Objectives and Key Results (OKR) is derived from several well-known methods of resource management, including Management by Objectives or MBO and SMART to determine the organization’s key goals. Since the emergence of management science in the 1960s, business owners have used various designed techniques to improve the organization’s performance.
In 1967, Peter Drucker, the father of modern business, introduced the MBO management technique. Goal-based management is a method to increase participation and involve employees in which the manager together with the employees set, record and monitor the goals for a certain period of time.
In this method, the goals and plans of the organization flow from top to bottom and are determined in the form of individual goals for employees. The underlying concept of this method is “regular and flexible planning”. This means that the organization and its members will not be satisfied with only reacting to events and incidents, but must be pioneers. The idea of MBO was a big and efficient change in the industrial age. In many ways, it was the first management philosophy that properly suited the new information age.
In the early 1990s, SMART goals and key performance indicators (KPIs) became common methods for determining key organizational goals. The simplicity of SMART helped organizations set better goals that were time-bound and supported by actionable KPIs. This results-focused approach was a key element of the OKR model.
SMART goal setting stands for the following words:
- S stands for Specific: target a specific area for improvement.
- M stands for Measurable: Measure the progress of the project or at least define a measure to measure it.
- A stands for Assignable: Specify who is responsible for executing the project.
- R stands for Realistic: Specify what results can realistically be expected with the available resources.
- T stands for Time-related: specify the time frame in which the goals will be achieved.
The thing to note is that these criteria do not say that all goals at all levels must be measurable. In some situations it is not realistic to try to measure a goal, especially when the goal is related to the activities of middle managers.
Managers and companies can sacrifice the benefits of a more abstract goal in order to make their goal measurable. But what really matters is the combination of the goal and the path to reach it. Therefore, serious managers should focus on both of these and not just on the goal itself.
In 1968, Andy Grove, the CEO of Intel Corporation, developed the OKR framework. With this technique, he contributed to the tremendous growth of Intel during that period. Using the MBO and KPI frameworks together, Grove created what we know today as OKRs. Currently, OKRs are used by tens of thousands of companies, from small and medium-sized enterprises (SMEs) to Fortune 500 companies.
Google, LinkedIn, Intel, Zynga, Sears, Oracle, and Twitter are just some of the famous OKR users who love and use this technique.
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The general structure of OKR is very simple and effective:
At first, you should specify 3 to 5 of your goals at the level of your team or organization. Goals should be smart: specific, measurable, assignable, realistic, and at the same time ambitious and have a specific implementation period.
After defining OKRs, share your goals and key results with everyone on the team so that the entire organization has a common understanding of what they should be striving for. After starting work, people should update their progress indicators regularly and weekly.
Under each goal you should define 4 measurable results. Each of these goals is assigned a score of 0 to 1 based on progress and achievement of that goal. This scoring will be given to you by the scrum master or group manager.
When using the OKR index, you should note that this method does not mean employee evaluation in any way. That is, OKR is not a tool to deal with employees, and on the contrary, it should increase productivity and create motivation. A few points about OKRs are very important and important, and in fact they can be considered as proper OKR features.
The OKR system should be a reward-oriented method for employees and not be considered as a penalty if these goals are not met. As much as possible, non-work related and behavioral criteria should also be used in these OKRs.
The main difference between OKR and KPI is its public access. In this way, people’s OKRs are clear and available for all employees of the organization, but each person’s KPI is only for him and other personnel are not aware of it.
The key to OKR implementation is to be flexible with your schedule and update your OKRs if your team, company, or goals change.
Advantages of using the OKR system
- Aligning the goals of each individual with the overall goal of the company
- Creating focus in the organization
- Connecting employees to the core mission of the company
- Improving the learning culture in the organization
- Increasing flexibility, improving responsiveness
- Better evaluation of employees
- Greater transparency in projects and advancing goals
- Accelerate the way to achieve the goal
Necessity of using OKR for startups
Whether a startup consists of two people or 50 people, an OKR system can ensure that the company’s top priorities are clear to everyone, even if goals are not met, OKRs track progress and because they are regularly are reviewed, providing valuable feedback for informed decision making. When executed correctly, OKRs can help startups balance innovation and productivity.
Recent studies on the performance of startups show that 90% of startups fail. According to the study, this failure is nearly 60% for more than 27,000 startups supported by the Cambridge Institute. However, even this number suggests that more than half of startups fail.
Overcoming difficult situations requires more than luck. And to do the impossible, a startup must have a focused, aligned and committed team. Also, their resources should be deployed effectively. Keep in mind that OKRs won’t solve all of a company’s problems, but they can be measurable and accessible.
You don’t need any special software to set up the OKR system, but the miro website and application have very suitable templates and spaces for creating a flexible program and implementing the OKR structure. You can access one of the templates of this website by clicking on the link and customize it according to your project and teams. You can participate in the comprehensive data-based marketing training course to learn more about OKR, KPI and learning methods.