What is OKR?
OKR is a proven-effective collaborative goal-setting process in which teams and individuals set and achieve ambitious goals. If implemented correctly, OKRs will focus all your efforts on realizing your primary, overarching ambition. When organizations implement OKR methodology, they can increase collaboration and eliminate silos by connecting all areas of operation around a shared purpose.
What does OKR stand for?
OKR stands for objectives and key results. It's a process put in place to help drive businesses towards success. More specifically, objectives and key results are a goal-setting methodology that aligns a company’s efforts throughout the entire organization. The key benefits of using an OKR framework are that it can help businesses increase transparency, clarity, and accountability. It can also help businesses stay focused on their most important objectives and track progress over time.
If you're thinking of implementing an OKR system in your business, there are a few things you should keep in mind:
Objectives are the ultimate goal, i.e., what is to be achieved. Objectives should be concrete, actionable, and aspirational. A clear objective will eliminate confusion and fuzziness–there shouldn’t be any grey areas here. If you ask yourself if the objective has been achieved, it should be a yes or no answer.
Key results are the measurable outcomes that will drive the path to achieving the set objectives. Key results are how the objectives will be achieved. Key results should be time-bound, specific, data-driven, and challenging–but within the realm of possibility. Key results will almost certainly have a number in front of them.
Initiatives are the efforts that go behind key results. They are the daily tasks that are focused on achieving the key results.
Put together, OKRs will look something like this:
I will achieve [objective] by accomplishing [key results], which will be driven by [initatives].
OKRs vs KPIs–What’s the difference?
It’s a common mistake to confuse OKRs and KPIs–or more often, key results and key performance indicators. They both have similar definitions: KPIs measure how successfully a business achieves its objectives. They are numerical targets and business metrics set and tracked within a specific timeframe. OKR, however, is a goal-setting methodology that structures the focus of your work to improve performance.
KPIs and OKRs usually work together: Key performance indicators dictate what metrics should be analyzed to determine success, while objectives and key results show you what needs to be done to achieve success.
Benefits of using OKR
Using OKR can often solve many common underlying problems in organizations, such as lack of engagement, demotivation, and weak employee retention. How? By giving employees a shared purpose. Clear, meaningful, and ambitious goals can create alignment, clarity, and job satisfaction.
OKRs connect teams’ daily work to the company’s broader mission. When implemented correctly, OKRs will set challenging targets and deadlines while at the same time leaving room for changing circumstances. OKRs allow executives to learn quickly from failure and promote the celebration of wins, both large and small, throughout the organization.
OKRs can inspire employees to work harder while giving them autonomy and the space for creative freedom. According to John Doerr, the five most valuable benefits of using objectives and key results are the “F.A.C.T.S.”:
Focus: Because you are limited in the number of objectives you can set (there can be more than one, but always less than seven), you increase the focus of your goals. This forces you to make a choice about what you choose to spend your time and efforts on.
Alignment: After these high-level objectives are set, the strategy goes from top-down to bottom-up: OKRs give teams the autonomy to decide how to execute goals and ensure that their daily work is always tied to company goals. In this way, OKRs simultaneously prioritize business goals while encouraging employee engagement.
Commitment: OKRs align the company and focus teams’ efforts, which, in turn, requires commitment. Resources are allocated, and deadlines are set. Since everyone is working toward the same goals, progress needs to be transparent between team members.
Tracking: Remove the need for aimless stand-up meetings by making progress tracking easy, accessible, and transparent. Keep your target metrics at eye level to ensure that objectives are met on time. Find out how to track OKR progress with Collato.
Stretching: Objectives are meant to be difficult, pushing organizations to shoot for the moon, striving for what might seem almost impossible. This means that you shouldn’t be afraid to fail–but be sure you have the tools, resources, and means to ultimately get there.
Types of OKRs
There are three types of OKRs, committed, aspirational, and learning. All three types can be broken down on another level, between strategic and tactical goals.
The primary difference between committed and aspirational goals is that one is fixed and the other is flexible. A committed OKR means that your organization or team has agreed to pursue a goal and therefore has a plan, schedule, budget, and resources to execute it. Committed OKRs are measurable and can be graded based on their success.
Example of a committed OKR
Objective: Improve our presence on Instagram to boost leads with high buying intent.
KR1: Increase positive brand mentions from sponsored influencers by 50%.
KR2: Create 20 sponsored ads
KR3: Obtain 50+ demo requests from Instagram leads
Aspirational OKRs are less predictable goals, they’re sometimes referred to as “moonshots.” They require teams and individuals to “stretch” past the norm to achieve beyond what they are normally capable of. That’s why aspirational OKRs are harder to accomplish in full, but they are still valuable because they help establish a bar for success and push employees to think bigger than just the committed OKRs.
The idea behind aspirational OKRs, or stretch goals, is that they force you to break free from existing patterns and think bigger, not just improving what you're already doing. Challenge yourself to think about what your ultimate goal is, and strive for innovation and meaningful growth. When writing aspirational OKRs, try using the 10x method. Instead of saying you want to improve something by 10%, change your objective to be 10x better than what it currently is. Just remember, that achieving even 70% of your aspirational OKR should be considered a huge success.
Example of aspirational OKR
Objective: Become 10x more profitable than current market leader.
Key result 1: Get 10 major corporations to change from our competitor to us.
Key result 2: Achieve closing rate of 30%.
Key result 3: Expand to German market.
Learning OKRs are useful when you're not sure if your team is headed in the right direction. These objectives and key results are experiments that help support or disprove a theory at the end of the OKR cycle. Usually, the goal of a learning OKR is not to achieve a certain target metric, but rather explore different directions or learn something valuable about how to move forward. an example of a learning objective could be "make the best possible product" with key results that focus on learning important information about users.
Committed, aspirational, and learning OKRs can positively impact your organization’s success; you just have to decide which method resonates with your employees and works best for the company.
How do you decide between committed and aspirational OKRs?
Setting OKRs in motion takes time, practice, and a shift in management thinking. That’s why it’s recommended to start with committed goals. Committed OKRs make it easier to form new habits within the organization because key results are specific, attainable, and motivating. Once your company is familiar with committed results, then you can introduce aspirational goals as well. The combination of both may establish you as a results-driven organization, it just depends on your organization's structure and team dynamics.
Strategic and tactical OKRs
Every organization needs strategy and execution to hit targets, but not understanding the difference between strategy and tactics can lead to confusing or misaligned OKRs. Strategic OKRs are designed to help carry out a company-wide goal typically set at the executive level. Tactical OKRs help individuals, teams, and departments carry out their own goals that play into the overall strategy.
The most successful OKR implementations understand that different goals have different cadences. Tactical goals tend to change much faster than strategic goals, and the speed of these rhythms depends highly on the company. For instance, Spotify utilizes a strategic cycle every six months while its teams set OKRs every six weeks. Both strategic and tactical goals can be committed or aspirational.
How to write and grade OKRs
There is no one-size-fits-all formula for writing good OKRs: your objectives and key results will be individual and tailored to your vision. But there are some important considerations when creating effective OKRs.
How to write objectives
First of all, your objectives should be tied to your greater mission. If you haven’t figured out your purpose, starting there will make writing your objectives much easier. Create objectives that represent meaningful change and inspiring accomplishment. They should be challenging, such as
- Coming out on top of your competitors
- Becoming an industry leader
- Inventing something disruptive
If your objectives seem too easily achieved, you might revisit them and try to think bigger. However, remember that you should have both committed and aspirational objectives to work towards (see above).
How to write key results
When writing your key results, it should be clear that when they add up, they allow you to achieve your set objective. Your key results should also be:
- Specific and time-bound
- Ambitious yet achievable
- Measurable and verifiable
If your key results are undeterminable at the end of the cycle, then you need to reassess.
The simplest way to check if the OKRs you write are effective is to see if you can answer “yes” or “no” to the question of their achievement. But most importantly, your OKRs should
- Point to visible change
- Highlight the biggest priorities of the given time frame
- Provide clarity on what comes next
Best practices for writing OKRs
When writing your OKRs, these five principles will help guide you to success:
Less is more: Limit your chosen OKRs to three to five per cycle to increase focus on certain objectives. For each objective, choose five or fewer key results to commit to consciously chosen priorities.
Set goals collaboratively: OKRs should be a collaborative effort between management and teams. Determine priorities and track progress together to create a culture of autonomy and engagement. Even if business objectives are set in stone, teams and individuals should determine their own key results. Entirely top-down goal setting can often lead to demotivation. OKR expert John Doerr states, “Collective agreement is essential to maximum goal achievement.”
Be aggressive: According to Andy Grove, the so-called father of OKRs, striving for hard-to-reach goals will enable peak performance from your team. When writing objectives, create some which are to be met in full and realistically achieved. However, you should include one or two potentially unattainable goals, often called “stretched goals” or “moon-shots.” These goals are the ones that can push organizations to new heights.
Be flexible: Circumstances change; it’s a fact of life. Your objectives can be changed or modified mid-quarter, or key results can be adjusted if they’re not working. Implementing OKRs will be a state of trial-and-error at first.
How to grade OKRs
At the end of your chosen OKR cycle, it’s worthwhile to give your OKRs a score to determine effectiveness beyond whether or not your objectives were reached. By grading them using a scale, you can see how effective each key result actually was and how it impacted the objective’s end result.
Using a scale like the one below, give each individual key result a score from 0 to 1.0, with 0.0 meaning complete failure to make progress, and 1.0 meaning delivery or beyond.
Before the cycle begins, make it clear which metrics indicate which score for the key results. For example, if your key result is “reach 1000 followers on Instagram,” then perhaps your scoring would look like this:
- 0 followers = 0.0
- 100 followers = 0.1
- 500 followers = 0.5
- 700 followers = 0.7
- 1000+ followers = 1.0
Once you’ve done this for all your key results, you should have a clear idea of which key results drove progress and which fell short. This should help give you a clearer picture of how to create more effective OKRs in future cycles.
Common OKR Pitfalls
You might run into a few challenges during the beginning phase of OKR planning, whether in the new quarter or business year. But if you can detect and then avoid some of the most common OKR mistakes from the get-go, your organization will develop a goal-setting rhythm that will guarantee success.
Setting unrealistic goals
Ambition goes a long way in business, but you shouldn’t set oversized goals that are impossible to achieve. The purpose of OKR is to inspire employees to push their limits, not demotivate them if the goal seems unreachable. Missed goals often lead to negative emotions, such as disappointment, frustration, and feeling like a failure. And if it happens often enough, it leads to a lack of employee engagement. To forgo these adverse reactions, make your OKRs challenging but realistic so your employees can work confidently.
Creating tasks, not goals
A common misconception when goal planning is that OKRs and tasks are identical. However, a task doesn’t yield an immediate impact, whereas an OKR does. For example, writing a social media caption would be a task because you don’t expect a direct outcome from it. Google’s re:Work sums this idea up perfectly: “One thing OKRs are not is a checklist. They are not intended to be a master task …Use OKRs to define the impact the team wants to see, and let the teams come up with the methods of achieving that impact.” Make sure you understand the distinction between key objectives and tasks so your OKRs never fall short at the end of their cycle.
Using strictly a top-down approach
When setting goals for your organization, it’s easy to implement a top-down approach, where management creates a mission statement and objectives that engages employees. However, focusing on just one method will not add the value you’re seeking. Instead, goal-setting should harmoniously merge top-down and bottom-up approaches for a more aligned, committed, and productive organization.
Not designating a directly responsible individual (DRI)
Sometimes critical tasks can get lost in the pipeline if it’s unclear who owns that project. Assigning DRIs, or making a particular individual accountable for a decision or an assignment, reduces ambiguity and deferred responsibility. This is paramount for OKR planning because it guarantees that all duties are completed to reach the overarching goal.
Overlooking OKR tracking
One benefit of OKRs is that they make it simple for leaders to see the progression of company-wide and team-level goals. Without a designated space for the organization to give updates and see progress, hitting targets and OKRs can seem like an uphill battle. A collaborative tool that displays goals and initiatives, aligns every team member, and celebrates success is a great way to keep everyone on top of OKR tracking. Luckily, Collato is just such a tool! Find out how to track OKR progress with Collato.
Examples of OKRs
When implementing OKR, it’s critical to establish key results that are SMART. That is, the results are specific, measurable, achievable, and time-bound. Let’s take a look at some OKR examples for different departments.
OKR examples for CEOs
Objective: Build a more agile organization
KR1: Improve employee engagement score by 20%
KR2: Centralize 100% of company content into X application
KR2: Update 50% of technology and software programs by the end of the quarter.
Marketing OKR example
Objective: Make blog primary lead-generation channel
KR1: Increase blog traffic by 30% every month
KR2: Introduce blog distribution on two new channels
KR3: Improve conversions via CTAs by 10%
Engineer OKR example
Objective: Improve data security on product
KR1: Reduce data breach incidents from 2 to 0.
KR2: Decrease data backup time from 5 hours to 1 hour.
When it comes to writing and tracking the progress of your OKRs, which OKR software you decide to use will ultimately be a choice of personal preference. A spreadsheet is one of the most common ways to track objectives and key results, but it frequently becomes a chore for teams to actively remember to upload their progress onto yet another Excel file or Google sheet.
Collato has reinvented OKR software, giving teams the ability to collaborate on goals and track progress in an easy, transparent, and fun way.
With Collato’s OKR software, you can organize your objectives, key results, and initiatives in a minute. You can visualize the connection between team initiatives and company goals with unlimited hierarchy levels. Track progress precisely to see which initiatives are advancing goals to 100%. Create workflows down to the most minor task without the need for yet another project management tool.
Plus, with Collato, you can make updates actually enjoyable. Record your screen and talk your team through any project asynchronously, with the ability to comment and react to content. If you want a personal tour of Collato, book a demo with us!