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What is OKR, and Why Should You Apply it in Your Business?

What is OKR
What is OKR

OKRs (Objectives and Key Results) are collaborative goals used by Google and other teams. It helps set challenging goals that have measurable results. 

OKRs help you monitor progress, produce alignment, and increase engagement around the goals.

goals

Read on to learn how to formulate OKRs. We will also explain their benefits and why you should consider using them in your business. 

What Comprises an OKR?

Before focusing on what makes an OKR a critical addition to a business, we need to explain what it is and its major components.

Here is what comprises an OKR.

Formula 🗒️

You can write OKRs by listing the following: 

  • The objective you want to achieve.
  • 2-5 Key Results from meeting the objective.

You may also write it as a statement based on John Doerr’s formula:

“I will (objective) as measured by (key results).”

You can also measure your success by scoring them.

According to CIO, you can score your OKR results on a 1-100% scale. For example, if you get 30%, you can count the result as a fail. A result of 70% is much better, but there is still room for improvement. 100% means you completed the objective perfectly.

Components

As well as the overall formula, there are the individual components you need to consider.

Here are the parts that make up the OKR framework.

1. Objectives

These are what you would like to achieve.

obstacles

It must be important, concrete, challenging, and inspirational. Objectives can last for a long time. For some, you can use them for a year or more.

2. Key Results

You can use these to monitor your progress toward your objectives. 

Here is what key results must be to help you understand if you achieved your objectives.

KRs

Per one objective, you must have two to five key results. Too many KRs will not be effective because they are easier to forget.

Key results are either pass or fail, with no middle ground. It can evolve, and when you finish all of them, you will achieve your objective. 

Example

There are many examples of OKRs. Here is one from John Doerr’s Measure What Matters book:

“O – Create a planning model for the company.

KR1 – Finish the presentation on time.

KR2 – Make an example set of quarterly OKRs.

KR3 – Gain management agreement for a 3-month OKR trial.”

What Are the Benefits of Using an OKR?

Setting and completing OKRs is incredibly beneficial for any organization. They help improve the business and offer multiple benefits to the workforce.

Here are some benefits you can get from using OKRs.

1. OKRs Give More Meaning to Your Work

OKRs can help inspire and motivate employees by providing them with a mission and well-defined goals.

Employees with little direction or meaning while at work aren’t likely to achieve much in a workday. 

A study by Bi Worldwide found that employees with specific objectives are 3.6x more likely to commit to their organization fully. Additionally, employees who work for a goal-focused company are 6.7x more likely to feel pride at work.

Employees

Source: Bi Worldwide

2. Helps With Alignment

OKRs unite everyone to work together to achieve the desired objectives.

A company with aligned objectives will have more focus and can quickly achieve results.

3. Empowers People 🧑‍🤝‍🧑

Each staff member is part of stating the objectives and tracking their progress.

It makes them feel that they were able to contribute to something great.

4. Simplicity

Using OKR is a straightforward and easy-to-understand process. 

First, it decreases the time needed to set measurable goals, giving you more time to achieve them. 

Also, the number of results makes what you need to do to achieve them much more evident. You can also use the results list as a checklist to leave no stone unturned. However, you must be aware that the objectives are there to add value, not completely deliver the task.

Finally, the simplicity of the goals improves team member performance.

culture

5. Transparency

OKRs are available throughout the organization, allowing transparent and efficient tracking of the goals over a specific time frame. 

A Harvard Business Review study found that 40% of employees knew their employers’ objectives and strategies. The remaining 60% stated they didn’t know their company’s goals.

Not being transparent with the workforce leads to confusion and a lack of productivity. Therefore, you should consider using OKRs to solve this. 

What Are the Three Main Types of OKR?

The benefits of OKRs should sell you on using them for your business, but are you aware that there’s more than one type?

There are three main types of OKR that you should know. Read about them below and why they are necessary.

1. Committed OKRs

 This type of OKR focuses on commitments. 

At the end of a cycle, you should be able to pass them because they are essential objectives.

Committed OKRs should be the priority over the other types.

Ken Blanchard

2. Aspirational OKRs

Other names for aspirational OKRs include: 

  • Stretch goals
  • Moonshots

In this type of OKR, you must forge your path because these are rare goals that are much harder to reach.

They can be long-term, going beyond a cycle. You can also transfer these goals to other staff to increase engagement. 

3. Learning OKRs

This type of OKR is vital if you want to learn something new. 

You can use these results to create a different type of OKR in the succeeding cycle. You can also use them to promote change for the company.

According to the 2022 OKR Impact Report, just under 60% of companies used OKRs to help their companies transform and grow.

companies

Source: Mooncamp

What Are Some Common Mistakes When Implementing an OKR in a Business?

In writing your OKR, you might not know that you’re doing something wrong. Some things you can do while writing an OKR may not seem like mistakes, but that makes them even easier to do.

So, here are some mistakes you should avoid while writing an OKR.

1. Using OKR as a To-Do List

An OKR is not a task list.

You should use it to add value and not to deliver tasks. So, before setting OKRs, try to know the difference between activity-based and value-based measurable Key Results. Here is how Felipe Castro explains the two results.

Felipe Castro

2. Having Many OKRs

As mentioned earlier, having too many OKRs is terrible because the employees may forget about them all. 

That’s why you should only list the top priorities (per quarter) as your OKRs.

According to a video by Perdoo, the ideal number of OKRs is 3-5 per quarter. They stress that this is the maximum amount; setting more than this can decrease efficiency. They state that while it may sound too low, 1-2 OKRs are perfectly fine.

3. Not Aligning Them

You shouldn’t set OKRs on your own. 

You should consult with the other teams because OKRs are helpful for company alignment.

4. Forgetting Your OKRs

There’s a chance for your employees to forget the OKRs, so you must follow through regularly. By doing this, you will get to achieve them.

Here are some methods to help you remember to follow through on OKRs.

OKRs

5. Doing Business as Usual (BAU)

Business as usual (BAU) refers to the normal day-to-day operations of a business. 

OKR is about implementing change and growth, so using BAU will contradict that.

6. Treating OKR as a KPI

A Key Performance Indicator, or KPI, relates to OKR, but they differ. 

They are both measurable and show the team’s performance, but they have different objectives.

KPIs

KPIs are metrics that display performance. Meanwhile, OKR is an objective-setting method that you can use to enhance performance and motivate change. The KPIs will tell you what you should analyze as a basis for your OKRs.

7. Sandbagging

Sandbagging is when you lower your expectations about strengths and competencies to have greater results than expected. 

OKRs should challenge your employees. They won’t improve if you sandbag.

Self-awareness

What Are Some Tips for Creating Good OKRs?

Now you understand what to avoid when creating OKRs, we can explain some ideas we encourage to make OKRs that will benefit your company.

Here are some tips for writing good OKRs for your organization.

In Writing Objectives 🖊️

Here is what we recommend to write excellent objectives:

  • Choose the goals that will help your company improve. They should be specific to your company’s success.
  • Make it short, simple, and quick to remember.
  • Don’t make it boring; you need to engage your employees with objectives.
  • Let it suit your company’s culture.

In Writing Key Results

Below are some tips for writing fantastic Key Results for your business:

  • Precisely define the expected results and what constitutes a pass and fail.
  • Differentiate initiatives from metrics.
  • Set only 2-5 per objective.
business

Source: KaiNexus

Should You Continuously Improve Your Company’s OKRs?

Setting OKRs for your company is only the beginning. You must improve them so they remain relevant and effective for the company. Doing this for OKRs is the same for any goal you have for the business.

According to a KaiNexus survey, if you have a customer-focused business, 54% of continuously improved business elements will increase satisfaction from your customer base.

Here are some of the best tips to continuously improve OKRs for your business:

  • Evaluate each OKR regularly to check if they are still fit for purpose.
  • Establish feedback intervals for employees to weigh in on OKRs.
  • Accept that you may need to adapt to improve business performance.
  • Learn from failed OKRs. Work out why you didn’t achieve them, and use the data to right your wrongs for future OKRs.
  • Be transparent with employees if an OKR needs improvement.

Final Thoughts on the Reasons for Using an OKR in a Business

For an effective goal system, consider using OKRs. 

Michelangelo

It is a powerful way to set and fulfill company goals and drive engagement on a team level. Ultimately, it helps your company to grow and succeed.

Do you want more tips on improving your company’s effectiveness? You can find the answers you need on our blog on Tommy!