What Everybody Ought To Know About OKR

Agile Coaches and Consultants are creating a lot of buzzes these days around a fancy “new” method that Google is using as a management tool. They call it OKR (short for Objective and Key Result) and seem to be pretty successful with it. But just like Scrum and many tools, you could easily misuse OKRs which leads to a messy management fad (also check out my article about The ugly truth about why you fail with your agile team). But let us start with the purpose of OKRs and why you should use them:

OKRs are often seen as the next step in the evolution of MBO (Management By Objectives). They’re a logical consequence for agile management because they are based on a shorter (often quarterly) cadence. Therefore they allow for more agility than MBO as their yearly counterpart. But why should you engage in discussions around Objectives in the first place? They are non-value adding for your product and therefore can be seen as another form of waste. Well, objectives can help you to focus and align your work and engage your employees by giving them a sense of purpose. That drives intrinsic motivation as described by Dan Pink. And of course, high motivation focused on a target drives performance. Sounds amazing, right?

Not so fast. Just as regular Scrum, OKRs are easy to learn, but hard to master. Common practice as seen in some companies is the usage of the same old MBO process and content relabeled in a quarterly OKR board. But just changing your cadence will not unleash the full potential of OKRs. So, let’s have a deeper look here.

Choosing the right objectives for OKR

Your company probably worked with objectives before. Objectives are your qualitative descriptions of what you’re actually trying to achieve. And there lies already one of the most common traps when using any goal management method: You aim for a specific output and are satisfied once the output is delivered. Generating output makes you believe that you are actually creating value and gives you a wrong sense of progress.

But remember that your output could be totally useless unless it is proven valuable by a real customer (not a manager). Therefore you have to stop aiming for output and start caring about the outcome and how that outcome is impacting the world. Earning money for your company will not inspire anyone. And switching to OKR won’t solve that issue for you. OKRs just give you the structure to manage your objectives. You still need to learn how to formulate compelling objectives. Oh, and by the way: It is called objective, not activity.

Defining a reasonable set of objectives

Remember that one point of having objectives in the first place is more focus within your team. In order to achieve focus, you have to limit your amount of objectives to a reasonable number. You’ll not be able to focus your work when your set of objectives is too broad. There is a tipping point where your OKR process quickly turns into an administrative burden that keeps your team busy with maintaining itself.

At that point you’ll be better off with no goal management at all because you just created a pile of wasteful activities, that does not bring you any focus. This is probably one of the hardest parts. Because to reduce your set of objectives you need to say “no” to many other topics. And as much as you tried to avoid saying “no” in the past, you’ll still try to avoid making tough decisions even if you are using OKR. So again, OKR will not fix your poor management. There is no way around learning to say “no” and make tough decisions.

Defining meaningful Key Results

Whenever you are writing down objectives, you might want to describe how you are actually planning to realize your achievement. Key Results are a model to indicate the status of your objective. Key Results follow the same basic principles as regular KPIs. They must contain at least three components:

• the exact method of measuring
• initial value
• target value

A KPI or Key Result is worth nothing if one of those components is missing. If you do not describe the exact method of measuring, you’ll end up in potentially huge errors in your data points based solely in different measurement. And if you do not know your initial value it is impossible to set reasonable target value. If you do not set a target value, well… I think that is obvious: The direction of your change is obscure. Consequently, a Key Results always describes a change from one data point towards another data point. If you haven’t been disciplined with your former KPIs in regards to these components, chances are that you’ll again end up with useless Key Results. Once again, OKR does not fix your discipline in formulating precise KPIs.

The motivational nature of OKRs

I already mentioned that Performance Management systems like OKRs can be used as a tool to motivate individuals. But how exactly are the mechanics behind that principle? Defining compelling goals with a clear target picture will result in a strong sense of purpose. Employees will immediately understand the meaning of their work. If they identify with these goals, they will feel intrinsic motivation which drives them to high performance. But there is a catch: They need to identify with the goal! If your goals are not inspirational, no tool will ever unlock the intrinsic motivation of your team. Therefore it is essential to include your employees in the creation of objectives.

Also, it is inherent to any inspirational goal, that it is ambitious enough to really get you going. But you will successfully prevent ambitious goals by coupling your OKRs with bonus systems. Instead, you’ll again end up in the trap of extrinsic motivation. And you probably already learned, that extrinsic motivation is a dead end for building strong high performing teams. So only introducing an OKR structure will not change the mechanics of your team’s motivation. Once more it is required for you to master more profound management principles.

Vertical Alignment with OKR

Traditional Goal Management is usually cascaded top-down. Even though you could (mis-)use OKR to cascade top-down, it is not meant to be created in such a way. Top-down management of cascaded goals works under the assumption, that higher management has better knowledge about the market than lower management. This is known as traditional Taylorism and has been proven wrong several times. In the agile community, we already learned, that people doing the work are actually the best experts for their work. Therefore each layer in the hierarchy needs to define their OKR for themselves. That does not only save a lot of time but also results in better targets. Since all OKRs should be transparent, each layer makes sure to align their OKRs with the other layers in a reasonable way without any strict process.

To sum it up, using OKR is great if you mastered essential management skills. But no tool on earth will ever fix the source of your management issues. If you are serious about your Agile Transformation, you need to let go of your old patterns and behaviors and start changing not only the process but learn to master the essentials of management. Learn to focus and create effective alignment. Inspire employees with ambitious goals.

Developing that core competency results in a major change of your impact. Do not expect that OKR will be your easily implemented solution that can replace the hard work. There is no shortcut to success. If your change is not hurting a bit, you probably aren’t changing anything substantial at all. Without substantial change, you will just use another tool to fill with your same toxic content. So if you decide to be serious about OKR, check out the book “Objectives and Key Results” by Wiley

Key Takeaways

• Stop measuring output and start measuring outcome/impact instead
• Start focusing finally and reduce your amount of objectives
• Be disciplined with defining meaningful KPIs containing method, initial value, and the target value
• Motivation comes through inspirational goals, not bonuses
• Do not cascade your OKRs top-down
• OKRs are not a quick fix to your more profound management issues