OKR Framework!
Andy Grove helped Intel become one of the most valuable companies by 1997.
At Intel, he conceived a management and goal-setting system called OKR, which stands for "objectives and key results."
Venture capitalist and early investor in Google, John Doerr, systematized in the book "Measure What Matters."
Before I dive right into it, below is a preview of what it looks like! But before the sponsor of this newsletter.
Today’s Sponsor: Sidebar
The peer group you’ve been waiting for
Being a leader is hard. Every day, there are tons of things you’d love advice on, but there is no one to ask.
Sidebar is a personal board of advisors for the next generation of leaders. Find out why a staggering 93% of members say that Sidebar has been a career game changer.
A glance at the OKR system
In the 1970s, Intel was among Silicon Valley's most respected and admired companies.
At that time, Intel's CEO, Andy Grove, drove organizational change.
Andy Grove did that via a goal-setting process called OKRs, or objectives and key results.
Where the objective is the direction toward which the organization needs to be in the medium term.
And the key results are milestones that allow the company to get there.
Those key results must be easily trackable, understandable, and shared across the company.
This is critical, as the OKR's ability to become actionable is largely determined by how well a company addresses its key results.
In its purest form, OKRs consist primarily of four superpowers:
Focus and Commit to priorities
This superpower focuses on making clear what matters and what doesn't.
More precisely, it allows whole teams and departments to decide where the focus is and dispel any confusion.
Align and connect for teamwork
One essential ingredient of the OKRs is their transparency, which needs to be openly shared across the organization, from the CEO down to each team and member.
OKRs is not a siloed process but rather a transparent goal-setting tool.
This is another core tenet of the OKR framework.
Indeed, this aspect differentiates OKR from any other goal-setting tool.
OKR uses an open approach to goal-setting. These goals are shared across the organization and made visible to anyone.
In addition, OKR enables teams to work together on shared, ambitious goals while keeping them measurable and achievable.
Track for accountability
OKRs are data-driven.
It doesn't stress, though, on countless metrics that help to increase the noise level.
OKRs instead focus on a few critical metrics to measure the impact on the business.
This sort of North Star Metric, or set of metrics, is the one that will inform the whole plan as it moves forward.
Stretch for amazing
Objectives set in OKRs aren't conservative; those are aggressive, hard yet possible, and attainable.
From this balance, OKRs bring the organization forward.
Those superpowers are kept together by continuous improvement and corporate culture.
How are OKRs different from MBOs?
For those who know Management by Objectives (MBO), it might be easy to confuse it with OKRs. However, there are a few key differences.
At its core, the MBOs focused on what while it was primarily top-down and risk-averse.
By converse, OKRs focus on the "what" (direction) and "how" (key results).
Rather than an annual review process, which might make it too complicated and formal, OKRs follow a quarterly or monthly schedule that is public, transparent, and usually bottom-up.
Where MBOs' goals are risk-averse, OKR’s goals are aggressive and aspirational.
OKRs objectives have a few key elements, such as:
Ambitious.
Qualitative.
Time-bound.
Actionable by the team.
While OKR key results are primarily:
Measurable and quantifiable.
Make the objective achievable.
Lead to objective grading.
Difficult but not impossible.
The OKR cycle
Brainstorm
In this phase, the top senior leaders set the company-wide OKRs.
Communicate
The OKRs can be communicated to everyone.
At the same time, teams develop their OKRs to be shared
Share
Contributors share their OKRs but also negotiate them with their managers.
Track
Employees track and share their objectives with managers.
Reflect
At the end of the cycle, employees perform a self-assessment of what they have accomplished.
OKR scoring system
How do you score the success of the OKRs?
There are two ways to score OKRs:
The simple way
Andy Grove would use a very simple "Yes/No" approach to understand whether the key results would be achieved and whether the primary objective also got accomplished.
OKR example
Objective: Reach $100K in revenue this year:
KR: build a newsletter with a thousand subscribers to sell $33K worth of products
KR: attend three events where to find 10 clients worth $33K in contract value
KR: publish 10 articles to share to sell $33K worth of products
Track the results with the simple method:
Build a newsletter with a thousand subscribers to sell $33K worth of products? Yes
Attend three events where you find 10 clients worth $33K in contact value. No
Publish 10 articles to share to sell $33K worth of products. Yes
The advanced approach
Each key result can be scored on a scale. “0” means failure, and “1.0” means achieving the objective.
Therefore, you can score each result against its outcome and evaluate whether you failed, made progress, or achieved them.
It's essential, in this phase, to be honest about the self-assessment as the OKR itself requires self-reflection.
OKR vs. KPI
It is also important not to confuse OKR with KPIs (Key Performance Indicators), performance metrics for a specific activity.
OKRs are aggressive and aspirational.
They drive the key objectives underlying the plan.
KPIs are more objective standards for measuring activity and operating plans.
OKRs are set to achieve extraordinary goals.
Therefore, KPIs and OKRs might be connected, yet OKR is a specific methodology where the company needs, through aggressive yet achievable, shared goals, to work through them.
Often, KPIs can be made more useful and focused by picking up a so-called North Star metric, which can help the company be more focused.
Most organizations use KPIs to address their short and long-term goals. While OKR is quite popular among startups.
OKR vs. SMART Goals
SMART goals are very similar to objectives defined within the OKR framework.
The critical difference is that OKR is a company-wide exercise aiming to align an entire, potentially large company to achieve goals and move fast, nonetheless size.
SMART goals, instead, might be more suited for individuals.
Another core difference is that OKR's objectives, even if achievable, are very ambitious, often connected with 10x targets.
Where SMART goals might and might not be as ambitious.
OKR vs. Balanced Scorecard
A balanced scorecard's main aim is to track, control, and improve the execution of activities that can be monitored by executives and managers within an organization.
The balanced scorecard differs in scope and aims from the OKR, which is set to achieve an ambitious growth plan.
OKR and 10x: Moonshot thinking as a way to renew your business model
2010, Google founded its research and development lab, called X, or Google X.
As pointed out by Google:
"While almost every corporate research lab tries to improve the core product of the mother ship, X was conceived as a sort of anti-corporate research lab; its job was to solve big challenges anywhere except in Google’s core business."
This connects with Google's founders' 10x mindset, which we can apply back to the business world as it makes us switch from an incremental growth mindset to a 10x mindset.
What are some of the key elements?
As I highlighted in the moonshot thinking guide, the fundamental principles are:
When you apply this sort of mindset, it might seem way more difficult to implement in the short term.
Once the proper context has been developed, it becomes cheaper and more effective.
It's essential to align part of the team around 10x goals, enabling the company to look for opportunities outside the core business model.
Like in Google, where most of the organization is focused on maintaining and incrementally growing the core business model, Google is also invested in other bets, a strategic set of initiatives that could change its whole business model.
Where Google is the most potent advertising machine, with the cash invested in new bets, it might become something else in the future decades.
This is at the core of reinventing your business model.
OKR examples
Here are three hypothetical OKR examples from which a business can draw inspiration.
Marketing department
Objective: Increase brand awareness and reach outside of the United States.
KR 1 – Publish one thought leadership article each week.
KR 2 – Increase web traffic from the Canadian market by 15%.
KR 3 – Add at least 300 new weekly subscribers to the newsletter.
Objective: Create a customer community
KR 1 – Devise a customer community strategy based on best practices.
KR 2 – Achieve a 25% community participation rate via discount incentives.
KR 3 – Publish at least 15 articles in the first quarter that outline and draw attention to customer success.
Objective: Improve the efficiency and consistency of social media marketing
KR 1 – Increase posting frequency from two times per week to three times per week with a core focus on video content in TikTok and Instagram Reels.
KR 2 – Boost user engagement to 30% by hosting live chat events and increasing the quality of the content posted.
KR 3 – Add at least 1,000 TikTok followers every month for the first half of the year.
Customer success
Objective: To demonstrate to our customers that their input drives/influences company outcomes.
KR 1 – Interview at least 50 customers monthly and collate suggestions for product and service improvements.
KR 2 – Hire three additional customer success managers.
KR 3 – Reduce product-related complaints from 65 to 30 before the end of the year.
Objective: Train customer success staff to enhance their capabilities.
KR 1 – Ensure that every member of the team has a personal development plan in place.
KR 2 – Increase task success rate from 75% to 90%.
KR 3 – Come up with 4-6 coaching and training opportunities each year.
Objective: Ensure the team has the necessary support to achieve company objectives.
KR 1 – Solicit training firm to run three personal development sessions per quarter.
KR 2 – Onboard 15 new customers per month.
KR 3 – Maintain a customer response time that never exceeds 18 hours.
People expertise
Objective: Create a team of employees that is motivated, happy, and engaged.
KR 1 – Offer regular opportunities for personal and professional development.
KR 2 – Employees who meet stated objectives and performance standards shall be offered at least one raise of 5% per annum.
KR 3 – Schedule at least two meetings with department heads per quarter and ensure that quarterly check-ins are maintained.
Objective: Acquire more talent to increase the collective strength and capabilities of the organization.
KR 1 – Launch hiring campaigns in three regional markets.
KR 2 – Devise and implement an employee referral program.
KR 3 – Decrease the average time to hire from 25 days to 18 days.
Objective: Become an industry leader in talent retention.
KR 1 – Implement a program to provide continuous educational assistance to employees.
KR 2 – Review current remuneration policies and adjust where appropriate according to peers.
KR 3 – Distribute a questionnaire to employees to assess the current corporate culture and where it could be improved.
Key Highlights
Introduction to OKRs: The OKR (Objectives and Key Results) system was developed by Intel's CEO, Andy Grove, in the 1970s as a goal-setting process for driving organizational change.
Objective and Key Results: OKRs consist of objectives, which are the direction a company aims to move in, and key results, which are measurable milestones that help achieve the objective.
Superpowers of OKRs:
Focus and Commit to Priorities: OKRs clarify what matters, helping teams and departments make informed decisions about where to focus.
Align and Connect for Teamwork: OKRs are transparent and shared across the organization, fostering collaboration and alignment from top management to every team member.
Track for Accountability: OKRs are data-driven, focusing on a few critical metrics that measure the impact on the business.
Stretch for Amazing: OKRs are ambitious and challenging, driving the organization forward.
Comparison with MBOs (Management by Objectives): MBOs are more top-down, while OKRs involve both the "what" (direction) and "how" (key results). OKRs are transparent, frequently updated, and more aggressive in setting goals.
OKR Cycle:
Brainstorm: Senior leaders set company-wide OKRs.
Communicate: OKRs are shared and communicated across the organization.
Share: Teams develop their OKRs and share them.
Track: Employees track and share their progress with managers.
Reflect: At the end of the cycle, employees self-assess their accomplishments.
OKR Scoring System:
Simple Method: Uses a "Yes/No" approach to determine if key results and objectives were achieved.
Advanced Approach: Scores each key result on a scale from 0 (failure) to 1 (achievement).
OKR vs. KPIs (Key Performance Indicators): OKRs are aggressive, aspirational goals that drive growth and are shared transparently, while KPIs are performance metrics that measure specific activities.
OKR vs. SMART Goals: Both OKRs and SMART (Specific, Measurable, Achievable, Relevant, Time-bound) goals focus on specific objectives, but OKRs are more ambitious and often aim for 10x growth.
OKR vs. Balanced Scorecard: The balanced scorecard focuses on tracking and improving activities, while OKRs aim for ambitious growth and align the organization to achieve extraordinary goals.
OKR and 10x Thinking: OKRs can be aligned with moonshot thinking, aiming for at least 10x goals to drive innovation and renewal of the business model.
OKR Examples:
Marketing Department: Increase brand awareness, create a customer community, and improve social media marketing efficiency.
Customer Success: Demonstrate customer input drives outcomes, enhance customer success staff capabilities, and provide the necessary support for team objectives.
People Expertise: Create a motivated team, acquire more talent, and become an industry leader in talent retention.
Ciao!
With ♥️ Gennaro, FourWeekMBA
Today’s Sponsor: Sidebar
The peer group you’ve been waiting for
Being a leader is hard. Every day, there are tons of things you’d love advice on, but there is no one to ask.
Sidebar is a personal board of advisors for the next generation of leaders. Find out why a staggering 93% of members say that Sidebar has been a career game changer.
 | A guest post by
|