History of OKRs: Peter Drucker had a great idea but Andy Grove made it real.

“Aliyar hates processes.” I heard one of my teammates explain to a new hire.

It was true. I used to hate management by processes. Too much reliance on following processes leads to mediocrity. I’ve seen it happen before and I was determined to avoid it by promoting healthy scepticism and a spirit of experimentation. I’m still not a huge fan of processes but I’ve come to see that all processes aren’t created equal.

Building a high-performance team requires a disciplined approach to managing performance and rewards. Before fully adopting OKRs I had heard about them but I didn’t fully commit to using Objective & Key Results without some trial and error.

Along the way the two management titans that inspired me the most were Peter Drucker and Andy Grove.

Discovering my Way of Working

Processes are tools and as a manager, you can use them to enable your team to excel or stifle inspiration and hold them back.

The most important process an organisation needs to master is how to get its most important work done. I prefer the term Way of Working to describe such processes.

A way of working isn’t just a schematic guide it’s also a culture of shared values.

For me, our Way of Working had to lead towards building an environment that attracted high performers and enabled them to do their best work.

It doesn’t make sense to hire smart people and tell them what to do; we hire smart people so they can tell us what to do.

Steve Jobs

Managing myself

If you want to attract and retain high performers you need to start with hiring and training team leaders who can deliver disciplined management and dependable leadership.

I firmly believe that some managers can grow their teams to match their own competence, while others enable their teams to reach beyond anyone’s individual skills.

I wanted to be the latter type.

As a team leader, my first responsibility was to commit my energy and skills towards the development of my team. Knowing that I’m an overachiever and annoyingly competitive at times, it was my first priority.

On top of that, I like testing new ideas, learning and pivoting as often as it’s necessary. I knew that I needed to find a way to set objectives, evaluate them regularly and optimise without driving my team crazy.

I needed a process and that’s when I first came across Management by Objectives.

Peter Drucker and Management by Objective

Peter Drucker introduced the inclusive, open, consciences and goal-oriented management practices that we Millennials adore and advocate.

Drucker believed that managing knowledge workers required a more inclusive approach compared to the authoritarian top-down management style common during the mid-twentieth century.

In his book The Practice of Management published in 1954, he popularised his management theory known as Management by Objective or MBO.

A corporation should be a community based on trust and respect for the workers, not just a profit machine.

Peter Drucker

George Odiorne was Drucker’s student and a contributor to his new management theory. He described Management by Objectives – in his book by the same name as:

A process where the superior and the subordinate jointly identify common goals, define each individual’s major areas of responsibility in terms of the results expected from him or her, and use these measures as guides for operating the unit and assessing the contribution of each of its members.

Wikipedia – Management by objectives

Management by Objectives was a revolutionary idea which encouraged managers to involve their subordinates in not only setting common objectives but also deciding the key activities required to reach them.

Management by Objectives inspired a new generation of business managers and leaders. Research published in 1991 showed that CEOs that committed to MBO saw a 56% improvement in productivity versus only a 6% gain where the commitment was low. In fact, many successful organisations such as HP and Xerox attribute their success to their adoption of Management by Objectives.

Organisations that adopted MBO started doing things differently when it came to

  • Reviewing organisational objectives.
  • Setting employee objectives.
  • Monitoring progress.
  • Evaluating results and
  • Giving rewards.

Performance mismanagement

While MBO is an effective approach it also has an inherent flaw i.e. tying performance to financial rewards. While goal setting is beneficial mismanaging performance and rewards can lead to disastrous results.

When this approach is not properly set, agreed and managed by organizations, self-centered employees might be prone to distort results, falsely representing achievement of targets that were set in a short-term, narrow fashion. In this case, managing by objectives would be counterproductive.

Wikipedia – Management of Objectives

Separating performance from rewards

Look at any job ad out there and you’ll see employers looking for people with deep expertise, independent thinking, problem-solving skills, entrepreneurial attitude and willingness to take on greater responsibilities.

Yet many organisations still rely on yearly performance reviews which are notorious for being time-consuming, subjective, demotivating and ultimately useless.

A performance management system is inherently worthless unless it can deliver a subjective analysis of an individual’s i) performance ii) skills and iii) impact on the job.

That’s where Objectives and Key Results come in.

Andy Grove – Father of OKRs

Andy Grove was instrumental in transforming Intel into the world’s largest manufacturer of semiconductors. Grove’s management philosophy was influenced by both Peter Drucker and arguably by an essay named The Giving of Orders by Mary Parker Follet written in 1929.

Grove understood that good leadership and not performance reviews was the bedrock for growth. Being aware of the shortcomings of Peter Drucker’s methodology he specifically separated performance towards achieving organisational goals from financial incentives or compensation.

During his time at Intel between 1968 and 1997, he developed, implemented, tested and refined this management method called Intel’s Management by Objectives which later came to be known as OKRs – Objectives & Key Results.

Grove believed in building an environment where execution trumped over knowledge. In his words:

It almost doesn’t matter what you know. It’s what you can do with whatever you know or can actually acquire to accomplish.

Andy Grove – Quote from Measure What Matters

John Doerr in Measure What Matters wrote

The crucial quality of a healthy OKR culture are ruthless intellectual honesty, a disregard for self interest, and a deep allegiance to the team.

John Doerr – Measure What Matters

OKRs not only separated organisational objectives from individual rewards, but his introduction of Key Results also brought the metrics required to measure individual skill, impact and contribution towards the team.

Success stories of Google, LinkedIn and Bill & Melinda Gates Foundation are just a few examples of how OKRs not only push organisations towards achieving their Wildly Important Goals but also lay the foundation for a culture based on meritocracy, openness and collaboration.

Introduction to OKRs: There are many ways to get shi*t done but this is my favourite

In this article I’ll introduce the OKR management methodology, give examples of good vs bad OKRs and share advice on how you can get started with OKRs.

Since you’re here I’m sure you’ve already heard (or read) about how LinkedIn, Intel, YouTube, Bill & Melinda Gates and perhaps most notably Google have used OKRs to achieve exponential growth.

“Culture eats strategy for breakfast.”

Peter Drucker

Beyond delivering growth OKRs has also given them to tools to build a remarkable organisational culture that nourishes performance, collaboration and accountability.

What are OKRs?

Objectives & Key Results is a management methodology that’s designed to help companies, of any level and at any stage, achieve their most important business goals.

A management methodology that helps ensure that a company focuses efforts on the same important issues throughout the company.

John Doerr – Measure What Matters

We can trace its roots back to Andy Groove who developed and perfected it it at Intel. In his book High Output Management he wrote that the purpose of OKRs is to answer two important questions.

  1. Where do I want to go?
  2. How will I know I’m getting there?

The OKR methodology has two parts.

  1. Objectives
  2. Key Results

Objective

An Objective is your organisation’s most important goal. Achieving this goal has to be fundamental to the success of your business.

Objectives are significant, concrete, action oriented and ideally inspirational. When properly designed and deployed they are vaccine against fuzzy thinking and fuzzy execution.

John Doerr – Measure What Matters

Key Results

Key results are milestones that help you stay your course. Key Results outcomes that are specific, measurable and time-bound leading towards your objective.

The key result has to be measurable so at the end you can look and without any argument say did I do it or did I not do it. Simple. No judgements in it.

Andy Grove – Intel

In summary, Objectives are Inspirational Goals while Key Results are the measurable and time-bound milestones that lead you towards fulfilling your objective.

A well-drafted OKR follows this structure: ‘We will (Objective) as measured by (Key Results)’.

Here you can watch Andy Grove explaining OKRs at Intel’s Organisation, Philosophy, and Economics course, known as iOPEC.

How I started using OKRs

I got my first job in business development right after finishing my undergraduate degree. It was at a rapidly growing business and I was over-the-moon happy about having a paycheck, even if the job wasn’t all that exciting.

Despite losing interest in the job, I was always able to find the motivation to do new things just to see what I could personally achieve and how far we could go as a team. It was really all because of my team leader. He was somehow able to get us to push for more without compromising what needed to be done to manage our day-to-day responsibilities.

After that job, I joined Resolution Media. A few months into the job, I was given the responsibility to build a new service portfolio and lead a small team of two and a half people.

Leading my first team

While I had run businesses before, it was the first time I was leading a product team at one of the leading agencies in Finland. I was ecstatic and sh*t scared at the same time. I had no doubt that we’d succeed but I knew I needed to create an environment where people wanted to do their best without excessive management.

In an agency, billable hours take priority over any internal development objectives. We’re always short-staffed, with a high burnout and churn rate. None of those facts made life any easier.

I knew I needed a different approach to managing my team than asking them to put in more hours or giving up on having any team objectives. That’s when I found OKRs.

At first, I used OKRs to manage my own responsibilities and later scaled it up to my team. During the first full year of leading product development, we exceeded our revenue target by over 200% and trained new people who could represent our offering in their own teams.

I have been using OKRs both personally and as a team leader for over 4 years. I love working in a demanding agency environment and I know what I’ve been able to accomplish wouldn’t have been possible without OKRs.

How did I benefit from OKRs

Objectives and Key Results is a framework. It requires planning, iteration, metrics and open communication. Being a growth marketing consultant working at an agency with other digital marketers, the first three requirements came easy.

Open communication needed a bit of work to establish and actively nourish. That’s where we really benefited following the OKR methodology.

Here’s a list of some of those benefits.

  1. We set shared Objectives for the team with shared responsibility for Key Results. That helped us define our focus.
  2. The fact that we had shared responsibilities despite the differences in our roles brought alignment.
  3. Knowing that our work output is tracked against set metrics regardless of seniority made everyone equally accountable.
  4. The fact that we shared a common objective and appreciated having a competitive streak meant that we tried pushing just a little bit harder. In other words, we set Stretch Goals.
  5. Each of us was only as successful as the team, this meant that individual financial rewards weren’t the root cause of better performance.

Good vs Bad OKRs

One of the common reasons why goal setting goes wrong is due to poorly defined goals. The cautionary tales of Enron and Ford Pinto are well-cited examples of how goals that are too narrow, too specific and missing an appropriate time horizon can lead to disastrous results.

A good Objective is ideally inspirational and a well defined Key Result must always be measured against a qualitative and a quantitative metric.

For Example:

Objective: Become the most trusted service provider and reach a revenue target of 1 000 000 € from New Business between January – December 2019.

Key Result 1: Send proposals worth 500 000 € per quarter. (Quantitative Result)
Key Result 2: Convert 40% of prospects to customers per quarter. (Qualitative Result)
Key Result 3: Maintain 80+ NPS among new customers. (Qualitative Result)

In the above example starting with the Objective, each Key Result includes a quantitative value (bolded). At the same time, there are two types of KRs. The first KR is purely quantitative e.g. send out proposals worth 500 000 € the remaining KRs are there to measure the quality of the proposals and the customer relationship.

Failing at either one of them will be a failure to accomplish the Objective.

Here’s an example of a poorly defined OKR.

TypeTime Frame
ObjectiveIncrease New Business Revenue.Yearly
KR 1Send new proposals.QuantitativeQuarterly
KR 2Close new deals.QualitativeQuarterly

A poorly defined OKR lacks clarity, measurability, time frame and does very little to ensure accountability.

Measurability combined with qualitative and quantitative types of Key Results is the hallmark of good OKRs.

You can find more examples here and here.

Common mistakes while setting OKRs

The most common mistake when getting started with OKRs is thinking that it’s a productivity tool. Although organisations using objectives based management see a 56% increase in productivity, benefiting from OKRs requires a cultural change as well as an operational one.

Here’s a list of common mistakes to avoid when getting started with OKRs.

OKRs are not a To-Do list

OKRs are not another way to get things done. The true power of OKRs comes from increased collaboration and alignment across the whole organisation around its most important goals.

Setting too many OKRs

The OKR framework forces leadership teams to narrow their focus and direct resources towards a small number of meaningful and impactful objectives.

Objectives (Yearly)1 – 4
Key Results (Quarterly)1 – 5

Failing at alignment

In principle, leadership teams are only supposed to set top-level or organisational OKRs. Beyond that different functions and teams need to align their key activities around the organisational objectives by setting their own OKRs.

This process of open communication and accountability creates alignment which is essential for succeeding with OKRs.

LevelDescriptionReview Period
StrategicHigher-level and Strategic organisational objectives.1 Year
TacticalShort-term and specific to a function or a team.1 Quarter
OperationalInitiatives are usually measured as KR on both levels.1 week – 1 Month

Lack of follow-through

Speaking from experience, adopting OKRs is an exercise in behaviour modification. No individual or group will become more open, more accountable or more collaborative just by filling an excel sheet.

Training, support and follow-ups are an essential part of getting started with OKRs.

It’s recommended to appoint an OKR coach during the transition period. The coach is responsible for helping people set and refine their OKRs as well as openly sharing the progress against them during monthly and quarterly follow-ups.

On average it can take up to 2 quarters to implement OKRs and often a bit longer to get better at setting stretch objectives.

Planning for successful adoption of OKRs

The table below is an adaptation from WhatMatters – the official website of Measure What Matters by John Doerr. It provides a schedule for how you can pace your OKR adoption process and continue it afterwards.

Time FrameOutcome
4 – 6 Weeks before the quarterBrainstorm annual and Q1 organisational OKRs.
2 weeks before quarterCommunicate upcoming annual and Q1 OKRs.
Start of quarterSet and communicate team-specific OKRs for Q1.
First week of quarterSet and communicate OKRs for individuals for Q1.
During the quarterTrack progress and Check-In.
End of the quarterCheck progress and score OKRs.

An OKR score is typically between 0.0 – 1.0.

ScoreStatus
0.0 – 0.6No progress
0.61 – 0.70Some progress
0.71 – 1.0Success

Useful resources

  • Google’s OKR Playbook [PDF] – Link
  • How OKRs are used at LinkedIn. – Link
  • A typical OKR cycle [PDF] – Link