Understanding the OKR Basics to Fully Unleash Your Company’s Potential
Understanding the OKR Basics
In his new book entitled Measure What Matters, American Investor and venture capitalist John Doerr talks about how focusing on the objectives and key results (OKR) can significantly boost the performance of any team.
Doerr studied electrical engineering. He joined Intel in 1974 and later moved to a venture capital firm. He made a fortune by investing on Amazon, Google, Symantec and Intuit.
Doerr has been one of the great minds behind the continued success of Google. In 1999, he made a whopping £11.8m-investment in exchange for a 12% stake at the company. He made such a huge investment after feeling impressed by the drive and passion of Google’s co-founders – Larry Page and Sergey Brin.
While they were really good at the industry they’ve chosen, Doerr knew Page and Brin lacked management experience. In an effort to steer the growth of Google, he gathered all employees of people – composed of 30 strong-minded individuals – and presented a pitch about a management tool that has become widely popular since then: Objectives & Key Results.
In his book, Doerr described how OKRs, combined with the company’s Larry Page’s ambitious goal of going 10X bigger, transformed Google. There were also insights and contributions from some of the most successful people in the business world, such as Bill Gates and Susan Wojcick (CEO of YouTube). Each of them shared how OKR helped transform their companies and empowered their people.
If any of these companies and business leaders inspire you and would like to emulate their achievements through your company, you’re in for a treat. The discussion below showcases the potential impact of OKR to your company.
OKR Basics: Eliminating Fuzzy Thinking
Doerr defines OKRs as a collaborative goal-setting framework. It can be applied to your company as a whole, in teams, and even in individual level. However, he notes that OKRs are not a miraculous fix.
OKR cannot replace your sound judgement, strong leadership, and workplace culture in your company. OKRs can be used to guide your company to strengthen further these corporate fundamentals and guide you towards growth and success.
OKR as a Survival Tool
According to Doerr, OKRs are a survival tool that smaller start-ups can benefit from in order to guide their company in the same direction. In the tech industry, in particular, new companies must be able to move and grow fast before they lose money on capital.
Having a structured set of goals give companies like yours a “yardstick” for success. OKRs are specific and give them a clear vision of the path they want to take.
Medium-sized companies that are rapidly scaling can greatly benefit from OKRs too. Through OKRs, individuals can easily clarify expectations. They are able to answer important questions, such as what they need to do to get things done fast, who will work on it, and how to keep your employees aligned with your company goals.
In large companies, Doerr points out that OKRs serve as a neon-lit road sign. This framework helps eliminate barriers and nourish connections between teams, departments, and individual contributors. Furthermore, OKRS keep even the most successful companies achieve more by encouraging “stretch goals”.
Quality Over Quantity
Another OKR basic is the principle that quality is more significant than quantity. Thus, setting fewer goals in a specific time period is much better and highly encouraged than setting many goals. The ideal number of objectives is between 3 and 5. According to Doerr, having too many objectives can just distract people from focusing on the most important things.
It was a problem experienced by MyFitnessPal – a successful health and fitness app. Before they implemented OKRs, they were used to setting too many goals. They were trying to get a lot of things done that they had a hard time prioritising. When they started setting fewer OKRs, they were able to focus on things that create more impact.
Scaling As Fundamentals to OKRs
Simply writing down your goals, say for a quarter, already increases your chance of achieving them. And by monitoring its progress and sharing it with your department heads, you even have more odds of succeeding. This is what OKRs are about.
In fact, in one study, it was found that people who recorded their goals, tracked them on a weekly basis and reported their progress to a friend were 43% more likely to achieve their objectives than those who simply thought about their goals and didn’t share them.
OKRs was first used in the 1970s by Intel. It has since been applied by many organisations and even the government of the United States (when it made its stretch goal of setting foot on the moon). With OKRs in place, managers became mentors and coaches. There began a more emphasis on data than assumptions.
Undoubtedly, OKRS are highly effective, proven tool that drives companies to excellence. And if it worked for Google, Intel and other companies, it will work for your team too!
Another interesting Objective and Key Results concept is the abandonment of organisational hierarchy. Most companies follow the “rule of 7” wherein managers are limited to a maximum of 7 team members. However, the fewer the ratio of manager and direct reports, the more hierarchical the organisation becomes.
Having more team members allow for a flatter organisational chart, greater frontline autonomy, and a better environment for creative collaboration that all lead to the next company breakthrough.
Setting Ambitious Goals
Larry Page was very ambitious with his goal of growing Google by tenfold. But with the use of OKRs, he and his team were able to set challenging yet achievable objectives, and measurable key results that led to the realisation of their ultimate goal.
One great example of innovation powered by OKR is the Gmail. The major problem with earlier web-based emailing systems was that they had very low storage. The ability to archive data was just out of the picture. During the development of Gmail, the developers thought about doing an enormous upgrade, with the goal of offering 100MB of storage per user.
By 2004, Google didn’t offer 100MB of storage. Rather, they provided a full 1GB! That’s more like 500 times that of their competitors. That changed the digital communication industry. Google made another historic mark.
All these lessons from Google may not sound replicable but the OKR framework can help your company stretch these limitations that you feel. Remember that it’s designed to keep pushing your teams forward. You may not land on the moon anytime sooner but if you’re breaking all the company performance records, it’s kinda like landing on the moon already : )
If you want to know more about this type of strategies and framework in optimising your company performance, we created an Organisational Mastery Quiz to unravel aspects of your company performance that can still be improved beyond your expectations. It’s less than 5 minutes to answer all the questions.
Do you want to know more about OKRs? We wrote a white paper that summarises everything that you need to know in order to start using OKRs in your company! Do not wait any longer and download your white paper now.Download The White-Paper