OKRs are not a new concept. OKRs are a set of proven and effective goal-tracking techniques for business management that have been reinvented to meet the management needs of new professionals.
Already with company giants, such as Henry Ford, similar techniques were applied based on the fact that business management could be divided into a chain of processes.
Ford understood that employee output could be objectively measured. And that daily production capacity could be predicted and adjusted.
In 1954, in his book in his book «The Practice of Management«, the master of management Peter Drucker devised his scheme for the management objectives corporate. Until then, everyone focused only on the raw numbers.
The introduction of the Drucker concept certainly improved the numbers, but it also helped achieve specific ancillary goals. Drucker called this technique "Management by Objectives" (MBO).
Today, most Fortune 500 companies employ at least one of these goal setting techniques. Some companies tend to set annual goals, and others employ a semi-annual goal-setting process. But the ultimate goal is the same: better measure the performance and progress of the entire organization.
Andy Grove
In the 1960s, Andy Grove, co-founder of Intel, came up with the concept we are most interested in: OKRs (Objectives and Key Results). Grove, greatly influenced by Drucker's Management by Objectives (MBO), evolved it and he didn't just try to rewrite it.
Nor should we forget that the OKR models arrived, there were other means of goal setting such as SMART (developed by George T. Doran) around 1980 and the Key Performance Indicators (KPIs, Key Performance Indicators).
In addition to that, he focused on matching (what he called) “Key Results” with his own metrics for the goals (objectives) of the organization.
According to Andy Grove, these “Key Results” should be fixed milestones that help the workforce move in the right direction: reaching ambitious goals for the future.
Another change Grove made to the MBO method was to state that objectives and key results must flow from the bottom up in the organization.
They should start at the grassroots level (employees) and flow harmoniously up (to management), and back down, appropriately.
This introduced a sense of “people empowerment” into the process.
Until then, it was typical for companies to simply set targets for high levels of responsibility and then that responsibility would be passed through the floors of the organization to the employees.
But Andy Grove's method gave his team leaders more freedom to work alongside, without being constrained by, senior management's vision.
Another concept Grove introduced was (what he called) the "Flexible Lens." These are goals that are almost impossible to fully achieve. To Andy Grove:
70% is the new 100%
Which means that if only 70% of a goal was achieved it would be excellent, because the initial goal itself was so ambitious that even achieving a mere fraction of the goal was quite satisfying.
This bold framework of goals ("soft goals") tends to have a positive psychological effect on people in the organization, encouraging them to aim high and think "outside the box."
All the development of his ideas and how he came to them was published in 1983 in his book "High Output Management."
He is the genius behind two questions that reshaped the perception of management in his time. Those two questions are: "Where do I want to go?" and “How will I pace myself to get there?”
John Doer
During the latter part of the 1990s, the OKR model spread throughout Silicon Valley like wildfire.
Johh Doerr joined Intel in 1974, and was one of the company's top sales managers and the one who started the whole thing.
Leaving Intel, he became a partner in one of the most successful venture capital firms in the country: Kleiner Perkins. Doerr was familiar with OKRs from his work at Intel under the leadership of Andy Grove.
With that knowledge he implemented them in Silicon Valley. Once other companies in the valley began to notice Grove's success, they soon followed his lead, adopting similar OKR systems and tailoring them to his needs.
One of the best OKR success stories is that of Google. The entire company, from the top echelon of management to everyone below, sets their OKRs on a quarterly basis; a practice that works well for the fast pace that concerns today's world of constant change and momentum.
At Google, each person sets their OKRs digitally, and the information is made public on the company intranet. This allows for a harmonious transparency of goal setting. The OKRs at each level are accessible and visible to everyone.
So if a team is out of alignment, it will be automatically detected and this will make goals easier to score and modify.
It is these attributes of “transparency of purpose” and “objectivity” that make OKRs such a rich management method for the workplace today (if technologically enabled). And once their value is understood and appreciated, it's easy to understand why so many companies have quickly adopted them.
After observing Google's success in adopting the model, other companies such as Netflix, Twitter, Walmart, The Guardian, Shopify, Airbnb, and others have included it in their model as a key factor. Currently companies, organizations and even individuals use the OKR goal model.
Although the OKR model still has the same core, it is clear that relevant changes have occurred. One of these changes is the growing number of uses of this framework.
Another benefit is purely technological. Today there are platforms for marking, monitoring and collaboration on OKRs in an aggregated way from the person to the management and from the management to the people.
FAQs
Differences between OKRs and KPIs
OKRs and KPIs are tools to track the goals of individuals and organizations. However, they differ in the methods used to measure and track goals and objectives.
The difference between OKR and KPI can be found in the full form of their acronyms. An OKR is oriented towards Objectives and Key Results, while a KPI is considered as a Key Performance Indicator.
KPI presents the functioning of the organization, while OKR deals with goals and results. Due to their nature, KPIs are excellent key results for an OKR.
For example, a book fair collects data on the participants and the number of people who bought books; that data serves as KPI. The objective of the book fair is to contribute more to the culture of reading in the community.
The first Key Result of this goal will be to increase the number of book fair participants by 30% for the next quarter. The second Key Result is to increase the number of book clubs by five before the next quarter.
In this example, you can see that KPI is more about data, while OKR is about goals and results.
Differences between OKR and MBO
MBO (Management By Objectives) helps organizations improve their performance. It is one of the most popular management tools on the market, along with OKRs.
The difference between MBO and OKR is that MBO helps establish what you want to achieve, while OKR goes beyond that. OKR helps answer the what and how questions related to your goals and objectives.
Another difference is that the MBO is reviewed in the long term, usually annually, while the OKR is reviewed in shorter periods, usually quarterly.
MBO is a private and confidential discussion within the organization, while OKR is public and transparent. Only a few members of the organization contribute to the MBO discussion. For OKRs, all teams and individuals can weigh in on them and their elements.
MBO takes a top-down approach to goal setting, while OKR uses a bottom-up, cross-cutting approach. MBO has compensation or rewards associated with performances, while OKR does not use that approach.
Another difference between MBO and OKR is that the former is risk averse and terms to set safe targets that the company can easily achieve. OKR, on the other hand, takes a more aggressive and aspirational approach.
View: What is an OKR?
