Objectives and Key Results E-Book

Paul R. Niven

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: Wiley Corporate F&A
• Sprache: Englisch

Seitenzahl: 371

Veröffentlichungsjahr: 2016

Beschreibung

Everything you need to implement Objectives and Key Results (OKRs) effectively Objectives and Key Results is the first full-fledged reference guide on Objectives and Key Results, a critical thinking framework designed to help organizations create value through focus, alignment, and better communication. Written by two leading OKRs consultants and researchers, this book provides a one-stop resource for organizations looking to quantify qualitative goals and ensure each team focuses their efforts to make measureable progress on their most important goals. You'll learn how OKRs came to be and how leading companies use them every day to help teams and employees stretch their thinking about what's possible, build their goal-setting muscles and achieve results that reflect their full potential. From the basic framework to a detailed dissection of best practices, this informative guide walks you through real-world implementations to help you get the most out of OKRs. OKRs help employees work together, focus effort, and drive the organization forward. Key results are used to define what it means to achieve broad, qualitative goals, and imperatives like "do it better" are transformed into clear, measureable markers. From the framework's inception in the 1980s to its popularity in today's hyper-competitive environment, OKRs make work more engaging and feature frequent feedback cycles that enable workers to see the progress they make at work each and every day. This book shows you everything you need to know to implement OKRs effectively. * Understand the basics of OKRs and their day-to-day use * Learn how to gain the executive support critical to a successful implementation * Maintain an effective program with key assessment tips * Tailor the OKRs framework to your organization's needs Objectives and Key Results is your key resource for designing, planning, implementing, and maintaining your OKRs program for sustainable company-wide success.

Leseprobe

Advanced Praise forObjectives and Key Results: Driving Focus, Alignment, and Engagement with OKRs

“Providing value to your organization is about business outcomes, not technology. This book is a must-read for anyone looking to align resources to focus on what matters most to their business. The insights and techniques you will acquire reading this book will put you on a fast track to providing clarity of purpose.”

Roger Fugett CIO, CareerBuilder

“Even after implementing OKRs three years ago at SHC, this book helped me reflect on how we can continue to improve our approach and benefit even more from the tremendous value of OKRs. If you're new to OKRs, read this book. If you've already implemented OKRs, read this book.”

Holly Engler Director Strategic Talent Management, Sears Holdings Corporation

“A great read! OKRs are critical to driving operational rigor and alignment—and every company can benefit from this approach. Applying the right technologies and the right processes together can truly revolutionize the way we work. If you care about driving business results, innovation, employee engagement, and alignment, this book is a must read.”

Kris Duggan CEO, BetterWorks

“Niven and Lamorte have done a great job putting together this comprehensive guide to OKRs. They offer an interesting and practical approach that is sure to save you time in figuring out what works best for your organization.”

Henrik-Jan van der Pol Founder & CEO, Perdoo

“Written by two renowned experts in the field, this is the essential OKRs handbook. As an OKRs coach, I can tell you with confidence that you don't want to miss this one.”

Felipe Castro Founder, Lean Performance

“Setting objectives and measuring performance against those objectives are critical to every organization's success for many, many reasons. This book is a must-read for any organization that wants to do these things right.”

Randall Bolten CFO and author of Painting with Numbers

“A scorecard is great for an executive, a dashboard for a department, but what about individuals? Enter the OKRs—objectives and key results—a new lightweight technique popularized by Intel and Google that focuses and motivates employees to achieve at high levels. This book explains what OKRs are, how they work, and how they can transform organizations.”

Wayne W Eckerson Founder & Principal Consultant, Eckerson Group

“When I discovered OKRs, I realized that someone had codified the methods that the best executives use to create consistently superior performance. When I read this book, I realized that Niven and Lamorte had explained what OKRs are, why OKRs lead to success, and how to implement OKRs in a practical, efficient manner. CEOs of companies large and small should read this book!

Mark Mitchell Entrepreneur & Angel Investor

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Table of Contents

Title Page

Copyright

Dedication

Introduction

Why We Wrote this Book

How We Got Started with OKRs

How The Book is Organized

Acknowledgments

Chapter 1: Introduction to OKRs

The History of OKRs

What Are Objectives and Key Results (OKRs)?

Objectives

Key Results

Organizational Challenges, and Why You Need OKRs

Benefits of OKRs

Notes

Chapter 2: Preparing for Your OKRs Journey

Why Are You Implementing OKRs?

Executive Sponsorship: A Critical Component of Your OKRs Implementation

Where to Develop Your OKRs

Special Cases

An OKRs Development Plan

Key Lessons for Successful Transformation

The Building Blocks of OKRs: Mission, Vision, and Strategy

Roadmap Strategy

Notes

Chapter 3: Creating Effective OKRs

Omaha

Creating Powerful Objectives

Tips for Creating Objectives

Objective Descriptions

Characteristics of Effective Key Results

Tips for Creating Key Results

Types of Key Results

Scoring OKRs

How Often Do We Set OKRs?

How Many Okrs Do We Have?

Do OKRs Stay the Same from Quarter to Quarter?

Can OKRs Change

during

the Quarter?

The Process to Set OKRs

Notes

Chapter 4: Connecting OKRs to Drive Alignment

A Critical Link

Connecting OKRs

How to Connect OKRs

Creating Alignment

Confirming the Alignment of Connected OKRs

Closing Thoughts on Connecting

Notes

Chapter 5: Managing with OKRs

The Cycle: Monday Meetings, Mid-Quarter Check-Ins, and Quarterly Reviews

Updating OKRs at the End of the Quarter

Software and OKRs

Let's Play 20 Questions!

Notes

Chapter 6: Making OKRs Sustainable

Don't Think of OKRs as a Project

Who Owns the OKRs Process?

OKRs and Performance Reviews

OKRs and Incentive Compensation

Top 10 OKRs Issues

How Not to Implement OKRs…and Where Consultants Can Help

Concluding Thoughts

Notes

Chapter 7: Case Studies in OKRs Use

Flipkart

CareerBuilder

Zalando

Sears Holdings Corporation (SHC)

GoNoodle

TaxSlayer

Note

About the Authors

Index

End User License Agreement

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Guide

Table of Contents

Begin Reading

List of Illustrations

Chapter 1: Introduction to OKRs

Exhibit 1.1 Examples of Company-Level OKRs

Exhibit 1.2 Examples of Team-Level OKRs

Exhibit 1.3 Examples of Individual-Level OKRs

Exhibit 1.4 Why OKRs?

Chapter 2: Preparing for Your OKRs Journey

Exhibit 2.1 Where to Deploy Your OKRs

Exhibit 2.2 Creating Context for OKRs

Exhibit 2.3 Simplified Mission Statement Template

Exhibit 2.4 Example Mission Statements

Exhibit 2.5 Example of MOKRs (Mission, Objectives, and Key Results)

Exhibit 2.6 The Four Fundamental Strategy Questions

Chapter 3: Creating Effective OKRs

Exhibit 3.1 Anatomy of an Effective Objective

Exhibit 3.2 Anatomy of an Effective Key Result

Exhibit 3.3 Types of Key Results

Exhibit 3.4 Scoring Key Results

Exhibit 3.5 The “Craft” Process for Developing OKRs

Chapter 4: Connecting OKRs to Drive Alignment

Exhibit 4.1 The Connecting Process

Exhibit 4.2 Horizontal Alignment

Chapter 5: Managing with OKRs

Exhibit 5.1 OKRs Timeline

Exhibit 5.2 Primary Users of OKRs Solutions

Exhibit 5.3 Data Entered into OKRs Solutions

Chapter 7: Case Studies in OKRs Use

Exhibit 7.1 OKRs are A Global Phenomenon

Objectives and Key Results

Driving Focus, Alignment, and Engagement with OKRs

PAUL R. NIVENBEN LAMORTE

Copyright © 2016 by JohnWiley & Sons, Inc. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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To my wife, Lois, for always believing in me and offering the inspiration to reach beyond the limits of what I think is possible.

-P.N.

To my wife, Ariana, for the limitless, unconditional love and for encouraging me to focus on my dreams.

-B.L.

Introduction

WHY WE WROTE THIS BOOK

Any company embarking on an OKRs implementation will realize very soon after the work begins that it is much more than a “measurement project.” The ultimate goal is improved performance through the identification of objectives and key results that are refreshed frequently in order to ensure agility in a business world where the pace of change is ever accelerating. However, to achieve success with OKRs, there are numerous processes and tasks that must be seamlessly executed. Generating support and enthusiasm from executives, determining where to deploy OKRs, mastering the nuances of effective OKRs, connecting OKRs throughout the company, reporting results, capturing key learnings, and ingraining the methodology into the culture of the organization are just some of the requirements of an effective rollout.

As we write this, the OKRs field is still relatively nascent in terms of standard practices and proven procedures. It is an emerging discipline, and while implementations are growing by the day, and consultants and software providers are coming forward in attempts to plug knowledge gaps, no definitive how-to guide exists for organizations anxious to implement OKRs without falling prey to potential pitfalls that can derail this or any change effort. This book is our answer to that challenge. It was written to fill the void that currently exists between knowledge and practice. Organizations wishing to reap the benefits of OKRs must first be made aware of—and properly equipped to overcome—the challenges associated with an undertaking of this magnitude. Based on our global consulting experience with OKRs as well as the extensive research we've conducted, these pages will act as your comprehensive guide through the entire OKRs terrain. We're confident the tools and techniques profiled in this book will propel the success of those currently engaged with OKRs and compel more executives to launch OKRs programs in their own organizations. Before we outline how the book is organized, let us share with you our backgrounds and experience with the topic.

HOW WE GOT STARTED WITH OKRs

Ben

“When you go for a hike with your family, it's fine to just walk and enjoy the scenery, but when you're at work you need to be crystal clear about the destination. Otherwise you're wasting your time and the time of everyone who works with you.”

Those words changed Ben's life. The source of that wisdom was former Oracle Chief Financial Officer Jeff Walker. Walker shared this advice with Ben in a personal conversation and later expanded on the principle in a keynote he delivered to a group of planning professionals in Palo Alto in 2011. During the talk Walker explained objectives and key results (OKRs). He discussed how businesses must outline their desired future in the form of objectives—aspirational and qualitative statements designed to move the organization forward in a desired direction. Each objective is then translated into an underlying set of measurable key results. If the objective asks, “What do we want to do?” the key result asks, “How will we know if we've met our objective?” Ben was immediately struck by the potential power of OKRs and sensed that the framework would become critical to his work, but at that point didn't know how it would manifest. He was soon to find out.

Ben was approached by an organization to assist them with a KPI (key performance indicators) project. He accepted the assignment and found himself eagerly awaiting the strategy document that was to be supplied by the company's CEO. When it arrived, Ben felt overwhelmed. The strategy slide decks and documents were stuffed with ideas and good intentions, but the materials contained a confusing mix of key pillars (corporate priorities), core values, and business metrics. Ben struggled with how to approach the project, and it wasn't until arriving at his hotel room the night before meeting with the CEO and CFO that he recalled the advice of Jeff Walker. With that in mind, Ben condensed the strategy document into a single page, translating the key pillars into objectives, and assigning key results to each. The next day, he used this organizing framework of OKRs to share his understanding of the organization's strategy. After his overview, the executives fell quiet and asked for a moment of privacy. Ben left the room convinced he had misinterpreted the strategy and would quickly be dispatched to the airport for the next plane home. Two minutes in the hallway felt like two hours, but when he was summoned back into the room he was relieved to see a smile on the face of the CEO, who said: “We want you to help us create this type of document for every business unit and department in the company!” After helping close to 50 teams at the company draft and refine their OKRs, and later witnessing their success with the method, Ben knew he had found his calling. Hundreds of hours coaching teams and managers later, here we are.

Paul

Paul has been working in the performance measurement and strategy execution space for close to two decades. He was introduced to the concepts through interactions with a company looking to improve its performance. In Paul's case, the company was in a fast-changing industry with nimble competitors emerging rapidly and customers demanding improved service with no price increases. A new strategy was created: one that if effectively implemented would deliver enhanced strategic skill sets across the company, see the overhaul of key business processes, drive value for customers, and ultimately produce breakthrough financial results. But could they make it happen? Key to their execution was the identification of measures they would use to hold themselves accountable for achieving each plank of the strategy. It took time, but by focusing on a core set of metrics to learn about what was, and was not, working with the strategy, the company ultimately delivered on its promises to customers, employees, and shareholders alike. The real “Aha” for Paul came in the form of employee surveys conducted before and after the development and use of strategic measurement. Beforehand, just a small percentage of employees said they understood the company's strategy and how they could contribute. However, after the use of strategic measurement, the percentage jumped nearly fivefold to a large majority of employees. Like Ben, Paul saw the value of applying measurement to strategy and set out to help organizations harness that power.

Some readers may be familiar with Paul through his work and books on the Balanced Scorecard, a popular framework that translates strategy into objectives, measures, targets, and strategic initiatives, using four distinct yet related perspectives of performance: financial, customer, internal processes, and learning and growth. The framework has been embraced by legions of organizations around the globe, and while it is unquestionably effective, many companies have struggled in implementing, and fully maximizing the benefits of, the scorecard model. One of the chief issues organizations raise is the model's increasing complexity. The Scorecard's taxonomy has swollen over the years since its founding in the early 1990s, and many experts have layered on increasingly convoluted schematics that have added even more moving parts to what was originally conceived as an easy-to-apply approach to measuring an organization's strategy. The end result is that, for many organizations, despite its benefits the Balanced Scorecard appears too cumbersome to be rolled out to an entire organization, one comprised of teams yearning for simple, yet powerful methods to ensure their work is focused on what matters most and leads to the execution of the company's strategy. Enter OKRs.

Paul was searching for a “lighter-weight” system that would still provide the very real benefits desired by his clients who wished to extract the most value from their strategies. He discovered OKRs through his research and quickly learned of the work Ben was doing in the field. The two met and bonded over their mutual desire to help improve organizational performance and the belief that OKRs, while seemingly simple, can deliver outsized value to any company wishing to improve focus, drive alignment, and improve engagement. They began working together with clients in 2015.

HOW THE BOOK IS ORGANIZED

Objectives and Key Results is composed of seven chapters. The first six will lead you through an OKRs implementation in more or less chronological order, while the final chapter showcases the work of a number of global organizations currently benefiting from OKRs.

In the opening chapter we share the history of OKRs, followed by definitions and examples of both objectives and key results. Modern organizations face many crucial challenges that OKRs are well-suited to overcome. The chapter explores some of the more pressing topics. Chapter 1 concludes with an overview of the many benefits of OKRs. Before you can implement OKRs, you must ensure your organization is ready to embark on the journey ahead. Chapter 2 explores how to prepare for the creation and use of OKRs. The first question posed is, “Why are you implementing OKRs?” The critical topic of executive sponsorship is discussed, including how to gain sponsorship. Considerations on where to develop OKRs are presented, followed by a comprehensive plan for developing OKRs. The chapter concludes by defining the strategic context for OKRs using a mission, vision, and strategy. In order for OKRs to deliver benefits, they must be crafted with care and possess a number of key characteristics. Chapter 3 outlines how to create effective OKRs. Types of key results are examined, followed by a discussion of health metrics, and the scoring of OKRs. The chapter ends with a review of our CRAFT (create, refine, align, finalize, and transmit) process for creating OKRs.

OKRs must be created throughout the organization in order to drive engagement, accountability, and focus. We call this “connecting OKRs,” and it is the subject of Chapter 4. Processes and tips for connecting OKRs both vertically and horizontally across the organization are explored. To gain the maximum value from OKRs, they must be regularly monitored both during, and at the conclusion of, each cycle. Chapter 5 explores the cycle of OKRs reviews and how software can enable OKR success. The OKR review cycle consists of three primary mechanisms, each of which is discussed: Monday meetings, mid-quarter check-ins, and quarterly reviews. The second half of the chapter examines the use of software in the implementation and management of OKRs. To ensure the long-term success of OKRs, they must be ingrained into the culture of the organization. Chapter 6 examines how to make OKRs sustainable. Many companies will consider OKRs a “project,” but that is a mistake. The chapter opens by arguing why you should consider OKRs an ongoing process. Any company using OKRs must determine whether to link them to performance reviews and/or incentive compensation. These potential links are explored in detail in the chapter, with pros, cons, and recommendations. The chapter concludes with the top 10 issues to consider before, during, and after creating OKRs and analyzes how and if to leverage consultants for your OKRs implementation.

Chapter 7 shares the stories of six global organizations currently using OKRs to great advantage. Profiled in the chapter are: Zalando, Flipkart, Sears Holdings, TaxSlayer, GoNoodle, and CareerBuilder. We're confident you'll both enjoy and learn from the reflections offered by these exceptional and innovative organizations.

Companies at any stage of OKRs development will benefit from the advice offered in this book. Those launching OKRs efforts will, of course, derive benefits from the detailed tools and techniques guiding them from initial design to the creation of a robust management system. Those organizations that currently employ OKRs will also benefit from a review of the topics presented here. The processes and exercises chronicled can serve as a checkpoint or audit of their own program to ensure it is operating at peak effectiveness. And for those of you who are currently utilizing another form of strategic management system, we invite you to consider the many advantages offered by OKRs. Wherever you are on your OKRs journey, we thank you for allowing us to serve as your guides.

Paul R. Niven and Ben LamorteSan Diego and San Anselmo, California, May 2016

Acknowledgments

THIS BOOK IS PRIMARILY CONCERNED with connecting goals to the larger strategic picture and focusing on what is most important. Therefore, it's only fitting that we begin by recognizing the many people who contributed to this book, ensuring that we remained strategic and focused on what matters most in relating the story of OKRs. We've been exceedingly fortunate to enjoy the support of clients, colleagues, friends, and family. Outlined below are some of the many people we've been honored to work with and learn from—individuals whose lessons and insights helped shape this book.

We'd like to thank John Doerr, a leading Silicon Valley investor, for recognizing the power and potential of OKRs and introducing the concept to Google. We extend a shout-out to Rick Klau for creating the Google Ventures workshop video detailing how Google uses OKRs, and who was kind enough to take time to discuss OKRs with us. Thanks to Sid Ghatak, Jennie Lindeman Fimbres, Craig Heldman, Bobby Wilson, and the entire Metrics360 team. What began as an exercise in key performance indicators quickly evolved into the OKRs project that got us started. We'd like to thank our early OKR coaching clients who took the time to provide extensive feedback after OKR coaching sessions. These early clients include Terrell Chafin and Ken Heaps of Latham & Watkins, Richard Kip at University of California Santa Barbara, Chris Mason and Holly Engler at Sears Holdings Corporation, and Gary Mynchenberg of ZIN Technologies who hosted one of our first OKR workshops in Cleveland, Ohio. Our first International OKRs project took us to Berlin where we enjoyed many nights along the Spree River, collaborating with the team at Zalando. We'd like to thank Christoph Lange, Robert Gentz, Frauke von Polier, Maren Kroll, Katrin Mueller, Rami Sowan, Steven Bianchi, Edouard Yendell, and all the Zalandos who sat through our full-day OKRs Expert Training sessions. Thank you Willem-Jan Jansen and Grant Bryce of eBay Classified Group for connecting us to the Kijiji team in Toronto. We are indebted to John Herbold, Scott McQuigg, and the GoNoodle team for proving that it is in fact possible to launch a successful OKRs project across an entire organization in just a few weeks! We thank Devin Sherman, Brian Rhodes, Scott Rhodes, Thomas Sherrouse, and the TaxSlayer team for their southern hospitality and putting in the extra work to draft OKRs prior to our workshops in Georgia. We'd like to thank Sonia Madan for setting up our memorable OKRs workshop with Roger Fugett and the early OKR adopters at CareerBuilder along with Sabrina Pickeral and Andy Krupit for coordinating workshops in Chicago and Atlanta where CareerBuilder somehow managed to learn about OKRs and create drafts for roughly 30 teams in just a few days!

Although we cannot name every client, we do want to acknowledge some clients who often came to our minds as we developed material for this book, including Reiko Imai of ShopStyle, Jim Ricitelli, Thomas Spoonholtz, and Brian Elbogen at FirstREX, Alicia Raymond at OfferPop, Ben and Moisey Uretsky at Digital Ocean, and Roger Corn from OpenX.

In addition to these clients, we've benefited tremendously from the relationships and input from colleagues and friends. Vincent Drucker didn't simply provide us with guidance about what his father, Peter Drucker, might have had to say about OKRs, his mentoring forced us to carefully consider long-term planning at the team level in addition to the company level. In addition, Vincent reinforced our belief that OKRs should be framed positively and enabled us to expand OKR scoring by balancing the stretch concept with a commitment level. Conversations with OKRs experts around the world, especially Christina Wodtke, Felipe Castro, and Dan Montgomery, inspired us over numerous discussions regarding the theory and implementation of OKRs. Thanks to Kris Duggan and Paul Reeves at BetterWorks for giving Ben the opportunity to contribute to some of the early OKR training materials, hosting Goal Summit, and introducing us to Donald Sull. We'd like to thank other software vendors in the OKRs space, including Henrik-Jan Van der Pol, founder of Perdoo, and Chris Pieper of Alliance Enterprises, for their passion and commitment to ensuring OKRs can be connected and made visible throughout an entire organization. Other business partners and friends that have been instrumental in our thinking include Jay Forbes from MTS, Greg Foster of Vizen LLC, Sandy Richardson of Collaborative Strategy, Joe Clark of Prana Business, and Tor Inge Vasshus of Corporater. Finally, we would like to thank our parents, Bev and Jean Niven (posthumously), and Mario and Suellen Lamorte, for their love and support.

Chapter OneIntroduction to OKRs

THE HISTORY OF OKRs

We're fans of the BBC television show Connections, which premiered way back in 1978, and was later reprised in 1994 and 1997. The program demonstrated how major discoveries, scientific breakthroughs, and historical events were “built from one another successively in an interconnected way to bring about particular aspects of modern technology.”1 What the show made clear is that there is a long and interesting history behind virtually everything. So it is with OKRs. While we think of the model as relatively new—most of us would pin its origination to Google's adoption in the 1990s—it is actually the result of a successive number of frameworks, approaches, and philosophies whose lineage we can track back well over a hundred years. At the turn of the twentieth century, organizations were much enamored with the work of Frederick Winslow Taylor, a pioneer in the nascent field of Scientific Management. Taylor was among the first to apply scientific rigor to the field of management, demonstrating how such an approach could vastly improve both efficiency and productivity.

In another development, in the 1920s, researchers discovered what would later be termed “The Hawthorne Effect.” At a factory (Hawthorne Works) outside of Chicago, investigators examined the impact of light on employee performance. The studies suggested that productivity improved when lighting increased. However, it was later determined the changes were most likely the result of increased motivation due to interest being shown to employees. While these and many other advancements were casting a light on how companies could enhance productivity through monitoring discrete activities, for the most part employees themselves were an afterthought. That all changed, however, with the work of Peter Drucker.

Considered by most people (ourselves included) to be the father of management thinking, Peter Drucker set the standard for management philosophy and the theoretical foundations of the modern business corporation. Many of his more than 30 books are considered classics in the field. It is one book, his 1954 release, The Practice of Management, which is of particular significance to those of us interested in OKRs. In the text, Drucker tells the story of three stonecutters who were asked what they were doing. “I am making a living” was the response of the first cutter. The second continued hammering as he answered, “I am doing the best job of stonecutting in the entire country.” Finally, the third answered confidently, “I am building a cathedral.”2 The third person is clearly connected to an overall aspirational vision, while the first is focused almost exclusively on providing a fair day's work for a fair day's pay. Drucker's primary concern was with the second stonecutter, the individual focused on functional expertise, in this case being the best stonecutter in the county. Of course, exceptional workmanship is something to be esteemed and will always be important in carrying out any task, but it must be related to the overall goals of the business.

Drucker feared that in many instances, modern managers were not measuring performance by its contribution to the company, but by their own criteria of professional success. He writes, “This danger will be greatly intensified by the technological changes now underway. The number of highly educated specialists working in the business enterprise is bound to increase tremendously…the new technology will demand closer coordination between specialists.”3 Did we mention he wrote this in 1954! Prescient as always, Drucker recognized the surge in specialized roles that were to become the hallmark of the modern corporation, and sensed immediately the danger that change posed should these specialists be focused on individual achievement rather than the goals of the enterprise.

In response to this challenge, Drucker proposed a system termed management by objectives, or MBO. He introduces the framework this way:

Each manager, from the “big boss” down to the production foreman or the chief clerk, needs clearly spelled-out objectives. These objectives should lay out what performance the man's own managerial unit is supposed to produce. They should lay out what contribution he and his unit are expected to make to help other units obtain their objectives. Finally, they should spell out what contribution the manager can expect from other units toward the attainment of his own objectives… These objectives should always derive from the goals of the business.4

Readers will forgive Drucker's exclusive use of the masculine pronouns; again, he was writing this in the 1950s. He went on to suggest that objectives be keyed to both short- and long-range considerations and that they contain both tangible business goals and intangible objectives for organizational development, worker performance, attitude, and public responsibility. This last point is yet another example of Drucker's considerable foresight. It would be another four decades before the inclusion of intangible “assets” was formally included in a corporate performance management system (the Balanced Scorecard).

Already somewhat of a renowned management guru, Drucker's words carried significant weight in the boardrooms of corporate America and thus resonated with executives, who then raced to create MBO systems within their firms. Unfortunately, as is often the case with any type of managerial or organizational change intervention, implementations varied widely in form, often straying far afield from Drucker's original intentions for the model. Perhaps the biggest mistake committed by firms eager to gain the benefits offered by MBOs was transforming what was originally envisioned as a highly participative event into a top-down bureaucratic exercise in which senior managers shoved objectives down into the corporation with little regard of how they would be executed. Many also damaged the integrity of the model by making it a static exercise, often setting objectives on an annual basis, despite the fact that even 50 years ago businesses faced pressure to react quickly to market and environmental changes. But, rather than adopt a more frequent cadence, when it came to objective setting most companies chose the “Set it and forget it” pattern we so often see in organizations to this day.

Drucker's expectation was that organizations would use MBOs to foster cross-functional cooperation, spur individual innovation, and ensure all employees had a line of sight to overall goals. In practice, that rarely occurred and eventually MBOs became the subject of substantial criticisms. However, those with keen business acumen saw the underlying power of Drucker's words and recognized the value inherent in the process. Enter Andy Grove.

A Silicon Valley legend, Andy Grove served as CEO of Intel Corporation from 1987 to 1998 and shepherded the company through its remarkable transformation from a manufacturer of memory chips into the planet's dominant supplier of microprocessors. An astute student of business, Grove recognized the latent power in the MBO system and inserted it as a key piece of his management philosophy at Intel. However, he made a number of modifications to the model, transforming it into the framework most of us would recognize today. In Grove's thinking, a successful MBO system need answer just two fundamental questions: (1) Where do I want to go (the objective) and (2) How will I pace myself to see if I am getting there?5 That second question, simple as it may seem, turned out to be revolutionary in launching the OKRs movement by attaching what would come to be known as a “key result” to an objective.

A guiding principle in Grove's use of objectives and key results was driving focus. As he put it:

Here, as elsewhere, we fall victim to our inability to say “no”—in this case, to too many objectives. We must realize—and act on the realization—that if we try to focus on everything, we focus on nothing. A few extremely well-chosen objectives impart a clear message about what we say “yes” to and what we say “no” to—which is what we must have if an MBO system is to work.6

He didn't stop at limiting the number of objectives, however. Grove modified the Drucker model in a number of important ways.

First, he suggested setting objectives and key results more frequently, recommending quarterly or in some cases monthly. This was in recognition of the fast pace of the industry in which he found himself, but also reflected the fundamental importance of adopting fast feedback into an organization's culture. Grove also insisted that objectives and key results not be considered a “legal document” binding employees to what they proposed and basing their performance review solely on their results. He believed OKRs should be just one input used to determine an employee's effectiveness.

Another important ingredient of success at Intel was ensuring OKR creation was a mix of top-down and bottom-up involvement. As noted earlier, Drucker assumed this mechanism in his rendering of the model, but many organizations, fixed in a purely hierarchical mindset, abandoned it. Not so with Grove. He intuited the critical nature of employee involvement in fostering self-control and motivation.

Finally, Grove understood the importance of introducing the concept of stretch into OKRs. In his words:

When the need to stretch is not spontaneous, management needs to create an environment to foster it. In an MBO system, for example, objectives should be set at a point high enough so that even if the individual (or organization) pushes himself hard, he will still only have a 50-50 chance of making them. Output will tend to be greater when everybody strives for a level of achievement beyond his immediate grasp, even though trying means failure half the time. Such goal-setting is extremely important if what you want is peak performance from yourself and your subordinates.7

At this point in our story, we're just one degree of separation from Google and the OKRs boom we're witnessing today. John Doerr represents that link in the chain. Now a partner at the venerable Silicon Valley venture capital firm Kleiner Perkins Caulfield and Byers, Doerr started his career at Intel and enthusiastically soaked up the many management lessons Andy Grove was only too pleased to volunteer. Among them, of course, was objectives and key results. Doerr recognized the value and potential of the model and continues to share it with entrepreneurs to this day.

Two of his early students were Larry Page and Sergey Brin, who you may know as the founders of Google. Here's how John Doerr recalls the introduction of OKRs at Google:

Shortly after we invested, we had our board meetings around a ping pong table above the ice cream parlor on University Avenue, and Larry called an all-hands meeting because I'd shown him this OKR thing…I went through a slide presentation that I still have today…and Larry and Sergey—so smart, so aggressive, so ambitious, so interested in not just making but achieving moonshots, embraced the system and that was thirty or so people and to this day I think they're part of the culture, they're part of the DNA, at Google they're part of the language the actual words that you use. Larry embraced it for himself, for the company and he uses it as a tool to actually empower people. People think it's about accountability and it does achieve that as a byproduct. It's really a way to build a social contract in your organization that says I'm going to sign up to do this amazing stuff.8

From those modest beginnings at a board meeting above an ice cream parlor, the OKR model has become the performance management tool of choice throughout all of Google.

We live in a Google universe today. As an example of the behemoth's place in the business zeitgeist, if you were to type “Google” into the search bar on Amazon (books only) you'd get 17,882 results as of March 2016. If someone were to write a book sharing how often Google changes the paper towels in their restrooms it would most likely rocket to number one. Given their place in the popular culture you might assume that OKRs began their ascendance immediately upon Google's adoption of the program. However, it wasn't until 2013 and the release of a video by Google Ventures partner Rick Klau that the model and the movement really began to gain inexorable momentum.9 The Klau video has now been viewed over 300,000 times, and while that might not seem like an extraordinarily high number when sleeping-kitten videos easily attract millions of views, it is an achievement when you consider the program runs close to an hour and a half. That's a serious commitment, but one many organizations were willing to make in order to emulate the performance paradigm at Google.

As of today, OKRs have been embraced by thousands of organizations around the world. The nexus of OKR activity is often assumed to be Silicon Valley, with high profile companies like LinkedIn, Twitter, and Zynga serving as passionate proponents of the framework, but in reality, OKRs have been embraced by organizations large and small around the globe. What we've shared represents the life of OKRs to this point. We look forward to companies like yours contributing to the next phase of their development.

WHAT ARE OBJECTIVES AND KEY RESULTS (OKRs)?

Here is our definition:

OKRs is a critical thinking framework and ongoing discipline that seeks to ensure employees work together, focusing their efforts to make measurable contributions that drive the company forward.

We doubt anyone is going to put that on a t-shirt any time soon. But it's important to specifically define the model so that as you begin working with, and sharing it with your teams, you possess a shared understanding of what exactly you mean when you say “OKRs.” One of the biggest problems we see when organizations launch any kind of a change program is simply terminology, or, more precisely, not being specific with their terminology.

Confusing your words can lead to the transmission of mixed signals to employees and result in less than desirable outcomes for the organization. Thus, it's imperative that you use consistent definitions for OKRs terms and concepts. We recommend that you employ what we outline in this book. However, in the end it really doesn't matter what you call the concepts—remember Shakespeare's admonition: “What's in a name? That which we call a rose by any other name would smell as sweet.” The key is using your chosen terms with unwavering consistency throughout the organization to ensure there is true consensus on the point, and the terms and concepts are communicated clearly to all stakeholders. Everyone has to be operating from the same playbook should you expect OKRs, or any new initiative, to be understood, accepted, and able to produce results. Back to our definition, let's break it down into more reasonable bite-sized chunks:

Critical-thinking framework

: The end in mind with OKRs is accelerating performance, but you don't get there simply by monitoring your results each quarter. In the preceding history lesson we introduced the work of Peter Drucker. One of our favorite “Drucker-isms” is this: “The most serious mistakes are not being made as a result of wrong answers. The truly dangerous thing is asking the wrong questions.”

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When examining OKR results your challenge is to go beyond the numbers and, like a business anthropologist, dig deeper into what they're telling you so that you can unearth the stimulating questions that may lead to future breakthroughs. OKRs, when implemented with rigor and discipline, facilitate this model of critical thinking.

Ongoing discipline

: OKRs represent a commitment—of time and effort. Earlier, we warned against the danger of “set it and forget it” goal setting. To ensure you benefit from OKRs, you must commit to actually (as common sense as this sounds) using the model. That entails updating OKRs each quarter (or whatever cadence you choose), examining results carefully, and modifying your ongoing strategy and business model as necessary, based on results.

Ensure employees work together

: We've already noted the importance of cross-functional collaboration and the value of teams in creating organizational success. OKRs must be structured, and used, to maximize collaboration and alignment. One of the ways this is facilitated is through the inherent transparency of OKRs, which are shared widely so that everyone, from top to bottom, can see objectives and key results from throughout the organization.

Focusing their efforts