How many ways are there – or rather: how many do you need – to manage your company’s goals? Apparently we all need one more: Objectives and Key Results (OKRs). But why would you want to add this methodology to your arsenal? The reason given most often may not be the one that matters most to you.
The OKR methodology differs in one crucial way from established goal setting and performance management approaches: it not only defines, how to set goals, but also how to achieve them. Methodologies for setting goals have evolved since the 1950s. Management by objectives (MBOs) is a framework based on a business’s needs and goals. The aim of MBO is to identify the main goals of employees or teams and prioritize alignment between activity and outcome. MBOs were developed by Peter Drucker and introduced publicly in his 1950s book The Practice of Management1 based on a tenet of human nature: a course of action is more likely to be seen through if it has been chosen by the group of people responsible for its execution. MBOs have enjoyed tremendous popularity with corporations, including Credit-Suisse, Hewlett Packard and Intel.
OKRs evolved from MBOs, offering further clarity by outlining how the company defines success. Developed by Andy Grove and John Doerr in the 1970s, OKRs help teams and organizations reach their goals through identifiable and measurable results. By design, the OKR framework works across teams to create a standard the whole company can adopt. OKRs give purpose to teams and organizations.
The main similarity between the methods is the use of ‘objectives,’ with both frameworks focusing on goal-setting. Both share a belief in the motivating power of setting explicit goals and offer adaptability of format for different departments in a business.
Google has demonstrated repeatedly that a few hundred people working in concert can change an entire industry in two years or less (e.g. the search industry with Google Search, the browser industry with Google Chrome, and the entire mobile phone industry with Android). This working in concert is based on the Objectives and Key Results (OKR) methodology.
Properly implemented, OKRs can address problems any larger company faces:
- People are working on the wrong things – or several teams are working on the same thing
- Projects slip due to unacknowledged dependencies
- Projects are stopped before go live or – even worse – die a slow, painful and costly death
As the founder of the body of knowledge on business strategy said:
The essence of strategy is choosing what not to do. Without tradeoffs, there would be no need for choice and thus no need for strategy.2
This focus on, well, focus, is a key feature of OKRs — and ignoring this aspect is one of the most frequent reasons why an OKR implementation fails. To paraphrase Porter: if the leadership at the top is not willing to make the tough choices, – i.e., say no –, there is no benefit from articulating a strategy and OKRs won′t fix what the top leadership failed to accomplish.