I’ve written before about how OKRs measure up against other strategy and performance management tools, like BSC, KPIs and MBO. But, if you’re entirely new to the OKR approach, I thought it might help to explore some pros and cons of using OKRs – and how to get the best out of OKRs in your organisation.
Er, what the heck does OKR mean?
Let’s start by defining what OKR actually is. The acronym stands for “objectives and key results”, which pretty much summarises what OKR is all about: setting out what you want to achieve (your objectives) and what success looks like (your key results).
The idea is to define top strategic priorities, breaking it down into strategy (your O) and execution (your KRs). In a nutshell, you just set a goal then define how you’ll get there. It couldn’t be simpler.
The OKR approach has been embraced by top Silicon Valley companies like Twitter and Google. (In fact, Google investor John Doerr introduced the concept to the company way back in the late 1990s. Google is like the Obi-Wan Kenobi of OKRs.) But the approach has since spread far beyond Silicon Valley, and has been adopted in all manner of companies.
Advantages of using OKRs
Let’s look at some of the upsides of OKRs:
- OKRs encourage people to set ambitious goals. Unlike traditional objectives frameworks like MBO, OKR isn’t about setting “safe” objectives and expecting 100% achievement. People are encouraged to set bold, tough (but not impossible) goals, so it follows that they might not achieve them 100%. Even 60% is okay in an OKR context – 60% of a really ambitious goal still represents great strides in performance. OKRs are therefore about inspiring people to aim high and push boundaries, rather than play it safe.
- OKRs are reviewed regularly. Forget the traditional way of setting annual objectives and reviewing performance at the end of the year. OKRs are typically reviewed and updated once a quarter, sometimes monthly, which is much better suited to today’s fast-paced world, where constant transformation is the norm.
- OKRs are quantitative in nature. Many objective-setting frameworks focus only on the goal, not how you get there. But the ‘KR’ part of OKRs means you really delve into the nitty gritty, setting quantitative results that define success. This provides absolute clarity on what success looks like, and what steps/initiatives/actions must be taken to deliver on strategic priorities.
- OKR is a bottom-up and sideways process. Traditionally, the objective setting process cascades from the top down, with the leadership setting objectives for managers, and managers setting objectives for their teams. With OKRs, people have more freedom to design their own objectives and results that feed into the organisation’s overall objectives. When every employee is involved in the process of setting objectives and key results, they’re much more engaged in the process and have more ownership of the goals.
- OKR is divorced from compensation. OKR is (or should be) separate from pay and bonus decisions, which is a great thing. Performance metrics that are tied to compensation can result in skewed behaviours, where people play it safe to get their bonus. Because OKRs encourage ambitious goals that may not be 100% achieved, it makes no sense to tie them to pay and bonuses.
And what about the disadvantages?
So, there are many plus points to OKRs. However, there are also some pitfalls to be aware of:
- The overall relationship between OKRs isn’t obvious. OKRs are supposed to be transparent, with everyone’s OKRs visible to anyone else. That’s great, but it doesn’t necessarily flag up the relationship between different objectives and how one objective might feed into another. OKRs are typically just a straightforward list, but I much prefer a strategy map approach. A visual map of objectives shows, at a quick glance, the relationship between objectives – and helps to ensure everyone is moving in the same direction.
- OKRs designed from the bottom-up can lack company-wide alignment. While it’s great that OKRs are created with input from everyone in the organisation, this can have its disadvantages. Namely, if every team is designing their own OKRs, overall alignment with the top organisational priorities can be lost. For the bottom-up approach to be really successful, there needs to be absolute clarity on what the organisation as a whole is trying to achieve. OKRs should then feed into this.
- The “how” can be too prescriptive for some people. Rather than leaving individuals and teams to make their own best way towards an objective, OKRs set out clear results that lead, step-by-step, to the objective. This might be too prescriptive for some people, particularly if they’re used to a lot of autonomy, and could potentially leave them feeling unmotivated or detached – even if the objective itself is something they were previously engaged with! That’s why it’s so important to involve everyone in the process of setting OKRs.
- People can set too many OKRs. While a strategy map or Balanced Scorecard focuses attention on the very top strategic priorities, in theory, a list of OKRs could be as long as your arm. With a simple list format, there’s no structure to adhere to, no limit to what you can add. This can lead to objective-overload, which is never a good thing. It’s far better to stick to top priorities only. Remember, OKRs are like jewellery – less is more!
Making OKR work for you
So how can you embrace the bottom-up and sideways nature of OKRs, while still ensuring alignment with organisational priorities across the business? It’s not as impossible as it sounds.
Firstly, the leadership needs to clarify the organisation’s top-level OKRs and visualise these in a strategy map or plan-on-a-page. This is a really powerful way to communicate and embed strategy, while clearly showing the causal relationship between various objectives.
Then, using this framework as a guide, teams and individuals can design their own ambitious objectives and key results that support the strategy map. During this process, teams should collaborate to ensure that their OKRs are in alignment.