Measure What Matters: How Google, Bono, and the Gates Foundation Rock the World with OKRs

by John Doerr

An OBJECTIVE, I explained, is simply WHAT is to be achieved, no more and no less.

Definition: objective

KEY RESULTS benchmark and monitor HOW we get to the objective. Effective KRs are specific and time-bound, aggressive yet realistic. Most of all, they are measurable and verifiable.

Definition: key results

Where an objective can be long-lived, rolled over for a year or longer, key results evolve as the work progresses.

The difference

“hard goals” drive performance more effectively than easy goals. Second, specific hard goals “produce a higher level of output” than vaguely worded ones.

Hard and specific goals

“clearly defined goals that are written down and shared freely. . . . Goals create alignment, clarity, and job satisfaction.”

Goals!

and making it public to everyone at Google.

Make it public

At medium-size, rapidly scaling organizations, OKRs are a shared language for execution. They clarify expectations: What do we need to get done (and fast), and who’s working on it? They keep employees aligned, vertically and horizontally.

OKRs for startups

It almost doesn’t matter what you know. . . . To claim that knowledge was secondary and execution all-important—well, I wouldn’t learn that at Harvard.

Execution over knowledge

The objective is the direction: “We want to dominate the mid-range microcomputer component business.” That’s an objective. That’s where we’re going to go. Key results for this quarter: “Win ten new designs for the 8085” is one key result. It’s a milestone. The two are not the same. . . .

Intel OKRs

He sought to “create an environment that values and emphasizes output” and to avoid what Drucker termed the “activity trap”: “[S]tressing output is the key to increasing productivity, while looking to increase activity can result in just the opposite.”

Output vs 'activity'

MBOs vs. OKRs

MBOs vs OKRs

A limit of three to five OKRs per cycle leads companies, teams, and individuals to choose what matters most. In general, each objective should be tied to five or fewer key results. (See chapter 4, “Superpower #1: Focus and Commit to Priorities.”)

Keep it concise

What is most important for the next three (or six, or twelve) months? Successful organizations focus on the handful of initiatives that can make a real difference, deferring less urgent ones.

Focussed OKRs

top-line goals must be clearly understood throughout the organization.

Communication clarity

Leaders must get across the why as well as the what.

Not just the what but the why

Objectives are the stuff of inspiration and far horizons. Key results are more earthbound and metric-driven. They typically include hard numbers for one or more gauges: revenue, growth, active users, quality, safety, market share, customer engagement. To make reliable progress, as Peter Drucker noted, a manager “must be able to measure . . . performance and results against the goal.”

Objectives can be inspirational and lofty ambitions while key results are numbers bound and metrics driven

If you’re certain you’re going to nail it, you’re probably not pushing hard enough.

If you are certain you can reach it then its not hard enough

Keep in mind, though, that it’s the shorter-term goals that drive the actual work. They keep annual plans honest—and executed.

Short term goals are what drive progress

Clear-cut time frames intensify our focus and commitment; nothing moves us forward like a deadline. To win in the global marketplace, organizations need to be more nimble than ever before. In my experience, a quarterly OKR cadence is best suited to keep pace with today’s fast-changing markets. A three-month horizon curbs procrastination and leads to real performance gains.

Quarterly OKRs cadence

Key Results Paired for Quantity and Quality

Pairing results with quantity and quality, i.e. 10 million in sales while still maintaining 50% gross margins, result: marketing & sales campaigns that dont rely too heavily on subsidies or excessive markdowns

Finally, completion of all key results must result in attainment of the objective. If not, it’s not an OKR.*

Completion of all key results should result in objective reached

In a high-functioning OKR system, top-down mandates to “just do more” are obsolete. Orders give way to questions, and to one question in particular: What matters most?

Just do more top down mandates are obsolete

if we try to focus on everything, we focus on nothing.

If we try to focus on everything we end up of focussing on nothing

OKRs are neither a catchall wish list nor the sum of a team’s mundane tasks. They’re a set of stringently curated goals that merit special attention and will move people forward in the here and now. They link to the larger purpose we’re expected to deliver around. “The art of management,” Grove wrote, “lies in the capacity to select from the many activities of seemingly comparable significance the one or two or three that provide leverage well beyond the others and concentrate on them.”

OKRs are not to do lists!

I’ll never forget stepping into the bathroom of his tiny loft office and seeing a list of company objectives taped to the mirror, over the commode. Now there was a sign of serious goal orientation.

Vocalize and repeat constantly

OBJECTIVE Support company hiring. KEY RESULTS Hire 1 director of finance and operations (talk to at least 3 candidates). Source 1 product marketing manager (meet with 5 candidates this quarter). Source 1 product manager (meet with 5 candidates this quarter).

Hiring OKR

Alongside focus, commitment is a core element of our first superpower.

#1 focus, #2 commitment

But at a start-up, the only constant is change,

The only constant is change

We created quarterly OKRs and annual OKRs,

We don’t hire smart people to tell them what to do. We hire smart people so they can tell us what to do. —Steve Jobs

Jobs quote

In an OKR system, the most junior staff can look at everyone’s goals, on up to the CEO. Critiques and corrections are out in public view. Contributors have carte blanche to weigh in, even on flaws in the goal-setting process itself. Meritocracy flourishes in sunlight. When people write down “This is what I’m working on,” it’s easier to see where the best ideas are coming from. Soon it’s apparent that the individuals moving up are the ones doing what the company most values. Organizational poisons—suspicion, sandbagging, politicking—lose their toxic power. If sales hates the latest marketing plan, they won’t be simmering inside their silo; their differences will be aired out in the open. OKRs make objectives objective, in black and white.

Company wide OKR transparency

Transparency seeds collaboration. Say Employee A is struggling to reach a quarterly objective. Because she has publicly tracked her progress, colleagues can see she needs help. They jump in, posting comments and offering support. The work improves. Equally important, work relationships are deepened, even transformed.

Transparency seeds collaboration

A lack of alignment, according to a poll of global CEOs, is the number-one obstacle between strategy and execution.

Alignment between strategy and execution

With our top-level OKRs set, we work our way down the organization.

Start with top level OKRs and work down

As general manager, I cascade my goal down to the next level of management,

Cascading OKRs

My key results become their objectives. (See OKR Chart 2.) The head coach’s objective is to win the Super Bowl, with three key results to get him there: a passing attack of at least 300 yards per game, a defense surrendering fewer than seventeen points per game, and a top three ranking in punt return coverage. He cascades those KRs as objectives for his top three executives, the offensive and defensive coordinators and special teams coach. They in turn devise their own, lower-level key results. To achieve a 300-yards-per-game passing attack, for example, the offensive coordinator might aim for a 65 percent pass completion rate and less than one interception per game—after hiring a new quarterbacks coach.

Top level key results become one downs objectives

OKR Chart 3—OKRs for the Organization

Example of org OKRs

Meanwhile, my SVP of marketing has derived her objective from my other key result, to fill the stands to 90 percent capacity. (See OKR Chart 3.) She’s crafted three key results: Upgrade the team’s branding, improve our media coverage, and revitalize the in-stadium promotion program. These KRs are cascaded as objectives for the marketing director, team publicist, and merchandise manager, respectively.

Another example of cascading OKRs

Now, what’s wrong with this picture? Here’s a clue: The SVP’s key results are a mess. Unlike the head coach’s KRs, they’re unmeasurable. They’re not specific or time bound. How do we define “improvement,” for example, in the team’s media coverage? (Five special features on ESPN? One cover spread in Sports Illustrated? Fifty percent more followers on social media?) But even if the SVP came up with stronger key results, the organization’s goal-setting approach would remain deeply flawed. The top-line objective—to make a wealthy person wealthier—lacks intrinsic motivation for the general manager, much less for the team’s East Coast scout or the PR intern slaving away at the copy machine.

Correct OKRs are measurable/examples of poor OKRs

In moderation, cascading makes an operation more coherent. But when all objectives are cascaded, the process can degrade into a mechanical, color-by-numbers exercise, with four adverse effects:

Adverse effects of top down OKRs

Bottoms Up!

Bottom up OKRs

Fortunately, we have an alternative. Precisely because OKRs are transparent, they can be shared without cascading them in lockstep. If it serves the larger purpose, multiple levels of hierarchy can be skipped over. Rather than laddering down from the CEO to a VP to a director to a manager (and then to the manager’s reports), an objective might jump from the CEO straight to a manager, or from a director to an individual contributor. Or the company’s leadership might present its OKRs to everyone at once and trust people to say, “Okay, now I see where we’re going, and I’ll adapt my goals to that.”

non cascading OKRs

Innovation tends to dwell less at the center of an organization than at its edges. The most powerful OKRs typically stem from insights outside the C-suite. As Andy Grove observed, “People in the trenches are usually in touch with impending changes early. Salespeople understand shifting customer demands before management does; financial analysts are the earliest to know when the fundamentals of a business change.”

Innovation can often come from outside of core management, therefore non cascading OKRs allow for flexibility and freedom for creative innovation

Micromanagement is mismanagement. A healthy OKR environment strikes a balance between alignment and autonomy, common purpose and creative latitude.

Micromanagement is mismanagement

In business, I have found, there is rarely a single right answer. By loosening the reins and backing people to find their right answers, we help everybody win. High-functioning teams thrive on a creative tension between top-down and bottom-up goal setting, a mix of aligned and unaligned OKRs. In times of operational urgency, when simple doing takes precedence, organizations may choose to be more directive. But when the numbers are strong and a company has grown too cautious and buttoned-up, a lighter touch may be just right. When leaders are attuned to the fluctuating needs of both the business and their employees, the mix of top-down and bottom-up goals generally settles at around half-and-half. Which sounds about right to me.

Mix between aligned and non aligned OKRs

MyFitnessPal provides insights—we call them “moments of clarity”—that stick with our users all their lives.

Data insights - moments of clarity

Maybe toughest of all, we must balance the task of making systems work perfectly today (as our people expect) with our mandate to invest in the future. For example: Intuit used to have nine different billing systems to serve our array of products, and each of them had special challenges. When you’re putting out fires every day, it’s hard to build a next-generation billing technology.

Trade off between present and future

For leaders to keep pace, they should be checking their funnel on a daily basis. At EBS, we need to be thinking about real-time reporting, data, and analytics,

Check your funnel daily!

Their life cycle unfolds in three phases, which I’ll consider in turn.

OKRs three lifecycle

OKRs don’t require daily tracking. But regular check-ins—preferably weekly—are essential to prevent slippage.

Weekly reviews