Objectives and Key Results

Driving Focus, Alignment, and Engagement with OKRs

Paul R. Niven, Ben Lamorte

• Publisher: Wiley
• Year: 2016
• ISBN:
  9781119255666
• Edition: 1
• Topic: Business
• Subtopic: Management
• Index: Business

Everything you need to implement Objectives and Key Results (OKRs) effectively

Objectives and Key Results is the first full-fledged reference guide on Objectives and Key Results, a critical thinking framework designed to help organizations create value through focus, alignment, and better communication. Written by two leading OKRs consultants and researchers, this book provides a one-stop resource for organizations looking to quantify qualitative goals and ensure each team focuses their efforts to make measureable progress on their most important goals. You'll learn how OKRs came to be and how leading companies use them every day to help teams and employees stretch their thinking about what's possible, build their goal-setting muscles and achieve results that reflect their full potential. From the basic framework to a detailed dissection of best practices, this informative guide walks you through real-world implementations to help you get the most out of OKRs.

OKRs help employees work together, focus effort, and drive the organization forward. Key results are used to define what it means to achieve broad, qualitative goals, and imperatives like "do it better" are transformed into clear, measureable markers. From the framework's inception in the 1980s to its popularity in today's hyper-competitive environment, OKRs make work more engaging and feature frequent feedback cycles that enable workers to see the progress they make at work each and every day. This book shows you everything you need to know to implement OKRs effectively.

• Understand the basics of OKRs and their day-to-day use
• Learn how to gain the executive support critical to a successful implementation
• Maintain an effective program with key assessment tips

• Tailor the OKRs framework to your organization's needs

Objectives and Key Results is your key resource for designing, planning, implementing, and maintaining your OKRs program for sustainable company-wide success.

Chapter One
Introduction to OKRs

THE HISTORY OF OKRs

We're fans of the BBC television show Connections, which premiered way back in 1978, and was later reprised in 1994 and 1997. The program demonstrated how major discoveries, scientific breakthroughs, and historical events were “built from one another successively in an interconnected way to bring about particular aspects of modern technology.”¹ What the show made clear is that there is a long and interesting history behind virtually everything. So it is with OKRs. While we think of the model as relatively new—most of us would pin its origination to Google's adoption in the 1990s—it is actually the result of a successive number of frameworks, approaches, and philosophies whose lineage we can track back well over a hundred years. At the turn of the twentieth century, organizations were much enamored with the work of Frederick Winslow Taylor, a pioneer in the nascent field of Scientific Management. Taylor was among the first to apply scientific rigor to the field of management, demonstrating how such an approach could vastly improve both efficiency and productivity.

In another development, in the 1920s, researchers discovered what would later be termed “The Hawthorne Effect.” At a factory (Hawthorne Works) outside of Chicago, investigators examined the impact of light on employee performance. The studies suggested that productivity improved when lighting increased. However, it was later determined the changes were most likely the result of increased motivation due to interest being shown to employees. While these and many other advancements were casting a light on how companies could enhance productivity through monitoring discrete activities, for the most part employees themselves were an afterthought. That all changed, however, with the work of Peter Drucker.

Considered by most people (ourselves included) to be the father of management thinking, Peter Drucker set the standard for management philosophy and the theoretical foundations of the modern business corporation. Many of his more than 30 books are considered classics in the field. It is one book, his 1954 release, The Practice of Management, which is of particular significance to those of us interested in OKRs. In the text, Drucker tells the story of three stonecutters who were asked what they were doing. “I am making a living” was the response of the first cutter. The second continued hammering as he answered, “I am doing the best job of stonecutting in the entire country.” Finally, the third answered confidently, “I am building a cathedral.”² The third person is clearly connected to an overall aspirational vision, while the first is focused almost exclusively on providing a fair day's work for a fair day's pay. Drucker's primary concern was with the second stonecutter, the individual focused on functional expertise, in this case being the best stonecutter in the county. Of course, exceptional workmanship is something to be esteemed and will always be important in carrying out any task, but it must be related to the overall goals of the business.

Drucker feared that in many instances, modern managers were not measuring performance by its contribution to the company, but by their own criteria of professional success. He writes, “This danger will be greatly intensified by the technological changes now underway. The number of highly educated specialists working in the business enterprise is bound to increase tremendously…the new technology will demand closer coordination between specialists.”³ Did we mention he wrote this in 1954! Prescient as always, Drucker recognized the surge in specialized roles that were to become the hallmark of the modern corporation, and sensed immediately the danger that change posed should these specialists be focused on individual achievement rather than the goals of the enterprise.

In response to this challenge, Drucker proposed a system termed management by objectives, or MBO. He introduces the framework this way:

---

Each manager, from the “big boss” down to the production foreman or the chief clerk, needs clearly spelled-out objectives. These objectives should lay out what performance the man's own managerial unit is supposed to produce. They should lay out what contribution he and his unit are expected to make to help other units obtain their objectives. Finally, they should spell out what contribution the manager can expect from other units toward the attainment of his own objectives… These objectives should always derive from the goals of the business.⁴

---

Readers will forgive Drucker's exclusive use of the masculine pronouns; again, he was writing this in the 1950s. He went on to suggest that objectives be keyed to both short- and long-range considerations and that they contain both tangible business goals and intangible objectives for organizational development, worker performance, attitude, and public responsibility. This last point is yet another example of Drucker's considerable foresight. It would be another four decades before the inclusion of intangible “assets” was formally included in a corporate performance management system (the Balanced Scorecard).

Already somewhat of a renowned management guru, Drucker's words carried significant weight in the boardrooms of corporate America and thus resonated with executives, who then raced to create MBO systems within their firms. Unfortunately, as is often the case with any type of managerial or organizational change intervention, implementations varied widely in form, often straying far afield from Drucker's original intentions for the model. Perhaps the biggest mistake committed by firms eager to gain the benefits offered by MBOs was transforming what was originally envisioned as a highly participative event into a top-down bureaucratic exercise in which senior managers shoved objectives down into the corporation with little regard of how they would be executed. Many also damaged the integrity of the model by making it a static exercise, often setting objectives on an annual basis, despite the fact that even 50 years ago businesses faced pressure to react quickly to market and environmental changes. But, rather than adopt a more frequent cadence, when it came to objective setting most companies chose the “Set it and forget it” pattern we so often see in organizations to this day.

Drucker's expectation was that organizations would use MBOs to foster cross-functional cooperation, spur individual innovation, and ensure all employees had a line of sight to overall goals. In practice, that rarely occurred and eventually MBOs became the subject of substantial criticisms. However, those with keen business acumen saw the underlying power of Drucker's words and recognized the value inherent in the process. Enter Andy Grove.

A Silicon Valley legend, Andy Grove served as CEO of Intel Corporation from 1987 to 1998 and shepherded the company through its remarkable transformation from a manufacturer of memory chips into the planet's dominant supplier of microprocessors. An astute student of business, Grove recognized the latent power in the MBO system and inserted it as a key piece of his management philosophy at Intel. However, he made a number of modifications to the model, transforming it into the framework most of us would recognize today. In Grove's thinking, a successful MBO system need answer just two fundamental questions: (1) Where do I want to go (the objective) and (2) How will I pace myself to see if I am getting there?⁵ That second question, simple as it may seem, turned out to be revolutionary in launching the OKRs movement by attaching what would come to be known as a “key result” to an objective.

A guiding principle in Grove's use of objectives and key results was driving focus. As he put it:

---

Here, as elsewhere, we fall victim to our inability to say “no”—in this case, to too many objectives. We must realize—and act on the realization—that if we try to focus on everything, we focus on nothing. A few extremely well-chosen objectives impart a clear message about what we say “yes” to and what we say “no” to—which is what we must have if an MBO system is to work.⁶

---

He didn't stop at limiting the number of objectives, however. Grove modified the Drucker model in a number of important ways.

First, he suggested setting objectives and key results more frequently, recommending quarterly or in some cases monthly. This was in recognition of the fast pace of the industry in which he found himself, but also reflected the fundamental importance of adopting fast feedback into an organization's culture. Grove also insisted that objectives and key results not be considered a “legal document” binding employees to what they proposed and basing their performance review solely on their results. He believed OKRs should be just one input used to determine an employee's effectiveness.

Another important in...

Table of contents

• Cover
• Title Page
• Copyright
• Dedication
• Table of Contents
• Introduction
• Acknowledgments
• Chapter 1: Introduction to OKRs
• Chapter 2: Preparing for Your OKRs Journey
• Chapter 3: Creating Effective OKRs
• Chapter 4: Connecting OKRs to Drive Alignment
• Chapter 5: Managing with OKRs
• Chapter 6: Making OKRs Sustainable
• Chapter 7: Case Studies in OKRs Use
• About the Authors
• Index
• End User License Agreement