Do you have big dreams for your business? Major companies like Google and Amazon have used Objectives and Key Results (OKRs) to achieve big dreams. And so can you!
With just two simple ingredients—your objectives and key results—OKRs can help you accomplish goals that seem out of reach.
What Are OKRs?
Objectives and Key Results (OKRs) are a goal-setting framework conceptualized by Andrew Grove and popularized by John Doerr. Individuals, businesses, and organizations use this framework to specify goals they’d like to accomplish and to measure their performance.
OKRs outline your objectives—where you want to get to or what you want to achieve. In the context of OKRs, objectives are specific and high-directional goals. They are easily understandable and capture the ambition of an organization. For instance, you may launch a next-generation product or increase your annual revenue by 50%.
Conversely, key results are the roadmap to your objectives, showing how you’ll achieve your goals. They help you track how much of your objectives you’ve achieved. One of your key results could be hitting 100,000 Naira in new product preorders by XYZ or reducing customer churn rate by A% by XYZ.
How Do OKRs Help Your Business?
OKRs are a big deal in business. Here’s why:
- Say goodbye to scattered efforts. OKRs help teams to work together towards the same objectives—with their eyes on the company mission.
- This goal-setting framework ensures that your teams understand their priorities and focus on high-impact goals.
- Due to its strategic framework, OKRs boost motivation and morale by providing teams with challenging and realistic goals.
- They promote organizational transparency and communication because everyone can see the roadmap to success and monitor advancement.
- Because they’re revisited regularly, OKRs allow teams to adapt to changes, effectively reducing risks and promoting higher performance.
What Makes OKRs Effective?
The effectiveness of an OKR is dependent on setting objectives that are ambitious and inspirational. This way, your team has a high-level direction that will drive focus and enhance their performance.
Your objectives need to be SMART: Specific, Measurable, Achievable, Relevant, and Time-bound. Integrating these core qualities helps ensure clarity and precision in developing your organization’s goals. We don’t want the objectives to confuse your team!
OKRs should provide a framework for the following basic questions: How high do you want to take your company? And how can you accomplish this?
To ensure your OKRs propel growth and not cause confusion, keep these in mind:
1. Outline Clear and Specific Objectives
Great OKRs are easy to understand. It would be best to clearly spell where you want to go in simple, straightforward language. For example, say you want to increase the company’s annual revenue by 50% than to increase profits.
2. Formulate Key Results That Are SMART
Create achievable key results that can be used to measure the company’s performance. Make these key results quantifiable and time-bound. Say you want to increase annual revenue by 50%. Specify a timeframe and the marker to show you’ve achieved your objective.
For instance, you can increase average order value by 15% before the end of the year by offering bundle deals or introducing premium offerings. Then, you can check your average order value at regular intervals to see if it is going up.
These metrics are important to continually monitor and track each department and team in a company.
3. Create Objectives That Result in the Organization’s Success
Developing objectives that align with your organization’s values is critical. All objectives you create should only contribute to the growth and success of your business. An example is crafting objectives that help boost revenue or increase exposure to new audiences.
4. Encourage Open Collaboration and Communication
When creating your OKRs, keep your team members in the loop. Always provide in-depth information and updates on individual OKRs to ensure everyone understands their duties.
5. Analyze the Outcomes of Completed OKRs
Record and review the key results from your OKRs to understand better what worked and what should be improved. Use these results to gain insights that can help improve the quality and settings of future OKRs.
Step-by-Step Guide to Setting Impactful OKRs
Here’s how you can create impactful OKRs throughout a standard annual cycle.
1. Set Company-Level Objectives Based on Your Business Strategy
Creating impactful OKRs starts by first understanding your company’s goals. Once you’ve got a clear grasp of your goals, you can break down these goals and develop effective strategies that align with them.
Identify key areas in your organization that need special focus and establish high-level objectives. You can strategize using a hierarchical approach, like creating general OKRs that the whole team understands and later moving down to individual OKRs to address specific objectives.
Let’s say you’re a body cream manufacturer. One of your objectives could be to increase annual revenue from your body cream products by 50%.
2. Define 3 to 5 Key Results Per Objective
John Doerr suggests having three to five key results for every objective. These results would act as a measurable indicator of your performance and success. While the objective is the destination, the key result is proof of achieving it. They also work as maps to reach your core goals faster by helping you understand the effort, resources, and tools required to accomplish a certain task.
Say your objective is to increase annual revenue from your body cream products by 50%. Your key results could be any of the following:
- Expand your market share by 10% by XYZ.
- Optimize pricing and promotions to achieve a 15% increase in your average order value by XYZ.
- Launch 2 new body cream lines targeting untapped market segments, like men’s skincare or specific skin concerns by XYZ.
- Expand distribution channels by 20% by entering new online marketplaces or securing partnerships with international retailers by XYZ.
- Boost customer retention by 10% through loyalty programs, personalized recommendations, and exceptional customer service by XYZ.
These key results would have metrics and strategies attached to be actionable and measurable. For instance, to expand your market share by 10%, you can track the number of body creams you sell compared to the total industry units sold. Alternatively, you can measure the percentage of customers buying your body cream within your target demographics. With these metrics, you monitor your market share regularly to track your progress. As for strategies, you may improve your unique selling proposition (USP), offer competitive pricing options, or build a strong brand identity.
These results provide a quantifiable method to measure your step-by-step progress toward achieving an objective. It also gives a clearer outlook as an organization moves closer to its goals.
3. Cascade to Departments or Teams
Once you’ve determined your objectives and key results, you’ll break them down into specific goals for departments and teams, giving them a clearer picture of the company’s goals. For instance, the objective for your product development team could be to develop new body cream lines that capture 15% of the market share within the ‘XYZ’ segment within the next year. For your customer service team, it could be to increase customer satisfaction by 10% compared to the previous year, as measured by XYZ. Of course, you’ll also craft key results for these team objectives.
This is just an example of translating general company OKRs into individual team goals. Remember, the key is to ensure alignment and ensure everyone knows how their role contributes to your business’s greater good.
4. Track Progress Frequently
Keep your teams updated on their OKRs while implementing a system that can track their progress. Make frequent check-ups to ensure each team member is on the right track, celebrate victories, and follow up on mistakes with the appropriate adjustments.
Utilize OKR tools and management strategies to monitor key results and overall performance effectively. Track and review your OKRs using weekly team meetings, individual reviews, and quarterly company meetings. A regularly reviewed and updated OKR facilitates transparency and accountability in an organization.
5. Reset Quarterly
Your organization’s OKRs should not be set in stone. Instead, they should be dynamic, effectively responding to unexpected changes within a company. Review and reset your objectives and key results quarterly to adapt to the changing priorities and unexpected challenges experienced by your organization.
This step will ensure your organization stays grounded and flexible to changes while it develops. Remember, your OKRs are yours to customize, so make them your own and make them work!
Craft Results-Driven OKRs Today
OKRs may seem like a lot, especially if you’re coming across it for the first time. However, it can be a transformative framework for your business. Clear, ambitious objectives with measurable key results can propel your company towards unprecedented growth.
Remember, OKRs are not just goals but a roadmap for success. So, embrace the challenge, roll up your sleeves, and get ready to achieve remarkable results!
Ready to craft OKRs but need more guidance? At Systems and Processes Consulting, our strategic planning specialists can help you formulate objectives and key results tailored to your business needs. Learn more about our services here.