by Sarah K. White

What is OKR? A goal-setting framework for thinking big

Jun 30, 20239 mins
BudgetingIT Governance FrameworksIT Leadership

Objectives and key results (OKR) help establish high-level, measurable goals for your business by establishing ambitious targets and outcomes that can be tracked over the quarter.

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OKR is a goal-setting framework that helps organizations define objectives and then track outcomes in days instead of months.

OKR has been around since the 1970s, and the concept was created by Andy Grove, but popularized by John Doerr, one of the earliest investors in Google. OKR quickly became an important focus for Google, and companies such as LinkedIn, Twitter, Dropbox, Spotify, AirBnB, and Uber have since followed suit.

Doerr’s OKR formula is to set an objective, which is “what I want to accomplish,” and the key results, which enable how to get it done. Thus, with OKR, a goal isn’t just what you want to achieve; it must include a way to measure achievement. Embraced by tech companies, OKR can help businesses stay on track in a fast-paced, ever-changing industry, while still encouraging innovation.

OKRs support a goal or vision, and they should also be measurable, flexible, transparent, and aspirational. They’re also typically established by leadership and they’re never tied into compensation or performance reviews. Ultimately, OKRs help businesses set ambitious goals, and then focus on achieving outcomes over the course of a business quarter.

OKRs vs. KPIs

OKRs and KPIs may seem similar on the surface, but they both address different aspects of organizational performance. KPIs are focused on the performance of employees, creating goals to measure their success in their careers and within in the organization, whereas OKRs are focused on the organization, helping companies identify quarterly goals to improve business performance and grow the organization’s success.

You don’t need to abandon KPIs for OKRs, but you should leverage the differences between the two. OKRs should be tied to business goals and objectives, rather than employees’ work. KPIs on the other hand can be tied directly to an employee’s day-to-day work and performance. Both tools are designed for achieving success in the workplace, each with a different target. 

How to use OKRs

According to Ben Brubaker-Zehr, co-founder of strategy management software company Meddo, OKRs are generally simple and flexible, which can be good or bad depending on how they’re implemented within your organization. You want to avoid a “set it and forget it” mindset, he says. Instead, OKRs should align with business goals and enterprise initiatives, with regular check-ins to gauge progress throughout the business quarter.

“When done well, OKRs can be really effective and ensure that organizational objectives cascade in clear, accountable, and measurable ways. When they aren’t, they tend to be vague, personal, and not particularly useful,” Brubaker-Zehr says.

OKRs usually contain three to five high-level objectives, with another three to five key measurable results for each objective. Even at the biggest organizations, it’s never advised to have more than five OKRs at one time. For smaller teams and organizations, you’ll want to keep it to three. After establishing your objectives, you’ll track the progress of each key result individually and reference them often during the quarter.   

“In the workplace, it’s a helpful tool to guide projects and initiatives because when a project pops up that doesn’t fall within our OKRs for the quarter, we need to decide whether we want to add it in, and prioritize something down, or if we need to say no to this project,” says Ada Chen Rekhi, founder and COO of note-taking software company Notejoy.

Establishing OKRs

In developing OKRs, you want to encourage your team to set goals that are out of its comfort zone and ambitious. But it’s important to emphasize that the outcome of OKRs won’t negatively impact performance reviews, compensation, or job security.

Brainstorming meetings in which your team can flesh out the goals that will have the most impact in the next quarter are worthwhile. Australian software company Atlassian suggests posing the question, “What are the most important impacts we need to make in the coming quarter?”

Once you establish OKRs, you’ll need to score them, typically using a sliding scale between 0 and 1, or a percentage between zero and 100. A score of 0.3 or 30% means you missed the mark, while a score of 0.7 or 70% means you made progress but didn’t hit the target, according to Atlassian. A score of 1.0 or 100% means you hit your target and accomplished your goal, but Atlassian advises that even a score of 0.7 or 70% is considered a success. OKR goals are typically long-term or “stretch” goals that will take longer than a quarter to complete.

Identify key results

Once you’ve established your objectives, you need to figure out the key results. Avoid turning your KRs into a to-do list and instead, focus on outcomes related to business priorities. Your KRs need to explain how certain tasks will produce desired results. Atlassian gives the following examples of an incorrect OKR and a correct OKR:

Wrong: “Ship feature X by the end of the quarter.”

Right: “Shipping feature X increases new user signups by 10% this quarter.”  

To make your goals measurable, you’ll have to consider each objective and the results you want. Since goals are inherently qualitative, you want to bring in an objective way to measure success. Each KR should also have an owner on the team—that person is responsible for tracking progress and finding ways to achieve the desired outcome.

How often should OKRs be reviewed?

There are no hard and fast rules about when to review OKR progress, but it’s typically recommended to review them weekly with key stakeholders, and quarterly with a broader audience.

For most companies, a weekly progress review will include a check in with the team dedicated to that goal or project. This is a time to involve the people closest to the project or goal, to narrow down the smaller details, and to check in with everyone involved in the overall progress. These meetings should be held consistently leading up to the quarterly check-ins that involve a wider group of people invested in OKR progress.

When it comes time for the quarterly check-ins, it’s important to have a clear agenda that outlines who will present progress updates and what teams will be involved. There should also be enough time at the end for a Q&A and constructive feedback on OKR success. It’s important to foster an open environment where everyone feels comfortable offering feedback, asking questions, and raising any potential concerns.

What makes a good OKR?

OKRs are meant to be flexible, which means they can adjust with your priorities. Once you establish your OKRs, if you feel confident you can hit a KR, then Atlassian suggests you increase the target by upward of 30%. If you aren’t sure you’ll meet your KR targets, that means you probably set your sights high enough.

Every month you should evaluate and check-in on OKRs to make sure everything is moving along. You’ll want to predict the end-of-quarter score for each KR to judge how it’s tracking, to catch any problems or to adjust priorities if necessary. Average the score for all your KRs and that’s your overall score for that specific objective.

Benefits of using OKR

OKRs are inherently designed to help companies move forward with a strategic plan to grow and succeed as a business. Some of the benefits of OKRs include:

  • Aligning employees with business goals and establishing productivity around those goals 
  • Optimizing resource management and allocation
  • Establishing accountability, transparency, and goal measurement
  • Identifying problems and their root cause, and allowing you to address potential roadblocks
  • Creating a better environment for informed decision-making
  • Implementing weekly progress check-ins structured around clear and specific goals
  • Effectively tracking goal progress and ensuring it’s aligned with business goals

OKR best practices

OKRs are used for both individual and team goal-setting to help knowledge workers prioritize work in fast-paced environments, like the tech industry, says Rekhi, so it’s important to stay focused on the most important priorities.

“OKRs are valuable as a tool to prioritize initiatives and define the desired outcomes from those goals,” says Rekhi. “OKRs establish the purpose—the objective—and the desired outcomes you want to affect with your work—the key results.”

Atlassian further offers the following checklist for setting OKRs:

  • Put the customer first
  • Don’t skimp on ambition
  • Tie OKRs to larger company goals
  • Just enough Os and KRs is enough
  • If you can’t measure it, it’s not a good KR
  • KRs are outcomes—not tasks
  • Assign KR owners

When your OKRs are complete, you’ll want to evaluate them to figure out what worked and what you need to change in the future. Ask yourself and your team if your objectives were ambitious enough, key results were measurable, any OKRs were ignored, they remain aligned with the business strategy, and the organization felt invested in the OKRs. You’ll want to establish what you learned and how to apply that to the next quarter.