Effective goal-setting is the key to unlocking employee performance and achieving business results. Two of the goal-setting pioneers, Prof Locke and Latham, say that five factors determine the success of a company's goals: clarity, challenge, commitment, feedback, and task complexity. Companies use many intelligent goal-setting frameworks, such as MBO, SMART, BHAG, and OKR, to factor in those five elements.
OKR, or Objectives and Key Results, has been one of the most revolutionary goal-setting frameworks to come out in recent decades. It's more suitable for today's agile companies working in a rapidly evolving world. Andy Grove developed OKRs by refining the MBO framework when he was a CEO at Intel in the 80s. Grove then taught OKRs to John Doerr, who introduced the framework to many companies.
OKRs help companies set and achieve ambitious goals. But unlike other frameworks, OKRs are independent of compensation. And their focus on 3-5 objectives with clear-cut metrics leaves no room for misreading. Every goal is specific, time-bound, and measurable. That's why more and more companies are adopting it. But managers still may have some doubts. Here are the ten most common questions they ask and their answers.
1. What is the right goal-setting model for my startup?
The conventional goal-setting framework that they teach at the business schools and use in the corporate world is SMART: specific, measurable, achievable, realistic, and time-bound. But SMART goal-setting doesn't work as expected. Strong links to compensation, sandbagging, and opaque goal-setting undermine SMART's ability to drive execution.
Startups, unlike the corporate world, are more agile, data-driven, and meritocratic. So, they can look at the data to decide which goal-setting framework to use. Research by Locke and Latham found that:
- Setting challenging but specific goals lead to better performance
- More ambitious the goal, better the performance
- Tight deadlines help deliver faster (Parkinson's Law)
- Transparent goals, where each employee's commitment is public, drive people to give their best
The only goal-setting framework that allows you to do all of the above is OKR. That's why companies such as Google, Twitter, Amazon, Salesforce, Uber, and LinkedIn use it. Google was one of the earliest companies where John Doerr introduced OKRs. And many big-name non-tech companies have also adopted it.
2. How do OKRs work?
OKRs have two main parts: objectives and key results. Objectives are the "what" or the goals you want to achieve. Key results are the "how" or the benchmarks to guide you to accomplish your objectives. Think of key results as the goalposts.
OKRs work by turning your abstract objectives into concrete milestones, removing everything unnecessary to your mission. You decide what you want to achieve and the metrics to measure your progress. It's that simple. And this simplicity is what makes OKRs so powerful.
3. How many OKRs can I have?
Three to five objectives with four to five key results for each—at most.
With OKRs, less is more. Large companies with multi-layered corporate hierarchies may have many OKRs that map to each level.
4. How can I write OKRs?
Writing OKRs is simple once you understand the basic concept behind them: Audacious objectives combined with time-bound and measurable results. Here's an example from the sales department:
Become the best selling B2B productivity suite in the bay area
- Capture more than 50% share of new B2B productivity suites sales in the area
- Generate 100 leads every month
- Close leads with at least a 20% conversion rate
- Achieve a customer retention rate of at least 80% by the end of the quarter
5. What are the differences between OKRs and KPIs?
OKR is a complete goal-setting framework with both goals and metrics to measure progress. KPIs, or key performance indicators, are only metrics. Think of KPIs are the "key results" part of the OKR.
6. Will OKRs work for my large startup?
If OKRs work for Adobe, Google, Microsoft, they will work for any large startup. The key is to start small, have a commitment from the top to the employee level, and be transparent. You can cascade OKRs across levels if you want to.
7. Should I move to OKR at this stage?
We recommend switching to OKR at the start of your quarterly cycle. But company goals are not set in stone and must reflect the reality. If your current goals are not getting you anywhere or business priorities have changed, you can shift to OKRs mid-cycle. Remember to discuss the new OKRs with your team and help them understand why you need to make the switch.
8. How can OKRs help my hybrid teams?
One of the most significant challenges that people in hybrid teams face is communication gaps. There's so much back and forth, Zoom fatigue, and calendars that are always full. Thanks to their simplicity and clarity, OKRs make company goals and individual tasks crystal clear to everyone. This clarity motivates people to take ownership of the results and deliver their best performance.
In recent surveys, people have said that they would like to keep the flexibility remote work gave them even after the pandemic. OKR's focus on "key results" provides flexibility by freeing people from traditional nine to five schedules.
9. How fast can I roll out OKRs?
It's up to you.
Some startups have shifted their entire workforce to OKRs within a quarter, while others have gradually rolled out. The key to success with OKRs is not the speed but clear communication and public commitment from leaders. When people at the top set and achieve their goals with OKRs, it sets an example for other people to follow.
10. What should I do when my OKRs do not work?
OKR is a tried and tested methodology to drive employee engagement and achieve goals. If your OKRs are not delivering results, the first step is to find out what's not working and fix it. More often than not, it will be one or many of the following reasons:
- You have more than five OKRs
- Not everyone on the team is on board
- Objectives are abstract
- No set dates for reviewing key results
- You've tied OKRs to compensation
- Not having HR tech with OKR support for teams to use
- No clear owner of each OKR
Remember, OKRs are flexible. If you believe an objective is not working at all, you can toss it out at any point in the OKR cycle. And be patient. It will take time for your teams to adapt to OKRs.