Objectives and Key Results explained (New OKR Crash Course)

Summary

The script delves into the OKR framework, emphasizing its three core components: Objectives, Key Results, and Initiatives. It clarifies the distinction between OKRs and KPIs, highlighting OKRs' role in driving innovation and KPIs' function in monitoring performance. The script also underscores the importance of strategy, alignment, and transparency in the successful implementation of OKRs, advocating for a rhythmic approach to setting and reviewing goals across an organization.

Takeaways

• 🎯 OKR stands for Objectives and Key Results, but also includes Initiatives, which are the actions taken to achieve Key Results.
• 📍 The Objective in OKR is a future-oriented goal that sets the direction for an organization, similar to a destination on a map.
• 📊 Key Results are quantifiable outcomes that help specify and measure progress towards the Objective, and they must contain a metric with a start and target value.
• 🔑 Initiatives are the projects and tasks undertaken to make progress on Key Results, effectively the means to an end.
• 🚫 Avoid using technical jargon in Objectives to ensure they are easily understood and memorable across the organization.
• 🔄 The distinction between an output (a task or project) and an outcome (a result of the task or project) is crucial in defining effective Key Results.
• 🏆 OKRs originated from Management By Objectives (MBO) and were further developed by Intel, with Google being a notable adopter.
• 🔄 OKRs and KPIs serve different purposes; OKRs bridge the gap between ambition and reality, while KPIs evaluate ongoing processes or activities.
• 🛣️ OKRs act as a roadmap guiding the organization towards its destination, whereas KPIs are like dashboard indicators monitoring the vehicle's performance.
• 🤝 Alignment is a key reason for implementing OKRs, ensuring everyone in the organization works towards a common goal.
• 📈 Strategy is foundational to OKRs, with the Ultimate Goal and Strategic Pillars defining the organization's aspirations and differentiators.
• 🔄 OKRs operate on various cadences, with annual OKRs at the company level and quarterly OKRs at the department and team levels.
• 🔄 Transparency is vital in OKR implementation; making goals visible to everyone helps align efforts and foster a shared understanding of objectives.
• 🔄 Regular updates and reviews of OKRs are linked to higher goal achievement, emphasizing the importance of ongoing progress monitoring.
• 🔚 Reflecting on and closing OKRs at the end of a cycle is important for learning and informed decision-making for future goals.
• 📝 Best practices for OKR include focusing on fewer, more critical objectives, prioritizing strategy, ensuring transparency, and understanding the distinction between OKRs and KPIs.
• 🚀 To start with OKRs, consider using platforms like Perdoo for practical implementation and resources for further understanding.

Q & A

What does OKR stand for and what are its three components?

OKR stands for Objectives and Key Results, and it consists of three components: an Objective, Key Results, and Initiatives. The Objective sets the direction, Key Results measure progress towards the Objective, and Initiatives are the actions taken to achieve the Key Results.

What is the purpose of an Objective in an OKR framework?

An Objective in the OKR framework describes something that an organization or team aims to achieve in the future. It sets the direction, like a destination on a map, and should be easy to understand, memorable, and inspiring without containing technical jargon or metrics.

How do Key Results support the Objective in an OKR?

Key Results support the Objective by specifying and quantifying it, making it specific and measurable. They also help track progress towards the Objective, containing a metric with a start and target value.

What is the difference between an output and an outcome in the context of Key Results?

An output is an action or task performed, such as making sales calls, whereas an outcome is the result of those actions, like closing new customers. Key Results should focus on outcomes rather than outputs.

Can you provide an example of an Initiative in the context of OKRs?

An example of an Initiative could include squashing high-priority bugs in a product or hiring new support agents. Initiatives are the projects and tasks undertaken to advance progress on Key Results.

Why did the creators of the OKR platform choose to use OKR instead of just goals?

The creators chose OKR over just goals because OKR is both a framework containing best practices for managing organizational goals and a way to formulate those goals, providing more clarity and focus on what is truly important.

What is the historical origin of OKRs?

OKRs date back to 1954 with Peter Drucker's invention of Management By Objectives (MBO). Andrew Grove of Intel further developed MBO into the OKR framework in 1968. John Doerr introduced OKR to Google's founders, Larry Page and Sergey Brin, who implemented it at Google.

How are OKRs different from KPIs?

OKRs are about setting and achieving ambitious goals and breaking the status quo, while KPIs are performance measurements that evaluate the success of ongoing processes or activities. OKRs and KPIs work well together, with KPIs monitoring performance and OKRs driving innovation.

What is the significance of having a clear strategy before implementing OKRs?

A clear strategy is crucial before implementing OKRs because it defines the organization's purpose, the playing field, and what winning looks like. This strategy serves as the foundation that inspires all OKRs and KPIs, ensuring everyone is aligned and working towards common goals.

What is the recommended cadence for setting and reviewing OKRs in an organization?

The recommended cadence for OKRs is a combination of annual OKRs at the company level and quarterly OKRs at the department and team levels. This allows for both long-term strategic focus and short-term progress tracking.

Why is it important to update and review OKR progress frequently?

Frequent updates and reviews of OKR progress are key to success because they ensure that the organization stays on track and can make informed decisions. It also helps in adjusting strategies and initiatives as needed to meet the Key Results and Objectives.

What are some best practices for starting an OKR program?

Best practices for starting an OKR program include focusing on a few critical OKRs, ensuring a clear understanding of the organization's strategy, promoting transparency by making goals visible to everyone, recognizing the difference between OKRs and KPIs, and establishing a rhythm for setting, closing, updating, and reviewing OKRs.

Outlines

00:00

🎯 Understanding the Fundamentals of OKR

This paragraph introduces the concept of OKR, which stands for Objectives and Key Results, and highlights the three components: Objectives, Key Results, and Initiatives. Objectives set the direction for an organization, Key Results quantify progress towards the Objectives, and Initiatives are the actions taken to achieve Key Results. The paragraph emphasizes the importance of clarity, memorability, and inspiration in setting Objectives and the necessity of metrics in defining Key Results. It also distinguishes between outputs and outcomes, with Key Results being outcomes that indicate progress. The example provided illustrates how to set an Objective and corresponding Key Results, such as increasing an employer's NPS score.

05:05

📚 The Historical Roots and Evolution of OKR

This section delves into the history of OKR, tracing its origins back to Peter Drucker's Management By Objectives (MBO) in 1954. It acknowledges Andrew Grove, the co-founder of Intel, as the 'Father of OKR' for refining MBO into the OKR framework. The narrative continues with John Doerr's introduction of OKR to Google, which still uses the framework today. The paragraph also clarifies the difference between OKRs and KPIs, explaining that while KPIs measure ongoing processes, OKRs bridge the gap between ambition and reality, driving organizations into new territories. The comparison of an organization to a car, with KPIs as dashboard indicators and OKRs as a roadmap, effectively illustrates their complementary roles.

10:06

🛣️ Strategy and the Importance of Alignment in OKR

The paragraph discusses the significance of strategy in the OKR framework, emphasizing that a well-defined strategy is essential for effective goal setting. It outlines the components of a strategy, including the Ultimate Goal and Strategic Pillars, which together form the foundation for all OKRs and KPIs. The text stresses the importance of transparency and alignment across the organization, suggesting that understanding the strategy is crucial for everyone to work towards a common goal. It also introduces the concept of OKR rhythm, which involves setting and reviewing OKRs at different cadences, such as annually for the company and quarterly for departments and teams, to maintain continuous progress.

15:06

🚀 Best Practices for Implementing OKR and Perdoo Resources

This final paragraph offers key takeaways and best practices for effectively using OKRs. It advises focusing on a few critical OKRs to maintain clarity and prioritize based on the organization's strategy. The importance of transparency is reiterated, with a call to make strategy and goals visible to all. The paragraph also reiterates the distinction between OKRs and KPIs and their complementary roles in an organization's success. Finally, it encourages creating a rhythm for the OKR program and provides a resource for further learning on strategy, OKRs, KPIs, and growth at Perdoo's website.

Keywords

💡OKR

OKR stands for Objectives and Key Results, which is a framework for setting and tracking goals within an organization. It is central to the video's theme as it is the main subject being discussed. The script explains that OKR consists of three components: an Objective, Key Results, and Initiatives. For instance, the Objective 'Our customers are the happiest they've ever been' sets a direction, while Key Results quantify this ambition with metrics.

💡Objective

An Objective in the context of OKR is a forward-looking statement that describes what an organization or team aims to achieve. It is a part of the OKR framework and is meant to be easy to understand, memorable, and inspiring. The script emphasizes that Objectives should not contain technical jargon or metrics, serving as a guiding destination, such as 'Our brand is the talk of the town.'

💡Key Results

Key Results are specific outcomes that need to be achieved to reach the Objective. They serve to clarify the Objective and measure progress towards it. The script mentions that Key Results should contain a metric with a start and target value, acting as signposts on the journey to the Objective, like increasing an employer NPS score from 30 to 50.

💡Initiatives

Initiatives are the actions or projects undertaken to achieve Key Results. They represent the 'how' of reaching the Objective and are part of the OKR framework. The script provides examples such as 'squash all high priority bugs in our product' or 'hire two new support agents,' illustrating the practical steps taken to progress towards Key Results.

💡Outcome

An outcome in the script is defined as a result of an action, distinguishing it from an output, which is simply an action performed. Outcomes are important in OKR as they represent the desired results, such as 'I closed 10 new customers,' which is a result of making sales calls, an output.

💡Strategy

Strategy in the video script refers to the long-term plan of an organization, including its Ultimate Goal and Strategic Pillars. It is essential for setting the direction and priorities for OKRs. The script explains that strategy is critical for resource allocation and competitive positioning, and it should inspire all OKRs and KPIs.

💡Alignment

Alignment in the context of the video means ensuring that all members of an organization are working towards common goals and are aware of the organization's direction. The script mentions that a key reason for implementing OKR is to improve alignment across the organization, which is crucial for effective goal attainment.

💡KPI

KPI stands for Key Performance Indicator, which is a measure used to evaluate the success of ongoing processes or activities. The script clarifies that KPIs are different from OKRs, with KPIs monitoring performance and OKRs driving progress and innovation. KPIs are likened to a car's dashboard, providing ongoing performance data.

💡Cadence

Cadence in the script refers to the frequency with which OKRs are set and reviewed within an organization. It is part of creating an OKR rhythm, which is essential for continuous progress. The script suggests that a common cadence is annual OKRs at the company level and quarterly OKRs at the department and team levels.

💡Rhythm

Rhythm in the context of OKR refers to the regular pattern of setting, updating, reviewing, and closing OKRs. The script emphasizes the importance of creating a rhythm for an OKR program to ensure everyone in the organization knows what is expected of them and when.

💡Perdoo

Perdoo is mentioned in the script as a platform that offers a free account for users to start working with OKRs and put the knowledge from the video into practice. It is a resource for those interested in implementing OKR in their organizations.

Highlights

OKR stands for Objectives and Key Results, which includes a third component, Initiatives, not just Objectives and Key Results.

An Objective in OKR is a future-oriented goal that sets the direction for an organization or team, without technical jargon or metrics.

Key Results quantify and specify Objectives, providing measurable progress towards the set goals with metrics and target values.

Initiatives are the projects and tasks undertaken to achieve Key Results, acting as the actionable steps towards the Objective.

A good Key Result is an outcome, not an output, representing the result of actions rather than the actions themselves.

OKR is a framework for managing goals and a method for formulating them, distinguishing it from traditional goal management.

OKRs provide clarity on what is important, unlike traditional goals which can lead to a list of equally important tasks.

The history of OKR dates back to 1954 with Peter Drucker's Management By Objectives and further development by Andrew Grove at Intel.

John Doerr introduced OKR to Google, where it continues to be used, highlighting its significance in the tech industry.

OKRs are not the same as KPIs; they serve different purposes but work well together, with KPIs monitoring ongoing processes and OKRs driving new initiatives.

An organization's strategy is critical for OKR implementation, defining the Ultimate Goal and Strategic Pillars that guide OKRs and KPIs.

OKRs improve alignment across an organization by ensuring everyone is working towards a common goal, based on a well-defined strategy.

An OKR rhythm involves a combination of cadences, with different frequencies for setting and reviewing OKRs at various organizational levels.

The OKR framework is flexible, allowing organizations to find the best cadence for their needs, starting with an annual and quarterly approach.

Frequent updates and reviews of OKR progress are key to success, with best practices suggesting weekly check-ins for quarterly OKRs.

Closing OKRs is an important process for reflection and learning, informing future goal setting and strategic decisions.

Best practices for OKR include focusing on fewer critical goals, prioritizing strategy, ensuring transparency, and understanding the distinction and complementarity of OKRs and KPIs.

Creating a rhythm for the OKR program with standardized processes helps align expectations and timelines for goal setting and review.

Transcripts

OKR stands for Objectives and Key Results that will make you think that there are only  

two components to an OKR. But in fact there are three:

an Objective, Key Results and Initiatives.

The Objective tells you where to go.

Key Results help you measure progress towards your Objective.

And Initiatives are everything  you'll do to achieve your Key Results.  

Let's take a closer look at each of these three components starting with Objectives.  

An Objective describes something that  you'd like to achieve in the future.  

It sets the direction for your organization or team – think of it as a destination on a map.  

It's important that an Objective is easy  to understand, memorable, and inspiring.  

Objectives are a great tool to communicate across the organization what everyone is working on.

For that reason, Objectives shouldn't contain technical jargon and they also shouldn't contain a metric.  

An example of an Objective would be "Our customers are the happiest they've ever been".

Now let's take a closer look at Key Results.

Key Results are all the results that need to be achieved in order to get to your Objective.

Key Results do two things: firstly they help specify the Objective.

Qualitative Objectives can be a bit ambiguous so you need Key Results to quantify the Objective

and to make them specific.

Imagine your Objective is to be a top place to work in the United States.

You could measure this in terms of where you rank in Fortune's 100 top places to work list,  

eNPS score, number of applicants per  job post, or multiple indicators at once.

Whatever you mean by being a top place to work the Key Results will make that clear.  

Secondly, Key Results help you measure progress toward your Objective.  

Therefore, a Key Result must always contain a metric, and have a start and target value.

Think of Key Results as a signpost with a distance marker  that shows you how close you are to your Objective. 

Imagine your desired destination is New York, that's your Objective.

The signposts indicating distance towards your destination are your Key Results.

One important thing to note is that a good Key Result is typically an outcome and not an output.

An output simply is something that you do, such as a task or a project.

For example, make 50 sales calls will be an output.

An outcome is a result of what you do, for example, I closed 10 new customers. That's an outcome. 

Now given the example Objective provided earlier, a good key result will be: 

Increase our employer NPS score from 30 to 50.

Finally let's take a look at Initiatives.

Initiatives are all the projects and tasks that you work on in order to push progress on your Key Results.

Think of it as everything you'll do in order to get to your destination.

An example of initiatives could be: (1) squash all high priority  bugs in our product or (2) hire two new support agents.

By now you have a clear understanding of the components of an OKR.  

But you're probably wondering what all the fuss is about.

Why not stick to calling these simply goals as we already know it? Why complicate things?

Trust me we have a good reason for it.

After all we didn't build an entire platform with OKR at its very core for no reason.  

So let's briefly talk about the  difference between goals and OKR.

OKR is two things: on the one hand it's a framework that contains best practices to  

help you manage your organization's goals.

On the other hand it's a way to formulate those goals.

Let's first have a look at how  you're used to managing goals.  

Imagine you want to increase brand awareness for your business.

You would then set yourself a goal to acquire 20 000 new leads per month.

And you'd probably go on to set yourself even more goals such as setting up 10 ad campaigns and

writing five new blog posts per month.

You end up with this list of goals that all feel equally important and you don't really know where to start.

But the only thing that truly matters is  to increase brand awareness.

Now if you'd structure these goals as an OKR you would have much more clarity about what really is important to you.  

Your Objective would be our brand is the talk of the town.

Your Key Results will be to acquire 20 000 new leads per month.

Together this Objective and the Key Result form the outcome that you'd like to achieve.

Your Initiatives are the things that  you'll be doing to help you reach that outcome.

That could entail setting up 10 ad campaigns, write 5 new blog posts per month, or put up  

100 new billboards around the city's most busy spots.

Make sense? Great!

Before we get any further into the details, let's just go back in history shortly to see where and when OKR came into being.

OKR dates back to 1954 when Peter Drucker invented Management By Objectives, also known as MBO.  

In 1968 Andrew Grove co-founder of Intel, also known as the 'Father of OKR' further developed  

and refined MBO into the OKR framework as we know it today.

In 1974 John Doerr joined Intel and learned about the concept of OKR.

Doerr went on to join Kleiner Perkins Caulfield and Byers – one of the first major investors in Google.

Doerr became an advisor to Google in its very early days.

He introduced OKR to Google's  founders Larry Page and Sergey Brin.

They then implemented OKR at Google. In fact, Google still works with OKR today.  

Now that you have a good understanding of what OKR is all about and before we move on  

there's one important thing I need to point out since many people confuse OKRs for KPIs.

OKRs are not the same as KPIs.

OKRs and KPIs are completely different goals with different purposes.

They work really well together and there's great value in tracking them alongside each other.

But what's the difference between the two?

KPI stands for Key Performance Indicator.

KPIs are a type of performance measurement aimed at  evaluating the success, output, quantity or quality of an ongoing process or activity.

These processes and activities are usually already in place.

OKRs on the other hand provide the missing link between ambition and reality.

They help you break the status quo and take you into new often unknown territory.

If you have a big dream; something that you'd like your organization to achieve in the future, you'd need OKRs to take you there.  

As I said, OKRs and KPIs work well together.

Let's imagine your organization is a car and you're driving that car towards the destination.

Your KPIs are what you'll find on your car's dashboard such as the fuel gauge and the engine temperature  gauge.

These are the things that you constantly need to watch to ensure your engine isn't overheating and that you're not running out of gas.  

On the other hand, your OKRs are like your roadmap that guides you toward your destination.  

These are all the temporary goals that will change from time to time.

So once you've passed the landmark toward your destination you'll then focus on the next landmark and then the next one.  

Now that we've clarified the difference between OKRs and KPIs, it's time to take a closer look at the purpose of OKR.

Why should you adopt OKR for  your organization and what should you be using it.

Following Google's success with OKR it's  become a popular goal management framework and  

has been adopted by millions of organizations worldwide.

A key reason for most organizations to implement OKR is to improve alignment across their organization.

They essentially want to make sure everyone is pulling in the same direction and working toward a common goal.

But in order for OKR to boost alignment, you first need to get your strategy in place.

Every organization has limited resources and is faced with competition.

For that reason, strategy becomes critical and tough choices will have to be made.

Such as which battles you want to fight and which battles you don't want to fight.

And what winning looks like.

The answers are your strategy.

Your strategy consists of two parts: your Ultimate Goal and your Strategic Pillars.

The Ultimate Goal defines your organization's ultimate winning aspirations,

making clear what the purpose of your business is,

for whom your organization is fulfilling that purpose,

and when you'll consider your venture a success.

Once you know your business' playing field and what winning looks like the next step is to figure out  

how you're going to win.

Those how-to-win choices reflect what you do to differentiate yourself in the market.

Those choices will be the pillars that will support your Ultimate Goal.

If you decide to change your Ultimate Goal, you also have to revisit how to win on that new playing field.

Your Ultimate Goal and Strategic  Pillars are therefore jointly called your strategy.  

This strategy will serve as the foundation that will inspire  

all the OKRs and KPIs that your organization will be working on.

And that's why it's so important to track your strategy and goals in the same place.

It creates transparency, enabling everyone to see the bigger picture and if what they're doing is aligned with it.

An OKR rhythm is most successful when it operates on a combination of cadences.  

These cadences interact with each other to create a rhythm of continuous and focused progress.  

If you're wondering what a cadence is: a cadence is quite simply the frequency with which the  

organization and its teams set and review their OKRs.

While your organization's strategy guides you in everything you do, it needs to be made actionable through OKRs.

On company level, these OKRs are usually annual.

On department and team level OKRs are typically quarterly.

Toward the end of the year, executives start reviewing current year's performance

as well as the organization's strategy.

They then define the organization's key priorities for the next year.

These company level OKRs communicate the three, four, or sometimes even five  

bigger themes that the leadership team wants  everyone to focus on throughout the next year.  

Teams and departments then set shorter term OKRs that support the higher level company-wide priorities.

It's important to note that the OKR framework is flexible and forgiving.  

There's no one-size-fits-all rule on  setting the right combination of cadences  

for your organization and its teams.

Since 94% of organizations work with this annual quarterly cadence, it offers a safe starting point.

From there you can modify your approach as you learn what works best for you.

Staying on top of OKR progress is the key to success.

Our data is showing that organizations updating and reviewing their goals progress frequently

are more likely to achieve their goals than those that don't.

Therefore to ensure that execution succeeds it's important to clearly define the frequency

at which people need to update and review their goals.

For quarterly OKRs it's a best practice to check in on a weekly basis.

An often overlooked part of an OKR program is the process of closing OKRs.

As you approach a new quarter and are wrapping up work on the current quarter's OKRs,

it's important to pause and reflect.

It enables you to collect and share your learnings before you start focusing on something new.

By doing so you and your teams have enough information to make informed decisions for the future.

So don't forget to allot time at the end of the quarter to take a step back and reflect on your goals.

I know that probably was a lot of information.

We're almost done before you go I'd like to sum the key takeaways from this video

and share a few important best practices to help you kick-start your journey with OKR.

1. When it comes to OKR, less is more.

OKRs help you focus on what's most important right now.

So don't set too many OKRs and avoid putting everything you're doing in your OKRs.

Don't be afraid to say no to things that are just not critical right now.

2. Strategy first, OKR second.

If your people don't understand your organization's purpose in the field it's playing in,

no amount of well-written OKRs can support your organization in reaching its desired destination.

3. Transparency. To ensure you're moving in the right direction you want to involve everyone in your organization.

Your people can't make an impact if they don't know what they're working toward

and what's currently happening across the organization.

So make sure your strategy company  and team goals are visible to everyone.  

4. OKRs are not the same as KPIs.

Instead, they perfectly complement each other.

KPIs monitor performance and identify  problems and areas for improvement. 

OKRs solve problems improve processes and drive  innovation.

Tracking them alongside each other not only provides the bigger picture at all times

but you also have all the functioning parts in front of you that your organization, teams, and people need to deliver strategy.  

5. Create a rhythm for your OKR program.

Standardize the processes for when you set, close, update, and review your OKRs.

By doing so everyone knows what's expected of them and when.

If you're ready to start working with OKRs and put your new knowledge into practice  

head over to our website perdoo.com  and sign up for a free Perdoo account.  

If you'd like to learn more about OKR, head over to our resources hub at perdoo.com/resources for a wealth of knowledge on

everything about strategy, OKRs, KPIs, and growth.