If we talk about the methods of personnel management, the first place in the rating of popularity will be KPI (Key Performance Indicators). This is what every modern IT company should have.
At the same time, Agile, Scrum and Kanban have been introduced by many companies along with KPI as a means of providing the necessary flexibility in a rapidly changing market environment. For IT companies the best approach to build work is in teams. Agile and Scrum from IT have expanded into other activities. For example, these techniques have been successfully used by law companies. The flexibility and «customizability» of the intermediate tasks to achieve the final goal is equally suitable for both information technology and jurisprudence.
In order to master the principles of OKR, and to successfully implement this technique in your company, it is desirable to have KPI and Agile experience.
I have such an experience. And now I have come to the point where I am ready to summarise my knowledge in OKR. There have been conversations with entrepreneurs who are both familiar and not familiar with OKR. There have been discussions at conferences. Perhaps with my conclusions I will simplify the path to OKR for someone.
The goal-setting method is to compile a list of objectives, and to formulate 3-4 key results for each goal. Measurement of key results is a prerequisite. The degree of achievement is measured – in percent from 0 to 100% or in parts from 0 to 1.0.
Now it is time to «dive» deeper».
Here are some questions about OKR (Goals and Key Results) that I was initially interested in:
- Why should you use OKR?
- How to learn to set goals in the face of market uncertainty?
- How to involve all team members (employees) in the process of setting goals?
- How do I synchronise team goals?
- What influences the chances of achieving the goals?
- What kind of failures can occur when implementing OKR?
- How to avoid mistakes or reduce them at least?
- How do I use OKR with KPI and with Agile, and should I do it at all?
- How does OKR influence the company’s strategic and resource management?
Abstracts from the author of the methodology
Below I will share with you the materials that I have read in the process of development of OKR. But I recommend starting from the source, that is, the principles formulated by the author of the methodology by Intel President Andy Grove back in the 1970s.
Less is more
A maximum of three to five goals, and up to five outcomes tied to those goals, is better than a whole list where companies, teams, and employees cannot prioritise.
Nothing is imposed
Goals and key results are formulated by all, including through debate, adjustment already in progress. Each employee is maximally involved in the process, so he took part in the programming of this process.
Instead of a cascade model «from top to bottom» OKR uses bidirectional goal setting. Approximately 60% of tactical OKR from teams are aligned with the strategic objectives of the business. They are captured by managers «bottom up».
Setting «inflated» goals
In the list must necessarily be present superplanned, practically impossible. Striving for more helps active business development, not just maintaining a stable course.
Tool, not a weapon
Grove compared the OKR method with a stopwatch, which provides «measurement» by employees of their own results. This is not a manual whose failure to comply is punishable. Moreover, if the goal is no longer relevant before it is achieved, it is better to discard or modify it rather than drag it along.
Flexibility rules! That’s why Agile and Scrum are used.
By trial and error
Often, OKR implementation occurs after four to five quarterly cycles. During this time, misguided goals and missing key results are the norm.
From the personal experience of the OKR team in the international company Letyshops, where I worked earlier, I can say: the launch took several months. It was a time of preparation of teams and development of the theory, which was drawn from open sources of the world web. By trial and error they built their first OKR in Excel, which further consolidated the CEO.
Important! It is considered a success to achieve a key result of 70-80% (0.7-0.8) by the end of the cycle (cadenza).
The OKR method gained popularity due to the introduction and very successful use in Google. It has also been picked up by Netflix, LinkedIn, GoPro, Zynga, Oracle and Twitter brands.
In Google the technique was introduced in 1999 by John Doer. At that time the company was just a young startup. John Doer later described the details of the introduction in the book «Measure the Most Important».
Larry Page, co-founder of Google, notes that the OKR method has increased business growth tenfold, and more than once.
As for me, an interesting fact: in Google as much trust employees, that anyone can watch OKR any colleagues, up to top management. Of course, you can see the level of achievement of key results. But OKR does not judge whether an employee is effective or not. This indicator is not taken into account when calculating bonuses . Goals can be so ambitious that even 50% of the achievement is a lot.
Many companies, including Ukrainian ones, tried to copy exactly the model of OKR implementation in Google. For the most part they expected a complete collapse. The reason lies on the surface. The OKR implementation algorithm should be based on company values. Other values – other ways of implementation!
Life hack! I am convinced: together with OKR it is necessary to implement CFR – C (conversations) ) F (feedback) = R (recognition). Specifically:
- C (conversations) – well-established communication between manager and staff;
- F (feedback) – feedback between team members;
- R (recognition) – recognition of achievements of colleagues, their contribution.
It is necessary to engage in corporate culture to show in practice that employees can now manage their own goals.
OKR and KPI: activity-driven vs results-driven
The topic of comparison between OKR and KPI is causing a lot of discussion. Some say that it is «about apples and oranges», that is, methods are completely different and it is not correct to compare them. But I think the difference is quite obvious: if KPI is a result orientation, then OKR is an action orientation. OKR is used for change/innovation management (change & disrupt), KPI for process management (run).
Imagine that your organisation is a machine and you drive it to its destination (your mission and vision). Your key performance indicators are what you’ll find on the car dashboard, such as the fuel level indicator and the engine temperature indicator. They prevent engine overheating and ensure you don’t suddenly run out of gasoline. OKR is similar to your road map, they will take you to your destination. OKR is temporary, they will change periodically. Once you’ve driven the landmark towards your destination, you’ll focus on the next. Result-oriented organisations need both KPI and OKR.
In both methods, the letter K is the key. In both cases the most important is highlighted. But KPI is guaranteed to be achieved (except for the story with the Potcharuk government). But the goals of OKR are more ambitious. They are more audacious and courageous. They can be achieved in principle, but sometimes to the limit of possibilities or under special circumstances. The idea of setting such a goal is to stimulate the team to develop, overcome «ceilings».
Common between OKR and KPI:
- the letter «K»;
- Accurate measurements (scale or percentage)
- There is an interval of time (often a month or a quarter).
Difference between OKR and KPI:
- OKR are not tied to salary;
- OKR is not allowed to reach 100%;
- OKR is not mounted on top.
On the example of successful IT-companies I conclude: OKR and KPI can be combined, used simultaneously. Or you can allocate a block of «priority goals» in OKR. And it will actually be KPI.
My forecasts for KPI and other «indicators of the efficiency»:
KPI, Performance Review and other similar tools will be relevant for a long time to come. In most companies, this is the only method of evaluating the effectiveness of teams. It is easy to attach motivation and measure performance at any time, even daily.
Progressive companies use BI (Business-Intelligence) business analysis systems to measure the efficiency of employees and activities. Such systems provide the ability to monitor indicators at any level of detail, compact, with convenient visualization. You can upload reports and receive them automatically. Examples of BI systems include: QlikView, Klipfolio, Tableau, Power BI, Domo.
In the following articles, we will separately address the topic of the importance of metrics and their measurement using different tools and at different stages of the life of IT-company.
Moving around, let’s dwell on the main concepts:
Simple, concise and well-defined phrases about what you want to achieve.
Components of the achievement of the goal. Indicators of achievement should be periodically updated, for example – once a week.
***Note: If the target is 100% achieved, it means that it was not ambitious enough. You are not making a breakthrough, but simply being reinsured.
Correctly set goals can cause a sense of inconvenience, the need to get out of its «comfort zone». Although in this context, the question that 70% OKR can equal 100% KPI is debated…
Most companies use multiple OCD cycles at once:
- Strategic (long-term) cadenza for the company (often annual).
- Tactical (medium) cadenza for teams (quarterly).
- Operational (short-term) cadenza for selected initiatives (weekly).
For example, Spotify uses a six-month strategic cadence, and teams set OCD every six weeks.
Strategy and tactics are implemented at different frequencies, and tactics change faster.
The shorter the cadence selected, the clearer the goals must be. For example, revenue and NPS are included in almost all quarterly reports. The tools that each individual team will use to improve performance will be different.
And one last thing…
The representatives of the company write: we have implemented OKR. We understand… And there is KPI, only overstated several times. An «ambitious goals», and in fact – an attempt to reach the Moon on the assembled in the garage quadcopter.
There are two potentially unpleasant consequences. The first is that the targets were planted from above, so it is likely to be perceived with some resistance (resistance – friction – slowing down movement/ development). Second, employees can take for granted the right to achieve results by only 70%. This does not work at either KPI or OKR. After all, the new-fashioned method can be «scrapped» without even giving it a chance.
My findings will not be enough to fully master the OKR method. I did not set the task of creating a comprehensive guide to OKR. This is just food for thought. And in order for the thinking to be meaningful, I offer you a unique selection of OKR links for download. All the best articles on OKR in one collection! Read, and implement business drivers consciously. Good luck!