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Issue #6 | OKR 101 - What are OKRs and why every organisation should use this framework (1/3)
Understanding the basics of the OKR framework and why it can be a game changer for the organization
Hello to my lovely subscribers, I hope you all are doing well!
This edition of the newsletter brings a very exciting topic which is OKR and since its quite a big topic in itself, I have planned to explain everything you need to know about OKRs and how to implement them in 3 parts.
In the first part (1/3) of OKR 101, we will understand the basics of OKR framework, and why this can be a game changer for any organisation which is serious about its goals and their effective execution.
Origin of OKRs
Let’s look at the origin of the term OKR first. It is important to understand why it was created in the first place.
John Doerr coined the term OKRs but it was his mentor Andy Grove under whom he learned this revolutionary management approach of goal setting and accountability during his time at Intel in 1970s.
Andy had created this system for simple goal setting that was polar opposite of the conventional management by objectives (MBO) systems, which tend to be top-down, hierarchical, annual, and linked to compensation, as told by John Doerr.
So the problem at that time was the goals were rather some procedures or set initiatives that were decided by the higher management and followed by the people below leading to lack of new ideas, complete transparency of the strategy and effective execution.
Over the next decade, John practiced and refined the OKR framework at different organisations such as Kleiner Perkins Caufield & Byers and in the late 1990s implemented this framework at Google, where he joined as a board member and the rest is history.
Larry page, who co-founded Google said, “OKRs have helped lead us to 10x growth, many times over”
So what is OKR really?
We talked about the origin of OKRs and why this framework came into existence in the first place, so now we can jump into the defintion,
OKR stands for ‘‘Objective and Key Result’’
It is a collaborative goal setting framework for organizations, teams or even individuals. OKR ensures that the whole organization focuses the efforts on the same important issues or goals of the company.
When each and every individual in the company knows what the company’s goals are for the next quarter, 6 months or a year, it gives a sense of direction and accountability to everyone to be focused and work towards that goal.
As said by Yogi Berra, “If you don’t know where you’re going, there are huge chances that you might not get there” and that is the essence of OKRs to provide everyone in the organization the right path/direction for them to follow and know when they have reached the destination.
What are Objectives?
Objectives are the description of something that you want to achieve with your product in the future, near or far depending on the duration of the OKRs but in essence sets the direction. This is analogous to the destination that is entered in the Maps, as per the direction where you want to go.
For eg. Reduce the carbon footprint of the Product X, Increase the customer satisfaction of the product etc.
What are Key Results?
Key results are the measurable outcomes or result needed to achieve the set objective. Key results tells us clearly whether the set objective has been reached or not. It depicts the progress towards the objective just like the sign-post tells how much far the destination is from the current location.
For eg. Increase the website traffic to 150%, Improve the NPS score from 20 to 30 etc.
When Objectives and Key Results are used together in a framework called OKRs, it bridges the gap between strategy and execution and move from output to outcome based approach.
Why should any organization use the OKR framework?
There are multiple benefits for any company to implement this goal management framework such as:
High business impact:
OKR framework is more of bottom ups approach in nature and gives more freedom and accountability to each and every person employed, to be super focused, aligned and effective which results in higher business impact. OKRs helped Google to grow 10x more multiple times 🚀
More Transpareny and Clarity:
Frameowork like OKR brings more transparency and clarity over the set goals and organizations with high level of clarity around their goals are 4x more likely to score in the top quartile of their industry as per Research from Bersin by Deloitte
The biggest impact of using OKR in most organizations without any goal management already in place, is a cultural shift from output to outcomes. That is a huge shift in the mindset when employees start to think about what impact their work is creating on the lives of customer or with the growth of the company. It becomes more than simply completing the mundane tasks assigned to you to making an impact within organization and/or into the lives of the users.
How many time do people in companies face the situation where in they don’t understand the prioritization or rather it changes too often that it is hard to have focused execution. OKR changes this situation completely as it helps focus only on what’s most important by prioritizing only the work that has the biggest business impact.
Increases employee engagement:
As the employees have more clarity and transparency of the goals, it empowers them more to engage in creating the vision and also empowering them to experiment, innovate and take more accountability leading to more engaged working environment.
There is no doubt regarding the impact of this goal setting framework as many big companies have been using this for very long time such as Google, Amazon, LinkedIn, Microsoft, Netflix, Asana and the list goes on and on.
Now it is also imperative that the OKRs that are set have to be quality OKRs as these will define the path for your product or company. Hence, in the next part of this OKR 101, we will understand how to set great OKRs, what differentiates a great OKR with a bad one etc. So stay tuned for that! 😃
If you made it till the end, Thank you for the patience and putting the time to read this article. YOU are amazing!
I hope you enjoyed reading this and found something interesting. As always, I had fun writing this article and if you learned something from it then it would be great if you could like and share it to someone who is very new to PM and might find it useful. Also please comment below if you have any suggestions for improvement. That would be awesome, Really! 😁
Other interesting stuff that i wrote which you might useful, do check them out 🤓