OKRs are a pioneering concept in business management that have helped shape some of the most successful companies of today. If it worked for Google and Intel, why can't it work for your business?
If you've heard of OKRs before and ever wondered how the idea came about, keep reading for a quick guide to the history and development of OKRs as a wildly popular (and effective) system of management.
What is an OKR?
The acronym OKR stands for objectives and key results. Basically, OKRs are a holistic technique to manage the goals and performance of an enterprise at every level.
An OKR consists of three parts: an objective (O), up to five key results (KR), and sometimes also initiatives. Included in the framework are tools to help employees prioritize, focus, and measure the success of the work they do. This, in turn, helps managers to better track their employees' successes and drive the organization towards stronger performance metrics.
Objectives, Key Results, and Initiatives
An objective, quite simply, is the goal that needs to be achieved. It's what employees work towards, providing a clear direction and desired end result of a project.
A key result has two parts: a starting metric and a target metric. Think of it like mile markers on a trail. Key results allow employees and managers to track progress towards the final objective.
Initiatives operate at the next level below key results. Where key results help measure progress towards an objective, initiatives help measure progress towards a key result. They also describe what participants must do to work towards the key result.
Ideally, when writing your OKR, you should have 3-5 objectives at any one time and 3-5 key results for any individual objective. These should be set quarterly and reviewed regularly, typically on a weekly or monthly basis.
This review should be public, visible, and available to employees so they can see how they're doing and what they could do better by the next review.
It is quite common that OKR´s are divided into two types:
1. Aspirational – objectives that aim extremely high, sometimes called moon shots
2. Comitted – the traditional ones that needs to be fulfilled to 100%
History of OKRs
How did managers today arrive at OKRs as a tool to guide their businesses toward success?
Really, it began with those who started thinking of business as a science.
The Fathers of Management
We can trace the roots of OKRs to the forefathers of modern management: Taylor, Ford, and the like. They figured out their businesses could do better if they measured output and formed hypotheses about how they could improve output. At the time, that meant output per individual employee.
Then came Peter Drucker, celebrated today as the man who invented management.
In the 50s, Drucker introduced a system he called, "Management by Objectives" (MBOs). Drucker figured out that managers' goals could be a great thing, and MBOs called for everyone in a company to set objectives.
These objectives had to be a clear roadmap of the contributions an individual employee and their work unit were expected to make within a given timeframe to help other units meet their objectives. Under this system, employees didn't just have to improve their numbers--they had to reach for specific goals when the occasion demanded it.
SMART Goals and Reshaping MBOs
In 1981, a man named George T. Doran came up with the concept of SMART goals, which became a popular management system alongside Key Performance Indicators (KPIs). These concepts meshed seamlessly with OKRs to create a focused, time-bound approach.
Andy Grove, then the CEO of Intel, took a second look at the MBO format and reshaped it. Grove's version of MBOs was designed to answer two simple questions:
- Where do I want to go?
- How will I pace myself to get there?
Grove also believed that objectives should be set more frequently to match the fast-paced environment of business. He also said that these objectives should be stretch goals that should be almost impossible, forcing employees to push as hard as they can to achieve tangible results.
Thus, by Grove's thinking, achieving 70% of your goals was just as good as fully hitting them, since the goals were designed to be impossible from the start.
Grove also believed that objectives and key results should be created in a bottom-up process, from the employee u, to encourage buy-in from the start. In fact, Grove encouraged employees to set goals according to broad company guidelines, where before these goals were handed down from the C-suite.
In addition, Grove argued that MBOs were best used in conjunction with other management systems. Grove was also responsible for coining the term OKR, helping to create the framework of the modern management systems that the HR professionals of today are familiar with.
Google and the Late 90's
One of Grove's students, as it were, was John Doerr, a Silicon Valley legend who learned OKRs through his time at Intel. He later brought OKRs to Google in the late 90s, which is where they hit their final major breakthrough.
Google's model of OKRs was surprisingly similar to Intel's. What was different was that Google dramatically shortened the OKR life cycle to a quarterly process. This system has been deemed one of the key pillar's of Google's rapid development into one of the most successful companies in the world.
Using OKRs for Your Business
Once you know the history of OKRs, it's easier to understand how to implement them for your business. Of course, if you still need some guidance (or just want to make sure you do it right the first time) we can help.
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