Many businesses fail to execute on their best opportunities. They want to achieve great things, but they don’t have a system for managing focus, alignment, and accountability. “Measure What Matters” explains how “OKRs” can help organizations thrive.
The approach applies to teams of all sizes. Startups need to be pulling in the same direction, scaling organizations need a shared language for execution, and larger organizations need to improve alignment. In each case, OKRs can help.
Successful businesses like Google, Disney, Dropbox, LinkedIn, Slack, Spotify, and Twitter use this approach. And in “Measure What Matters,” legendary venture capitalist John Doerr explains how you too can use OKRs to transform your organization.
Introducing OKRs: Objectives & Key Results
OKRs provide a collaborative goal-setting protocol for companies, teams, and individuals. The approach promotes focus, alignment, accountability, and ambition through clearly defined objectives and measurable key results.
An OBJECTIVE is simply what is to be achieved. By definition, objectives are significant, concrete, action-oriented, and (ideally) inspirational. When done right, they help teams avoid fuzzy thinking and improve clarity of purpose.
KEY RESULTS benchmark and monitor how the objective is achieved. Effective KRs are specific and time-bound, aggressive yet realistic. Most of all, they are measurable and verifiable, so it’s clear whether or not a given result is complete.
An objective will typically include three to five key results. And when each of the key results has been completed, the objective will have been achieved.
For example, a business objective might be to “create a healthy and productive work environment as we scale to 150+ employees,” as measured by the following KRs:
- All employees have completed the performance review/feedback process.
- All employees have scored their Q3 OKRs within the first week of Q4.
- New employees have completed the onboarding & training process.
OKRs surface your primary goals. They channel effort and coordination. And they link diverse operations, lending purpose and unity to the entire organization.
The Four Superpowers of OKRs
The essence of a healthy OKR culture is ruthless intellectual honesty, a disregard for self-interest, and deep allegiance to the team. With that in mind, let’s explore the four superpowers of OKRs: focus, align, track, and stretch.
Superpower #1: Focus and Commit to Priorities
An effective goal-setting system starts with disciplined thinking at the top. Leaders must invest time and energy to choose the things that matter most. No individual or company can do it all. So it’s critical to keep the total number of objectives small.
Measuring what matters begins with the question: What is most important for the next three (or six, or twelve) months? Successful organizations focus on the handful of initiatives that can make a real difference, deferring less urgent ones.
Most important of all, top-line objectives must be significant. OKRs are neither a catchall wishlist nor the sum of a team’s mundane tasks. They’re a set of stringently curated goals that merit special attention from teams and individual contributors.
“There are single OKR lines on which you can spend an hour and a half thinking, to make sure we are focused on doing something better for the user.”Sundar Pichai, Google CEO
By standing firmly behind a few top-line OKRs, leaders give their teams a compass and a baseline for assessment.
Superpower #2: Align and Connect for Teamwork
A lack of alignment is the #1 obstacle between strategy and execution. Cloud-based OKR tools like Lattice, Ally, and Koan* enable company-wide transparency. As a result, even the most junior staff can instantly view everyone’s individual OKRs.
This open approach makes it easy for teams to identify how they can contribute to the mission. Objectives don’t have to be cascaded down the organization in lockstep. Instead, teams and individual contributors can define their OKRs based on having a clear picture of what the organization is trying to achieve.
“We don’t hire smart people to tell them what to do. We hire smart people so they can tell us what to do.”Steve Jobs, Former Apple CEO
An optimal OKR system frees teams and contributors to set at least some of their own objectives and most or all of their key results. And this helps to unlock their creativity and autonomy, which drives engagement and superior results.
Superpower #3: Track for Accountability
Unlike traditional, frozen, “set them and forget them” business goals, OKRs are living, breathing organisms. They can be tracked, revised, or adapted as needed. And because they are open and transparent, everyone can monitor their progress.
The combination of accountability and transparency drives engagement because team members can quickly see how their work contributes to the company’s success.
“The single greatest motivator is ‘making progress in one’s work.’ The days that people make progress are the days they feel most motivated and engaged.”Daniel Pink, Author of Drive
OKRs don’t require daily tracking, but regular (often weekly) check-ins are essential to prevent slippage. For best results, OKRs are scrutinized several times per quarter by contributors and their managers. Progress is reported, obstacles are identified, and key results are refined.
Each objective is scored by averaging the percentage completion rates of its associated key results. For example, Google uses a scale of 0 to 1.0:
- 0.7 to 1.0 = green. (We delivered.)
- 0.4 to 0.6 = yellow. (We made progress but fell short of completion.)
- 0.0 to 0.3 = red. (We failed to make real progress.)
These color-coded scores help pinpoint what is on track and what is falling behind, so teams can adjust priorities accordingly. There are no judgments, only learnings.
Superpower #4: Stretch for Amazing
Conservative goals kill innovation, so teams must be free to set some ambitious objectives. With this in mind, Google divides its OKRs into two categories: committed goals and aspirational (or “stretch”) goals.
Committed goals are tied to critical projects: product releases, bookings, hiring, and more. Management sets them at the company level, and employees set them at the departmental level. In general, they are expected to be achieved in full.
Aspirational goals reflect bigger-picture, higher-risk, more future-tilting ideas. They can originate from any tier in the organization. By definition, they are challenging to achieve. An average failure rate of 40% is part of the territory.
To increase the odds of success, stretch goals must not seem like a long march to nowhere. Nor can they be imposed from on high without regard to realities on the ground. Employee commitment is essential, so leaders must convey the importance of the outcome and believe that it’s attainable.
“Setting specific challenging goals is also a means of enhancing task interest and of helping people to discover the pleasurable aspects of an activity.”Edwin Locke
When stretch goals are chosen wisely, the payoff can be significant.
Continuous Performance Management with CFRs
Annual performance reviews are costly, exhausting, and mostly futile. On average, they swallow 7.5 hours of manager time for each direct report. Yet only 12 percent of HR leaders deem the process “highly effective” in driving business value. Only 6 percent think it’s worth the time it takes.
Just as quarterly OKRs have rendered annual goals obsolete, we need an equivalent tool to revolutionize outdated performance management systems. In short, we need a new HR model for the new world of work.
Introducing CFRs: Conversations, Feedback, and Recognition
The modern alternative to annual reviews is continuous performance management using CFRs. Like OKRs, CFRs champion transparency, accountability, empowerment, and teamwork at all levels of the organization. They involve:
- 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.
CFRs ignite OKRs and then boost them into orbit; they’re a complete delivery system for measuring what matters. That’s because you need continuous performance management to surface the critical questions: Was the goal harder to achieve than you’d thought when you set it? Was it the right goal in the first place? Is it motivating?
Here’s a football analogy: Let’s say objectives are the goalposts, the targets you’re aiming for, and key results are the incremental yard markers for getting there. CFRs embody all the interactions that tie the team together from one game to the next. They’re the Monday videotape postmortems, the midweek intrasquad meetings, the pre-play huddles—and the end-zone celebrations for jobs well done.
How To Incorporate CFRs Into Your Culture
A great example of implementing continuous performance management comes from Pact, the Washington, D.C.-based international trade and development nonprofit. Their approach consists of four elements.
- The first is a set of monthly one-on-one conversations between employees and their managers about how things are going.
- The second is a quarterly review of progress against OKRs. They sit down and say, “What did you set out to accomplish this quarter? What were you able to do—and what weren’t you able to do?”
- Third, they have a semiannual professional development conversation. Employees talk about their career trajectory—where they’ve been, where they are, where they want to go.
- The fourth bit is ongoing, self-driven insight. Employees are constantly surrounded by positive reinforcement and feedback.
OKRs are custom-built for peer-to-peer recognition. Quarterly goals establish and reestablish the areas where feedback and recognition are most valued. Transparent OKRs make it natural for coworkers to celebrate big wins and smaller triumphs alike.
Avoid The Trap Of Linking Compensation to OKRs
Because OKRs reflect a person’s most meaningful work, they’re a source of reliable feedback for the next cycle. But when goals are used and abused to set compensation, employees can be counted on to sandbag.
“It’s always possible, even with a goal-setting system, to get the goals wrong… Maybe the market does something crazy, or a client leaves their job and suddenly you have to rebuild from scratch. You try to keep all of that in consideration.”Laszlo Bock, Former Senior VP at Google, CEO of Humu
OKRs amount to a third or less of performance ratings at Google, according to Laszlo Bock. They take a backseat to feedback from cross-functional teams, and most of all, to context. Google is careful to segregate OKR scores from compensation decisions. In fact, their OKR numbers are wiped from the system after each cycle!
Focus On Developing A Strong Culture
Culture, as the saying goes, eats strategy for breakfast. It’s our stake in the ground; it’s what makes meaning of work. Leaders of large companies are turning to OKRs and CFRs as tools for culture change. And growing numbers of job seekers and career builders are making the right cultural fit their top criterion.
By aligning teams to work toward a handful of common objectives, then uniting them through lightweight, goal-oriented communications, OKRs and CFRs create transparency and accountability, the tent poles for sustained high performance.
An OKR culture is an accountable culture. You don’t push toward a goal just because the boss gave you an order. You do it because every OKR is transparently important to the company, and to the colleagues who count on you.
Beyond The Measure What Matters Book Summary
This summary of Measure What Matters is just a preview of how to establish focus, alignment, and transparency in your business. It’s not a substitute for reading the book because the original text provides a much richer learning experience.
* Note, OKR tools were not mentioned by name in the book. I added them to the summary as examples of services that are available today. I don’t believe the author has endorsed any specific tool.