The OKR methodology is a goal-setting management framework. In this acronym, “O” stands for “objectives” and “KR” for “key results”.. It was invented in the 1950s by the “management pope” Peter Drucker, known for having developed a number of ideas and concepts intended to revolutionize the business world. But it was only in the 1970s that it became more democratic, thanks to Andy Grove, former CEO of Intel.
The OKR methodology has been adopted by top companies such as Google, Twitter, Linkedin, Netflix, Oracle, etc. But don’t get it wrong: OKR is not reserved only for large companies. SMEs and start-ups also increasingly use this method in Europe.
How does this methodology work and what does it bring to the company? How to put it in place concretely? What are the potential pitfalls to avoid? In this article, we tell you all about OKRs!
The fundamentals of the OKR methodology and its benefits
The OKR methodology is a great alternative to traditional project management approach. It simplifies objectives definition and monitoring to help individuals and teams be more efficient. OKRs are based on two pillars: a general mission expressed by several ambitious objectives, and the key results which are precise and measurable indicators of success.
The OKR methodology brings several benefits:
- it makes work more meaningful by giving everyone a global mission and clearly defined objectives
- it unites, aligns and motivates employees around a common goal
- it empowers teams: each employee is involved in the process of defining the objectives which are then monitored and shared with everyone
- it enables a transparent and efficient monitoring of objectives over a specific period of time, usually a quarter
- it translates the vision and the mission of the company into a concrete action
This management framework cannot be set up overnight, it requires some time and preparation. It is important to adapt this concept to the specificities of your company. First of all, the fundamental mission of the company must be defined and understood by all. More or less complex to set up in certain structures, choosing the right objectives derives from a global perspective. This mission should be neither too general (otherwise it is difficult to implement) nor too descriptive (otherwise it will not be meaningful and the teams won’t believe in it).
For example, the mission of a company like Hermès is to "create unique and original objects". Each team (marketing, communication, sales, finance, etc.) must then put in place a strategy to participate in this mission, through the objectives that it sets for itself. This is where you need to know how to define the objectives as well as the expected results.
First step: set the right goals
The first step is to set ambitious but achievable goals, usually on a quarterly basis. Quarterly time horizon allows you to course-correct your goals or trajectory and learn fast. To define the objectives, you must answer the question “Where do we want to go or what do we want to achieve?”. The objectives must be clear, never vague: everyone must be able to understand them. For example, don’t say that you want to have a European footprint, but rather set the goal of opening 10 new stores in Europe. Goal setting can be a topic to cover during your weekly or biweekly management rituals. As a manager, this is a good time to coordinate with each member of the team and set appropriate goals.
The objectives must push employees to give their best. Hence the importance of the term “ambitious”. "We tell ourselves that we are happy if we have reached 70% of our objectives," Perrine Daumont, business development manager at Google, told Maddyness. Underneath is that the person has been too presumptuous, above that is that he has not been ambitious enough. Also, it is important to choose between 3 and 5 goals, not too many, so as not to feel overwhelmed. Finally, each employee must feel involved, so the objectives must be set collectively. Defining an action plan allows you to target a common goal and will allow everyone to be aligned with a meaningful strategy. Consistent and concrete goals strengthen employees’ engagement who will feel more able to accomplish them. In addition, it allows employees to develop their confidence and perform better on a daily basis.
The SMART method is very effective in setting the right objectives and achieving them over a realistic period. This method adapts to the profile of each employee to help them achieve their goals. In particular, it will help clarify the responsibilities of each person on the team and improve the quality of employees’ work in the long term as well as in the short term.
Second step: define precisely the expected results
The second step is to define the key results which should be concrete indicators that will serve as a benchmark for the achievement or not of the objective. Defining the key results is equivalent to answering the question "How to achieve such a goal?" Key results must always be precise and specific.
For example, the key outcome of opening 10 new stores in Europe is to find 20 stores for sale in each relevant city. Among these 20 opportunities, you will visit 10 by the end of the month, etc. These are always quantifiable elements that should be used to measure progress. Such data is significant when it is collected and then analyzed. They can follow a readjustment of objectives and allow the status of projects to be checked. Critical for HR, these indicators can be assembled into a report for semi-annual, quarterly or annual review. They will also allow you to think about the future perspectives of your team.
Finally, keep in mind that OKRs can be defined at the individual level and / or at the team level. Monitoring can be a bit more complex when the method is done at the individual level. The start-up Partoo explains in this article the difficulties encountered, in particular in terms of timing and format for quarterly reviews.
Mistakes to avoid
As we have seen, the OKR methodology helps the company to think globally, to foster employees’ autonomy and to clearly identify progress and roadblocks that teams may encounter. However, this method can be counterproductive if it is not well managed. If the objectives are poorly defined or if they are too ambitious, they will rarely be achieved, which can lead to demotivation among teams. "Stretch goals", or goals that are deliberately difficult to achieve in order to identify the best profiles (Google, for example, uses this method), can put employees morale and performance at risk. Indeed, what is the point of even trying if the goal is unachievable or unrealistic? To make sure you assign achievable goals, take the time to review them with each team member. For example, you can ask the questions "Do you feel capable of achieving this goal?", "What do you need from me to achieve these goals?" Once a month, check in to take the pulse.
It is also important to remain mindful of time when implementing an OKR approach within the company. Definition of objectives and key results each quarter, validation by the top management, communication to other team members, monthly updates: the OKR methodology can quickly become very time-consuming. It is not uncommon for some teams to give up after a few weeks: for example, Spotify tried to roll out OKRs but stopped after a few months. You need to equip yourself with the right tool that will facilitate the definition and monitoring of OKRs throughout the year. By giving the right framework and automating the process, Popwork is a quick and easy way to effectively implement the OKR methodology.
Finally, keep in mind that team management is not just about defining quantified objectives and measuring performance. Human aspects and more qualitative indicators are just as important, don't forget it!
In the end, the best way to get an opinion on the OKR methodology is to give it a try!