”If you don’t know where you are going, you will probably end up somewhere else.” –Lawrence J. Peter
Goal-setting is critical for the success of an organization. It helps allocate resources efficiently and provides the direction and focus to achieve committed and aspirational goals.
Most successful and innovative organizations put great emphasis on goal setting. They create both short-term and long-term goals and also motivate their employees to accomplish more by helping them set individual goals. By keeping their workforce aligned towards organizational objectives, they create a competitive advantage and brand positioning in the market.
On the contrary, organizations that do not set goals become stagnant and struggle to keep up with the competition. Further, their employees are not engaged and committed towards the organizational goals. Such companies have high turnover rates, plunging employee productivity, and are low on creativity and problem-solving skills.
In the current scenario, where uncertainty and unpredictability are ambushing businesses, it is imperative for leadership to develop a focused, determined, and goal-driven organizational culture.
By using this framework, they have reached new heights and created a distinguished position for their products and services in the market. They are able to better organize their resources and create a continuous learning and improvement environment.
By focusing on the most important goals, OKRs help organizations achieve more in less time. It helps in making teams and individuals more accountable towards their goals. Furthermore, it keeps track of employee productivity and creates a communication channel for better collaboration between employees and managers.
This article will discuss the different intricacies of OKRs and will unpack the following details:
OKR, a.k.a., Objectives and Key Results, is a goal-setting and tracking framework that helps individuals, teams, departments, and organizations set and achieve measurable goals.
It is a collaborative methodology that provides a match between the objectives that organizations want to achieve and the key results that help measure their progress. By tying objectives to small and measurable key results, the framework enhances visibility and provides actionable insights into every employee’s contribution and performance.
Unlike other goal-setting frameworks, OKRs are clearly defined, making it easier for managers and employees to track progress. By breaking down objectives into small key results, managers can create milestones that help accomplish challenging goals.
The different qualities of good OKRs, such as qualitative, inspirational, committed, and time-bound, make them immensely useful for every team. That’s the reason the framework has garnered excessive adoption in the last two decades, with everyone from large-scale organizations to budding startups and even NGOs now using it to set their goals.
What are the Components of OKRs?
OKRs are made up of two components: objectives and key results.
Objectives are the goals organizations want to achieve in the short or long term. They are clear, informative, qualitative, and inspirational in nature. A well-defined objective helps organizations stay committed to their goals and also aids in resource allocation.
It is important to note that organizations should have only three to four objectives that they wish to achieve in a specific period.
Having more objectives can lead to ineffective resource allocation and confusion among employees. Also, it is highly taxing to keep track of too many objectives.
Examples of objectives:
Increase employee engagement and productivity.
Reduce the average time spent on onboarding employees.
Key results help measure the progress and achievement of objectives. Every objective is followed by three to four key results that are quantifiable in nature.
It’s important to note that key results have to consist of activities that are in sync with objectives. Otherwise, they would not harbinger any positive results. Some of the important qualities of key results are that they are measurable, clear, specific, and time-bound.
Examples of key results:
Conduct an employee engagement survey every quarter.
Implement an employee engagement tool to increase engagement by 10% per month.
Types of OKRs
Every organization wants to accomplish more with their workforce. But the distinguishing factor amongst the successful ones and the laggards is how well organizations understand the difference between aspirational and committed goals.
Based on the types of goals, OKRs are differentiated into two types: aspirational OKRs and committed OKRs.
Committed OKRs are goals that an organization would want its employees to accomplish anyhow in a given cycle. The commitment percentage of such OKRs is 100%. Also known as “roof shot goals,” they determine the short-term achievement of objectives.
An example of a committed OKR:
Objective: Increase outbound sales
Key Result 1: 10% increase in customer revenue
Key Result 2: Close 3 enterprise clients in a quarter
On the other hand, Aspirational OKRs are the stretch goals that push the workforce to achieve more in an OKR cycle. They are also known as “moonshots” because they cannot be accomplished in a given timeframe.
An example of aspirational OKR:
Objective: Increase sales revenue
Key Result 1: Close 15 enterprise clients in a quarter
Key Result 2: 30% increase in average customer revenue
As per Google OKRs, a 60–70% achievement of overall OKRs is considered a success. Anything below that indicates that organizations are not realizing their full potential.
A Brief History of OKRs
OKRs were founded by Andy Grove, the then CEO and cofounder of Intel Corporation, in the 1970s. He incorporated the methodology while working in the company, thereby leading it to enhanced performance and better goal completion. Using this framework, Intel restructured itself into a goal-driven and employee-centric organization.
The concept of OKRs was further popularized by John Doer, an Intel employee. He understood the application and nuances of the framework and shared it with the founders of Google, Larry Page and Sergey Brin, in 1999, while working for a venture capitalist firm.
Google used the OKR approach to reposition itself as the world leader and grew its revenue by leaps and bounds. Seeing the success of Google and Intel, many organizations have switched from the traditional goal-setting approach to OKRs.
What are the Benefits of OKRs?
A report by Asana found the following about communicating company’s goals and objectives to their employees:
A mere 16% of employees believed that their organization was good at goal-setting and communicating it to different teams.
Only 26% of employees understand how their contributions affect the company’s goals. That leaves 74% of employees in a state of complete confusion with no idea about how to add value to organizational goals.
The above statistics highlight two important things. The first one is that organizations aren’t communicating effectively with their employees. The second is that the majority of employees have no clarity about organizational goals, how it guides their work on a day-to-day basis or how they contribute to the overall goals of the company they work for.
To overcome the issues of miscommunication and goal misalignment, organizations are implementing OKRs. It helps in aligning organizational and individual goals and creates a purpose-driven culture. Some of the benefits of OKRs include:
Clear direction to employees and leadership
Focus on individual and organizational goals
The ability to track the progress of different goals
Goal-setting leads to higher engagement and productivity
Increased transparency, accountability, and dependability in the organization
Leads to better resource allocation and utilization
There are two approaches used in setting OKRs. The first one is a top-down approach, in which the organizational objectives are cascaded down to different departments, and in alignment with them, teams create their own OKRs.
The second approach, bottom-up, is the opposite of the top-down approach. Here, different teams and employees create their own OKRs and try to convince top management to adopt them. The approach usually requires leadership’s rationale and forward-thinking for the adoption of OKRs.
While most organizations use a mix of both approaches, it is important to follow the OKR process to get substantial results from it.
The process consists of the following steps:
Involvement of leadership in adopting the OKR methodology
Understanding the ultimate goal an organization wants to achieve is crucial. It could be higher ROI, better retention ratio, enhanced productivity, increased organizational efficiency, and better preparedness for unprecedented challenges
OKR Cadence: Zeroing down on the frequency with which organizations want to set their OKRs
Write winning OKRs: Writing corporate and departmental OKRs can be challenging. Leaders should take reference from previously used OKRs to kick start the process. They can also get help from an OKR consultant to define the layout of the whole process.
Creating an OKR scoring method to effectively calculate the completion of an objective
Communicate OKRs to the workforce so that they can write OKRs for themselves based on organizational goals
Tracking OKRs through weekly check-ins and quarterly or annual reviews
Fine-tune the process for better results
OKR Best Practices
To get the most out of the goal setting process, it is important to follow some standard OKR best practices. While most organizations spend a considerable amount of time investigating OKRs, there are some specific areas they need to mull over for effective OKR implementation and tracking.
Some of the OKR best practices listed below will be useful for HR leaders in charting out an efficient OKR process.
Use a mixed bottom-up and top-down approach to set OKRs
Do not interlink performance reviews with OKRs
Reviewing OKRs quarterly to track progress
OKR Examples for Different Teams
Many organizational leaders and departmental heads find it challenging to create OKRs. But with a clear understanding of the OKR process, experience, and due diligence, it is possible to create objectives and key results that can make a positive impact. Moreover, examples of OKRs can help clarify the process further. The below links to OKR examples will help in compiling them for different departments and teams.
To simplify the process of goal setting, scoring, and tracking OKRs, organizations use OKR templates. It helps in creating a synergy between the leadership and different teams. Furthermore, it provides greater visibility into the system and uncovers actionable insights to accomplish goals.
Image: Goal Setting Template
Image: Goal Tracking Template
How Does OKR Software Help?
OKR software is a new-generation, tech-powered tool that helps with effective goal-setting, tracking, and analysis of individual, team-level, and organizational goals. It also provides visibility to HR leaders and department heads regarding real-time performance and the progress of different teams. With the help of advanced analytics and reporting tools, it offers an in-depth analysis of organization-wide performance.
Some of the salient features of OKR software are discussed below.
Simple and easy to understand: It should be easy for managers and employees to understand and navigate through the tool
Advanced analysis and reporting: Having customizable dashboards and reports will save time on tracking and analysis
Check-ins: This feature allows managers to discuss issues and opportunities with team members and also keeps track of employee activities
Easy Integration: It should allow organizations to seamlessly integrate with different HR tools
Data protection and security: It should be compliant with international data protection laws and must have a secure data infrastructure to protect organizational data from attacks
The current dynamic and unprecedented business challenges offer both threats and opportunities for organizations. Sustainability in today’s world requires taking smart decisions and being goal-centric. Companies that are leveraging technology for decision-making and performance management are reaping the benefits of higher ROI and productivity. The OKR methodology can help companies set strategic goals and become highly efficient at utilizing their valuable resources.
Chandler Barr is the VP of Sales at Engagedly and is focused on driving a culture of progress over perfection in a no-fault environment where employees are secure and encouraged to think creatively to solve problems. Chandler is a seasoned leader that has scaled sales teams for SaaS startups and multibillion-dollar publicly traded tech companies, as well as, led Marines to accomplish the mission during hardships overseas.