The “secret sauce” of OKRs is simple: combine an inspirational vision for the future with innovative actions to get you there. While your company’s mission and values provide your “Why”, objectives and key results answer your “how” and “what”.
Objectives and Key Results are broadly applicable to help you reach any goal. Even your personal goals can benefit from the structure of OKRs. Whether you’re preparing a company for an IPO or just trying to improve your health, OKRs can help you turn your goals into reality!
In this post, we’ll take a look at why OKRs have been so successful for so many organizations and share some stand-out examples of OKR success.
How can teams use OKRs to grow?
OKRs can power growth by tying an aspirational vision to innovation and new initiatives. Objectives comprise your growth goals while Key Results are the actions that ensure you’re reaching those goals.
Traditional approaches to goal setting typically start with measuring what a team is achieving currently and targeting incremental improvements. OKRs, on the other hand, start with an Objective that requires new ways of thinking and working.
Companies like Google grew at a mind-boggling pace because their OKRs pushed them to develop new and previously unimagined capabilities. Instead of setting goals they could be 100% sure they could hit, they set OKRs with an acceptable failure rate of 30 or 40 percent.
OKRs originate from the management philosophy of Andy Grove, the third employee and eventual third CEO of Intel. At a previous company, Andy saw the limitations of the OKRs’ predecessor, Management By Objectives (MBOs).
MBOs tied employee compensation to the employee’s ability to hit targets set by management. The result was goals that lacked employee engagement and failed to reflect new information as the business evolved.
As Intel transitioned its product focus from memory to microprocessors, OKRs allowed the company to think ahead to lead a new revolution in technology. The ability for every employee to set their own goals drove innovation and a culture of success at Intel.
Grove defined this OKR in his classic book, High Output Management, as the answer to these two fundamental questions: “1) Where do I want to go? and 2) How will I know I’m getting there?”
OKRs at Google
If Andy Grove is the father of OKRs, John Doerr is, as he self-proclaims, The ‘Johnny Appleseed’ of OKRs.
Dick Costolo, former CEO of Twitter and Google alum, explains it as follows:
The thing that I saw at Google that I definitely have applied at Twitter are OKRs—Objectives and Key Results. Those are a great way to help everyone in the company understand what’s important and how you’re going to measure what’s important. It’s essentially a great way to communicate strategy and how you’re going to measure strategy. And that’s how we try to use them. As you grow a company, the single hardest thing to scale is communication. It’s remarkably difficult. OKRs are a great way to make sure everyone understands how you’re going to measure success and strategy.
Google still openly publishes their OKRs on areas of focus like sustainability. Every employee, from the CEO to programming interns, shares their OKRs publicly.
How does Google set goals with OKRs?
The key to the success of OKRs at Google comes from their aggressive, but achievable targets. Google targets a 70% success rate on their OKRs, allowing for learning from failure. re:Work, Google’s official guide to work describes this strategy:
Google often sets goals that are just beyond the threshold of what seems possible, sometimes referred to as “stretch goals.” Creating unachievable goals is tricky as it could be seen as setting a team up for failure. However, more often than not, such goals can tend to attract the best people and create the most exciting work environments. Moreover, when aiming high, even failed goals tend to result in substantial advancements.
This tolerance of failure created a learning culture at Google. This culture attracted employees who wanted to experiment and drive innovation. As Lazslo Bock, former head of People at Google explains, “If your goals are ambitious and crazy enough, even failure will be a pretty good achievement.”
For a deep dive on how Google sets OKRs, check out this training from Google Ventures Startup Lab partner Rick Klau.
Other than Google, what companies use OKR?
A wide array of companies have used OKRs to achieve success. Thanks to John Doerr, many organizations including the Gates Foundation, Zynga, and Kleiner Perkins-funded start-ups chose OKRs as their preferred goal setting method. Let’s dive into a few of these companies to see how they utilized OKRs.
OKRs at Intel
Intel used OKRs to power the shift from traditional memory storage to become the leader in microprocessors. Originally, Andy Grove called them ‘iMBOs’ for “Intel Management by Objectives”. As he explains, it took some iteration to get right. “We didn’t fully understand the principal purpose of it. And we are kind of doing better with it as time goes on.”
At Intel, Andy developed the understanding that stretch goals were useful for driving innovation. “Output will tend to be greater,” Grove says in High Output Management, “when everybody strives for a level of achievement beyond [their] immediate grasp. . . . Such goal-setting is extremely important if what you want is peak performance from yourself and your subordinates.”
At Intel, Grove also realized that maximizing OKR effectiveness meant dissociating it from compensation decisions. While they can be a factor in performance reviews, they are not the sole basis for evaluation like with many MBO programs. The OKR, Andy says, “is meant to pace a person—to put a stopwatch in his own hand so he can gauge his own performance. It is not a legal document upon which to base a performance review.”
OKRs at The Bill and Melinda Gates Foundation
When Bill Gates started the Gates Foundation he began with Jim Collins guiding question from Good to Great: “What can you be the best at in the world?” Having built Microsoft, he settled on ‘using technology to create change’. From there, the foundation decided to focus on impacting DALY (Disability-Adjusted Life Years) through vaccination campaigns.
When John Doerr introduced OKRs to the Gates Foundation, they decided to set an objective of eliminating Guinea Worm worldwide. The objective (eliminating a particular disease) powered their mission (increasing length and quality of life). Their Key Results involved quarterly and annual targets for eradication program rollouts. As a result of their grants, global incidences of Guinea worm declined from 75,000 in 2000 to just 22 in 2015.
OKRs at Netflix
One critical component of OKRs is their transparency. The visibility into every team and individual priority drives accountability and weeds out those who would rather avoid such scrutiny. Such is the case in the radically transparent OKR culture at Netflix.
An impressive 94% of employees at Netflix say the company’s goals are clear and they are invested in them. However, this doesn’t come without its detractors. In interviews with the Wall Street Journal, some employees described the culture as “ruthless, demoralizing and transparent to the point of dysfunctional.”
Clearly, this type of culture is not for everyone. And Netflix is OK with that. As they explain in their culture guide:
“Being on a dream team is not right for everyone, and that is OK. Many people value job security very highly and would prefer to work at companies whose orientation is more about stability, seniority, and working around inconsistent employee effectiveness. Our model works best for people who highly value consistent excellence in their colleagues.”
Does Amazon use OKRs?
Many teams at Amazon use OKRs to structure their work. As CEO Jeff Bezos says, “Our goal is to be earth’s most customer-centric company.”
OKRs align with the company’s approach to ambitious goal-setting. Bezos declares, If you decide that you’re going to do only the things you know are going to work, you’re going to leave a lot of opportunities on the table.
Recently, this led to the release of newly developed goals committed to diversity. These comprise the top line Objectives that will drive personnel decisions across Amazon. Here are a few:
Inspect any statistically significant demographic differences in Q1 2021 performance ratings by VP team to identify root causes and, as necessary, implement action plans.
Inspect any statistically significant demographic differences in attrition and low-performance actions by VP team on a monthly basis to identify root causes and, as necessary, implement action plans.
Retain employees at statistically similar rates across all demographics.
How do I get started with OKRs?
Getting started with OKRs begins with developing top-line company Objectives based on your mission and value. This usually starts with an ambitious vision for the impact your organization wishes to have on the world. The Big Hairy Audacious Goal, as formulated by Jim Colins, is a simple and easily understood way to define your vision.
The next step is composing the team objectives that will power your company objectives. Here’s a post that can help you with how to get started with OKRs.
Maximizing Growth with OKRs
The success of OKRs at every company discussed above depends on their transparency and alignment. Growth depends on the company’s ability to direct efforts to the areas of highest impact.
Having a system for sharing and tracking OKRs keeps the team informed and working together on what matters most. As blockers or opportunities pop up, transparency allows the team to quickly act on new information.
While there are many ways to track and share OKRs, only Align combines OKR tracking, long-term vision-setting, and communication cadence for Conversations, Feedback, and Recognition (CFR). If you’re ready to turn your inspirational goals into successful execution, try the OKR tools in the Align software today!