Increasingly in use, but rarely applied correctly: OKR is on everyone’s lips. You might be forgiven for thinking that it is just another business fad. The crux of the matter is: The OKR method will not be forgotten tomorrow. It is a tried and true, highly successful management framework.
As early as the 1970s, Andy Grove devised the OKR method and used it to put Intel on the road to success. John Doerr later introduced the method to Google, which is the company best exemplifies the OKR model today. OKRs have shown their effectiveness everywhere from global corporations, like Intel, Google, LinkedIn, Zalando, and Daimler to a variety of medium-sized companies, start-ups, and small businesses. Even individual employees have applied them successfully. So let’s talk about it:
OKR – What Is It?
Definition: OKR is an agile method for strategy implementation.
The acronym OKR stands for objectives and key results, which are the two central levers that the method uses to help your company achieve progress: a motivating goal and measurable results.
The objectives describe the target vision that is to be achieved in the short term. This target status provides the team with orientation and inspiration. The key results define the measurable changes that must be brought about in order to achieve the target state with all its facets. It is a matter of making qualitative goals (objectives) measurable using quantitative goals (key results).
Hence, the two fundamental questions addressed by OKRs are:
- What do we want to achieve?
- How do we know if we have achieved it?
The Added Value You Get from OKRs
Many of you will be familiar with the problem: Top management has drawn up a visionary strategy document, but the employees don’t have time to deal with it. They have to deal with the short-term challenges of day-to-day operations. Without a link to the operational level, the strategy can quickly seem unattainable and therefore irrelevant to the workforce. And so there is a gap between the strategy and its implementation. This is where OKR comes into play…
OKR breaks down the long-term vision into short-term achievable milestones. This helps to operationalize the strategy, focus efforts on the most important next step, and derive concrete to-dos for individual employees. In this way, OKR fills the gap between strategy and day-to-day business.
OKR Offers These Concrete Advantages
- Active participation: OKRs provide employees with the opportunity to actively participate in defining and implementing goals. This promotes identification with the goals and intrinsic motivation.
- Measurability of goals: OKRs make goal achievement measurable and assessable.
- Making the contribution to the company's success visible: The progress of achieving the OKRs is clearly visible at all times, and employees can use the results to see in real time how their own work improves the team or company's performance.
- Greater level of focus in everyday life: Focusing on the most important part of the strategy per quarter reduces complexity. Employees have fewer topics on their minds at the same time and can concentrate on achieving the one common objective.
- Encouraging creativity and innovation: Properly defined OKRs only specify the desired effect (outcome) and not any specific instructions for action. This creates plenty of room for creativity, the opportunity to think in new ways, and try out new approaches.
- More transparency: OKR makes visible which strategic topics are currently being actively worked on. This can eliminate the silo mentality within departments and improve cross-departmental cooperation and communication.
- Rapid responsiveness and agility: The OKR method allows companies to move towards strategic goals in a focused manner in short iterative three-month cycles, enabling rapid course corrections and a nimbleness to pursue trends.
- Maximum flexibility: Whether at the corporate, team, or individual level, the OKR method may be applied at different working levels. Moreover, the approach can basically be used to achieve any objectives, at any size company, and in all industries and administrative structures.
Agile OKR is a management methodology that helps to ensure that the company focuses efforts on the same important issues throughout the organization.
Example: OKR for the 1st Quarter
An OKR set consists of one target vision (objective) and 2-5 measurable target values (key results). Normally, the OKR is formulated for a quarter and is based on the long-term strategic goals. An OKR set could look like this, for example:
Checklist: Setting Up Good OKRs
Anyone who takes a closer look at OKR quickly realizes that the success of the method depends on the correct formulation of objectives and key results!
Objectives – The ‘Mini-Vision’ for the Next Quarter
The objective describes the desired state of the world (= target vision) – summarized in an inspiring sentence that employees will remember. As a guiding principle, the objective provides orientation for prioritizing work and motivates employees to contribute their own ideas to achieving the goal.
Further important characteristics:
- Statement of a qualitative goal
- 1-2 objectives per team
- Catchy phrase that describes the target group's perspective (e.g., “Our customers love...” or “Our employees know...”)
- Oriented towards the overarching, long-term strategic goals (e.g., vision and MOAL)
- Formulated inclusively, i.e. every team member can contribute to achieving the goal
Key Results – The Measurable Partial Results of the Objective
For the OKR method to really work, it is crucial that the key results measure the “right” goal! With OKR, success is not measured by how many resources have been invested (input), what specific measures have been taken (activities), or what visible products have been created (output).
Instead, key results are formulated in such a way that they measure the impact of all activities on the target group – i.e. the actual added value (outcome). This may sound obvious, but in practice this is perhaps the biggest challenge.
Further important characteristics:
- Statement of a quantitative, measurable goal: KRs always contain a number!
- 2–5 key results per objective
- KRs measure the desired reactions of the target group (outcome) and not the company's own investments, activities, or products.
- Oriented to the associated objective (KRs should cover all important facets of the objective)
- Clear, continuous, and measurable without major delays
What Stumbling Blocks Should You Avoid?
At itdesign, we have been working with OKRs for quite a while and also support our customers in using the method. Based on our experience, we have compiled some of our best practices to help you avoid typical pitfalls and take full advantage of the method:
In order to successfully implement OKRs, one of the most important things to have is the courage to fail. Set ambitious goals that inspire creativity, innovation, and change. OKRs should not include what you would achieve regardless. Yet, they shouldn’t be unattainable either. A good rule of thumb is that if you reach 70% of your target, you’ve done a really good job. And most importantly, celebrate successes! Accomplished key results reflect a feat of strength. This should be noticeable.
In the past, “strategy” meant drawing up a detailed action plan to achieve a goal and following it as closely as possible over a period of years. Nowadays, this approach no longer works. Our world is developing so quickly in all areas that a plan would have to be constantly corrected.
OKR therefore offers an agile strategic approach that thrives on regular reviews of success and failure. It is no longer necessary to carefully plan the path to achieving a goal because we assume that we will know a better way in a few months’ time anyway. Instead, only the most important next step is formulated as a short-term goal – these are the OKRs.
The three-month timeframe has proven itself in practice – long enough to really make a difference and short enough to remain flexible. Trends can be identified at an early stage and any necessary course corrections can be initiated in good time. Avoid planning OKRs for several periods in advance in order to retain the necessary flexibility.
Strategy development takes place at management level. However, OKR as a method for strategy implementation should not be understood as exclusively top-down. Instead, OKR offers the opportunity to involve the company’s base in the strategy work and to benefit from the operational expertise of employees. Involve employees closely in the design of objectives and key results. The commitment of the entire team is the decisive success factor for achieving objectives.
Establish OKR in your meeting culture and share regular status updates. In this way, the method increases employees’ identification with the goals and sharpens their focus on the purpose (“What is the purpose behind my tasks?”) – both important factors for the intrinsic motivation of employees and conducive to achieving the overarching overall goal. Make your OKRs easily accessible and findable for everyone.
Don’t make a list of everything that needs to be improved. Decide which one thing you really want to tackle now!
OKR is intended to help drive individual topics forward while consciously eliminating other topics. This is not about classic prioritization, where all other topics remain in a hierarchical backlog – no, it’s really about removing all topics except OKR from the backlog! Only if there are no hidden side issues can employees fully focus on achieving the objectives.
Too many objectives in a team at the same time indicate that there is insufficient focus or that your objectives are too fragmented. We recommend only one objective per team per quarter.
OKR is an important building block in the agile strategy toolbox. However, it is no substitute for a missing overarching strategy.
OKRs are short-term milestones and can only be meaningfully formulated if it is clear where the company wants to go in the medium and long term. The formulation of OKRs therefore requires other elements in your strategy framework (e.g., purpose, vision, mission, MOAL) that can be used as a guide for the OKRs.
For the introduction of OKR, you need a driving force with methodological expertise within your own ranks – an OKR champion or OKR master. This role drives the introduction forward with full conviction and at the same time brings the necessary methodological knowledge to the team. If the driving force or the know-how is missing, the OKR introduction may be doomed to failure and quickly lead to frustration for everyone involved.
Ideally, the OKR champion is a neutral person and not a team member themselves. This allows them to concentrate fully on moderating the OKR process without being involved in the content. However, a team member can also take on the role of OKR champion. It is important that the method is applied correctly, that the team is open to the method, and that there is a shared commitment to the objectives.
A correctly defined OKR sets the direction, but does not define the path. It describes the field of action in which the team is responsible for developing and testing measures. The key results should therefore not contain any recommendations for action, but only define the desired effect on the target group. The way in which this effect is achieved is then in the hands of the implementation team.
Example: As a KR, do not specify that employees should “Carry out 5 additional quality checks per day”. Instead, set the following target: “Reduce quality-related customer complaints by 50%”.
OKR is an agile method based on trial and error and the development of minimum viable products (MVPs). The intermediate results are analyzed on a weekly basis, new measures are defined and then tested.
In order to be able to see each week what effect the most recently implemented measures have had, the key results must reflect the impact of the actions with as little delay as possible. This requires early indicators (also known as “lead measures”), such as “number of visitors to our website” or “demand for demo appointments”. This is the only way to achieve a steep learning curve, draw the right conclusions, and optimize the procedure accordingly.
An example of how not to do it: The “number of contracts concluded” measures the change in customer behavior (outcome). However, in some sectors, it can take one to two years before a contract is concluded. It is therefore a late indicator (also known as a “lag measure“), where the effect of an action only becomes visible after a significant delay.
OKR is a method for implementing strategic changes (change-the-business), not for measuring performance in day-to-day business (run-the-business).
Instead, the performance of day-to-day work (run-the-business) can be measured using KPIs. These indicators are chosen for the long term, are permanently valid, and provide insights and control over the general health of the company. They help to sound the alarm if something goes wrong in the core business and performance does not meet expectations.
In contrast, OKRs are aimed at strategic changes. The objectives and key results are formulated so specifically that they are only relevant for the current period. In the next period, they are replaced by new objectives and key results. This focus on new objectives and metrics in each period enables a targeted focus on the currently most important change (change-the-business).
A good balance between change-the-business and run-the-business is needed to be successful. Therefore, you should not choose between using OKRs and KPIs, but use both – but each for the right purpose!
In order to successfully carry out strategy work with OKR, the teams in your company must have the freedom to define goals independently and implement changes. This is the only way to unleash creative potential and increase the necessary commitment. Top management provides medium and long-term strategic goals for orientation, but the teams can decide for themselves how they contribute to these goals based on the OKRs (= short-term goals).
In practice, this autonomy is often not given or is limited. On the one hand, top management sometimes finds it difficult to relinquish responsibility and refrain from issuing specific instructions. On the other hand, it can also be due to the structure, for example if changes are organized centrally (e.g., in the PMO) and teams are only responsible for operational implementation. One conceivable solution would be a cross-functional constellation of the OKR team consisting of project and PMO team members. Alternatively, you can also decide to only use OKR in teams that have the freedom to participate in change processes.
Managing OKRs in Clarity
Companies that want to introduce OKR (or are already working with it) are faced with the task of finding the right tool for implementation. This is accompanied by the question of what such a system must be able to do and what challenges it should provide an answer to. The good news if you are already using Clarity for your PPM: OKRs can be excellently mapped, organized, and tracked in Clarity. The introduction of an additional tool is therefore not necessary. We will show you how OKR management works in Clarity.
Would you like to display the content of YouTube? Then please confirm this with one of the two buttons. Please note that data will be exchanged with a third-party provider.
More InformationLet's Talk!
It is our pleasure to help you implement your OKRs in Clarity. We have not only overseen implementation projects for our customers, but we also have several years of experience working with OKRs in Clarity. We know the challenges and benefits of the approach from our own day-to-day work and look forward to sharing our experience with you. If you are interested in using OKRs at your company, we offer you a comprehensive package. Feel free to contact us with no obligation!
Read Next
Anna Schoch
Marketing Manager
Anna is a marketing manager and a true organizational talent. With her eye for the big picture, she ensures that our Clarity events and ...
OKR Management in Clarity
