One principle of the Agile Manifesto is that the best innovations emerge from self-organising teams. Self-organisation means that the team is able to develop solutions independently. There is no leader or architect to whom responsibility can be shifted. Agile organisations consist of many such teams and face the major challenge of coordinating them and finding a shared direction. How can it be ensured that these teams do not all go their own way or lose their bearings amid countless visions and requirements? One possible solution is OKR. The three letters stand for the management system “Objectives and Key Results”.
Background of Objectives and Key Results
The origin of the OKR system lies in the approach formulated by Peter Drucker as early as 1950: MbO – Management by Objectives. The basic idea was that leadership should be limited to setting objectives and agreeing on goals and reviewing them, while allowing considerable freedom in how these goals are achieved.
In the 1970s, Intel’s then CEO Andy Grove expanded the MbO approach by emphasising that achieving goals must be made measurable. The “Key Results” were born, and after decades of successful implementation, Google founders Larry Page and Sergey Brin first heard a talk about it in 1999. Google introduced the then relatively unknown management system, developed it further, and OKRs became part of the success story.
Goal achievement with numerical feedback
As the name suggests, OKRs consist of two elements:
- Objectives (max. 5 per quarter) are ambitious, inspiring and qualitative goals that define what is to be achieved together.
- Each of these goals has one to four Key Results, measurable results that show how the Objectives can be achieved together.
There are OKRs for the entire organisation, for teams and for employees. They are set and reviewed quarterly in three staff meetings, from the CEO through the various management levels, while the Key Results are defined in 1:1 meetings between manager and employee.
Core principles of OKRs
- Focus: OKRs are intended exclusively for strategic initiatives and projects and are not used for regular day-to-day operations.
- Participation: At least 60% of the Objectives and Key Results are proposed by employees.
- Transparency: The primary goal is a shared direction for the organisation. Therefore, all OKRs are publicly accessible in order to quickly identify deviations from the mission, vision and overarching goals.
- Evaluation: A Key Result is evaluated continuously and transparently on a scale from 0 to 1. Scores between 0.6 and 0.7 are considered good. The average of all Key Results reflects progress towards the Objectives. Once per quarter, an overall evaluation of all OKRs is carried out. Here, the employee receives brief, data-based feedback on their performance.
The OKR system was originally intended exclusively for aligning strategic goals. A growing number of companies also use OKRs for non-strategic day-to-day operational goals. There is a lively debate on this topic. If you would like to deepen your knowledge, it is worth researching this discussion online.
At a glance
Objectives and Key Results (OKRs) describe a visionary management system that enables organisations to find a shared direction while remaining agile, rather than rigidly adhering to annual goals.
- Objectives define what is to be achieved
- Key Results define and quantify how these goals are to be achieved
- OKRs are set and reviewed quarterly
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