29/05/2024

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The Fundamentals of OKRs and Their Role in Organizational Development

The Fundamentals of OKRs and Their Role in Organizational Development

“Begin with the end in mind,” said businessman Steven Covey, author of the landmark book, “The 7 Habits of Highly Effective People.” Though published more than 30 years ago, this business handbook continues to be a bestseller because it focuses on timeless leadership principles, such as honesty and dignity.

Today, we talk about OKRs (Objectives and Key Results) as a framework for businesses to achieve their desired results. There are numerous ways to use them. Entrepreneur Kris Duggan, who brings deep expertise in OKRs, explains how Google built its own proprietary technology to run its OKR program. The Google Ventures StartUp Lab even created a workshop entitled, “How Google sets goals: OKRs” that covers the Google OKR process, best practices, and goal setting.

OKR

But let’s take a step back. While OKRs might be second nature for Google executives, other companies may have just discovered this strategy and are seeking a more basic overview.

The Origins of OKRs

In the 1970s, Intel CEO Andy Grove developed the OKRs methodology, and taught it to John Doerr, one of the company’s most successful salespeople. Prior to this time, the conventional method of management was a top-down model known as management by objectives (MBO). This model was hierarchical, and linked to employee compensation.

OKRs, in contrast, focus on outcomes rather than procedure. In lieu of telling employees what to do, management can set a goal and allow the team to figure out how best to achieve it — a revolutionary idea at the time.

Doerr, who later served as a Google board member, introduced the OKR concept to Google founders Sergey Brin and Larry Page. Google implemented OKRs in 1999 and never looked back. Soon after, enterprise organizations such as Amazon and Disney began using OKRs to accomplish their objectives.

What OKRs Look Like in Practice

OKRs are like diving into crystal blue waters: they bring clarity and measurement to a company’s goals, providing a lattice that supports groups and ensures all teams are working in harmony to achieve the same goals.

The Objective is a goal statement: the attainable end you want to achieve. The Key Results are stepping-stones that measure your progress on the path.

An HR OKR might look like: establish a strong DEI culture by year-end.

Key Results:

  • Hold a diversity and awareness workshop for all employees
  • Meet with department managers to gain feedback about staff attitudes and behavior
  • Make accountability one of the organization’s named values.

Note: OKRs are not KPIs, though it’s easy for someone new to OKRs to confuse the two. KPIs (Key Performance Indicators) track team performance within projects and initiatives. OKRs are the framework for setting and fulfilling goals. If your objective is to build a framework for goal achievement rather than to track performance, OKRs provide the more holistic model.

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Keep Employee Evaluations Separate from OKRs

It’s important to keep OKRs separate from employee evaluations and compensation, says Duggan. HR should help managers evaluate employees organically, using structured conversations focusing on areas such as:

  • career growth
  • collaboration
  • contribution
  • innovation

Discussions about how employees have met their goals and contributed to the team, embraced organizational culture, and driven business value, are distinct from organizational OKRs, which are not focused on the individual.

By the same token, bonuses should not be tied to OKRs, so employees feel empowered to take risks and innovate in directions they might otherwise eschew. Performance ratings trigger a “fight-or-flight” response in the brain, which is the opposite of what managers want to bring forth when they implement OKRs.

OKRs are designed to bring alignment, focus, and even fun to companies, and in this way can help your business achieve greater operational efficiency.