I first came across Objective and Key Results (OKRs) when working for a $100M start-up in 2018. We had discussed the need for a goal setting framework like OKRs but it was never put into action as we wanted to run fast and complete other “high priority” work. In hindsight, not pausing to set goals was a big mistake as without clear objectives, people didn’t know what to focus on or what to aim for. This was particularly detrimental for the product team as we were extremely busy building features but no one knew why we were building it and how it tied back to it the company objectives. The start-up eventually failed in late 2020. There are many reasons why it failed but in my view, the rush to quickly build products without defining and aligning to the business objectives is a key contributor to the failure. The book Measure What Matters by John Doerr provides excellent insights into how the OKR system was adopted by various companies in Silicon Valley and transformed their business. I wish the book was available back in 2018 – perhaps if we had adopted the ORK framework, there will be a different outcome for the start-up today.
What are OKRs?
OKRs is a goal setting system that helps the company to focus its efforts on the most important issues throughout the organisation. It was first developed by Intel’s CEO, Andy Grove, who used it to drive Intel’s organisational change in 1970s. It was later adopted by various companies in Silicon Valley such as Google, Adobe and Netflix.
- OBJECTIVE = is the “What” to be achieved. It is significant, concrete, action orientated and inspirational.
- KEY RESULTS = are the “How” to get to the objective. KRs must be measurable and verifiable. Effective KRs are specific, time-bound, aggressive yet realistic.
For example, an objective is a direction for the business “Increase the number of stores by 20%”, and the key results are the milestones that are measurable:
- Select 40 new franchise candidates by March
- Train 30 of them before June
- Sign contracts with 25 of them before September
- Open 20 stores before December
The OKRs is an effective way to apply manufacturing production principles to “soft professions” that use knowledge to drive output. In a manufacturing assembly line, it is easy to distinguish output from activity but this is not easy when employees are paid to think. The “soft professions” can easily fall into the activity trap where they’re constantly doing things but not necessarily driving output. This is where the OKRs can help – defining a clear objective and measurable key results enables the teams to focus on and produce outputs. ‘Stressing output is the key to increasing productivity, while looking to increase activity can result in just the opposite.‘ – Andy Grove.
John Doerr’s famous football analogy of the OKRs
John uses the football analogy to explain the OKR framework in his book. It is the same analogy that he told Google executives and successfully convinced Google to adopt the ORK system. There is a factitious football team called The Sand Hill Unicorns and the team’s general manager has one objective “Make money for the owner” and two key results: 1. “win the Super Bowl”, and 2. “Fill the strands to at least 90% capacity”. The OKRs are cascaded down the team as the following:
- The general manager cascades his goal down to the next level of management; the head coach and the senior vice president (SVP) of marketing. The general manager’s key results become their objectives.
- The head coach has three key results that are cascaded down as objectives to his top three executives; offense coach, defense coach and special teams coach.
- The offense coach, defense coach and special teams coach devise their own lower level key results.
- Meanwhile the SVP of marketing has derived her objective from the general manager’s other key result “Fill the stand to 90 percent capacity”. The SVP crafts his own three key results which become the objectives of his direct reports: the marketing director, publist and merchandise manager.
- The difference here is that the marketing director, team publicist and merchandise manager do not devise their own key results – instead these are cascaded down to them by the SVP of marketing.
The head coach’s side of OKRs are clear, specific and easily measurable and it also provides autonomy to offense coach, defensive coach and the special teams coach. But what’s wrong with SVP of marketing side of the OKRs? Firstly, the key results are unmeasurable, not specific or time bound. Furthermore, the goal setting approach is not optimal because the lower level key results are cascaded down from the SVP to the marketing director, team publicist and merchandise manager rather than them devising their own.
OKRs are transparent throughout the organisation so they can be shared without cascading down the hierarchy all the time. Instead of laddering down from the CEO to a VP to a director to a manager, an objective might jump from the CEO straight to a manager, or from a director to an individual contributor. A healthy OKR environment strikes a balance between alignment and autonomy. An optimal OKR system allows the contributors to set some of their own objectives and most (or all) of their key results. When people set their own OKRs, they are led to stretch above and beyond, set more ambitious targets and achieve more. ‘People who choose their destination will own a deeper awareness of what it takes to get there. When our how is defined by others, the goal won’t engage us to the same degree’ – John Doerr.
Andy Grove’s Basic OKR Hygiene
Andy designed the OKR system based on the following key principals:
- Less is more: a limit of three to five OKRs per cycle leads companies, teams and individuals to choose what matters most. Each objective should be tied to five or fewer key results.
- Set goals from the bottom up: Teams and individuals should be encouraged to create roughly half of their own OKRs, in consultation with managers to promote engagement. When all goals are set top-down, motivation is corroded.
- No dictating: Collective agreement is essential to maximum goal achievement.
- Stay flexible: If the environment has changed and an objective is no longer relevant, key results can be modified or discarded mid-cycle.
- Dare to fail: OKRs should include “stretch goals” that should be uncomfortable and possibly unattainable to drive team’s peak performance.
- A tool, not a weapon: A OKR system is not a legal document to base a performance review. To encourage risk taking and prevent sandbagging, OKRs and bonuses are best kept separate.
- Be patient; be resolute: An organisation may need up to four or five quarterly cycles to fully embrace the OKR system.
How Google uses OKRs to drive success
John introduced the OKR framework to Google’s co-founders, Larry Page and Sergey Brin in 1999 when Google was less than a year old. Ever since then, Google has been using OKRs and even developed its own playbook. ‘We use OKRs to plan what people are going to produce, track their progress vs. plan, and coordinate priorities and milestones between people and teams. We also use OKRs to help people stay focused on the most important goals, and help them avoid being distracted by urgent but less important goals’ – Larry Page.
Google sees ORKs as big, not incremental. They don’t expect to hit all of them as if they do, it means their goals are not aggressive enough. Google divides its OKRs into two categories:
- Committed goals: tied to Google’s metrics; product releases, bookings, hirings, customers. Generally these are to be achieved 100% of the time within a set time frame.
- Aspirational (or “Stretch”) goals: reflect the bigger picture, higher risk and more future tilting ideas. These should be challenging to achieve. Failures at an average of 40% are part of Google’s territory.
When OKRs were first implemented at Google, it took courage for their product teams to come up with OKRs that might well fail but they knew it needed to be aspirational if they wanted to be great. This was possible as Google fostered a culture of setting risky, aggressive goals and making it okay to fail against them. ‘A ten percent improvement means that you’re doing the same thing as everybody else. You probably won’t fail spectacularly, but you are guaranteed not to succeed wildly. If you set a crazy ambitious goal and miss it, you will still achieve something remarkable’– Larry Page.
Google uses a simple scoring method and a colour scale to track their ORKs. Each objective is scored by averaging the completion rate of the key results and it is given a number between 0 to 1.0 and a corresponding colour (green, yellow, red).
- 0.7 to 1.0 = green (delivered)
- 0.4 to 0.6 = yellow (made progress but fell short of completion)
- 0.0 to 0.3 = red (failed to make real progress)
OKRs at YouTube
In November 2012, YouTube announced a massive stretch goal to kick off the coming year: one billion hours in daily user watch time by 2016. The watch time was chosen as the key metric, not the number of views or clicks because YouTube believed that this was the best metric to gauge the quality of the YouTube experience. The billion-hour OKR was a religion at YouTube and they never did anything without measuring the impact on watch time. In October 2016, YouTube hit the one billion daily hours. According to Susan Wojcicki, CEO of YouTube, they were able to reach the goal within the timeframe because they had the process, structure and clarity of the OKR. What did YouTube do that allowed them to achieve the one billion daily hour ORK?
- Make people believe in the goal: While one billion daily hours sounded like an awful lot, it represented less than 20 percent of the world’s total television watch time. YouTube leadership provided this context to staff as stretch goals can be demotivating if people don’t believe they’re achievable.
- Assign accountability to each OKR: People’s names were put next to each objectives with colour bars denoting progress: green, yellow, or red. YouTube’s Vice President of Engineering, Cristos Goodrow, was the responsible staff member for the billion-hour OKR.
- Leadership commitment: There was so much commitment from the YouTube’s leadership team that the Cristos announced he will resign from Google if they fail to achieve the objective by 2016.
- Continuous progress monitoring: Watch time graph was monitored every day, seven days a week. If there was a lag, the team reprioritised their work to reaccelerate watch time.
‘In a fast growing company, it’s a challenge to get everybody to align and focus around the same objective. People need a benchmark to know how they’re performing against it. The catch is to find the right one. The billion hours of daily watch time gave our tech people a North Star.‘ – Susan Wojcicki
Continuous Performance Management: OKRs and CFRs
Annual performance management is an outdated system that is costly, exhausting and mostly futile. In the book, John recommends the need for companies to move towards a continuous performance management system that involves using OKRs combined with Conversations, Feedback and Recognition (CFRs) framework.
- Conversations: a verbal exchange between manager and employee that drives performance, covering employee development, engagement, behaviours and competencies. Five critical areas of conversation are:
- Goal setting and reflection
- Ongoing process updates
- Two-way coaching
- Career growth
- Lightweight performance review
- Feedback: Communication up, down, and across organisational lines that assesses behaviours and outcomes, and guides improvement. Today’s people want to be inspired and empowered, not told what to do. They want to provide feedback to their managers not wait a year to receive feedback from their manager. Two-way and peer-to-peer feedback are important part of the continuous performance management.
- Recognition: The demonstration of appreciation for effort, attitude, and achievement. Examples:
- Weekly all hands meeting concludes with shout-outs from anyone in the organisation to anyone who’s done something remarkable
- Replace employee of the month to achievement of the month
- Celebrate smaller achievements
As John explains the CFR is a “delivery system” for the OKRs. In other words, CFR helps to turn the goals into actual results. Achieving success with OKR takes a lot more than simply setting and tracking the objectives and key results. CFRs should be happening throughout the OKR cycle in 1:1 meetings and at the end of an OKR cycle. OKRs can only be graded with “complete” or “incomplete” whereas CFRs give a “human voice to the OKRs” by providing opportunity to review and reflect performance and plan better for the future goals.
Football analogy of the CFRs
Let’s say objectives are the goalposts, the targets you’re aiming for, and key results are the incremental yard markers for getting there. To flourish as a group, players and coaches need something more, something vital to any team work. CFRs embody all the interactions that tie the team together from one game to the next. They’re the Monday videotape post mortems, the midweek intrasquad meetings, the preplay huddles – and the end-zone celebrations for jobs well done.
OKRs are different to other goal setting techniques because it aims to set ambitious goals while establishing specific and time bound key results. OKRs can be easily adopted by organisations as the framework is highly adaptable and flexible. ‘There is no dogma, no one right way to use them. Different organisations have fluctuating needs at various phases of their life cycle. For some, the simple act of making goals open and transparent is a big leap forward. For others, a quarterly planning cadence will change the game It’s up to you to find your point of emphasis and to make the tool your own.’ – John Doerr.
OKR is excellent at providing focus for a company because it links company goals to individual team member’s goals. While OKRs help the teams to answer the question “What will we accomplish?”, it is not enough to maximise team’s performance. CFRs should be used with the ORKs as CFRs help the company to answer the question “How will we develop and motivate our people in order to accomplish it?”.
I wish we had implemented the OKRs and CFRs at the start up I worked in. ORKs are especially useful for young companies that have limited resources and investment as it’s even more vital to be clear on where you’re going. In my view, OKRs is a must for every product teams as it allows the align the product success metrics to the company objectives and enables the teams to laser focus on the most important thing to build. If you’re in product management and haven’t yet read the book Measure what matters — I highly suggest you pick up the book and read it for yourself 🙂