OKR.

The model

An objective is a goal phrased so that a human being is motivated by it, meaning in plain language and without figures. A key result is a measuring point that shows whether the goal is getting closer, and it should be concrete enough that nobody can argue about whether it has been reached.

The rule of thumb is a small number of goals and two to four measuring points per goal, set for a quarter or half a year, and visible to everybody in the company.

Andy Grove developed the way of working at Intel during the seventies as a development of Peter Drucker’s management by objectives, and described it in the book High Output Management in 1983. John Doerr, who had worked under Grove, took the method with him to Google in 1999 and spread it further, later in the book Measure What Matters.

One thing is worth knowing about the name. At Intel the practice was called iMBO, meaning Intel Management by Objectives, and that is how Doerr met it when he arrived in 1975. The acronym OKR broke through only in the spread afterwards, and who coined it cannot be established. The content, then, is Grove’s, while the name we use today is not.

How it’s used

Start with the goal and not with the measuring points, because the reverse gives you a collection of key figures without a direction. Write the goal so that somebody who was not in the room understands why it matters.

Then test each measuring point with a single question: could we reach this and still have failed at the goal. If you could, it is the wrong measuring point. The number of customer meetings held is a typical one of those, because it can be met without anything whatsoever having changed.

The last step is the one that decides whether it actually happens, and it is the same thing as in Why decisions never get made: every goal needs a name, a date and something that was taken away to make room.

Reactive and proactive measuring points

The moment the measuring points are to be set, the same thing happens in nearly every room. First the financial numbers are reeled off, meaning revenue, margin and order intake, and they are all of them real and all of them equally reactive. They tell you what has already happened, at a point when it can no longer be done anything about.

What you want are the proactive ones, meaning the ones that move first and therefore give you a chance to act. Ask that question in a room and it usually goes quiet, because they are harder to find and harder to measure. But they exist in every business, and they nearly always sit closer to the work than to the year-end accounts.

Here a trade-off arises that is worth making consciously. A reactive number is exact and arrives too late. A proactive one is approximate and arrives in time. A quarterly result cannot be questioned but cannot be influenced either, whereas a number that says something about the next quarter can always be disputed. Rule out everything that is hard to measure and you will be left sitting with history alone.

There is still a limit, and it is the same as the test above. A proactive number has to both move ahead of the result and actually pull the result along with it. The number of customer meetings does move first, but it can be doubled without a single deal changing, and then it is only activity. The share of quotes sent within a day, or how many of your customers have a next step booked, also move first and are tied to the outcome as well.

The quarterly review

A missed goal of strategic importance calls for a decision and never for a note. Writing the same goal again for the next quarter, under the same conditions, is the one answer certain not to work, and it is the most common one all the same.

Before the action is chosen you need to answer why it was not reached, because the causes call for different things.

The approach did not hold. The goal was right but the route there did not work. This is the most common cause and the one that shows up worst, because it looks exactly like a shortage of resources. Add resources to an approach that does not carry and the work merely goes faster in the wrong direction, and confidence in the goal is spent in the process.

The goal was never a priority in practice. It was first on the list, but nothing was taken away to make room and new urgent work kept coming in alongside it. Here neither more people nor new goals help; what helps is that the capacity already set aside is actually protected. Top up a leaking bucket and you get a bigger leak.

The measuring point was wrong, not the goal. You are moving towards the goal but measuring something that does not capture it. Then the measuring point is changed, but only with a written-down reason. Without the reason it is moving the goalposts after the fact.

The goal was right and was missed anyway. The method rests on daring to set something that can be missed, and seventy per cent on a genuinely ambitious goal is no disaster. If every missed goal triggers an action, everybody quickly learns to set goals they know they will make, and then the form is still there but none of the method.

Only after that comes the decision, and it may very well be more resources or a reprioritisation. It may just as well be a new approach, a protected calendar, or a considered statement that you are standing firm and carrying on as you are. Whichever it turns out to be, it should be said out loud, written down and given a name and a date, exactly like every other decision that is meant to happen.

When the numbers are red

The method shows its greatest value in companies where the result is not good. A loss-making year or a heavy restructuring means that nearly every figure reaching the board is red, and in that situation people stop believing the work is leading anywhere, quite regardless of how much it actually is.

A football team that loses match after match and yet is developing recognises the problem. The result line says defeat every Sunday. At the same time the team created thirty per cent more chances this match than last and had a fifth more of the play. Both things are true at once, and it is the second that makes somebody turn up to training on Tuesday.

In a company it is OKR that carries that function. The measuring points can show that you are getting closer to the strategic goals even when the profit and loss account is not doing so yet. That is not consolation but information: if the proactive numbers are moving in the right direction the reactive ones will follow, and if they are not moving you have found out early enough to change course.

Two things are required for that to hold rather than become an excuse. The numbers have to be set in advance and not picked afterwards from among the ones that happen to look good. And somebody has to say straight out that the result is bad, in the same breath as the progress is reported. Without that sentence it becomes a whitewash, and then everybody stops believing both sets of figures.

Where it’s usually misused

As a new name for budget follow-up. Put OKR on what the company was going to do anyway and you get double reporting and no steering, and that is the most common reason the method is abandoned after two quarters.

It is also misused when OKR is tied to pay and bonuses. Then everybody will set goals they know they will make, and the method rests on the opposite, meaning on daring to set something you might miss. Grove had that as a point from the very beginning, and it is the part that most often disappears along the way.