Objectives and Key Results

Agenda

• The History of OKRs
• What are Objectives and Key Results?
• KPIs vs OKRs
• Benefits
• Creating Effective OKRs
• OKRs and Performance Review/Compensation
• Case Study by Zalando
• Further Reading

The History of OKRs

• Roots go to Peter Drucker’s management by objectives (1950)
• First initiated at Intel by Andy Grove (father of management science)
• Got popular after Google’s implementation by John Doerr (Student of Andy Grove)

What are Objectives and Key Results

“OKRs is a critical thinking framework and ongoing discipline that seeks to ensure employees work together, focusing their efforts to make measurable contributions that drive the company forward.”

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• Critical thinking framework
• Ongoing discipline
• Ensure employees work together
• Focusing their efforts
• Make measurable contributions
• Drive the company forward

Objectives and Key Results

Objective: “An objective is a concise statement outlining a broad qualitative goal designed to propel the organization forward in a desired direction. Basically, it asks, “What do we want to do?” A well-worded objective is time-bound (doable in a quarter) and should inspire and capture the shared imagination of your team.”

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Key results: “A key result is a quantitative statement that measures the achievement of a given objective. If the objective asks, “What do we want to do?” the key result asks, “How will we know if we've met our objective?”

Sample OKRs

KPIs vs OKRs

Benefits of OKRs

• Communication�Easy to understand framework increases buy-in and use
• Agility�Frequent cycles/change readiness
• Focus�Everyone is clear about what matters most
• Transparency�Transparency promotes cross-functional alignment
• Engagement�Most OKRs originate bottoms-up so teams and individuals own their goals
• Visionary Thinking�OKRs stretch our thinking about what’s possible

Creating Effective OKRs / Building Blocks

Creating Effective OKRs

Creating Effective OKRs / FAQ

• Planning Cadence�Quarterly cadence is the best approach
• Check-ins�Monthly check-ins and showcase meetings
• Top-down vs Bottom-up�Best approach: 40% top-down, 60% bottom-up.
• Aligning�Typically, the manager will communicate his/her objectives and ask the individual “How can you help me achieve my objectives?”�Or team/individuals alignment
• Scoring�0.0 - 1.0 system: 1: extremely ambitious, 0.7: what we hope to achieve, 0.3 what we know we can achieve, 0: no progress
• Key result types�Baseline, Positive Metric, Negative Metric, Target Metric, Milestone
• How many objectives and Key results?�Max 3 Objectives with max 5 key results
• Can OKRs change during the quarter?�Best approach is to prevent this, but depends!
• Who should own OKRs?�A team or an individual

OKRs and Performance Review/Compensation

CONS

• Intrinsic vs Extrinsic Motivation
• Killing the ambitious/stretch goal setting / Avoiding unnecessary risk
• Skipping the effort and focusing just the result
• Support the fraud/cheating

PROS

• Laser focus on goals
• Fairness
• Simplicity

Case Study by Zalando (2015)

Do you have a limit on the number of OKRs?

• To drive the focus
• Max 5 objectives with max 4 key results

How do you ensure that there is alignment among all OKRs?

• Alignment and buy-in meetings
• Alignment week
• Transparency

Have you, or did you ever, consider linking OKRs to compensation? Why or why not?

• No, we believe the biggest motivator is not money, but a challenging goal.
• Employees should never face the conflict of deciding between a personal reward and the company's success; this should always go hand-in-hand.

Have you linked OKRs to performance reviews? Why or why not?

• No, OKRs are not a performance management tool.

What specific benefits have you achieved from OKRs?

• Everyone at Zalando understands the direction of our company.
• Major increase in alignment
• It's a simple and powerful approach for generating alignment and staying focused on what's important.

Why were OKRs introduced? Did you consider any other program?

• Good feedback from other companies
• Global alignment
• Transparency
• Trust and Collaboration
• Easy to understand

Where in your organization did you develop OKRs? At the corporate level? Or at a business unit level, and why?

• Started in one department
• Department/Team/Individual level
• Fourth quarter introduced to whole company

What was your process for developing OKRs? Executive training, retreats, workshops, etc.?

• Research
• Spoke people from Google
• External support before rolling out to whole company

How do you ensure your OKRs reflect the organization's strategy—so that you have people focused on doing the right things?

• The majority of OKRs should connect to higher-level OKRs within our company.
• Yearly and Quarterly

How do you score your OKRs?

• 0 - 1 system

Further Reading