The OKR methodology is a goal-setting management framework, where “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. It is now broadly used across many company types.
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. First of all, the fundamental mission of the company must be defined and understood by all. 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.
Step 1: 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.
The objectives must push employees to give their best. Hence the importance of the term “ambitious”. 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.
Step 2: 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. 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.
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.
Step 3 : keep in mind the 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?
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.
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!