Forget SMART goals. Use OKRs instead!

Executives who want to dramatically increase their success should implement Objectives with Key Results (OKRs). Research shows that executives who set such goals can significantly improve the performance of their organizations over telling employees to “just do their best.”[i] Moreover, OKRs allow organizations to change measures and tactics to adjust to today’s digital pace of business.

For a long time, executives have used SMART goals. (A format for setting goals that call for Specificity, Measures, are Action-orientated, and will be viewed by the employees as Achievable and Relevant, and have Timelines.)

OKRs are different from SMART goals. Like SMART goals, OKRs have objectives, measures, and timelines, but they are more ambitious and allow for the writing of tactics as part of the objective “cluster.” The OKR process also allows for changes to be quickly made depending on the results. Like SMART goals, OKRs are deployed down into the organization, but the OKR process emphasizes managers and teams to write their own challenging OKRs.

OKRs are used by companies such as Microsoft, LinkedIn, Workday, and Netflix.

The OKR system was started at Intel and is attributable to its famed CEO, Andy Grove. It spread to Google upon the suggestion of Google investor John Doerr.[ii]

Google on its re:work website explains OKRs this way:

In practice, using OKRs is different from other goal-setting techniques because of the aim to set very ambitious goals. When used this way, OKRs can enable teams to focus on the big bets and accomplish more than the team thought was possible, even if they don’t fully attain the stated goal. OKRs can help teams and individuals get outside of their comfort zones, prioritize work, and learn from both success and failure.

To get started with OKRs, executives should communicate their top five strategies with their objectives and key results and milestones to be achieved during the year. These could include revenue and profit goals, sales and marketing goals, operations improvement goals, and innovation goals. Executives should then cascade this information down through the organization with the following standard: If any employee is asked, they should be able to repeat the top objectives and key results of the company. OKRs should be prominently displayed on digital kiosks and throughout facilities and be promoted with employees by top management at every opportunity.

Lower-level managers and their teams are to collaborate together in setting their own goals to achieve the results of the company. Besides, teams are encouraged to establish bottom-up objectives to achieve the top-level goals. This action builds commitment and unleashes the innovation of employees and teams.

In establishing OKRs, it is crucial to break the cascading objectives down into smaller goals to be achieved, which are measurable with deadlines.  For example, a manager could write, “We will improve sales by 15% per quarter.” The manager should never simply say, “Our goal is to improve sales,” and let it go at that. This latter statement is not measurable.

OKRs are frequently written not as one statement but in clusters. With each goal, there are also several “key results.” While one is the result they want to achieve, the others are the step results to achieve the result. For example:

Objective: We will improve sales.

Key Results:

  1. By 15% per quarter.
  2. By calling 20 accounts per day
  3. By having one email campaign sent to more than 1000 identified sales targets per month.
  4. By distributing a product feature blog monthly to our marketing lists.

No sandbagging! At Google, all OKRs are visible on Google’s intranet from the CEO on down. OKR’s are also on each employees’ internal profiles, and the scores against the OKR’s are visible too. This allows everyone to see the work of other employees. The annual OKRs can change, but the quarterly OKR’s are etched in stone. The scoring range at Google is 0-1, with one being perfect. However, if a Googler gets too many “1s” the view will be that the employee is sandbagging his or her goals and not “crushing it.”

Google constantly reminds its workforce that OKRs are designed to push employees not to make them look good. The ideal average score is .6 to .7. Google does not use OKRs to determine promotions.[iii]

If you want to learn more about OKRs, contact me or go online: Rick Klau gives an 80-minute video at Google’s Start-Up Lab on “How Google Sets Goals: OKR.” The video can be found at https://library.gv.com/how-google-sets-goals-okrs-a1f69b0b72c7.

Victor Assad is the CEO of Victor Assad Strategic Human Resources Consulting and managing partner of InnovationOne. He works with companies to improve their recruiting, HR operations, and develop extraordinary leaders, teams, and cultures of innovation. His new book is Hack Recruiting: the Best of Empirical Research, Method and Process, and DigitizationSubscribe to his weekly blogs at www.VictorHrConsultant.com.

 

[1] Edwin A. Locke and Gary P. Latham, A Theory of Goal Setting and Task Performance, Prentice Hall College Division, January 1, 1990.

[1] Jay Yarrow (Jan. 6, 2014, 8:59 PM), “This Is The Internal Grading System Google Uses For Its Employees—And You should Use It Too,” Business Insider. Found at http://www.businessinsider.com/googles-ranking-system-okr-2014-1.

[1] Google Re:Work. Found at https://rework.withgoogle.com/guides/set-goals-with-okrs/steps/introduction/.

 

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