OKR is a goal-setting methodology popularized by the legendary venture capitalist John Doerr, who once bought 12% of Google for $12 million.
Doerr, known as an early backer for world-leading technology companies like Google, Intuit, and Amazon, learned the OKR goal-setting technique from Andy Grove, a manager at Intel in the mid-1970s. When Doerr left Intel, he kept a copy of the original OKR slide deck that Grove had used to teach the OKR methodology to working groups within the Intel business.
Since leaving Intel, Doerr has written books on OKR goal setting and presented the original OKR slide deck to hundreds of organizations. As a result, companies like Google, Spotify, Twitter, ING Bank, Walmart, and Airbnb have adopted the OKR goal-setting technique to improve their collaboration and communication while accelerating innovation and goal attainment.
The term “OKR” is an initialism for “Objectives and Key Results”.
The idea behind OKR goal setting is to define an Objective for your team or project, along with 3-5 Key Results that will act as milestones or indicators of success as you work towards accomplishing your Objective.
An Objective is a strategically important and clearly defined goal. Objectives should be ambitious, bold, and aspirational – even to the point of feeling uncomfortable. Tough objectives pose a challenge that can motivate and inspire high-performing teams to get creative, innovate, and solve problems in ways that may never have existed in the past.
Key Results are a set of quantifiable metrics that will be used to measure your progress towards the desired Objective. In OKR goal setting, Objectives are usually accompanied by 2-5 Key Results that will be used to measure success.
OKR goals are typically formatted in one of two ways:
Some organizations prefer to communicate OKR goals in a list format.
The process here is simple: start with a single line that explains your objective, then create a list of key results underneath your objective.
Objective: Increase Sales Revenue for SaaS Company
Some organizations prefer to communicate OKR goals as a statement. The general format for an OKR goal statement (also known as “Doerr’s Goal Formula”) is:
“I will (Objective) as measured by (Key Results).”
I will increase revenue for my SaaS company, as measured by reaching $500,000 MRR, reducing customer churn by 20%, shortening the sales cycle by 25%, and increasing LTV by 20%.
Adopting OKR goal setting can help organizations achieve better alignment between individuals, teams, departments, and throughout the entire business.
The process begins with the company setting its top three or four objectives for the year and defining key results for each of those objectives.
Once these OKR goals have been documented and shared by organizational leaders, every department, team, or working group can establish its own OKR goals that align with those of the organization.
Finally, individual employees can establish OKR goals for themselves that align with the objectives and key results of their department or team.
This process of implementing OKR goal setting helps align the efforts and focus of the entire organization towards achieving the objectives and results that matter most for the overall success of the business.
According to John Doerr, Objectives should never be business-as-usual. They need to be challenging, with a real possibility of failure. Some proponents of OKR believe that Objectives should essentially be impossible, with the idea that striving for the unattainable pushes teams and individuals to stretch further and accomplish more than they would have otherwise.
Objectives should also be limited in number, with each team or individual pursuing no more than a handful of Objectives at any one time.
Key Results are used to quantify outcomes in OKR goal setting. To allow this, Key Results have to be objective and measurable. Every Key Result you identify should have a number attached to it, and you must be able to reliably quantify that metric to know whether the Key Result was/is being achieved.
On average, teams using OKR goal-setting should aim to accomplish 70% of their Key Results during each quarterly reporting period or goal-setting cycle. If a team accomplishes 100% of its Key Results, this is taken to mean that the Objective wasn’t difficult enough and the Key Results were too easy to accomplish.
A 70% success rate on Key Results is considered the “sweet spot”, indicating that the objective was realistic enough for teams to make progress but too aspirational to be fully completed.
For organizations implementing OKR goal-setting at the company, department, and individual levels, increasing the transparency of OKR goals can facilitate better communication and collaboration between departments.
When John Doerr worked at Intel, each employee had their own OKR goals posted outside their office, so everyone always knew what everyone else was working on.
OKR goal-setting is meant to encourage risk-taking and motivate employees to strive for ambitious targets, but when OKRs are tied to compensation and bonuses, employees are incentivized to set easier targets that make it more likely they will earn their full compensation.
Acknowledging this, proponents of OKR goal-setting recommend that employee compensation should never depend on Objectives and Key Results.
At Directive, our customer-led approach to Marketing Operations (MOps) aligns marketing activities with core business objectives for our B2B SaaS clients.
We leverage data analytics, market research, and systems optimization across multiple ongoing initiatives to prioritize strategic growth opportunities and exceed OKRs by delivering key results around revenue growth and customer generation.
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