Everything you need to know about OKRs

Introduction

If you are reading this Paper, you clearly have a goal.

to learn how to set goals for your company and achieve them consistently. And that is exactly what we are going to teach: why you should know the methodology used by giants like Google and Intel and which is benefiting more and more Startups and traditional businesses all over the world! Know everything you need to know about OKRs!


Chapter 1

Why not use traditional methodologies?

We are not saying that traditional methodologies are all bad and don't work or that OKRs are the only tool you should use. They worked for a long time, and even today they are used a lot!

But the traditional methods of setting objectives make it difficult for all employees to understand the company’s priorities since they are extremely methodical and strict in their implementation and execution.

When carrying out strategic plans in which objectives and metrics are defined for an entire year (reaching more than 5 years, sometimes) it has become impractical, since the speed with which market conditions change and the growing understanding that companies have the best ways to go.

When defining the company’s strategic objectives in this way, there are basically two options that are shown: the company could follow the plan to the end, even if it does not bring real results or it could change the plan completely, but this way there would be no actual measurement of performance in that time period.

Thus, companies that were experiencing greater growth than normal in the market noticed that they needed a leaner form of management and strategic planning. The new method to be used should clarify the company’s objectives and have shorter cycles, so that there is more transparency in the management of the company and the teams, in addition to increasing the amount of learning in each cycle, making the next one always better than the previous ones.


Chapter 2

Why use OKRs?

OKRs, an abbreviation for Objectives and Key Results, is a methodology that first appeared at Intel in 1983, through Andy Grove, then the company's COO. The purpose of this method is to help create really important goals and to know how to measure the results needed to achieve those goals.

To explain in a more didactic way, we can summarize OKRs in a sentence by John Doerr, author of the best-selling book on OKRs, “Measure What Matters: How Google, Bono Vox and the Gates Foundation rocked the world with OKRs”:

I will _____, which can be measured by _____.

This sentence demonstrates the structure of an OKR, composed of an Objective (I will), accompanied by Key Results (… which can be measured by).

By creating clear and aspirational goals and defining how we are going to measure data to find out if we reached that goal, an alignment in the company between strategy and execution is created. Each employee knows the objectives that the company has and how they can be achieved, so they will have a direction to follow and carry out tasks that will bring the company closer to the target objective.

As it is a methodology with a great focus on transparency, each employee will be able to know the objectives of those above in the hierarchy, such as CEOs, COOs and Directors, as well as the objectives of each other employee, facilitating mutual help by making all data visible, making with which, if a collaborator is not able to deliver the results he proposed to deliver, anyone can help him with ideas and suggestions.


Chapter 3

How to use OKRs in your company

"Ok, ok, I already understood the benefits, but how do I start using this methodology?"

The first concept to think about when starting to use OKRs is simple, but it requires time for reflection. You must define a few objectives (preferably aspirational, such as Dominating Latin America).

At Roads, we like to set goals at the company level every six months and team goals on a quarterly basis, in order to obtain constructive feedbacks that will make the next OKR cycles better than all the previous ones.

The difficulty, however, lies exactly in the definition of these objectives, because as William Shakespeare has already said:

 

If you don’t know where you’re going, any road will get you there

 

There is no point in performing tasks or thinking about what Key Results we want to achieve if we do not know why we are doing that.

After we have defined the why, we have to define how we are going to measure the results to know if we are on the right path to reach the goal, how fast we are going towards it and how we know we have reached that goal.

Here enter the Key Results. Each objective should preferably contain 3 to 5 Key Results that will indicate how we will achieve the objective. It is important to emphasize that you must assemble the Key Results in such a way that, if you reach all of them, the objective is really complete.

It is worth emphasizing the importance of having all Key-Results to be SMART.

“Calm down, what is SMART Key-Results?”. SMART Key-Results must meet 5 specific rules, each represented by a letter in the word: your KRs must be Specific, Measurable, Achievable, Relevant and Temporal.

Let’s consider the following KR to analyze whether it meets the 5 rules of a KR SMART: “Increase sales by 15% during the first quarter of 2020”

This KR is specific, as it is direct in showing what you want (increase sales), measurable (increase by 15%), attainable (it is possible to increase sales by 15% in this period), relevant (KR makes sense for the commercial team, for example) and temporal (the period up to the first quarter of 2020 is well defined). So this KR is a SMART KR.


Chapter 4

OKRs Hierarchy

As with most companies, within OKRs we tend to rank the levels of key objectives and results. Therefore, it is customary to divide OKRs between company, sector and personal levels, with a format similar to the image below.

OKRs at a company’s strategic level are the goals it aims to achieve as a whole, and how you will measure the success of those goals. Strategic OKRs usually last for 1 year. Some examples of good OKRs at the company level are:

    • Dominate Latin America by the end of 2020
      • Measured by:
        • Have 51% of the Market Share in Latin America by 2020;
        • Reach all Latin American countries by 2020;
        • Have a maximum concentration of customers in a single country of 15%.
    • Make our customers extremely satisfied by the end of 2020
      • Measured by:
        • Have a service NPS of 70 by the end of 2020;
        • Have a Churn rate below 1.5% at the end of the year;
        • Have 30% of the revenue coming from Upsell.

The OKRs at the tactical level (which are normally quarterly), for each team, should be inspired by the company’s OKRs, in thought such as: “How can my team contribute to achieving these goals?”. Thinking about a Marketing team, for example, we can have some good OKRs that will help the company achieve the goals created above, such as:

    • Educate and delight our prospects
      • Measured by:
        • Have a conversion of 30% of visitors to Leads in the first quarter of 2020;
        • Launch 10 new eBooks during the first quarter of 2020;
        • Issue 5,000 course certifications completed in the first quarter of 2020.
    • Attract prospects from across Latin America
      • Measured by:
        • Have a total of 700,000 visitors to the site during the first quarter of 2020;
        • Generate 5 more link building partnerships during the first quarter of 2020;
        • Have a maximum concentration of visitors in a single country of 15% during the first quarter of 2020.

Chapter 5

About OKRs cycles

As stated earlier, in order to apply the knowledge obtained in each cycle of OKRs, we must have shorter feedback cycles than traditional methods (which normally do strategic cycles between 5 to 10 years).

The reason for shortening the cycles is similar to the occurrence of compound interest in the financial market: with each cycle, we learn more about what we should or should not do, making the next cycle even more productive and so it follows, in a curve of exponential learning.

So that we can carry out these smaller cycles and really learn from them, cycles between 3 and 12 months are used (more mature companies usually have cycles closer to the upper limit, whilst younger companies usually have smaller cycles) and during these cycles, we have some events used to consolidate learning and to make sure that we are on the way to achieving our main goals.


Chapter 6

Events of an OKRs cycle

In order to use the OKRs methodology most effectively, we held some events during the cycles to learn from what has been done in the past and improve ourselves for future cycles.

The events normally used in an OKRs cycle are:

    • Objectives planning;
    • Key-Results Grooming;
    • Presentation of OKRs;
    • Check-up of OKRs;
    • Closing of OKRs;
    • Results report.

And comparison can be made with the PDCA Cycle (Deming Cycle) to better understand the objective of each event within a cycle of continuous improvement.

 

What is the PDCA Cycle

The PDCA Cycle, also called the Deming Cycle, in honor of its creator, W. Edwards Deming, is a representation of a cycle of continuous improvement, consisting of 4 steps: Plan, Do, Check and Act. In this cycle, the first step is to plan what will be done to make an improvement in some current problem, after that, you should execute what was planned, and when you finish the practical part, check what it worked, what went wrong and how it is possible to improve so that we can carry out an even more effective next cycle and generate an action plan to make the improvements happen. The goal when using this cycle is: get it wrong fast but fix your mistakes even faster.

Next, we will show where each OKRs event fits in each stage of the PDCA Cycle.

Objectives Planning (Plan)

The Objectives Planning meeting results in the alignment of objectives between the leaders of the executive team and the operational teams.

For this, we must think in an aspirational way: “What do we want to achieve in these coming months?” and write down the main objectives that emerge and that are at the same time aspirational and relevant.

KRs Grooming (Plan)

After we have the objectives well defined, it is time to think: “How will I measure our progress in relation to our objectives and how will I know when we have achieved or not achieved those objectives?”, Write down the KRs that arise and define which KRs will be for each goal

At this meeting, it is essential to remember to always create SMART KRs! At the end of the meeting, we want to have each goal with between 3 and 5 KRs.

Presentation of OKRs (Do)

Now that we have defined the objectives of the company or industry, it is time to present these OKRs to the rest of the company, leading to alignment and transparency between the company as a whole and between its sectors.

It is important that the objectives are clear and the way that each KRs will be measured is also well explained. The purpose of this meeting is to remove all doubts that each employee may have about each Objective and each KRs.

After this meeting, work is carried out to achieve the KRs that will lead to the desired goals. Hands-on!

Check-up of OKRs (Check)

We recommend holding this event monthly, in the case of tactical OKRs (at the sector level) or quarterly in the case of strategic OKRs (at the company level).

In this meeting, the objective is to collect data regarding the progress of each KRs so that it is possible to know which ones are going on the correct path and speed and which are falling out of plan.

During this meeting, action plans are created for KRs that are below expectations for that date, plans that will lead us to repair the company’s gears so that we have the maximum KRs reaching the goals.

OKRs Closing (Act)

During this meeting, the final data for each KR at the end of the cycle is collected. With these results in hand, we were able to assess the reasons that led some KRs to succeed and others not to reach the defined goals.

In the case of the KRs that were beaten, we want to know what were the actions that led to this result, so that we can replicate them in the next cycles, and in the case of unfinished KRs, we want to find out the reasons that led to the non-completion of this, in order to put together an action plan for the next cycles so that more and more the desired results are achieved in time.

Results Demonstration (Act)

With the cycle completed and in order to generate transparency for the entire company, we must hold a meeting to demonstrate the results achieved in this cycle, as well as the action plans so that in the next cycles we can have performance improvements.

At this meeting, leaders should answer any employee’s questions, so that the results and action plans are clear to all, in order to generate continuous improvement and a culture of transparency within the company.

Creation of Action Plans (Act)

At the end of each OKRs cycle, with the lessons learned about what went right and what went wrong, we must put together an action plan so that we can fix what has hindered the team from reaching the defined goals and so that we can continue to do which led the team to the most satisfactory results.
We recommend that you create improvement tasks with the highest priority possible in your Backlog if you are also using the Scrum methodology. When prioritizing these tasks, the first thing the team will do in the next cycle will be to improve it, accelerating growth and increasing the strength of continuous improvement cycles.


Chapter 7

Advantages of using OKRs

Summarizing some reasons that will take your company to another level when using the OKRs system, we have:

  • The clarity in objectives for all employees;
  • Greater transparency among all sectors of the company;
  • Understanding how each sector is contributing to the company’s results;
  • Short feedback cycles, enabling continuous improvements with each cycle;
  • Sense of belonging of employees, knowing that they are impacting the company’s results;
  • Simplification of business strategy;
  • Waste reduction, by defining a shorter cycle of objectives and therefore less harmful to the company in case of changes in the market;
  • Reduction of time spent conducting strategy definition meetings.

Chapter 8

Some successful cases of the OKRs methodology

Find out how big companies have transformed their ways of working with OKRs:

Google

In 1999, the then-newcomer Google had the following objective: “Organize the world’s information and make it universally accessible and useful.”

At that time, Google was the 18th search engine to be created and, therefore, faced tough competition.

When Andy Grove’s top disciple John Doerr worked at Google, he brought the concept that originated from Intel into the company. Since then, OKRs has become an essential component of the company’s success.

Out of a team of 30 people, Google now has more than 70,000 employees. In addition, the company is also a reference when it comes to using the OKRs methodology.

Amazon

Our second example of companies using OKRs is currently the most important company in the e-commerce sector in the world. Amazon, used by millions of people around the globe, is clear in its goals: “Make the buying and selling process fast, cheap and easy”.

For a giant company like Amazon, there is always a chance of communication failure, incompatible expectations, confusion and employees being drawn in many directions.

In this sense, OKRs help to ensure that all employees are properly aligned. This method gives people a clear direction of where the company is going and how their roles can contribute to its success.

Adobe

Adobe Systems Inc. is an American multinational software company, responsible for programs such as Acrobat Reader, PDF (Portable Document Format), Photoshop, Illustrator, Premiere and several other software.

Part of Adobe’s success in people management is the adoption of OKRs and their principles. In fact, one of them is listening to employees for feedback.

The company used to adopt the “rank and yank” system, in which managers had to identify their least productive members through an annual assessment.

Over time, this system was causing so much resentment and internal strife that it led some employees to leave the company and migrate to the competition.

As a result, the “rank and yank” system was replaced by a system called “Check-In”. Instead of breaking the bad news, managers happily inform their teams about who their best employees are. Then they give rewards in the form of bonuses and incentives.

OKRs were of great importance in much of this system, as they helped managers to easily measure employee performance. Although it is not intended to “rank” employees, managers can access their employees’ OKRs and assess their performance from there.

Microsoft

Founded in 1975 by Bill Gates and Paul Allen, Microsoft is a solid brand when it comes to anything related to computer programming.

Gates personally recommends using OKRs for anyone who wants to become a better manager. For him, this methodology has a great influence on his own management style.

Your company performs tasks more efficiently and obtains better results through OKRs. From them, it is possible to measure what matters and make everyone work on the same page.

LinkedIn

Perhaps the largest social networking platform for businesses and professionals, LinkedIn has more than 500 million users worldwide.

The company uses OKRs to create a sense of urgency. Through this methodology, the organization is able to focus on what is most important now, in the current quarter.

OKRs are also used to hold meetings. They focus on the status of everyone’s goals, especially the “earnings” that bring the company closer to its goals.