Objectives and Key Results – OKR as an effective goal-setting method
Definition and basics
Objectives and Key Results (OKR) is an innovative and highly effective goal-setting method that aims to actively involve employees in the formulation of company goals. This model divides target setting into two main components: 40 percent of targets are set top-down by management, while the remaining 60 percent are determined bottom-up by employees. This structure not only promotes identification with the company’s goals but also increases the intrinsic motivation of employees.
‘Objectives’ are motivating goals that are formulated ambitiously, but not necessarily quantitatively measurable. In contrast, ‘key results’ are specific key figures that define measurable results and represent the progress and success of the objectives. A key result is considered satisfactory if 70 percent or more of the objectives are met.
Principles and methodology
OKR is based on focusing on the essentials. A maximum of five objectives and up to four key results are defined for each objective at each organizational level. The method promotes self-organization, supports short cycles, and aims for continuous improvement. The four additional values of OKR are alignment, transparency, commitment, and intrinsic motivation. Transparency, in particular, plays a decisive role, as ideally, every employee has access to all of the organization’s OKRs at all times, including those of the management.
OKR is not a rigid model, but a flexibly adaptable framework. This makes it particularly suitable for agile organizations, as it can be individually designed to meet the requirements of the organization.
Origin
OKRs can look back on a long history of success, but the method has only actually been used for a few years. Their origins lie in the 1970s at Intel, where Andrew Grove developed the management method ‘Management by Objectives’ into the OKR method we know today. From there, the method reached Google at the end of the 1990s via John Doerr, who has been successfully using OKR ever since.
OKR cycle
The OKR cycle is dynamic and takes place every three months. At the beginning of each cycle, the objectives for the next three months are planned at all levels of the organization in the OKR Planning phase. This planning takes into account the organization’s vision and mission to ensure that the overarching mission statement is not lost sight of despite the short cycles.
During the cycle, progress is discussed in weekly OKRs and the results are evaluated in an OKR review at the end of each quarter. The ‘OKR Retrospective’ serves to learn from experience and continuously improve the process.
OKR vs. other management methods
OKR differs significantly from the ‘Balanced Scorecard (BSC)’ and ‘Management by Objectives (MbO)’. While BSC sets targets from different perspectives for a year, OKR enables a more flexible and regular review of targets. Compared to MbO, where targets are mainly set top-down, OKR offers greater employee involvement and motivation due to the high proportion of bottom-up targets.
Areas of application and tools
OKRs are particularly suitable for agile organizations and can be implemented effectively in companies of all sizes, but especially in start-ups. An ‘OKR tool’ creates transparency about the agreed objectives. A (digital) tool is not necessarily required; at the beginning or in small companies, recording on paper or existing solutions in the current system is sufficient.
There are now numerous digital tools available for managing OKRs that increase the transparency and efficiency of target tracking.
Conclusion
OKR is not just a method for goal setting, but a transformative force that supports agile ways of working and helps companies to focus on their core objectives and achieve them efficiently.
Would you like to integrate OKR into your process management?
