“Goals may cause systematic problems in organizations due to narrowed focus, unethical behavior, increased risk-taking, decreased cooperation, and decreased motivation” – this text, posted on a warning label in a paper “Goals Gone Wild”, published by Harvard School, represents a rebel idea that goal setting is dangerous and destructive, as it makes us blindly pursue ideals, often impractical, and sets unhealthy boundaries.
But is it a goal itself that is so destructive? Think about fire. If you are not careful, it will turn everything to ashes… but it can also give the warmth that may save your life on a cold winter night.
John Doerr, an investor and venture capitalist, knows very well how the right goal setting can transform a small start-up into a huge corporation famous worldwide. In his book “Measure What Matters: How Google, Bono, and the Gates Foundation Rock the World with OKRs” he explains the principles of the management system he introduced to companies like Google, Amazon, and Intuit. This system is OKRs, Objectives and Key Results, and it is very simple – yet it brings impressive results, if applied appropriately.
Here’s our short summary of Doerr’s “Measure What Matters” where we cover the main ideas shared in the book.
An effective goal management system—an OKR system—links goals to a team’s broader mission. It respects targets and deadlines while adapting to circumstances. It promotes feedback and celebrates wins, large and small. Most importantly, it expands our limits. It moves us to strive for what might seem beyond our reach.
Doer defines OKRs as “A management methodology that helps to ensure that the company focuses efforts on the same important issues throughout the organization.” As we already mentioned, the acronym OKRs stands for Objectives and Key Results: objective is what needs to be achieved, and key results – what needs to be done for the objective to be achieved. Objectives are “the stuff of inspiration”, while key results concern hard numbers like revenue, active users, market share and so on.
What's important, key results must describe outcomes, not activities. Words like “consult” and “help” describe activities, and not the end-user impact of them. This is why instead of saying, for example, “assess”, it’s better to say “publish measurements by [date].”
An Example of OKR:
An OKR system gives employees a chance to set at least some of their own objectives and key results – woven into the main picture of the company goals, approved in a consulting meeting. People can become more ambitious and achieve more. Besides, frontline employees get an opportunity to influence the whole work process: according to Doerr, “healthy organizations encourage some goals to emerge from the bottom up.”
An OKR system can be used in organizations at different points of their development. At smaller start-ups, it’s a tool of survival – it structures their goals and helps develop a vision. At medium-size companies, OKRs clarify expectations, keeping employees aligned, both vertically and horizontally. In large organizations, they enable autonomy and help find fresh solutions. Finally, it works in the non-profit world – for example, it’s used in Bill & Melinda Gates Foundation.
The term “OKRs” was coined by Doerr, but the idea belongs to Andy Grove, a CEO of Intel Corporation (where Doerr worked in the beginning of his career) who created an original management system: his main hypothesis was that it doesn’t matter what you know; what matters is what you do with your knowledge.
This system was based on Peter Drucker’s MBOs – management by objectives. Drucker was the first business management thinker who introduced “modern” ideas - as opposed to the hierarchical management theories implemented by old-school businessmen like Henry Ford and Frederick Winslow Taylor which presumed that there existed those who gave orders and those who executed them without questions.
Drucker, a professor and a journalist, created a new ideal: he was convinced that a perfect management model was result-oriented yet humanistic, and built on trust; that subordinates should be aware of the company goals and even choose the course of action. Some companies adopted this system, and the results were impressive. But something was missing – the goals were still centrally planned, and there were problems with updating.
Grove improved Drucker’s approach, calling his system IMBO (Intel Management by Objectives); to avoid confusion, Doerr refers to Grove’s new approach as OKRs. These two systems(MBO versus IMBO/OKRs) are very different by nature:
Working at Intel where OKRs were adopted and used on a daily basis, Doerr learned some lessons that best describe this approach:
Doer calls OKRs' main features “superpowers”, as they both help achieve incredible results and workplace satisfaction. So what are these superpowers?
Measuring what matters begins with the question: What is most important for the next three (or six, or twelve) months? Successful organizations focus on the handful of initiatives that can make a real difference, deferring less urgent ones.
What, How, When
Once you determine what has to be done (objectives), and how this needs to be done (key results), you still have to think about something – when exactly it needs to be done. Doerr recommends committing to no more than 5 objectives per cycle, as too many objectives can easily dilute the efforts. For each objective, there shouldn’t be more than 3-5 key results.
To start an OKR cycle, you need to set the appropriate cadence. The best thing to do is to combine quarterly tracking with the annual one, doing them in parallel. Deadlines are a great instrument to make people move forward, says Doerr.
Of course, there is no strict rule that would fit each and every organization. For an early-stage company, it makes sense to work in monthly cycles. For an engineering team, it can be a six-week cycle. The thing is, the OKR cadence has to fit your specific culture and context.
4-6 weeks before the quarter: senior leaders brainstorm top company OKRs, as well as annual ones that set the company’s direction.
2 weeks before the quarter: finalize OKRs and communicate them to everyone.
Start of the quarter: teams develop their own OKRs and share them.
1 week after the start of the quarter: employees share their own OKRs, usually discussed with their managers in one-on-one conversations.
Throughout the quarter: employees track and measure their progress.
Near the end of the quarter: contributors score their OKRs and perform self-assessment.
Communicate With Clarity
Leaders must explain WHY what they want their people to do is important; and employees must understand how their personal goals are connected to the mission of their organization. This is the only way to keep them truly motivated.
Pairing Key Results
Measuring success, it makes sense to conduct both qualitative and quantitative analysis – to make sure what you focus on is the quality.
For example, if your key result is to create a cleaner code, your quantity goal can be to create three features – but your quality goal is to have less than five bugs per feature. Naturally, if you see you stress more on quantity than quality, you need to change your strategy.
In an OKR system, the most junior staff can look at everyone’s goals, on up to the CEO. Critiques and corrections are out in public view. Contributors have carte blanche to weigh in, even on flaws in the goal-setting process itself… Organizational poisons—suspicion, sandbagging, politicking—lose their toxic power.
An essential feature of OKRs is that they are visible to everyone. Transparency is important: not only makes it easy for everyone to understand what is going on, who is doing what and so on (which makes work comfortable psychologically) it also saves time and money – in big corporations, it often happens that several people work on the same thing.
The Same Page
OKRs are very useful for organizations whose employees live in multiple offices – and even in different time zones – yet work on the same projects together. As Amelia Merril, an HR at RMS, California risk modeling agency, noted, one thing is human curiosity: we simply want to know what other people do, and how exactly our work correlates to theirs, as well as to the work of our leaders. OKRs enable better cooperation and teamwork – they provide a very clear picture.
The Grand Cascade
A characteristic feature of the OKR system is moving from the bottom up. In the traditional management model, goals are cascaded: a general manager cascades his goals down to the next level of management (for example, the head coach and the senior vice president of marketing.) Now his key results become their key objectives, and their key results further go down to their top executives, and so on. In theory, this sounds logical, but in practice, this approach creates many problems:
Of course, in times of operational urgency, it’s more reasonable to pick a directive approach, but the mix of top-down and bottom-up goals, provided by OKRs, is what works for both the business and the employees.
One of the obstacles that interferes with the smooth project development is unacknowledged dependencies. The cure, says Doerr, is cross-functional connectivity – peer-to-peer, team-to-team.
Linking up horizontally allows people to see what’s going on and contribute more: for example, people who design handsets can get a good idea about the user interface, and they can go directly to the software people to share it.
Doerr calls OKRs “living, breathing organisms” whose life cycle unfolds in three phases:
Setup. A very convenient instrument many companies use is OKR management software. These platforms offer mobile apps, updating, alerts, etc. Users can create, track, edit, and score their OKRs.
The advantages of these platforms are at the same time OKR values:
OKR cannot function effectively if not all team players fully adopt it. Of course, there will be people who will resist or procrastinate – and for this reason, it makes sense to choose one or more so-called “OKR shepherds.”
People like to see their progress visually represented - in the form of percentages. Measuring your progress can motivate more than public recognition or achieving the goal itself. And if you share your goal with other people, your chances to achieve success get even higher. OKRs offer both of these opportunities.
For best results, says Doerr, OKRs should be reviewed several times per quarter, by both contributors and managers, to report problems and identify obstacles. This can be done in the form of one-on-one meetings, as well as meetings at the levels of teams and departments.
Wrap-Up: Rinse and Repeat
Once you complete your work, it doesn’t mean your OKR is over – you can still get useful information through analysis.
The wrap-up consists of three parts:
1. Objective scoring. Scoring our OKRs, we can use scales. For example, Google uses a 0 to 1.0 scale:
0.7 to 1.0 means “we delivered” (it’s green);
0.4 to 0.6 means “we made progress, but that was not enough” (yellow);
0.0 to .03 means “we failed” (red).
2. Self-assessment. We believe that numbers provide the most objective data but, in fact, there can be circumstances that add some context that should be taken into account.
For example, if you have to recruit new customers and your key result is fifty phone calls, and you call 35 people, numbers will show that your score is 70 percent. But what is your actual result? Again, think about quality – how many customers have you actually signed?
Consider this example: If your goal is to bring in ten new customers, and you bring 8 - but it is just luck because one customer brings in 5 more - your progress will be 80%, but your score - is just 0.7.
3. Reflection. Think if you’ve accomplished your objectives. Analyze what helped you, and what were the obstacles. If you haven’t, roll it to the next quarter, but rewrite the key results. Or feel free to drop it, if it’s not useful anymore.
Two OKR baskets
According to Doerr, objectives can be committed and aspirational.
Committed objectives concern things that are supposed to be done for the company to survive and function (like delivering a feature by a set date). They are tied to hiring, customers, product releases, etc. These objectives are supposed to be fully (100 percent) achieved within a specific time limit.
Aspirational objectives are those that go beyond your everyday routine and are more about your vision of the company’s future. They are not always attainable, but necessary for management and contributors to challenge themselves.
The proportion of these two types will vary from organization to organization, and from quarter to quarter. However, leaders do need to ask themselves: are we a daring company or a conservative one? This will help them understand what their goals should look like.
The Gospel of 10x
“The Gospel of 10x”, the term author Steven Levy uses for big, aggressive goals, is something that makes an ordinary company extraordinary. Think about this: before Gmail was developed, web-based email systems’ storage room was 2-4 megabytes, which made users delete files again and again. Google considered offering 100 MB. Gmail provided 1 gigabyte, and, as Doerr points out, digital communication changed forever.
What business leaders have learned, very painfully, is that individuals cannot be reduced to numbers... Even Peter Drucker, the champion of well-measured goals, understood the limits of calibration.
A conventional HR system tells us that people must be managed at a higher level. But it’s not productive. What we need, says Doerr, is the contemporary alternative to annual reviews – continuous performance management. And it is implemented with CFR – conversations, feedback, and recognition.
Conversations. Doerr defines them as “authentic… exchange between manager and contributor, aimed at driving performance.” The point of conversation is mutual teaching through discussing specific problems. An important thing is that it should be viewed as the subordinate’s meeting: he should be the one setting the tone.
Feedback. Feedback is “bidirectional or networked communication among peers to evaluate progress”; Doerr also provides the definition of feedback by Sheryl Sandberg: “Feedback is an opinion, grounded in observations and experiences, which allows us to know what impression we make on others.”
Today, workers don’t want to be told what to do – they want to be inspired. They want to give feedback to their managers, not just receive it. Doerr notes that even though giving feedback is usually the responsibility of HR, more mature organizations make it real-time and multidirectional, enabling an open dialogue between people.
Feedback can be anonymous or public, but it must reveal problem areas and help employees move forward in their careers. Peer-to-peer feedback is valuable for horizontal communication, which, as we mentioned before, is very important for the company's well-being.
Recognition. It is “expression of appreciation to deserving individuals for contributions of all sizes.” Doerr discusses several ways to implement it:
So how are OKRs and CFRs connected? Establishing and reestablishing goals, we highlight areas where feedback and recognition are needed. If OKRs are clear, it’s also clear what to work on or what to celebrate.
Goals cannot be attained in a vacuum. Like sound waves, they require a medium. For OKRs and CFRs, the medium is an organization’s culture, the living expression of its most cherished values and beliefs.
Andy Grove said that culture means efficiency, and if the organization’s culture is coherent, decisions are made faster, and goals are understood by everyone. In his “High Output Management”, he explained that members of a coherent culture behave consistently without any regulations – and that makes a manager’s life much easier. This is why leaders have to develop a common set of values – by talking about them, or, which is even better, by example.
By formulating objectives, “vaccines against a fuzzy thinking”, and visualizing key results, you set a very straightforward direction for your company – and for yourself. This way, the OKR system provides unity for the organization, linking diverse operations and channeling efforts.
This system has been adopted by numerous Silicon Valley companies, including Disney, Samsung, BMW, etc. The success of these companies is more than obvious, which proves that the system works. And, as Doerr asks, if it worked for Google, why wouldn’t it work for you?
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