Nowadays, Google is one of the biggest, most important companies out there, right? But how did they get there?
Google’s co-founder, Larry Page, said:
“OKRs have helped lead us to 10X growth, many times over. They’ve helped make our crazily bold mission of ‘organizing the world’s information’ perhaps even achievable. They’ve kept the rest of the company and me on time and on track when it mattered the most.”
Objectives and Key Results (OKR) is an extraordinary goal-setting system. And if it helped google become the company that it is today, imagine what it could do for your business.
In this post, we’ll do a deep dive into how OKRs work. We’ll also review several OKR examples so that we can see how best to use this management technique.
Let’s start with understanding how OKRs can help entrepreneurs achieve their business goals.
What is OKR?
If you examine the phrase “Objectives and Key Results,” you’ll see that it has two parts:
1. Objectives: This refers to the goal that is to be achieved.
Your objective could be to become the largest company in the immediate area. Or if you run a restaurant, your target could be to attract more customers during the slack afternoon period.
2. Key Results: This part is about tracking improvements. Each objective could have more than one key result to be monitored. Between 2 and 5 key results are ideal.
OKRs can help small businesses bring a laser-sharp focus to the task of meeting organizational targets.
We had mentioned that a company’s objective could be to become the largest company in the immediate area. Here are the Key Results that could be tracked to meet this objective:
- Increase the number of calls on prospective customers by 50%.
- Implement a loyalty program for the 500 customers with the most significant purchases from the company.
And these are the possible key results for the restaurant that had the objective of attracting more customers in the afternoon:
- Offer a buy one get one free (BOGO) coupon that is valid between 2 p.m. and 7 p.m. on weekdays. Continue this promotion for four weeks. Hand out flyers explaining the BOGO promotion to 100 customers every day for the next month.
- Participate in four local events over the next month to promote afternoon sales.
You’ll see that the critical feature in these OKR examples is that the key results are measurable. As Marissa Mayer, the former chief executive officer of Yahoo! says:
“It’s not a key result unless it has a number.”
The OKR formula can be summed up as:
I will [objective] as measured by [key result].
OKRs also play a crucial role in converting a company’s vision and mission into action on the ground. OKRs provide the link between a company’s goals and the activities carried out by its people.
Now let’s spend some time understanding how the OKR movement began.
What’s the history of OKRs?
Andy Grove, the co-founder of Intel, is credited with developing OKRs.
But the OKR movement took off when John Doerr, billionaire investor, and venture capitalist, introduced them to Google.
John Doerr recommended OKR to Google because he had found it to be a simple and effective method that helped achieve organizational goals. He pointed out that Google’s founders should adopt this two-step approach.
The rest is history. OKRs started to gain popularity, and, nowadays, hundreds of companies use them to grow and succeed.
How can OKR help your business?
There are several ways in which OKRs can help your company. John Doerr says that an OKR system is built on four superpowers:
1. OKRs can improve focus and commit to priorities
What this means: Think deeply about your company’s objectives. What are your goals for the next quarter or the next month? OKRs will help you achieve them.
2. OKRs can help align and connect for teamwork
What this means: Let everybody in the company know about each person’s OKRs. They aren’t a secret. Decide on the key results for each of the priorities. Remember that they must be measurable.
3. OKRs can help track for accountability
What this means: Conduct review meetings to monitor progress. OKRs will help you know in which step of your objective you are, how long it will take you to get there, and if you can do something to improve the process. You can track which OKRs can do better and which people can help drive that progress.
4. OKRs can help stretch for amazing results
What this means: If you’re meeting all your objectives, you probably haven’t set them correctly. Don’t make the mistake of setting the bar too low. OKRs are not just tools to reach your objectives but to set yourself challenging goals that can help your business thrive.
Here’s an image that provides a visual representation of how OKRs work:
Let’s look at some more OKR examples.
Objective: To build closer ties with its customers by delighting customers.
Key Result 1: Conduct a client satisfaction survey with 100 customers over one month.
Key Result 2: Increase sales to repeat customers from 30% to 40%.
Key Result 3: Resolve 99% of customer complaints within three days.
Objective: Make the customer acquisition process more efficient
Key Result 1: Reduce customer acquisition costs by 30% over the next four months
Key Result 2: Increase the conversion rate from 7% to 10%
You’ll see from these OKR examples that it isn’t necessary to provide a numerical value to an objective. However, key results must be quantified.
As management thinker Peter Drucker pointed out:
“You can’t manage what you can’t measure.”
How to implement OKR in my business
The list of companies that use OKR is a virtual who’s who of the top corporations. Facebook, Netflix, Amazon, and Google, among others, have found OKR to be a useful management tool.
Don’t think that the fact that only the biggest companies are OKR adherents means that smaller firms can’t use this goal-setting and monitoring method. On the contrary, OKRs can be employed by businesses of any size.
So are you ready to start?
The first thing that you should do is to think of some OKR examples for your company. Which areas need attention? Are there any short-term objectives that you want to target?
When you have arrived at a list of four or five OKR examples for your business, you can go to the next step.
Create a list of key results for each objective. Limit the key results to five at the most.
Now take the steps that will help you to achieve these results. At the end of the month, see if you have achieved what you set out to do. How far have you met your targets?
Here are a few tips to make your OKR initiative a success:
- Ensure that you don’t take on too many objectives at the same time. A maximum of three or four in a month or a quarter is enough.
- Your key results must be measurable. Limit them to five for every objective. Learn to differentiate between results and tasks. Tasks are the activities you carry out. The results are the outcomes of these activities.
- Everybody should be aware of the OKRs that have been set. This will make people within the company realize what you want to achieve.
- Don’t spend too much time thinking about the objectives and key results. The idea is to get started on the tasks that will help achieve the results you want.
- Don’t evaluate an employee’s performance based on OKRs. If you do this, you’ll probably set unambitious objectives.
- Don’t expect results overnight. Getting used to working with OKRs may take time.
What are the results that you can expect from implementing OKRs in your company?
Here’s what Dick Costolo, a former Google employee who went on to become the chief executive officer of Twitter, says:
“The thing that I saw at Google that I definitely have applied at Twitter are OKRs — Those are a great way to help everyone in the company understand what’s important and how you’re going to measure what’s important.”
Achieve your objectives!
Small businesses have a lot to gain by adopting OKRs. They can help you identify your critical objectives and provide you with a method to achieve them.
Take the first step and decide on your objectives for the next month. Implementing the OKR system could give your business the push it needs to meet the goals that you have been struggling to achieve.
At Camino Financial, we endeavor to do our best to help small business owners with the resources they need to succeed.
Our motto, “No business left behind,” inspires us to provide entrepreneurs with the funds and educational resources they require to take their companies to the next level.