Business Operating System #9: OKRs

John Doerr was an electrical engineer who started at Andy Grove’s Intel, which he left to become one of the most successful venture capitalists in America. He has backed Amazon, AOL, Compaq, Google, Netscape, Twitter, Slack, and other successful tech businesses.

Doerr took Andy Grove’s objectives and key results (OKRs) management tool with him and introduced it to Sun Microsystems in 1980 and a startup called Google in 1999.  From there, it grew into a standard management staple of Silicon Valley.

OKRs are a collaborative goal-setting protocol for companies, teams, and individuals.

  • The first part of OKRs, objectives, represent what you want to do (launch a killer game!);
  • key results (KRs) are how you know whether you’ve achieved them (downloads of 25K/day, revenue of $50K/day).

Effective key results are specific, time-bound, aggressive yet realistic, measurable, and verifiable. Whereas objectives can be long-lived, lasting for a year or longer, key results change as the work progresses.

An effective goal management system links goals to a team’s broader mission. It moves people to strive for what might seem beyond reach. For larger companies, OKRs become the themes of the quarter, set by the top management team and cascaded to the organization.

Company OKRs a;low teams and individuals lower down in the organization to establish their own OKRs that contribute to the quarterly themes. Google makes all OKRs transparent to everyone in the organization, creating accountability and clarity. Everyone is privy to what everyone else is working on and understands their contributions and any interdependencies.

Fast-growing tech companies like Google, LinkedIn, and Zynga set both “committed OKRs,” expecting 100 percent completion, and “aspirational OKRs,” which they grade “green” and celebrate when more than 70 percent complete. For slower-growth businesses, setting committed OKRs is the norm. (The version of OKRs used in Scaling Up and EOS, called “Rocks,” is the equivalent of committed OKRs.)

Doerr enumerates the mistakes in writing OKRs and encourages business leaders to avoid the following traps:

  1. Confusing OKRs cause failure or priority inversion.
  2. Sandbagging is when committed OKRs are not fully consumed or aspirational OKRs are stretched.
  3. Setting low-value, “who cares” objectives doesn’t move the needle.
  4. When key results are insufficient for committed objectives, a fully completed OKR will fail to deliver.

Doerr introduces the concept of CFRs to help test OKRs. CFR stands for conversations (between manager and contributor driving results), feedback (bidirectional or with peers to evaluate progress), and recognition (appreciation of deserving contributions of individuals). CFRs are especially important for evaluating the partial accomplishments of moonshot-sized aspirational key results.

In One Sentence: Drive organizational priorities and communicate in your fast-growing business by setting, cascading, and evaluating objectives and key results.