In the last decade, the OKR (Objectives and Key Results) concept, a new approach to measuring business results that differs in several respects from the KPI model, has become popular. The OKR methodology goes a step beyond the definition of KPIs and stands out precisely because of its comprehensive look at an organisation's efforts. Companies such as Google, LinkedIn or Intel use the OKR strategy for performance analysis.
In this article we explore the OKR methodology, explaining what it means, what it is for and how to implement it in a company through examples.
Las siglas OKR significan Objectives and Key Results en inglés, que se traduce como Objetivos y Resultados Clave en español.
OKR es una nueva forma de enfocar la medición de objetivos y resultados de una empresa que se caracteriza por su enfoque completo. La metodología OKR tiene como objetivo alinear las acciones y esfuerzos de una organización hacia objetivos comunes, orientando el trabajo de los diferentes departamentos que conforman una empresa hacia una misma dirección.
OKR stands for Objectives and Key Results.
OKR is a new way of approaching the measurement of a company's objectives and results that is characterised by its comprehensive approach. The OKR methodology aims to align the actions and efforts of an organisation towards common objectives, orienting the work of the different departments that make up a company in the same direction.
The main characteristic of the OKR strategy is that its approach combines "Objectives" with "Key Results". Therefore, it not only gives importance to key results, but puts business objectives at the focus of the business strategy.
Within the OKR methodology, objectives are conceived as qualitative goals that provide direction and motivation to the daily work of a company. They answer the question: 'What do we want to achieve?
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On the other hand, key results are specific, measurable and time-bound milestones that indicate progress towards the achievement of objectives. These key results are the quantitative benchmarks against which success can be measured and which answer the question: 'How will we know when the objective has been achieved?
The combination of clear and inspiring objectives with measurable key results makes OKRs an effective framework for objective setting and performance management. They are set periodically, e.g. quarterly, and are visible to the entire organisation, fostering transparency and alignment of efforts. By following these objectives as a guide, teams can set their own OKRs, ensuring that each department contributes productively and collaborates to achieve the overall company vision.
The OKR methodology can be broken down into 5 main elements:
1. Objectives: Objectives are qualitative goals that provide direction and motivation to the daily work of a company. These objectives should be clear, inspiring and aligned with the overall vision of the organisation.
2. Key Results: Key results are specific, measurable and time-bound milestones that indicate progress towards the achievement of objectives. These key results are the quantitative benchmarks against which success can be measured and whether the objective has been achieved.
3. Scope: Scope refers to the extent and impact that the stated objectives and key results are expected to achieve. It is important to clearly define the scope to ensure that the objectives are achievable and realistic.
4. Metrics: Metrics are the indicators used to measure progress and success of key results. These metrics should be quantifiable and aligned with the stated objectives.
5. Timelines: Timeframes are the periods of time set to achieve the objectives and key results. These timelines should be realistic and provide sufficient time to achieve the desired results.
By following these five elements, companies can effectively implement the OKR methodology and achieve greater alignment, transparency and performance on their objectives and key results.
The key difference between OKRs and Key Performance Indicators (KPIs) lies in their focus and purpose. While OKRs focus on setting qualitative objectives and measurable key results to align an organisation's efforts, KPIs (Key Performance Indicators) are used to measure a company's performance and success against specific metrics.
While OKRs provide clear direction and motivation for daily work, KPIs are used to evaluate performance and make data-driven decisions. Both approaches are important in business management, but are used in different stages and contexts. OKRs are established periodically to guide work and progress towards objectives, while KPIs are used to assess performance and make strategic decisions.
Implementing an OKR strategy in an organisation offers a number of significant advantages, backed by the success that large companies have experienced in adopting this methodology over the last decade.
As mentioned above, OKR is a framework that not only aligns company-wide efforts towards common goals, fostering collaboration and cohesion between departments, but also provides clear direction and motivation by setting inspiring objectives and measurable key results.
1. Encourages collaborative work: Adopting the OKR methodology helps to avoid fragmentation in the organisation by ensuring that all employees are working towards the same overall vision. This approach not only improves alignment, but also keeps employees focused and engaged, as they clearly know the expectations and how their success will be measured.
2. Improves processes, workflows and productivity: Implementing the OKR methodology not only streamlines processes and workflows by assigning responsibilities in an organised manner, but also strengthens the corporate culture and improves the working environment. By setting goals and key deliverables, the level of task accomplishment is raised, which in turn can increase customer satisfaction and create an image of accountability, consistency and business strength.
3. Increases transparency: The inherent transparency and visibility of OKRs, being visible to the entire organisation, creates a more collaborative working environment, facilitating communication and information sharing between teams.
4. Encourages the development of a data-driven culture: The implementation of an OKR strategy accustoms all levels of a company to working with and understanding data, thus fostering a data-driven culture within the organisation.
At this point, it is natural to ask how to implement this methodology. Below, we will explore some examples that will help you understand how it works and how to apply it effectively in your organisation.
John Doerr, uno de los inversores de capital riesgo con más éxito de todos los tiempos. , inició su carrera en Intel, compañía dónde conoció el método OKR. Doerr, quién posteriormente introdujo la metodología OKR en Google, es el ideador de la fórmula para establecer objetivos en el método OKR:
John Doerr, one of the most successful venture capitalists of all time. He started his career at Intel, where he was introduced to the OKR method. Doerr, who later introduced the OKR methodology at Google, is the originator of the OKR goal-setting formula:
Doerr's formula for measuring goals is as follows:
I am going to ________ measured by ____________.
According to this formula, a well-defined business objective has to address both what we want to achieve and how we will measure its achievement. As Doerr explains, the key words in his formula are "measured by", because measurement is what makes a goal a goal. Without these two words, a goal is not a goal, it is just a desire.
As we have already seen, objectives and key results are the most important elements of the OKR methodology.
Objectives are memorable qualitative descriptions of what you want to achieve and should be short, inspiring and attractive.
Key results are a set of parameters that measure progress towards the objective. Each objective should have between 2 and 5 key results. Also, all key results should be quantitative and measurable.
As Marissa Mayer, former Vice President of Google said: "If it doesn't have a number, it's not a Key Result".
The following are two concrete examples of how an OKR would be implemented in the business environment.
For this example, we will use the example of a company that wants to improve its customer experience. According to this premise:
Objective: To improve the customer experience
As we have already seen, the objective must be accompanied by a measurement system. That is, one or more performance indicators or KPIs. In this case, because our objective is linked to customer experience, we can use the following KPIs:
Thus, according to Doerr's form, our target would have the following formula:
I am going to measure the customer experience by NPS, CSAT, CES and Churn Rate
The OKR methodology was originated by Intel and later spread to other companies in Silicon Valley. However, the best known case of companies using OKR is probably Google. Google incorporated the OKR method in 1999, in its first year of operation, playing a crucial role in its expansion from 40 employees to more than 60,000 today.
While Google may be the most prominent example of OKR, other well-known companies have also adopted OKR, including Spotify, Twitter, LinkedIn and Airbnb.
Importantly, the use of OKR is not limited to companies in the digital sphere. Large corporations such as Walmart, Target, The Guardian, Dun and Bradstreet, and ING Bank also implement OKR in their management and planning strategies.
OKR is often linked to the Agile method because Agile methodology and OKR share principles and values that make them very compatible.
Although OKR is not an Agile methodology per se, it can be effectively integrated into Agile environments to improve goal management and team performance.
Flexibility and Adaptability: Both approaches value the ability to adapt to changing circumstances and priorities. OKR stands out for its flexibility, allowing adjustments to key objectives and outcomes in short cycles. This adaptability aligns with the principle of responding to change in the Agile methodology.
Customer Value Orientation: Both Agile and OKR share a core focus on delivering customer value. OKRs are designed to link to tangible and valuable outcomes, which is consistent with Agile's emphasis on meeting customer needs through incremental and continuous delivery.
Collaboration and Transparency: Both approaches foster collaboration and transparency. OKRs are visible to the entire team or organisation, which promotes open communication and alignment of goals. This transparency facilitates collaboration, which is fundamental to the Agile methodology, which emphasises effective communication and constant collaboration.
Continuous Feedback: Both Agile and OKR value continuous feedback. OKRs provide a structure for assessing progress towards goals and adjusting accordingly, which aligns with the continuous improvement midnset in Agile.
In short, the connection between OKR and the Agile methodology lies in their philosophical and practical similarities. Both approaches are designed to enable adaptation, foster collaboration, focus on customer value and seek continuous improvement. Joint implementation of OKR and Agile can enhance organisational agility and responsiveness to changes in the business environment.
Conclusion
In conclusion, the OKR methodology offers companies a comprehensive and effective way to set and measure objectives and key results. By aligning the efforts of the entire organisation towards common goals, it fosters collaboration and cohesion between departments. It also provides clear direction and motivation by setting inspiring goals and measurable key results. Implementing OKR offers significant benefits, such as fostering collaborative work, improving processes and productivity, increasing transparency and creating a better working environment. Renowned companies such as Google, Spotify and Airbnb have successfully adopted this methodology. If you are interested in implementing OKR in your organisation, it is important to understand how it works and apply it effectively. The OKR methodology can be effectively integrated into Agile environments, as they share similar principles and values. In short, implementing OKR can lead to greater alignment, transparency and performance on your company's key objectives and results.