OKR – Google's agile leadership method, briefly explained

Imagine for a moment you were the managing director of a company with 200 employees. These are spread across 2 branches, a total of 15 departments and 34 teams.

How do you make sure that really all your employees pull in the same direction?
How can you check that your staff use their daily working time for the right company goals?

Basically, every managing director faces these questions and the challenges that come with them. Regardless of whether they're responsible for 5 or 500 employees.

One way to steer the success of an organization and at the same time actively involve your own employees is OKR. We'll introduce you a bit more closely to this management method, which is even in use at a global player like Google.

OKR offers companies the possibility to actively involve their employees in implementing company goals.

What is OKR?

OKR is the abbreviation for Objectives and Key Results, an organizational model applied for agile management.

Briefly summarized, this leadership method is meant to enable companies to implement goals more efficiently by making them measurable and thus transparent.

The Objectives (O) stand for the goals to be pursued as a vision. These guiding ideas don't always have to be fully achievable or concretized. They mainly serve as a benchmark to motivate employees and set a direction.

The Key Results (KR) are key outcomes. Unlike the objectives, the key results are concretely formulated and the result of deliberate actions. They practically determine how the set goals are to be reached and thus make successes measurable.

Who invented OKR?

The OKR system was first applied at the Intel Corporation, where it was introduced by co-founder Andy Grove. His innovative idea soon found resonance in Silicon Valley. The probably best-known example of this is Google.

John Doerr, an investor at Kleiner Perkins Caufield & Byers, brought the concept to today's search engine giant in 1999, whose founding at that time lay just one year back. Google has since grown from the 40 employees back then to thousands of staff worldwide and still relies on the OKR method in its performance management.

Since then, Google's success has animated many other companies, corporations and startups to introduce goal management in their organization. Some well-known representatives among them are LinkedIn, Twitter, Oracle, Spotify and Airbnb.

How does OKR work?

A special core property of company steering with OKR is that the system is flexibly deployable. It can be integrated into various organizational forms and lets itself be combined with other management methods and frameworks.

The basic systematics here is as follows:

• Within an organization, a certain number of goals to be reached is set on the basis of a previously defined vision and strategy. As a rule, all employees are involved in this.
• The process of goal-setting is bidirectional. That is, management formulates top-down requirements, which are then concretized in individual departments and teams. But just as well, the results of individual working groups can be brought to management and thus influence overarching company goals.
• Subsequently, key results are assigned to the set goals. These enable a measurability of progress and serve employees as well as leaders as orientation for when a goal is reached.
• The timeframes for strategy, planning and implementation of the goals can vary as needed. Google uses the 3-5-4 formula for this. That is, every employee sets themselves 5 objectives every 3 months, each with a maximum of 4 key results.

The exact shaping of how employees define their goals and focus on their implementation can turn out individually depending on the company context. A small start-up from the marketing sector will possibly make use of different tools and dynamics than a DAX corporation.

A practical example for OKR

To make the way OKR works a bit more tangible, an imaginary marketing agency named “Schnell&Laut” shall serve us as an example here.

Both the employees and the leadership level of “Schnell&Laut” have noticed that projects were repeatedly not completed at the planned time.

Accordingly, a possible objective for the coming quarter could be: Project management has to be improved in order to keep deadlines.

The goal stands. But what isn't yet clear is the way in which this goal is to be reached. That's why the employees formulate four key results that make the implementation measurable.

1. 90% of all executed projects in the quarter should be completed on time.
2. Project managers should receive 10% more budget so they can call on freelancers in case of bottlenecks.
3. The comparison between the planned and the actually necessary hourly effort of the employees may show a difference of at most 20%.
4. The duration of internal and external meetings should be reduced by 15% in order to place a stronger focus on the actual project work.

With the help of these key results, the agency “Schnell&Laut” can check at the end of the quarter whether the set goal was reached.

If that's not the case, the key results can be optimized on the basis of the collected experiences and newly formulated for the next three months. If, however, the target was achieved, then maybe a new topic has already come up again in everyday business that can be tackled.

What is OKR good for?

OKR differs from traditional management methods through its flexibility and versatility. It unites three significant components: vision, strategy and leadership.

Vision – As a framework, it serves to shape the vision of an organization more clearly and thereby implement short-, medium- and long-term goals in a focused way.

Strategy – Against this backdrop, OKR is at the same time an important instrument to continuously question the strategy of one's own company and to adapt its execution to current circumstances.

Leadership – The practical implementation enables you to lead your employees in an efficient and transparent way such that they work toward set goals independently and ambitiously. Everyone works synchronized in one direction and sets the same priorities in doing so.

As a format, OKR thus covers both the theoretical and the practical component of goal-setting and employee leadership of organizations.

At the same time, the model also takes into account the different speeds with which decisions are realized in the individual company levels. While the general vision, for example, can be set by management on an annual rhythm, concrete strategies in the form of objectives can be formulated in shorter, mostly three-month intervals. The execution itself can be determined with the help of the key results even weekly. Consequently, long-, medium- and short-term goals are pursued simultaneously and in a coordinated way.

On the one hand, that makes the system very holistic, and on the other hand it forms the basis for further advantages your organization can benefit from.

Advantages of OKR for your company

Agility
The OKRs are newly set at regular, short intervals and subsequently evaluated. As a result, you can compare your company strategy relatively quickly with the experiences from operational business and thus better steer the overall success of your organization.

Transparency
All employees are actively involved in co-shaping their daily work. The set goals and key results are usually viewable for all company levels, which enables a better understanding of the shared direction.

Efficiency
By regularly defining goals and consistently pursuing the achievement of them, a valuable routine sets in within the organization. The processes around strategy-finding and execution require less time and resources, which can be used elsewhere.

Motivation
The goal images help employees to work intrinsically motivated and engaged. With the OKR system as Google applies it, it's even advisable to set very ambitious objectives. If goals are always reached 100%, they're too easy. Instead, a rate of 70-80% can already be counted as a success.

OKR delivers many advantages for companies, the company culture and the individual employee.

When is OKR suitable, when not?

Whether a management method like OKR makes sense for you depends on various factors. These include, among other things, your expectations of the concept, the exact reason for its use and the individual conditions of your organization. Many companies fail in the attempt to introduce the OKR system because they pursue the wrong purposes with it.

One mistake that's frequently made is applying the method as a means for performance assessment of individual employees. If you want to pursue ambitious goals with your organization, then a basic prerequisite for OKR to function is the strict separation of said goals and rewards. As soon as employees reckon with a promotion or even punishment for not reaching set objectives, that influences the way the OKRs work.

Just as little does the method suit as a project management tool in daily business. It serves much more as an impulse for the focusing of all employees, not for the micromanagement of processes.

The OKR system is worth it for you if:

• You want to synchronize your company goals more strongly with operational business;
• You want a shared direction of all company levels;
• You want to involve your employees actively and on their own responsibility in reaching the company goals;
• You want to increase transparency and motivation in collaboration within your organization.

Which steps should one consider when introducing OKR?

The probably most important note at this point is that the introduction of OKR can't be compared with the application of other management methods.

The system isn't a rigid instruction, but framework and philosophy at once. Accordingly, the true potential of OKR doesn't show from one day to the next. The introduction of the model is much more a continuous transformation, in whose development and success all employees are equally involved.

In doing so, you should consider the following points:

• Understand OKR as a framework that has to be adapted to your individual needs and your organizational context.
• OKR should be a system for employee leadership and not for assessing employees. Your staff may bear no negative consequences if they don't reach ambitious goals on the first attempt.
• Communication is an important element in implementing OKR. The method serves to support organizations in their internal alignment and to keep the focus. Teams and departments should therefore coordinate their goals with one another, so that ultimately all employees pursue the same direction.
• OKRs aren't well-meant New Year's resolutions, but measurable success indicators for the goal-setting and management of an organization. The principle can only function if it's pursued continuously and seriously by all involved. The necessary conviction of your employees as well as suitable tools for implementation are therefore indispensable.

Are you toying with the thought of using OKR as an instrument in your company and need support with it? As experts for transformations, we're happy to be at your disposal.