A Beginner’s Guide to Objectives and Key Results (OKR)

What are objectives and key results (OKR)? 

The short answer is that they are goal-setting frameworks that help business leaders set and track objectives. 

Below, we’ll discuss the long version of this answer – we’ll learn about this goal-setting system, how this approach can boost business performance, how OKRs differ from KPIs, and more.

A Beginner’s Guide to Objectives and Key Results (OKR)

Like KPIs and metrics, objectives and key results (OKRs) provide a framework that organizations can use to track the performance of projects and initiatives.

However, unlike KPIs and metrics, which assess overall business health or the health of a project, OKRs measure performance against objectives. They are therefore more useful for determining progress, rather than health.

Here is a top-down overview of how to use OKRs:

• Create a small set of goals, less than six, that will be tracked throughout the quarter
• Once those are created, develop measurable objectives tied to those goals
• Choose goals and objectives that are most relevant to a given business strategy or aim
• Design a scoring system for those OKRs, such as a percentage-based system, which will tell teams how close they were to reaching their goals
• Be sure to define each objective in terms of its impact on business outcomes, since keeping it in context will help employees understand the rationale behind the OKRs and how their work affects business outcomes
• Continually review progress and make performance adjustments if necessary

OKRs can be very useful in a number of areas, from short-term business projects to long-term business initiatives, such as digital transformation programs.

Why Use OKRs?

Metrics and KPIs are a well-established method for tracking performance – so why do we need a new one?

There are a few reasons to consider OKRs over other methods:

• OKRs are better for evaluating performance against goals and objectives, which can then be tied directly to business outcomes, as mentioned elsewhere in this post
• OKRs clearly define “what success should look like” by quantifying it
• OKRs help teams see how project performance affects business outcomes, which can help motivate and engage employees
• OKRs help teams see how close they are to – or how far they are from – meeting their goals, which can then inspire change
• OKRs help managers make better decisions, since they offer insight into what works, what doesn’t, and why

These are just a few of the many points to consider when adopting OKRs. However, it is important to point out that these benefits can only be gained if OKRs are applied properly. 

Mistakes to Avoid When Implementing OKRs

To make the most of OKRs, it is important to use them appropriately.

Here are a few common errors and mistakes to avoid:

• Limit the number of objectives – too many objectives can be hard to track
• Don’t set and forget OKRs – they are only useful if they are actually used, reviewed, revisited, and followed
• Don’t “go it alone” – teams should be involved not only in the creation of OKRs, but in review sessions, which can boost employee engagement and productivity
• Don’t be vague – to be useful, OKRs should be quantifiable and measurable

Used in this way, OKRs can help teams rethink their approach to performance improvement and, ideally, generate better results than other methods.

OKRs vs. KPIs vs. SMART vs. CSF

OKRs are only one of several approaches to goal-setting and performance management.

A few other examples include:

• KPIs and metrics. KPIs and metrics measure the overall health of a program by tracking key performance indicators and similar measurements, which are ideally tied to goals. This approach is extremely common and can be very useful, but it tends to focus less on achieving specific goals than on monitoring performance.
• SMART. SMART stands for Specific, Measurable, Achievable, Relevant, and Time-bound. This framework further narrows the KPI approach by creating defined criteria for developing the most effective KPIs and metrics.
• Critical Success Factors. Critical success factors identify the drivers that determine an organization’s success or failure. Focusing on these critical factors can help managers and teams stay focused on the areas that boost organizational effectiveness and performance.

Overall, the performance measures outlined here tend to share the same aims, such as improving business outcomes, employee performance, and project results.

Putting It All Together: Improving Goals, Decisions, and Performance

Ultimately, OKRs should be part of an integrated strategic planning framework designed to improve goal-setting, decision-making, and business performance.

As we saw above, OKRs offer a new way to look at goal-setting, and they can help employees boost performance and business outcomes. We also saw how OKRs differ from similar performance improvement methods, such as metrics and KPIs.

One point to note, however, is that these methods are not mutually exclusive – OKRs can be used in combination with the other methods above, such as KPIs, the SMART approach, and CSFs.

Experimentation is perhaps the best approach to take, since this will help teams understand what gets the best results, what doesn’t work, and how to improve over time.