If we told you there was a practical way to align everyone in your company to one big ambitious goal, would you believe us? There’s no catch or secret, it simply comes down to a whole lot of dreaming and implementing OKRs.
If the OKR methodology is new to you, don’t fret – the OKRs framework has only risen to fame in the last 20 or so years after OKR advocate John Derr introduced this management methodology to the team at Google in 1999.
Google grew from 40 employees to its current 60,000 employees off the back of this performance management framework. Silicon Valley rapidly adopted this highly-effective people strategy, and now OKRs are used in some of the world’s most innovative companies.
Cool story, huh?
With some of the world’s biggest companies using the OKR goal-setting framework, we think more businesses need to know what the fuss is all about and everything about how OKRs work.
We wrote this ‘OKRs: Explained’ guide to do just that!
What is in this OKR guide?
Our OKRs guide is jam-packed with useful advice, such as:
- What are OKRs?
- Why use OKRs?
- OKRs vs. KPIs
- How to avoid common OKR mistakes
- OKRs advice for leaders
Download the free digital copy of the OKR guide now.
What are OKRs?
So what are OKRs? In what ways are your OKRS influencing your top company objectives? How can you use them in your business and just why are they so damn great anyway?
Let’s dive in!
OKRs stands for:
OKRs consist of an Objective, which defines a big goal to be achieved (the ‘what’ or ‘where do we want to go’), and up to 5 Key Results, which measure progress towards the objective (‘how do we know we’re making progress?’).
Each Objective Key Results can also have Initiatives, which describe the work required to drive progress on the key results. We suggest starting with a maximum of 3 to 5 key results and adding more as your company gets familiar with the OKR framework.
OKRs are created top-down and bottom-up. The only top-down OKRs should be your company-level OKRs.
From there, it’s up to each person and/or team to write OKRs for their team, together.
This gives your employees the opportunity to have a say in how they, in their role, will help to achieve the company OKRs. They are also designed to be publicly seen and set for everyone inside the business.
This means all employees, whether junior or senior, know what is expected of them. This transparency helps to cultivate a culture of trust and team spirit.
OKRs vs. KPIs
We wouldn’t blame you if you thought that by writing OKRs, you would replace Key Performance Indicators (KPIs). While they both measure performance and success within a business, there are actually a few key (sorry) differences.
OKRs are to help you achieve grand, ambitious goals. They’re designed with a crazily bold mission in mind rather than a specific tangible outcome. It is a qualitative goal.
KPIs, on the other hand, are tangible outcomes with measurable results. It is a quantifiable goal.
What are KPIs?
Key Performance Indicators (KPIs) have been the flavour of choice for performance management for some time now, so they really need no introduction… however, in case some youths have found their way to this blog, we’ll include a definition anyway.
KPIs vary from role to role and goal to goal, but essentially, they are clearly defined goals with measurable metrics that define your success.
In HR management, common KPIs can be:
- Absence rates or costs
- Employee satisfaction
- Turnover rates
For business owners, they’re likely to keep an eye on the total profit margins, revenue growth rate or inventory turnover – on top of everything else!
KPIs monitor the individual performance of employees. In the above example, a cashier isn’t going to be concerned with profit margins – their KPIs might be the number of customers they serve in an hour or the results of a customer satisfaction survey.
The main benefit of KPIs is that they identify areas that need improvement, but they rely on managers to ensure that KPIs are kept front of mind. Because KPIs are individual targets, they can easily be forgotten if managers don’t hold their team accountable.
What is the difference between OKRs and KPIs?
Like KPIs, Objectives and Key Results also bring focus to the areas of the business that make the biggest difference. Unlike KPIs, OKRs are team objectives that are collaborative – operating on a company, team and individual level that promotes transparency and accountability for all employees.
OKRs switch the focus from results to aspirations or goals (aka ‘objectives‘) that can be achieved by fulfilling a number of important tasks (aka ‘key results‘).
Goal setting using OKRs requires businesses, teams and employees to define their desired destination, the achievements that will confirm (or deny) their arrival and the time they must arrive by.
It also requires companies, individuals or teams to articulate what initiatives they will take to get there (yes, there’s another step not included in the acronym, but OKRIs just don’t have the same ring to it!).
Remember, objectives aren’t measurable. They are ambitious goals or aspirations that are attained by completing the key results.
Are KPIs better than OKRs?
So which is better? Well, we hate to sit on the fence, but the truth is both KPIs and OKRs have their uses; you just have to know what to use and when…
OKRs are about changing processes. Whether you’re troubleshooting a problem within the business or wanting to grow and innovate, use the OKR system as a strategic framework to enact change.
Your KPIs may help you decide on what the key results for new objectives will be, but they aren’t part of the process. Consider your KPIs as a baseline; they indicate that everything is going well and there are no issues that need to be addressed.
If your KPIs start to slip, that means something’s going wrong – you can use OKRs to get back on track. After you identify an area of the business that needs improving, it can become its own OKR.
How KPIs can help track progress of OKRs
For example, if an HR manager noticed that the company’s retention rates were dropping, he or she could make their objective to make employees more loyal.
Key results could include:
- Conduct weekly employee happiness surveys with a 50% participation rate
- Implement a peer-to-peer recognition program with over 100 individual pieces of recognition over the quarter
- Reduce turnover by 20%
Note that the objective (to make employees more loyal) isn’t measurable, but the key results are.
An HR Manager would then break down the key results even further into initiatives.
For example for the first key result,
- Research best employee engagement survey tools
- Make the business case for an employee engagement tool
- Launch surveys and communicate the ‘why’ to employees
- Monitor participation
Without monitoring the employee turnover rate (KPI metric), the HR Manager wouldn’t have known a change was needed. The business would have lost more and more staff. Turnover is expensive, so the more it happens, the more it eats into your margins.
Of course, the problem with only using KPIs is that there is a lack of visibility. If the CEO wasn’t meeting regularly with the HR Manager, and the HR Manager wasn’t engaged enough to monitor their KPIs, the business would have suffered. Using KPIs to accurately measure productivity is only possible if employees and managers alike are on the ball.
OKRs, on the other hand, are collaborative. Each employee should have at least one goal that contributes to the team goal, and team goals should have at least one goal that contributes to the company goal. And because key results are assigned to owners, employees are more accountable for their output.
This is how OKRs can be used to measure HR effectiveness alongside KPIs.
If you’re using Employment Hero’s Goals module, then anyone in the company can view their colleague’s OKRs, as well as the company goals. This improves the visibility of the team OKRs to individual employees, as the goals and vision for the company are easily communicated.
Not ‘either/or’, but both
As you can see, comparing OKRs and KPIs is like comparing apples to oranges. OKRs and KPIs serve different functions. KPIs measure performance (or lack thereof), whereas OKRs are a framework that businesses can use to change processes or outcomes for the better.
You should always keep an eye on your KPIs, but OKRs are your pathway to growth.
As we’ve previously discussed, OKR (Objectives and Key Results) is a goal system used by Google, Amazon, Netflix and other great leading companies around the world. It is a simple tool to create alignment and engagement around measurable goals.
How to write OKRs
Now we know what they are and why every business should be using them we want to dive a little deeper into our OKR breakdown and look at the best ways to structure and set your business OKRs, so you are getting the most out of them.
Ready? Let’s dive in with our top tips and advice when creating OKRs.
Step 1: Start with your big hairy audacious goal (or 5-year plan!)
I can already see some of you scratching your heads, “what’s a big hairy audacious goal?” you ask. A big hairy audacious goal (BHAG) is used to help your company reach for the stars.
Essentially a BHAG is a long-term goal that changes or defines your business trajectory.
We believe every company should have a BHAG that helps them set a huge, awe-inspiring mission for the future. If your company isn’t there just yet that’s okay!
Perhaps you can start by looking at your 1, 5, or even 10-year plan for the company, what do you want to have achieved by each point? This will give you the best chance at setting aspirational high-level objectives.
An OKR describes both what you will achieve (objectives) and how you are going to measure its achievement (key results). This makes OKRs a highly-effective goal-setting process. Being able to make an accurate measurement is what makes a goal, a goal. Without it, all you have is a desire or vision.
Why is goal setting important?
Goal setting improves performance, but if you start spending hours cascading goals up and down the entire company, they are not as effective. It takes up too much time, and it’s too hard to ensure all the set goals line up with one another.
This is exactly why the OKR process does not cascade in that way and instead uses a market-based approach. Goals simultaneously go bottom-up and top-down. The company as a whole can set the strategic OKRs that each team should use to draft their own individual and team OKRs.
OKRs that are structured this way should make sure that each individual team’s OKRs are aligned with the company’s committed OKRs. This is how setting OKRs help improves team engagement whilst also creating a better understanding of the strategy across the entire organisation.
By setting ambitious, actionable goals and making sure all employees know exactly how they are contributing to achieving them – your business is on the path to success.
So how do you go about structuring and explaining employee OKRs?
Let’s break it down further:
Step 2: Define team Objectives
What do you want to achieve? Where do you want to go? Your objective is your big goal. We’ll use the example of a fictional bakery, The Frosted Frenchman.
The Frosted Frenchman wants to be known for having the best croissants in Australia.
This is now their objective: ‘Have the Best Croissants in Australia’. 🥐
Step 3: Create measurable goals (Key Results)
What do you need to do to achieve the objective? How are you going to get where you want to go? Your key results are the actions you need to take to reach your top company objectives.
If we go back to the bakery analogy, the key results are your benchmarks of success. So for The Frosted Frenchman, one of their key results would be: ‘Win 3 bakery awards this year’.
Step 4: What are your OKR Initiatives?
As we mentioned earlier, Initiative is part of the OKRs process and is important in ensuring the success of your key results. Initiatives sit under key results as the activity that was taken to achieve them.
An initiative can be considered as the actual steps you take, like, ‘Enter 10 competitions this year’, or, ‘Taste and research prior winner’s croissants’. Put simply, your initiatives are a to-do list of how you achieve your key results.
Summary of the OKR process
If we think about the analogy above, you can see how the OKR is broken down into logical steps.
The Frosted Frenchman wants to be known for having the best croissants in Australia (Objective), so what do they do?
They need certain things to happen, like winning awards for it (Key Results).
Finally, what do they need to do to win those awards? (Initiatives).
Tips on setting good OKRs
Now that you understand what are Objective Key Results and how to write them – here are some tips when setting OKRs alongside some Objective and Key Results examples.
🌟 Top Objective Tips
- Directional. Objectives tell you where to go (key results tell you how to get there!).
- Make them memorable. Objectives need to be memorable and have qualitative descriptions of exactly what you want to achieve
- Keep them brief. Objectives should be simple, short, inspirational and engaging. If you can’t fit the entire objective into one sentence – you’ve gone too far!
- Inspire and motivate. Objectives should motivate and challenge the team. They shouldn’t be dull. Think outside the box for ways to include your company culture in your objectives and add a little bit of fun.
🏆 Good examples of Objectives
- For individuals working in Marketing:
- Create a high-converting landing page
- Increase brand awareness
- Increase lead generation through social media
- For Individuals working in Sales:
- Hit bookings target month on month
- Hit and increase revenue target by X%
- For individuals working in Product:
- Successfully launch milestone release by X date
- Improve overall app performance
🌟 Key Results Tips
- Measurable. Key Results are a set of metrics that measure your progress toward an objective. Make them quantitative and measurable with a number you will be able to easily define the progress of.
- Know your limits. Each objective to 2-5 key results, otherwise no one will remember them.
- Make them achievable. Key Results for an Objective are vital for achieving the objective at the end of the quarter. So make sure you’re KRs are achievable in the time frame you have.
- Challenging. Go hard, or go home! Key results are where your OKRs denote ambition. When writing your KRs, try to make the metrics uncomfortable but also realistic.
🏆 Good Examples of Key Results
- For individuals working in Marketing
- Increase conversion rate to 10% on X landing page
- Post 2x blog posts a week
- For individuals working in Sales
- Close X% of deals in November
- For individuals working in Product
- Increase APDEX score to 0.8
- Conduct 16 testing sessions with target users
OKR examples for HR managers
Let’s show an example of leadership and OKRs on employee engagement. An OKR for an HR/people and culture manager could look like:
Objective: Improve Employee Engagement
- Increase employee participation by 10% in the quarterly engagement survey
- Increase employee satisfaction by 5% as reflected in the quarterly engagement survey
- Leadership commit to 4 action items related to feedback
- Communicate action items and leadership owners/champions to business through all-hands meetings and internal newsletter by (specific date)
Initiative: Take the Key Result, 2. Increase employee satisfaction by 5% as reflected in the quarterly engagement survey
An employee engagement OKR initiative to help achieve this would be:
- Brainstorm with key culture influencers what they want to see improved or introduced
Pro tip: Make sure you give yourself a timeframe to achieve your OKRs.
Common OKR mistakes to avoid
1) OKRs are not a to-do list
Use OKR to measure if you are adding value, not if you are delivering tasks. You can create a to-do list around how you will complete key results as quarterly objectives if this helps you break them down.
But if you start using OKRs as your to-do list you might start feeling slightly disheartened at the end of each day when you haven’t ticked much off.
OKRs run over entire quarters in most companies and are bigger goal measurements than your Asana list or Trello board.
2) Don’t set too many OKRs
This mistake is a common occurrence in businesses. Your OKR list should be that quarter’s top business priorities and the definition of what is most important during that quarter.
If you start creating too many OKRs, employees will start to feel disengaged, unmotivated and uninspired by the incomplete list of growing OKRs.
3) Make sure your OKRs are aligned
The whole point of OKRs is to use them as a management tool to get the entire company aligned to set goals. So you should never set your OKRs in isolation.
You have to talk to the other teams in the business and all employees individually to make sure all OKRs are connected with achieving the overarching company goals or vision.
4) “Set it and Forget it.”
The dreaded ‘set and forget’. Every businesses faux-par. OKRs are not New Year’s Resolutions, they are for the quarter not just for Christmas… so, without regular follow-through, you will never achieve them!
Make sure you are regularly checking in with OKRs, monitoring your achievements or where you can improve in order to reach them by the end of the quarter.
Choosing the best OKR software
Before choosing an OKR software, there are a few features you should look out for when deciding whether it’s best for your business.
- Tailor-made for your business. Every business is different, OKR software isn’t a one size fits all kind of solution. Instead, you should look for software that allows you to tailor your OKRs to meet your business’s needs.
- Flexible and scalable. Sometimes minor tweaks need to be made to your OKRs depending on your team’s focus and size. So your software should be able to adapt and change as your business does.
- User friendly. It’s important that you choose an OKR software that can be easily integrated into your team. The focus should be on achieving your OKRs, not trying to figure out how to use new software. Have a look and see whether certain aspects need more attention to detail than others. If that’s the case, you might want to consider a team training session.
- Able to reflect progress. Your OKR software should be able to give you insights into your team’s progress in achieving them. Not only does this help track how your OKRs are going, you can also use this information to develop your employee performance reviews.
Achieving ambitious OKRs with Employment Hero
We liked OKRs so much that we made sure they became a key feature in Employment Hero’s all-in-one HR software.
To find out more about Employment Hero’s OKRs feature, book a demo with us today.
Download the OKR guide today for bonus tips for leaders thinking of implementing OKRs. Share the eBook with your team members, and get started with goal setting in no time!