war against malaria, polio, and HIV. Sylvia Mathews Burwell, a Gates alumna, ported the process to the federal Office of Management and Budget and later to the Department of Health and Human Services, where it helped the US government fight Ebola. Objectives Qualitative goal that you want to achieve. This is your desired outcome. Key Results Measurable, quantitative metrics contribute to an objective's achievement. Key Initiatives and Projects These actions will be taken to achieve critical results.

OKRs are not

• Unrealistic or ambiguous goals
• Task list or to-do list
• Overly specific Common mistakes
• No real plan to achieve OKRs
• Key results aren’t measurable
• Too many Objectives or Key Results

IN 2009, THE Harvard Business School published a paper titled “Goals Gone Wild.” It led with a catalogue of “destructive goal pursuit:" exploding Ford Pinto fuel tanks, wholesale gouging by Sears auto repair centres, Enron’s recklessly inflated sales targets, and the 1996 Mount Everest disaster that left eight climbers dead. Goals, the authors cautioned, were “a prescription-strength medication that requires careful dosing . . . and close supervision.” They even posted a warning label: “Goals may cause systematic problems in organizations due to narrowed focus, unethical behaviour, increased risk-taking, decreased cooperation, and decreased motivation.” The dark side of goal setting could swamp any benefits, or so their argument went. In business, alienation isn’t an abstract, philosophical problem; it saps the bottom line. More highly engaged work groups generate more profit and less attrition. According to Deloitte, the management and leadership consulting firm, issues of “retention and engagement have risen to No. 2 in the minds of business leaders, second only to the challenge of building global leadership.” 

OKR Superpowers Review your OKRs against the 5 OKR superpowers:

• Focus: What can be eliminated?
• Alignment: Who are the stakeholders?
• Tracking: Can we track if we were successful?
• Transparency: Where are there unseen implications or bottlenecks?
• Stretch: Is it propelling the business forward?

But exactly how do you build engagement? A two-year Deloitte study found that no single factor has more impact than “clearly defined goals written down and shared freely. … Goals create alignment, clarity, and job satisfaction.” Goal setting isn’t bulletproof: “When people have conflicting priorities or unclear, meaningless, or arbitrarily shifting goals, they become frustrated, cynical, and demotivated.” An effective goal management system—an OKR system—links goals to a team’s broader mission. It respects targets and deadlines while adapting to circumstances. It promotes feedback and celebrates wins, large and small. Most importantly, it expands our limits. It moves us to strive for what might seem beyond our reach.

Summary

• They are, first and foremost, a communication mechanism or information radiator to explain strategy and intent simply and succinctly (upwards, outwards, and inside your team).
• More than just goal setting, OKRs are meant to inspire and guide your work using both short (the key results) and long-term timeframes (the objectives).
• Great OKRs for a team-of-teams, for example, will also reflect and align to the cohesive strategy in the OKRs set at a company or division level and dovetail nicely with the OKRs of the individual teams in your team-of-teams. It may take some iterating to get everything aligned.
• OKRs are a flexible framework to explicitly state intentional direction, define boundaries, and, most importantly, provide the specific and measurable vital results you (and your team) will use to understand your progress definitively. Then, as per usual, inspect and adapt and carry on.
• The key results should be revisited at least monthly (Have we made progress yet? Are we on track to meet our quarterly key result measures? Even a quick gut check with the team is good). Then, OKRs should be refreshed, renewed, or replaced, perhaps quarterly, so that the focus remains on a small number of relevant and short-term items. This ensures you deliver the correct value to customers and establish feedback loops to verify that impact. It also helps you, your Product Managers and teams avoid working on too many things at once (and be able to say “no” to things not explicitly called out in your current strategy).
• As any good strategy does, OKRs connect all involved to WHY the work matters and ultimately HOW the customers and end users will benefit from your work. Ultimately, this encourages the team to deliver value incrementally against those goals to ensure all your work aligns with the intended direction.

Objectives:

• What you want to achieve: Objectives are ambitious, qualitative goals that define what you want to accomplish. They should be inspirational, challenging, and aligned with the organization's mission and vision.
• Examples: Increase customer satisfaction, improve product quality, expand market reach.

Key Results:

• How you'll measure progress: Key Results are specific, measurable outcomes that indicate whether you've achieved your objectives. They serve as quantifiable benchmarks for tracking progress and success.
• Examples: Increase customer satisfaction score by 20%, reduce product defects by 15%, acquire 100 new customers in the next quarter.

The OKR Formula:

1. Objective: Begin by defining clear and inspiring objectives that articulate what you want to achieve. Objectives should be ambitious yet achievable within a set timeframe.

2. Key Results: For each objective, define 2-5 key results that quantify how you'll measure progress towards that objective. Key results should be specific, measurable, achievable, relevant, and time-bound (SMART).

Example:

Objective: Increase customer satisfaction.

• Key Result 1: Increase Net Promoter Score (NPS) from 70 to 80 by the end of the quarter.
• Key Result 2: Reduce average response time to customer inquiries from 24 hours to 12 hours.
• Key Result 3: Achieve a customer retention rate of 90% or higher.

Key Principles of OKRs:

1. Alignment: OKRs should align with the organization's mission, vision, and strategic priorities.
2. Transparency: OKRs should be visible and accessible to all stakeholders, fostering accountability and collaboration.
3. Agility: OKRs should be flexible and adaptable to changing circumstances and priorities.
4. Stretch Goals: OKRs should challenge individuals and teams to push beyond their comfort zones and strive for ambitious outcomes.
5. Regular Check-ins: OKRs should be reviewed and updated regularly, typically on a quarterly basis, to track progress and make adjustments as needed.

Benefits of the OKR Formula:

• Focus: OKRs provide clarity and focus on what truly matters, helping teams prioritize their efforts and resources.
• Alignment: OKRs align individual and team goals with organizational objectives, fostering alignment and cohesion across the organization.
• Accountability: OKRs create a sense of accountability and ownership, empowering individuals and teams to take ownership of their goals and outcomes.
• Continuous Improvement: OKRs promote a culture of continuous improvement and learning, encouraging experimentation, innovation, and adaptability.

In summary, the OKR formula is a powerful tool for setting goals, measuring progress, and driving performance towards desired outcomes. By defining clear objectives and quantifiable key results, organizations can achieve greater focus, alignment, and accountability, ultimately driving success and growth.

References

When John Doerr Brought a ‘Gift’ to Google’s Founders | WIRED

Introduction to Microsoft Viva Goals | Microsoft Docs

Writing OKRs Cheat Sheet (microsoft.com)

Amazon.com: Measure What Matters: How Google, Bono, and the Gates Foundation Rock the World with OKRs: 9780525536222: Doerr, John, Page, Larry: Books