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Part 1: Introducing OKRs
Part
Part 3: Creating OKRs
Part 4: Managing with OKRs
if I can’t measure business impact during the quarter?
What is the difference between committed and aspirational OKRs?
How do you position your teams for success in creating OKRs?
there any
Should You Link OKRs to Incentive Compensation?
How Many OKRs Should You Have?
How Do You Overcome Resistance to OKRs?
What’s in It For Me? Why Should I Care about OKRs?
Where Can I Find a Library of Potential OKRs for My Business?
What Do We Do When We Can’t Control the Key Results?
How Do You Balance Stretch OKRs with a High-Achievement
How Do You Know Whether OKRs Are Right for Your Organization?
Can Business-as-Usual (BAU) Activities Serve As OKRs?
Have an Executive Sponsor, Champion, and Ambassadors in
Introduction
Hi, I’m Paul, and it’s my pleasure (really, I love this stuff) to serve as your guide to the brilliant world of objectives and key results, which I abbreviate as OKRs throughout the book.
I have no idea when you’re reading this. It could be during an economic boom time with job growth accelerating, the stock market escalating to record highs and, to quote Herbert Hoover, a chicken in every pot (apologies to vegans). Or perhaps you’ve picked up this book in an anxious period of economic turmoil, with corporate profits plummeting, layoffs dominating the headlines, and nothing but instant ramen noodles in every pot (apologies to anyone who eats).
Although I can’t predict the economic conditions that exist as you peruse these pages, one thing I can be sure of is that, regardless of the circumstances you’re currently facing, staying committed to what matters most to execute your organization’s strategy will be of paramount importance to you, your employees, and those you serve. To help you with that commitment, you have no better tool than OKRs to drive focus, alignment, and engagement.
Tools are powerful things when used with proper care and guidance. A chainsaw is a tool, but you wouldn’t want to be in the vicinity of someone with no training wielding one in your backyard (“I’m pretty sure I can reach that branch . . . aaaah!!”) Although poorly implemented OKRs are unlikely to end in catastrophe, if you don’t develop the program with care, it can drain significant human and financial resources. A poor OKRs implementation can also deprive you of a critical differentiator in any economic environment: the laser-like focus on those things, and only those things, that will catapult your organization to the next level.
I wrote this book so that you don’t squander that opportunity. OKRs For Dummies is your definitive guide on how to design and implement a successful and sustainable OKRs program, one that will provide lasting benefits in the form of intense focus, enhanced engagement, and top-to-bottom alignment.
About This Book
OKRs have become an immensely popular framework, relied on by organizations of all types and sizes, all around the globe, to effectively execute their strategies. There are many reasons for the system’s rise to prominence, a primary one being its relative simplicity. When it comes to OKRs, you don’t need a magnifying glass to follow the arrows, boxes, and concentric circles that make up some of today’s elaborate and overly complex management solutions. OKRs contain just two concepts: objectives (what you aspire to do) and key results (how you’ll demonstrate achieving that objective). But simple doesn’t mean simplistic. Numerous potential pitfalls and challenges lurk about, ready, willing, and very able to stall your OKRs progress to a halt. That’s why you need this book.
As with any popular management system, you’ll find no shortage of OKRs advice floating around — some of it valuable, much of it questionable, and a portion of it downright wrong. I’ve been working in this field for close to three decades and have chronicled in these pages the lessons learned from working with hundreds of organizations of every conceivable industry, size, and location. Throughout these pages, I map the entire OKRs journey for you to ensure that regardless of whether this is your first attempt at implementing OKRs, or you’ve tried and struggled with the system in the past, you can find the right information at the right time to maximize your use of the OKRs framework.
To make the content as accessible as possible, I’ve divided the book into five parts.
» Part 1: Introducing OKRs: In this part, I’ll share the power of goal setting, provide a brief but illuminating peek into the history of OKRs, and give you an overview of the basics. Because a number of “wannabe” systems may be vying for your attention, I also compare OKRs with other frameworks and demonstrate the many benefits OKRs have to offer.
» Part 2: Preparing to create OKRs: Whether you’re sprinting from the starting line in a Formula 1 auto race, starting a new project at work, or embarking on OKRs, getting off to a good start is vital. The chapters of this part equip you with everything you need to begin your OKR effort on the right foot. You see how determining your “why” for OKRs is the very first thing you should do, outline critical OKRs roles for people within your organization to play, receive guidance on where and when to create OKRs, and discover insights on the raw materials used to develop OKRs.
» Part 3: Creating OKRs: Let the games begin! This part of the book is devoted to providing you with all the tools, tips, and techniques (and maybe even some other things that start with t) that you need to create a powerful set of OKRs. This part begins with why training is critical to the success of OKRs and then walks you step by step through the process of creating OKRs, including
formulas, characteristics, and insider tips to write powerful OKRs. You’ll probably have a few questions along the way, so I end this part with a set of frequently asked questions on OKRs.
» Part 4: Managing with OKRs: You’re not going to let all that hard work of creating OKRs go to waste, are you? Not a chance! In this part of the book, I pass along the information you need to ensure that you don’t “set and forget” your OKRs. You discover how to run OKRs review meetings that maximize learning, learn how to score your OKRs, and find tips and advice on how to ensure that OKRs become ingrained in the culture of your organization.
» Part 5: The Part of Tens: If you’re looking for some quick inspiration, this is the place to go. The chapters in this part offer my top ten lists on common questions about OKRs that you’re likely to field from your team, must-do items to ensure OKRs success, and tips for creating dynamic and impactful OKRs.
Foolish Assumptions
In writing this book, I’m assuming that you’re a human being who cares enough to not simply go to ChatGPT or any other AI tool and type “Give me OKRs for my business.” Or maybe you tried that and it didn’t yield the results you were looking for, which led you to this book. If so, welcome!
I’m also assuming that you’re implementing OKRs for an organization of some type, whether a for-profit company or a nonprofit or government organization. However, having said that, the advice in these pages can, for the most part, apply to individuals and even families.
Icons Used in This Book
Throughout the book, you find icons in the margins that highlight certain types of valuable information. Following are the icons you’ll encounter, along with a brief description of each:
The Tip icon marks tips and shortcuts that you can use to make OKRs easier. They’re practical in nature and include specific steps you can take to improve the OKRs process.
The Remember icon marks ideas or information to always keep in mind.
The Warning icon tells you to watch out! It marks important information that may save you headaches when planning for, creating, and managing with OKRs.
Beyond the Book
In addition to the abundance of information and guidance related to OKRs that this book provides, you get access to even more help and information online at Dummies.com. Check out this book’s online Cheat Sheet by going to www. dummies.com and entering OKRs For Dummies Cheat Sheet in the search box.
Where to Go from Here
Where to go from here very much depends on where you are on your own OKRs journey, and of course your personal reading style. Whether I’m reading a novel, business book, or shampoo label, I’m the type of person who likes to read from end to end in sequential order. But not everyone is like that, and like all For Dummies books, this book is designed for you to be able to jump to the sections that are immediately relevant to you.
If your organization is new to OKRs, I recommend that you do read the chapters in order, because they guide you chronologically through the process. You may be tempted to skip over early chapters that cover topics such as the “why” of OKRs, or determining key OKRs roles, and get to the meat of writing objectives and key results, but you’ll be better served in the long run if you take the time to understand and aptly apply all the principles covered in the early part of the book.
If you’re reading this book because you’ve attempted OKRs in your organization but hit some hurdles, you may want to dive into specific chapters that address your pain points. But reading from the beginning can help to ensure that you don’t make the same mistakes twice, and will therefore pay considerable dividends in the end. Whatever you choose, I hope you enjoy the book, and I would love to hear from you. You can reach me at paul@okrstraining.com. Good luck, and have fun!
1 Introducing OKRs
IN THIS PART . . .
Objectives and key results (OKRs) is a powerful goal-setting and strategy-execution framework embraced by organizations of all types and sizes the world over. Its wide applicability and proven effectiveness are two of the many attractions of the system.
In this part, you discover the value of goal setting and dip briefly into stories of the people who brought the OKRs framework to life. You find out the core components of the OKRs system and compare it with other goal-setting tools. This part also details the many benefits OKRs have to offer an organization, including focus, alignment, engagement, accountability, visionary thinking, and the management of growth.
IN THIS CHAPTER
» Seeing how OKRs translate aspirations into action
» Showing how to write an objective and a key result
» Differentiating between OKRs and other goal setting systems
Chapter 1
Achieving Goals with OKRs
You’ve probably set many goals in your life. In fact, setting ambitious goals is a hallmark of the human experience. As a species, humans are ardent strivers. Whether the goal is to conquer space, cure debilitating diseases, or perform five push-ups every morning, people are constantly working toward desired results. In many ways, the pursuit of goals gives life meaning and purpose through the articulation of what you want, the planning to meet it, the execution of that plan, and, ultimately, the very rewarding experience of achieving your goals.
Organizations are avid goal setters as well, and OKRs is the framework of choice for successful goal setting around the globe in every possible type of organization: startups, nonprofits, government agencies at all levels, small- and medium-sized enterprises, and Fortune 500 conglomerates. OKRs stands for Objectives and Key Results, a simple and proven system for translating your aspirations into reality. OKRs provide the structure necessary to create goals that are crystal clear and will keep you laser-focused on concentrating your efforts on what matters most to deliver the outcomes you want.
This chapter introduces the OKRs framework in broad strokes. I talk about the value of goal setting, examine the components of OKRs, and briefly compare the OKRs approach to other goal-setting systems you may be familiar with.
OKRs Are a Goal-Setting System
As noted previously, humans are avid goal setters, constantly striving to improve our performance regardless of the field or endeavor we choose. Perhaps you have experience in setting goals in some of these domains:
» Family: Partner, children, extended relations
» Physical: Health, fitness, and wellbeing
» Work: Career, volunteering
» Spiritual: Religious or other spiritual affiliations
» Relationships: With friends or others
» Hobbies: Interests beyond work
Some of my goal-setting memories bring me a few chuckles, such as my goal of winning a “Best Screenplay” Academy Award after taking one screenwriting class. I even pictured Steven Spielberg having the honor of bestowing the Oscar on me. Hey, the more specific a goal the better, right? I talk a lot more about the value of specific goals in this book.
Your company probably has goals related to sales, customer satisfaction, retaining the best people, and a host of other elements designed to propel you past your competition. Whether people have their companies or themselves in mind, there is little doubt that setting goals is a very healthy and positive activity, one that everyone should pursue with rigor. Problems occur, however, in how people go about writing and constructing those goals. That’s where many people, whether crafting goals for companies or themselves, get stopped in their tracks almost instantly.
It’s common, for instance, to write goals that are vague and nebulous: “Get more fit.” “Be the best company in our industry.” They sound good — and few would argue with the merits of either of those examples — but the quality that specifically marks real success is missing from both. A number of other pitfalls loom out there in the goal world as well, such as
» Setting unrealistic goals that you have no genuine chance to achieve
» Having too many goals at one time
» Failing to account for any assistance you’ll require from others in achieving your goals
Goal setting is perceived by most people to be a relatively easy notion, one that requires little in the way of preparation or study. I return to this topic throughout the book, but for now, just be aware that in order to effectively implement OKRs in your organization, you need to change the way people think about the process of goal setting.
Despite the potential challenges, goal setting is one of the most powerful things you can do in your organization (and your life). You just need a better, more reliable system, and that’s where OKRs come in.
Sounds good, huh? Maybe if I’d have known about OKRs back when I was practicing that Oscar speech, I’d actually be clutching a gold statue now. The good news for me and you is that it’s never too late to succeed, so go ahead and get started!
Seeing the Value in Goal Setting
The title of this section makes it sound as if I’m trying to convince you that goal setting has something to offer. But maybe you’re already convinced and are a believer in the power of setting ambitious goals, with a lifetime of experience to back up that claim. If so, great — we have that in common. On the other hand, perhaps you do need to be convinced of goal setting’s value. You may be reading this book because your boss placed a bulk order, handing out a copy to every manager in the company with strict orders to read it, and over the weekend no less. Maybe you came up in the school of hard knocks and don’t believe in the woo-woo world of setting goals. Well, I’ve got news for you: Goal setting, especially with the use of OKRs, really works, and I’m going to win you over to this idea, I promise.
Back in 1968, when the Beatles song “Hey Jude” was dominating the airwaves, a little-known professor from the University of Maryland named Edwin Locke published a blockbuster article that would revolutionize the field of goal setting. “Toward a Theory of Task Motivation and Incentives,” based on Locke’s pioneering research, showed that setting goals led to higher performance in a wide range of domains. Whether it concerned office workers toiling in smoke-infested offices (it was the 1960s, remember), loggers felling timber in northern British Columbia, or truckers rolling along the blacktop, Locke demonstrated that setting goals improved performance in a statistically significant fashion. It wasn’t uncommon, for example, to see performance gains of more than 200 percent! Forget free love and flower children; the real revolution of the 1960s was goal setting.
Locke went on to collaborate with a professor from the University of Toronto named Gary Latham. Together they conducted hundreds of studies on goal setting and reviewed hundreds more, all culminating in their 1990 magnum opus,
A Theory of Goal Setting & Task Performance. Although it’s not a page turner a là Dan Brown or Agatha Christie, it’s a revelation. Locke and Latham demonstrated unequivocally that setting goals led to improved results, and as an added bonus, working toward a goal boosted motivation.
Locke and Latham made clear that certain types of goals are better than others. Specific and challenging (but not too challenging) goals were critical to improved performance. Both of these characteristics (specificity and challenge) are vital to OKRs, as you discover in the chapters ahead. Speaking of OKRs, I think I’ve kept you waiting long enough, so let me know introduce the star of our show, “Objectives and Key Results.”
FROM MBOs TO OKRs – THE PEOPLE AND IDEAS WHO BROUGHT OKRs TO LIFE
OKRs are not a business fad, but are based on, and have since improved upon, a number of common-sense, historically proven business principles. Here’s a brief sketch of some major players in bringing the OKRs framework to where it is today:
Peter Drucker: Considered by many to be the greatest management thinker of the 20th century, Peter Drucker was a true management rock star and writer of more than 30 ground-breaking books. In his 1954 title The Practice of Management, he introduced the concept of Management by Objectives, or MBOs. Very briefly, the idea was that all employees need objectives that spell out what contributions are expected of them and their teams. Drucker tied the idea of having objectives to the company’s strategy (goals of the business) and said they should be cross-functional in nature when necessary. Drucker had a huge and influential megaphone, and companies from coast to coast began creating MBOs.
Andy Grove: As CEO of Intel from 1987 to 1998, Andy Grove was behind much of the growth of Intel, leading the company from manufacturing memory chips to being the globe’s foremost supplier of microprocessors. Grove had a keen interest in management and recognized the potential benefits of a well-constructed and implemented version of Drucker’s MBO system. Grove boiled it all down to just two questions to be answered: 1) Where do I want to go (the objective); and 2) How will I pace myself to see if I am getting there? He eventually called the answer to the second question your key result. So when we use the acronym OKRs today, we owe it to Grove. Thank you, Andy!
Grove also experimented with the cadence of settings goals: Out were annual goals, and in were quarterly and sometimes even monthly objectives. Fast feedback and agility were critical in staying ahead of the competition, so OKRs had to be consistent with that goal. Grove also believed that the concept of stretch was vital with OKRs.
John Doerr: Doerr was a partner at the Silicon Valley venture capital firm Kleiner Perkins Caulfield & Byers when they made crafty bets on a number of startups destined to become household names. Ever heard of a little outfit called Amazon? Kleiner Perkins netted a tidy billion-dollar return on their investment of 8 million dollars. Doerr also worked at Intel in the early 1970s and was introduced to OKRs in a course conducted by Andy Grove. The framework became a key tool in Doerr’s toolkit for working with entrepreneurs and their companies, including the company of our final two names. Doerr’s popular book Measure What Matters offers a number of inspirational stories on the use OKRs from the likes of Bono and Bill Gates that you can use to demonstrate the power of OKRs. That book doesn’t provide step-by-step guidance on creating OKRs (hence the need for this book).
Larry Page and Sergey Brin: These are the creators of Google. Like many startups that eventually rose to global prominence, they started humbly, in that most Silicon Valley of ways, in a garage. However, they were fortunate enough to move early board meetings to a much more sophisticated location — a small office above an ice cream shop in downtown Palo Alto. There, John Doerr introduced the duo to OKRs, and Google decided to use the system from day one. Brin, Page, and subsequent leaders have consistently pointed to the system as a guiding force in the company’s never-ending upward trajectory.
Examining the Components of OKRs
The heading of this section sounds cold and clinical, but the fact of the matter is that goal setting, especially using OKRs, can be . . . wait for it . . . fun. As Locke and Latham (see the previous section) made clear, goal setting improves motivation, and who doesn’t like the feeling of being motivated to pursue something you care about?
More good news is that OKRs is a terminology-light framework. The framework involves just three terms: objectives, key, and results. Actually, it’s three words and a conjunction. Yes, I looked it up; “and” is a conjunction. But really it’s just two terms: objectives and key results, more commonly referred to as OKRs. In the upcoming section, I define these terms and look at an example.
Terminology matters in any kind of change initiative, including OKRs. You may find that some people will abbreviate the acronym to OKR, omitting the s. There is no agreed-upon acronym, but in this book I use the plural OKRs and suggest that you do the same. However, what’s most important is that whatever acronym you choose, you use it consistently throughout your organization.
Defining an “objective”
An objective is a statement of a broad, qualitative goal designed to propel the organization forward in a desired direction. There are a few things to unpack in that simple definition. The first is the word qualitative. This word points to the fact that objectives are aspirational statements and don’t include numbers. (As you find out shortly, numbers are the domain of the key results.)
The second word to put under the microscope is organization. You can, and most likely will, create OKRs at multiple levels of your organization: the companylevel; business unit; department team; and so on. Thus, the word organization in the definition is meant to be generic.
Finally, the last part of the definition notes propelling the organization forward in a desired direction. This is the essence of an objective, which, to keep things nice and simple, asks, “What do we want to do?”
Writing a basic objective
Now comes one of the hardest tasks I faced in writing this book: providing the very first example of an objective. Why was it so difficult? Because no matter what field or industry I draw on, there is a risk that some people will think, “Oh, so OKRs are for only those types of companies.” Or, “Well, that doesn’t apply to me.” Oy! Always remember that you can use OKRs anywhere and everywhere, from writing pop songs to ending malaria. So don’t read too much into the following example.
Say that your company has a mobile app that has been crashing lately, much to users’ chagrin. That’s a strategic problem, and OKRs are very well-suited to help you overcome strategic challenges. So here’s a possible objective:
Reduce mobile app crashes in order to increase user satisfaction.
Ta-da! You’ve just had your first exposure to an actual OKR-style objective. Exciting, isn’t it? (Surely it’s one of those “remember where you were moments” as you soak this in.) This example objective is a relatively simple statement, but it is composed of three parts that all effective objectives have in common:
» It starts with a verb. By its very nature, an objective is action oriented, so you always want to begin one with a verb.
Your verb choice will depend on the objective you’re striving toward, but every word matters in the objective, and the verb you choose sets the stage for the rest of the statement.
» The verb is followed by a description of what you want to do. In this case, you want to reduce mobile app crashes. Now, a lot of people would stop right there. “Reduce mobile app crashes” sounds like a worthy objective. But, and this is one of the most important buts in this entire book, there is a third component to a well-written objective, and that is . . .
» The “in order to” or “so that.” This final part captures the business impact of the first two components of the objective. Why is it important to reduce mobile app crashes? Because you believe that it will lead to increased user satisfaction. That final component is the most important, because it makes clear the strategic relevance of the objective: why it matters. I’ll bet you could stop reading right now and quickly brainstorm a dozen things you’d like to get done in the next few months. Doing that is relatively easy, but when you add that third component of why the objective is strategically important now, you quickly recognize what really matters, and which objectives are the critical ones to pursue.
Share this formula for writing an objective with your team:
Verb + what you want to do + in order to / so that (business impact)
Some people bristle at formulas and a paint-by-number approach to objective creation, but goal setting is not a natural muscle for most people. They need all the help they can get in writing effective OKRs, especially in the beginning. Providing a formula or template simply gives people a leg up on the task without inhibiting their creativity in any way. After all, the formula doesn’t dictate what verb to use, or why their objective is important. It simply provides a path for creating objectives that will be technically sound and add value.
Defining a key result
Now you can turn your attention to key results. A key result is a quantitative statement that measures the achievement of a given objective. The key results answer the question, “How will you know you’ve achieved the objective?” Of course, the most important word in the definition of “key result” is quantitative. A key result should consist of raw numbers, dollar amounts, percentages, or even dates, which you will use in the case of milestone key results.
Writing key results
In the earlier “Writing a basic objective” section, the example objective was “Reduce mobile app crashes in order to increase user satisfaction.” Now you have
to decide what set of key results will demonstrate the achievement of that objective. You may want to try these:
1. Study app crashes and determine the three most common causes by May 15th.
2. Develop fixes and update the app by June 1st.
3. Decrease the number of mobile app crashes from 5 to 1.
4. Increase app store rating from 4.2 to 4.8.
A question I get frequently is, “How many key results should we have for each objective?” Although there is no absolute right or wrong answer to the question, a good rule of thumb (as rules of thumb go) is three to five. But beyond the number, you should think in terms of telling a story with your key results. By that I mean that the key results should work together in a coordinated way to demonstrate the success of the objective.
Continuing with the example objective, if you’re going to reduce mobile app crashes, you first need to find out why the app is crashing by determining the common causes. That topic provides a good opening “chapter” in your story of success for this objective. This key result is a milestone, which is binary – either you achieve it or you don’t. Milestones are like hurdles that you need to get over in order to measure the ultimate business impact outlined in the objective.
A milestone key result always includes a date — how quickly you believe you can achieve the milestone without sacrificing quality.
After studying the reasons for the crashes, your next key result is devoted to developing fixes and updating the app. Think again of your story: First you study the causes, and then you develop fixes. This, too, is a milestone key result.
Now things get interesting. Your third key result measures the reduction of mobile app crashes from five to one. This is a metric key result because it has numbers. This key result also slots nicely into your story. You’ve studied the crashes, applied a fix, and your hypothesis is that by doing so, you’ll see a reduction in app crashes.
Hypothesis is a critical word in the context of OKRs, and in measurement in general. Whenever you measure anything, you’re making your best guess that it is related to your desired outcome.
The final key result, “Increase app store rating from 4.2 to 4.8,” is also a metric, again because it has numbers. It also holds the distinction of being the most important of the example’s key results because it directly measures the business impact of increasing users’ satisfaction that was identified in the objective. Therefore, it’s a great and logical ending to a strategic story.
