What are OKRs?
OKRs (Objectives - Key Results) are a format for setting performance objectives. They were developed at Intel by then-CEO, Andy Grove, in the early 70s, and made famous by Google in recent years. The format is based off of Peter Drucker’s Management by Objectives (MBO) approach.
A manager or employee creates an objective for their role, and then describes key results that would demonstrate success against those objectives. This process is outlined in the late Andy Grove’s book, High Output Management, as well as John Doerr’s new book, Measure What Matters.
John Doerr worked for Grove at Intel in the 70s, and eventually became a venture capitalist advising his network of leaders (Larry Page, Bill Gates, Steve Jobs, Jeff Bezos, etc.) to implement OKRs in their organizations. OKRs are now the most popular objectives-setting format for tech companies around the world.
OKRs were created at a time when Peter Drucker’s MBO concept (1954 - The Practice of Management) was becoming popular. By the early 60s, consultants and leaders everywhere were hungry for ways to help their teams create SMART objectives (Specific, Measurable, Attainable, Results-oriented, Time bounded), just as Drucker had advised.
In the mid-60s, Dr. Bill Reddin, a consultant and academic, created the idea of output-oriented objectives. He said that a manager’s primary responsibility is to achieve the outputs required of the job. With that, he created the concept of Effectiveness Areas, or Outputs. These outputs needed to be measurable, and those metrics required SMART objectives.
Reddin wrote about output-oriented objectives in his 1970 book, Managerial Effectiveness, and his 1971 book, Effective MBO (both out of print, but used books may be available on Amazon). Reddin implemented his system of objectives setting around the world and had an army of consultants helping organizations like Siemens, DeBeers, Western Pacific Bank and others implement effective MBO.
Since Reddin’s books were written, numerous objectives-setting formats have been developed, including OKRs, Balanced Scorecard, 4DX (4 Disciplines of Execution), and Job Effectiveness Plans.
In this post I aim to show you how to combine Intel and Google’s OKRs process with Reddin’s idea of output-oriented job definition so that your OKRs for the coming year are spot on.
What a Good OKR Looks Like
A good OKR, if it is to be output-oriented, has 3 essential ingredients:
Output oriented OKRs answer the question “why does my job exist?” The objectives you choose should represent some measurable improvement in some piece of data tied to your role. Here are some examples:
Identify no more than 5 objectives that represent all the outputs required of your role in the next performance period, regardless of whether you are currently skilled enough or resourced enough to achieve it.
Next you move on to key results for each Objective. The Key Results need to be numerical and should reflect a From-To format. Taking the examples above, you can look at the data available for each role and declare the following Key Results:
Objective: increase sales or improve profit margin on each sale.
Key Results:
Objective: improve your first call resolution.
Key Results:
Objective: speed up the time to hire for open positions.
Key Results:
Objective: build a component of our software that makes the user experience more efficient and fulfilling.
Key Results:
Notice that each of these Key Results is SMART: specific and measurable in that they are numerical, attainable in that they are realistic, results-focused in that they describe Outputs (not activities), and time bounded in that they include the timeframe in which the result would be attained.
“If you can’t measure it, forget it. Nobody will know anyway.” Bill Reddin
Why include the from-to format?
There are a couple of significant reasons. First of all it lets you plan your activities. Going from $500K to $850K in one year requires a different set of actions than going from $800K to $850K. After you set your OKRs, you need to figure out how you will achieve them. You need to create your action plan. Your action plan may include skills you need to acquire, processes you need to change, resources you need to put in place, etc.
The second reason you want to include the From-To is for the benefit of communicating the value you are adding to the organization. It gives your manager and others greater context for the work effort you will be undertaking. It shows magnitude of the task and better communicates the resources you will require to achieve the task. It gives you stronger negotiating power so you can obtain the resources you need.
The Best Way to Build Your OKRs
The best OKRs are the ones that are aligned vertically to the strategy of the organization, and horizontally to colleagues with whom you have interdependencies.
In the mid-60s, Dr. Bill Reddin, a consultant and academic, created the idea of output-oriented objectives. He said that a manager’s primary responsibility is to achieve the outputs required of the job. With that, he created the concept of Effectiveness Areas, or Outputs. These outputs needed to be measurable, and those metrics required SMART objectives.
Reddin wrote about output-oriented objectives in his 1970 book, Managerial Effectiveness, and his 1971 book, Effective MBO (both out of print, but used books may be available on Amazon). Reddin implemented his system of objectives setting around the world and had an army of consultants helping organizations like Siemens, DeBeers, Western Pacific Bank and others implement effective MBO.
Since Reddin’s books were written, numerous objectives-setting formats have been developed, including OKRs, Balanced Scorecard, 4DX (4 Disciplines of Execution), and Job Effectiveness Plans.
In this post I aim to show you how to combine Intel and Google’s OKRs process with Reddin’s idea of output-oriented job definition so that your OKRs for the coming year are spot on.
What a Good OKR Looks Like
A good OKR, if it is to be output-oriented, has 3 essential ingredients:
- It should represent all the outputs expected of your role in the coming performance period - outputs describe a result rather than an activity
- It should be numerical - there is some metric or piece of numerical data associated with it
- It should indicate where you are starting from, and where you want to get to
Output oriented OKRs answer the question “why does my job exist?” The objectives you choose should represent some measurable improvement in some piece of data tied to your role. Here are some examples:
- If you’re a sales representative, your Objective might be to increase sales or improve profit margin on each sale.
- If you’re a customer success or service representative, your Objective might be to improve your first call resolution record.
- As an HR manager you may have an Objective to speed up the time to hire for open positions.
- In a Developer role you might be tasked with building a software or component of that software that makes the user experience more efficient and fulfilling.
Identify no more than 5 objectives that represent all the outputs required of your role in the next performance period, regardless of whether you are currently skilled enough or resourced enough to achieve it.
Next you move on to key results for each Objective. The Key Results need to be numerical and should reflect a From-To format. Taking the examples above, you can look at the data available for each role and declare the following Key Results:
Objective: increase sales or improve profit margin on each sale.
Key Results:
- Increase sales from $500K last year to $850K this year.
- Improve the margin on each sale from an average of 15% last quarter to 16% this quarter.
Objective: improve your first call resolution.
Key Results:
- Increase the percentage of calls resolved on first contact from 60% to 70% over the next 6 months.
Objective: speed up the time to hire for open positions.
Key Results:
- Improve our average time to hire from 3 months to 30 days by the end of this year.
Objective: build a component of our software that makes the user experience more efficient and fulfilling.
Key Results:
- Improve the average user speed to complete the task from an average of 60 seconds to less than 30 seconds by June 30th.
Notice that each of these Key Results is SMART: specific and measurable in that they are numerical, attainable in that they are realistic, results-focused in that they describe Outputs (not activities), and time bounded in that they include the timeframe in which the result would be attained.
“If you can’t measure it, forget it. Nobody will know anyway.” Bill Reddin
Why include the from-to format?
There are a couple of significant reasons. First of all it lets you plan your activities. Going from $500K to $850K in one year requires a different set of actions than going from $800K to $850K. After you set your OKRs, you need to figure out how you will achieve them. You need to create your action plan. Your action plan may include skills you need to acquire, processes you need to change, resources you need to put in place, etc.
The second reason you want to include the From-To is for the benefit of communicating the value you are adding to the organization. It gives your manager and others greater context for the work effort you will be undertaking. It shows magnitude of the task and better communicates the resources you will require to achieve the task. It gives you stronger negotiating power so you can obtain the resources you need.
The Best Way to Build Your OKRs
The best OKRs are the ones that are aligned vertically to the strategy of the organization, and horizontally to colleagues with whom you have interdependencies.
Step 1: Review the organization’s and your manager’s objectives for context. Understand what’s important in the greater scheme of things so that you can build more thoughtful objectives for your own role.
Step 2: Think about your job - what is its purpose? What good do you produce? What outputs does the organization need from your role so that it can fulfill its strategy? Create the OKRs like I described above.
Step 3: Meet with your manager, and meet with your colleagues. Align your objectives vertically and horizontally. Ask your manager if he or she is satisfied with your OKRs. Ask your colleagues if you can share OKRs with one another and then seek out and resolve conflicting objectives, interdependencies, gaps or overlaps. Best done in person, not by email. Use this time to also negotiate the action plans and resources to ensure your success.
Step 4: If you’re a people manager, ask your direct reports to do steps 1-3 as well.
What Gets Measured Gets Managed
I have advised and consulted thousands of managers and employees on creating effective objectives since 2005. The advice I give most often to ensure their success is this: Know your numbers better than your manager does.
Setting OKRs does not end when you’ve written them down. Manage what you are measuring by gathering new data on your metrics periodically (weekly, monthly, quarterly, or whenever makes sense) and be responsible for moving the needle on that data. Don’t wait for your manager to ask about it. The best OKRs are the ones you manage yourself to.
Have you implemented OKRs in your organization? Share your tricks and tips below...
Step 2: Think about your job - what is its purpose? What good do you produce? What outputs does the organization need from your role so that it can fulfill its strategy? Create the OKRs like I described above.
Step 3: Meet with your manager, and meet with your colleagues. Align your objectives vertically and horizontally. Ask your manager if he or she is satisfied with your OKRs. Ask your colleagues if you can share OKRs with one another and then seek out and resolve conflicting objectives, interdependencies, gaps or overlaps. Best done in person, not by email. Use this time to also negotiate the action plans and resources to ensure your success.
Step 4: If you’re a people manager, ask your direct reports to do steps 1-3 as well.
What Gets Measured Gets Managed
I have advised and consulted thousands of managers and employees on creating effective objectives since 2005. The advice I give most often to ensure their success is this: Know your numbers better than your manager does.
Setting OKRs does not end when you’ve written them down. Manage what you are measuring by gathering new data on your metrics periodically (weekly, monthly, quarterly, or whenever makes sense) and be responsible for moving the needle on that data. Don’t wait for your manager to ask about it. The best OKRs are the ones you manage yourself to.
Have you implemented OKRs in your organization? Share your tricks and tips below...
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