What is OKR? A-Z about OKRs​

What is OKR?

What does OKR stand for? OKR stands for Objectives and Key Results. OKRs will align company goals with departmental goals.

The structure of OKR​

OKRs are made up of two components: Objectives and Key Results.

Objective:

• Objectives are what the business wants to achieve. They are the power to motivate each individual and team to constantly strive forward. Objectives need to be short, feasible, and achievable. In addition, they also need to inspire each member of the team to try to complete the work set out.
• Example: Businesses want to build an Online training course on Photoshop. Thus, the main goal is to create a free online Photoshop course that attracts a large number of participants. This is a short, feasible objective that arouses the enthusiasm and creativity of employees.

Key results:

• This is the measure of how well the objective is accomplished. Therefore, Key results will help businesses evaluate whether the objective has been completed. Each project should set out 3-5 key results for a more accurate and objective assessment of completion.
• Going back to the above example, the Key result is the specific key quantitative result as follows:
• • 30 students registered to participate in the first week.
  • 25% of students return to sign up for other courses.

>>> See also: What is Key Result? Examples of Effective Key Results​

Working principle​

OKR is a useful modern management method developed by Andy Grove of Intel. Then OKR was continued by John Doer and popularized at Google. OKR has an extremely strict operating principle based on the following factors:

• Ambition: OKRs always set goals higher than the actual capacity threshold.
• Measurability: Actual and objective metrics are integrated with Key results.
• Transparency: All members of the company regardless of position can follow the OKR of their business.
• Performance: Employee performance is not measured through OKRs.

Example of OKR

Let's take a look at some examples of OKR in each field, thereby better understanding the operation of OKRs as well as how to exploit the benefits of this management method:

In Sales:

• Objective: The enterprise's total revenue in 2023 is 15,000,000 USD.

• Key results:
• • The revenue is set at 1,155,000 USD.
  • The average minimum subscription value per month is $305.
  • The annual renewal percentage is 80%.
  • The monthly fluctuation rate is from 5-7%.

In Marketing:

• Objective: Acquire 1000 new customers for a new mobile app launch within 4 months.
• Key results:
• • App download rate reaches 250 times within 1 month.
  • The rating is from 4.5/5 stars on CH Play or the App store.
  • The app is recommended in famous technology magazines.

Common mistakes when applying OKR

OKR helps a lot in business management. However, if not used properly, leaders can easily lose time implementing and build OKR. Here are a few common mistakes when using OKRs:

• Too many OKRs are set in a short time: This will lead to work overload, making employees not know which focus and goal to focus on first.
• The goals of the departments are not synchronized: OKRs help link individual and departmental objectives towards a common one. Without the alignment and synchronization of objectives among departments, business activities will be difficult to manage.
• OKRs are managed by no one: Each objective set requires a monitoring and management team to adjust during operation. In addition, this team also evaluates the completion of the original objective.
• OKRs are not adjusted in the right direction: The company's employees must meet weekly and monthly to align the operating process and following plan. In addition, departments must also constantly monitor OKR to make adjustments in line with business objectives.
• The progress of OKRs is not tracked: Every individual in the company needs to constantly update OKRs to detect problems that need to be handled in the project.
• Key results are measurable end results: For example, if a business has a goal of producing shirts, the key result is to produce 2000 shirts in a month.
• OKR is a to-do list: OKRs are used to measure progress toward achieving company goals, not to manage day-to-day tasks. Therefore, businesses need to clearly distinguish these two purposes to use OKRs properly.
• Employees are not focused on OKRs: To create a perfect project and achieve the goal, each individual should consider OKRs as a corporate culture. Therefore, each update in OKR needs to be understood by employees to avoid seeing OKR as a plan.

Successful applications of OKRs

What is OKR? Why is OKR favored by many businesses and included in the business management system? Below, Vindoo would like to introduce a few businesses that have successfully applied OKR in business management.

Youtube

Youtube is an application that allows users to create and enjoy interesting videos. Therefore, Youtube’s objective is to increase the average watch time of users. The key results of that objective were to increase the average daily viewing time of users by XX minutes, reduce video download times by X%, and extend app performance on both operating systems.

The key results of Youtube are all aimed at one main purpose, which is to increase the viewing time of customers. The results are identified by a number, helping the manager know exactly the Key Results are achieved, and whether the objective is too easy to complete or not. Therefore, businesses can easily make adjustments for the following OKRs.

Every factor affecting progress is meticulously evaluated. The implementation team will then hold meetings for internal consultation before making a decision to change.

Google

In 2006, Google set an objective to develop Google Chrome - the future-generation platform for websites. The key result of this objective is reaching 20 million users within 7 days. At the time, this objective was difficult to achieve, because Google Chrome was just starting from zero. Therefore, the executives decided to break the objective down into sub-OKRs.

In 2008, Chrome set an objective to become the most popular browser. To achieve this, the key result is for Chrome to appear on new platforms like OS X and Linux instead of just on Windows as before. Thanks to that OKR adjustment, Google hit 111 million users in 2010.

LinkedIn

OKR is one of the secrets of LinkedIn’s success today. LinkedIn executives encouraged employees to set their own objectives and resolve to achieve them within a specific time frame. This helps employees personalize their work but stay on track OKR of the company.

In addition, the CEO of LinkedIn always encourages his employees to set 3-5 challenging OKRs every quarter. Every week the CEO holds a meeting to update the status of these OKRs.

Uber

Uber is also a typical example of the successful application of OKR in business development. Uber sets the objective of getting drivers coverage over 20% of the entire system.

Thus, the key result is that the frequency of drivers in each area must be at least 25%. In addition, the average driving time of drivers needs to increase to 25 hours per week. Besides, the number of drivers is also increased by 5,000,000 people worldwide.

FAQ - Frequently Asked Questions

The above information may have partly helped readers better understand OKR as well as the magical functions that this management tool brings. In the following part, Vindoo will answer a few questions about OKRs to help businesses get the most out of this method.

• What are OKRs and KPIs?

OKRs help to match the expected results and the actual results achieved. This is the guideline for businesses to break their limitations and lead steps to achieve the set goals. Meanwhile, KPI is simply a tool to evaluate work productivity and completed work volume. Thus, KPI only cares about the end result, while OKR pays attention to both the objective and the process of achieving it. Read the article Difference between OKRs and KPIs? Which indicator should be used? for more information.

• Difference between Strategic OKR and Tactical Objective?

Strategic OKR is a big objective, the overall goal of the business, and usually has a term of 1 year. Tactical Objective is the specific goal of each department and is completed in a short time.

• How can OKR be measured?

To measure the objective, businesses need to answer the question of how to achieve it. These objectives do not need to be in a comfort zone but can go further to challenge your limits. 

One way to measure goals is to limit the use of status words like “Continue”, “Maintain”, etc.

• How are OKRs and MBOs different?

OKRs and MBOs both have the same operational purpose, which is to manage the goals of the business. However, OKR can be considered a miniature version of MBO. Because MBO is more about whether the employee has completed the set goal or not, while OKR is about applying the Objective and Key Result in completing the original objective.

• The difference between OKR and SMART goals

The difference between these two management tools lies in the way goals are formulated. When setting goals according to SMART criteria, employees need to ensure the factors of feasibility. This can, on the one hand, discourage employees from taking risks to conquer new limits. However, OKRs can solve this.

• What is the OKR model? And how is it different from BSC?

OKRs are based on goal-centered identification. And BSC emphasizes the key strategies of the business. Thus, to increase the success of the project, businesses need to coordinate harmoniously between OKR and BSC.

• How long does it take to implement OKRs?

OKRs happen continuously and need to be adjusted accordingly as they work. Usually, the first 3 months after establishing an OKR is the toughest and most important period. The departments will adjust the OKRs properly and then the business will add the finishing touches.

• When is a goal considered successful?

When a business achieves 70-80% of its objective, it is considered a success. Note, if the goal can be achieved 100% in a short time, OKR is not yet challenging and not suitable.

• How many OKRs should businesses set?

Every business should set 3-5 OKRs within 5 to 7 years. Departments can set 3-5 OKRs per quarter.

• How many Key Results should each Objective have?

Depending on each Objective, the business sets out appropriate key goals. However, it is not recommended to set too many Key Results for one goal.