Objectives and Key Results (OKRs) - Measure What Matters

Recently, the chatter on OKRs was picking up on my Twitter feed. Before making specific comments on the agreement and disagreement points, I thought it was a good start to post my notes from John Doerr's excellent book. These notes are a couple of years old. I'll have some additional commentary in the follow-up posts.

There are two major parts — the first one focuses on OKRs (the yin), and the second part delves into CFR (the yang) - Conversations, Feedback, Recognition.

Definitions

OKRs are related to the essential parts of the work, not to some ancillary side projects. OKRs drive what we will focus on today, this week, this month, and so on. OKRs is a management philosophy for the company/department to focus on the same core issues. OKRs are evolving, living, and breathing organisms with an ability to adapt, not a model of setting upfront yearly goals and reviewing them once or twice a year.

Objective: An objective describes "what" needs to be achieved, no more and no less. Objectives are significant, concrete, action-oriented, and (ideally) inspirational.

 Key Results: Benchmark and monitor "how" we get to that objective. Effective Key Results are specific and time-bound, aggressive, yet realistic. They are measurable and verifiable. ("It's not a key result unless it has a number" - Marissa Mayer)

“Hard goals drive performance more effectively than easy goals. Second, specific hard goals produce a higher level of output than vaguely worded ones.” - Edwin Locke

OKRs Fundamentals

Doerr provides a framework with fundamental principles that he calls superpowers:

OKR - Mindmap

1. Focus and Commit to priorities

• Determine the duration of OKRs - quarterly goal setting. Some goals may span multiple quarters.

• A blend of objectives — upper-management-driven OKRs (top-down) and individual objectives (bottom-up). A 50-50 ratio is suggested; adjust accordingly. Innovation happens at the edges and not in the center. Bottom-up or organically driven objectives can boost intrinsic motivation.

• Commit to three to five top objectives. Choose the targets with the most leverage for outstanding performance.

• Settle for no more than five measurable, unambiguous, time-bound key results for each objective.

2. Align and connect for teamwork

• At any given time, many people are working on the wrong things. The challenge is knowing which ones. OKRs used effectively can help bring alignment.

• Employee motivation soars by understanding how their objectives are tied to the department and the company's more significant goals. Connect the dots and communicate.

• Do not over-align in a compulsive nature. An antidote for over-engineering is allowing some OKRs to come bottom-up.

3. Track for accountability

• Make everyone's goals visible to all. Google's model is fully transparent in goal setting and scoring. This model drives accountability, alignment, and internal networking.

• OKRs are adaptable by nature. They are meant to be guard rails, not chains or blinders. We have four options during the lifecycle of an OKR: a) Continue - "goal is good," b) Update - "Needs attention," c) Start - "Launch new mid-cycle," and d) Stop - "Drop it, outlived its usefulness."

• Scoring: For an objective, average the percentage completion rates of its associated key results. Google uses a score of 0 to 1.0: 0.7 to 1.0: Green (Delivered), 0.4 to 0.6: Yellow (Made progress, fell short), 0.0 to 0.3: Red (Failed to make real progress)

4. Stretch for amazing

• Conservative goal-setting stymies innovation. And innovation is like oxygen: You cannot win without it. Along with the committed objectives, ensure to set up aspirational objectives.

• Aspirational objectives reflect a bigger picture, high-risk, more future-tilting ideas. They originate from any tier and aim to mobilize the entire organization. By definition, they are challenging to achieve

• Failures are expected and encouraged. A 40% failure rate is typical at Google.

“It is our choices . . . that show what we truly are, far more than our abilities.” —J. K. Rowling

It's a paradigm shift in general for many organizations —

a) Interweaving OKRs and day-to-day work,

b) If there is no number in it, it is not a Key Result,

c) If you are hitting all the goals, there is a good chance you have set the bar too low (a certain level of failure is encouraged),

d) Decoupling or deemphasizing OKRs from incentive management. This item is a pre-requisite for c) to drive the behavior change in setting more aggressive goals.

Innovation, not incremental thinking -- 10x and not 10%.

OKRs and CFRs - Conversations, Feedback, and Recognition

“Talking can transform minds, which can transform behaviors, which can transform institutions.” —Sheryl Sandberg

As we establish OKRs on a set cadence (quarterly, annually, or a combination of both in many cases), providing and receiving feedback on the goals on a timely and ongoing basis would go a long way in determining the level of success. A new transformational system that replaces the outdated annual performance discussions is required. Enter CFR - Conversations, Feedback, and Recognition.

CFR - Conversations, Feedback, and Recognition

OKRs + CFRs = continuous performance management system

• Conversations: an authentic, richly textured exchange between manager and contributor, aimed at driving performance

• Feedback: bidirectional or networked communication among peers to evaluate progress and guide future improvement

• Recognition: expressions of appreciation to deserving individuals for contributions of all sizes

For a successful OKR program, CFRs drive transparency, accountability, empowerment, and teamwork. John Doerr provides a nice analogy on how OKRs and CFRs reinforce each other (emphasis is mine) —

"To hazard another football analogy: Let's say objectives are the goalposts, the targets you're aiming for, and key results the incremental yard markers for getting there. Players and coaches need something more vital to any collective endeavor to flourish as a group. CFRs embody all the interactions that tie the team together from one game to the next. They're the Monday videotape postmortems, the midweek intra-squad meetings, the pre-play huddles— and the end-zone celebrations for jobs well done."

Separating compensation from OKRs

John Doerr makes a compelling case on why OKRs need to be separated from the compensation decisions. If the overall company's mission is to achieve goals that are substantially significant and not just incremental, the separation between OKRs and compensation helps drive the behavioral change of setting more ambitious goals. At Google, Doerr says, OKRs play only a part of the compensation decision up to a third or so.

An ongoing forward-looking dialogue between leaders and contributors

This forward-looking ongoing dialogue may center on five essential questions:

• What are you working on?

• How are you doing; how are your OKRs coming along?

• Is there anything impeding your work?

• What do you need from me to be (more) successful?

• How do you need to grow to achieve your career goals?

Conversations

One-on-one meetings with managers and direct reports:

• Mutual teaching and exchange of information

• Regarded as the subordinate's meeting, with its agenda and tone set by him

  • The supervisor is there to learn and coach.

• Five critical areas: a) goal setting and reflection, b) ongoing progress updates, c) two-way coaching, d) career growth, and e) lightweight performance reviews.

Feedback

To reap the full benefits of the OKRs, feedback must be integral to the process. If you don't know how well you are performing, how can you possibly get better?

• Public, transparent OKRs will trigger the right questions from all directions:

  • Are these the right things for me/you/us to be focused on?

  • If I/you/we complete them, will it be a huge success?

  • Do you have any feedback on how I/we could stretch even more?

• Peer-to-peer (360-degree) feedback is an added lens for continuous performance management.

Recognition

According to Doerr, recognition is the most underestimated component of CFRs, and the least well understood.

• "Continuous recognition is a powerful driver of engagement: "As soft as it seems, saying thank you is an extraordinary tool to building an engaged team. . . 'High-recognition' companies have a 31 percent lower voluntary turnover than companies with poor recognition cultures."

• Doerr's suggestions to improve Recognition

  • Institute peer-to-peer recognition

  • Establish clear criteria — recognize people for actions and results

  • Share recognition stories — newsletters, company blogs

  • Make recognition frequent and accountable

  • Tie recognition to company goals and strategies

• "Every cheer is a step toward operational excellence, the crowning purpose of OKRs and CFRs."

“You need a culture that high-fives small and innovative ideas.” —Jeff Bezos

All-in-all, this book is an excellent read with several real-world use cases. Are you using OKRs or a similar system to track your key priorities? If yes, what’s working and what’s not? Let me know. Here’s my Twitter handle.