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

by John Doerr

Your odds are better still if you monitor progress while sharing the goal with colleagues—two integral OKR features.

Note/set and track/measure - two integral parts of OKRs

They’re meant to be guardrails, not chains or blinders. As we track and audit our OKRs, we have four options at any point in the cycle:

OKRs as guardrails

On state-of-the-art goal management platforms, OKR scores are system-generated; the numbers are objective, untouched by human hands. (With less automated, homegrown platforms, users may need to perform their own calculations.) The simplest, cleanest way to score an objective is by averaging the percentage completion rates of its associated key results. Google uses a scale of 0 to 1.0: 0.7 to 1.0 = green.* (We delivered.) 0.4 to 0.6 = yellow. (We made progress, but fell short of completion.) 0.0 to 0.3 = red. (We failed to make real progress.)

OKR scoring

And here is how these scores were determined: We completed three of five benchmarks for an 0.6, a borderline green. We did indeed repackage the 8086 family, under a new product line called iAPX. So that’s a perfect 1.0. Production of the 8MHz part, set for early May, was a fiasco.* Because of problems with the polysilicon, the target had to be pushed to October. That’s a zero. As for the arithmetic coprocessor, the goal was to ship 500 parts by June 15. We wound up shipping 470—which computes to 0.9, another green. Altogether, we averaged 62.5 percent (or a raw score of 0.625) on our KRs for this objective, a respectable grade.

Example of scoring

Scoring and Assessment Variations

Scoring and assessment table

A BHAG is a huge and daunting goal—like a big mountain to climb. It is clear, compelling, and people “get it” right away. A BHAG serves as a unifying focal point of effort, galvanizing people and creating team spirit as people strive toward a finish line. Like the 1960s NASA moon mission, a BHAG captures the imagination and grabs people in the gut.

BHAG!

Two OKR Baskets Google divides its OKRs into two categories, committed goals and aspirational (or “stretch”) goals. It’s a distinction with a real difference. Committed objectives are tied to Google’s metrics: product releases, bookings, hiring, customers. Management sets them at the company level, employees at the departmental level. In general, these committed objectives—such as sales and revenue goals—are to be achieved in full (100 percent) within a set time frame. Aspirational objectives reflect bigger-picture, higher-risk, more future-tilting ideas. They originate from any tier and aim to mobilize the entire organization. By definition, they are challenging to achieve. Failures—at an average rate of 40 percent—are part of Google’s territory. The relative weighting of these two baskets is a cultural question. It will vary from one organization to the next, and from quarter to quarter. Leaders must ask themselves: What type of company do we need to be in the coming year? Agile and daring, to crack a new market—or more conservative and operational, to firm up our existing position? Are we in survival mode, or is there cash on hand to bet big for a big reward? What does our business require, right now?

Committed vs aspirational

The way Page sees it, a ten percent improvement means that you’re doing the same thing as everybody else. You probably won’t fail spectacularly, but you are guaranteed not to succeed wildly. That’s why Page expects Googlers to create products and services that are ten times better than the competition. That means he isn’t satisfied with discovering a couple of hidden efficiencies or tweaking code to achieve modest gains. Thousand percent improvement requires rethinking problems, exploring what’s technically possible and having fun in the process.

Larry page quote on 10x

the importance of the outcome, and the belief that it’s attainable.

Stretch goals must be attainable and bottom up

At MyFitnessPal, Mike Lee considers all OKRs to be committed goals: difficult and demanding, yes, but attainable in full.

All OKRs are committed goals example

“We should make the web as fast as flipping through a magazine.” It inspired the whole company to think harder about how we could make things better and faster.

Example google high level OKR

Google is propelled by our moonshot culture. The very ambitious is very hard to do. In a healthy way, our team realized that the success of Chrome would ultimately mean hundreds of millions of users. Whenever we invent something new at Google, we’re always thinking: How can we scale it to a billion? Early in the process, that number can seem very abstract. But when you set a measurable objective for the year and chunk the problem, quarter by quarter, moonshots become more doable. That’s one of the great benefits of OKRs. They give us clear, quantitative targets on the road to those qualitative leaps.

Stretch OKRs define culture overtime

He used a metaphor called the Big Rocks Theory, which was popularized by Stephen Covey. Say you have some rocks, and a bunch of pebbles, and some sand, and your goal is to fit as much of everything as you can into a wide-mouth, one-gallon jar. If you start with the sand, and then the pebbles, the jar will run out of room for all the rocks. But when you start with the rocks, add the pebbles, and save the sand for last, the sand fills the spaces between the rocks—everything fits. In other words, the most important things need to get done first or they won’t get done at all.

Big rocks theory

Conversations: an authentic, richly textured exchange between manager and contributor, aimed at driving performance Feedback: bidirectional or networked communication among peers to evaluate progress and guide future improvement Recognition: expressions of appreciation to deserving individuals for contributions of all sizes Like OKRs, CFRs champion transparency, accountability, empowerment, and teamwork, at all levels of the organization. As communication stimuli, CFRs ignite OKRs and then boost them into orbit; they’re a complete delivery system for measuring what matters. They capture the full richness and power of Andy Grove’s innovative method. They give OKRs their human voice. Best of all, OKRs and CFRs are mutually reinforcing. Doug Dennerline is CEO of BetterWorks, the pioneer in bringing both of these tools to the cloud and smartphones and in helping hundreds of organizations make the processes their own. “It’s the marriage between the two—that’s the real home run,” Doug says. “If a conversation is limited to whether you achieved the goal or not, you lose context. You need continuous performance management to surface the critical questions: Was the goal harder to achieve than you’d thought when you set it? Was it the right goal in the first place? Is it motivating? Should we double down on the two or three things that really worked for us last quarter, or is it time to consider a pivot? You need to elicit those insights from all over the organization. “On the other...

CFRs!

As companies transition to continuous performance management, OKRs and CFRs become mostly independent from compensation and formal evaluations.

OKR vs CFR vs compensation

five critical areas have emerged of conversation between manager and contributor:

One on one convos as part of CFRs

Public, transparent OKRs will trigger good questions from all directions: Are these the right things for me/you/us to be focused on? If I/you/we complete them, will it be seen as a huge success? Do you have any feedback on how I/we could stretch even more? Feedback can be highly constructive—but only if it is specific. Negative feedback: “You started the meeting late last week, and it came off as disorganized.” Positive feedback: “You did a great job with the presentation. You really grabbed their attention with your opening anecdote, and I loved how you closed with next action steps.”

Feedback

Here are some ways to implement it: Institute peer-to-peer recognition. When employee achievements are consistently recognized by peers, a culture of gratitude is born. At Zume Pizza, the Friday all-hands “roundup” meeting concludes with a series of unsolicited, unedited shout-outs from anyone in the organization to anyone else who’s done something remarkable. Establish clear criteria. Recognize people for actions and results: completion of special projects, achievement of company goals, demonstrations of company values. Replace “Employee of the Month” with “Achievement of the Month.” Share recognition stories. Newsletters or company blogs can supply the narrative behind the accomplishment, giving recognition more meaning. Make recognition frequent and attainable. Hail smaller accomplishments, too: that extra effort to meet a deadline, that special polish on a proposal, the little things a manager might take for granted. Tie recognition to company goals and strategies. Customer service, innovation, teamwork, cost cutting—any organizational priority can be supported by a timely shout-out.

Recognition

Adobe Performance Management, Then and Now BEFORE: The annual performance review AFTER: Check-in Setting priorities Employee priorities set at the start of the year and often not revisited. Priorities set and adjusted with manager regularly. Feedback process Long process of submitting accomplishments, soliciting feedback, and writing reviews. Ongoing process of feedback and dialog with no formal written review of documentation. Compensation decisions Onerous process of rating and ranking each employee to determine salary increase and equity. No formal rating or ranking: manager determines salary and equity annually based on performance. Cadence of meetings Feedback sessions inconsistent and not monitored. Spike in employee productivity at the end of the year, timed with performance review discussions. Feedback conversations expected quarterly, with ongoing feedback becoming the norm. Consistent employee productivity based on ongoing discussions and feedback throughout the year. HR team role HR team managed paperwork and processes to ensure all steps were completed. HR team equips employees and managers to have constructive conversations. Training and Resources Managed coaching and resources came from HR partners who couldn’t always reach everyone. A centralized Employee Resource Center provides help and answers whenever needed. Adobe Before-and-After Chart

Adobe example

Most start-ups aren’t too eager to plunge into structured goal setting: We don’t need that. We go super-fast. We just figure stuff out. And often they do figure it out. But I think they’re missing an opportunity to teach people how to be executives before the company scales. If those habits aren’t ingrained early on, one of two things happens: Unsuccessful companies scale beyond the leadership team’s capacity, and they die. Successful companies scale beyond the team’s abilities and the team gets replaced. Those are both sad outcomes. The better way is to train people to think like leaders from the start, when their departments have a staff of one. So OKRs forge your people. They mint stronger executives and help them avoid rookie mistakes. They implant the rigor and rhythm of a very large company into the framework of a very small company. When we implemented OKRs at Zume, the immediate benefit was the process itself.

Implementing OKRs early helps groom founders and early hires

At a start-up, you can get lost in tactical minutiae—especially in my department, where we wear so many hats. That’s dangerous, because you’re swimming in tumultuous seas and it’s easy to lose sight of land. But those OKR meditations helped me reset my compass: How do I contribute to the scheme of things? Then it’s not just another report or campaign or field event. It connects to something bigger and more meaningful.

OKR as a compass

objective out into new revenue (marketing) and repeat revenue (product),

New vs recurring revenue; the former is a marketing goal and the latter is a product goal

Every new employee goes through mission and values training as part of their onboarding. Alex and I are very clear about what we expect from people. And our clarity forces us to be highly accountable, as an organization and as individuals. We have a best-idea-wins culture, and people are free to call out anybody, including the CEO. Alex: Especially the CEO, that’s the best call-out there is. When people challenge us in an open forum, we always stop and make a huge big deal about how impressive it is that the person spoke up. We try to overdo it, to create permission for people to lean in.

Mission and values training for new hires

Culture, as the saying goes, eats strategy for breakfast.

Culture eats strategy for breakfast

OKRs are big, not incremental—we don’t expect to hit all of them. (If we do, we’re not setting them aggressively enough.) We grade them with a color scale to measure how well we did: 0.0–0.3 is red 0.4–0.6 is yellow 0.7–1.0 is green

How google scores OKRs

Objectives are the “Whats.” They: express goals and intents; are aggressive yet realistic; must be tangible, objective, and unambiguous; should be obvious to a rational observer whether an objective has been achieved. The successful achievement of an objective must provide clear value for Google.

What are objectives

Key Results are the “Hows.” They: express measurable milestones which, if achieved, will advance objective(s) in a useful manner to their constituents; must describe outcomes, not activities. If your KRs include words like “consult,” “help,” “analyze,” or “participate,” they describe activities. Instead, describe the end-user impact of these activities: “publish average and tail latency measurements from six Colossus cells by March 7,” rather than “assess Colossus latency”; must include evidence of completion. This evidence must be available, credible, and easily discoverable. Examples of evidence include change lists, links to docs, notes, and published metrics reports.

KRs are the "how"

Committed vs. Aspirational OKRs OKRs have two variants, and it is important to differentiate between them: Commitments are OKRs that we agree will be achieved, and we will be willing to adjust schedules and resources to ensure that they are delivered. The expected score for a committed OKR is 1.0; a score of less than 1.0 requires explanation for the miss, as it shows errors in planning and/or execution. By contrast, aspirational OKRs express how we’d like the world to look, even though we have no clear idea how to get there and/or the resources necessary to deliver the OKR. Aspirational OKRs have an expected average score of 0.7, with high variance.

Committed vs aspirational OKRs

Classic OKR-Writing Mistakes and Traps TRAP #1: Failing to differentiate between committed and aspirational OKRs. Marking a committed OKR as aspirational increases the chance of failure. Teams may not take it seriously and may not change their other priorities to focus on delivering the OKR. On the other hand, marking an aspirational OKR as committed creates defensiveness in teams who cannot find a way to deliver the OKR, and it invites priority inversion as committed OKRs are de-staffed to focus on the aspirational OKR. TRAP #2: Business-as-usual OKRs. OKRs are often written principally based on what the team believes it can achieve without changing anything they’re currently doing, as opposed to what the team or its customers really want. TRAP #3: Timid aspirational OKRs. Aspirational OKRs very often start from the current state and effectively ask, “What could we do if we had extra staff and got a bit lucky?” An alternative and better approach is to start with, “What could my [or my customers’] world look like in several years if we were freed from most constraints?” By definition, you’re not going to know how to achieve this state when the OKR is first formulated—that is why it is an aspirational OKR. But without understanding and articulating the desired end state, you guarantee that you are not going to be able to achieve it. The litmus test: If you ask your customers what they really want, does your aspirational objective meet or exceed their request? TRAP #4: Sandb...

Classic mistakes when setting OKRs

More Litmus Tests Some simple tests to see if your OKRs are good: If you wrote them down in five minutes, they probably aren’t good. Think. If your objective doesn’t fit on one line, it probably isn’t crisp enough. If your KRs are expressed in team-internal terms (“Launch Foo 4.1”), they probably aren’t good. What matters isn’t the launch, but its impact. Why is Foo 4.1 important? Better: “Launch Foo 4.1 to improve sign-ups by 25 percent.” Or simply: “Improve sign-ups by 25 percent.” Use real dates. If every key result happens on the last day of the quarter, you likely don’t have a real plan. Make sure your key results are measurable: It must be possible to objectively assign a grade at the end of the quarter. “Improve sign-ups” isn’t a good key result. Better: “Improve daily sign-ups by 25 percent by May 1.” Make sure the metrics are unambiguous. If you say “1 million users,” is that all-time users or seven-day actives? If there are important activities on your team (or a significant fraction of its effort) that aren’t covered by OKRs, add more. For larger groups, make OKRs hierarchical—have high-level ones for the entire team, more detailed ones for subteams. Make sure that the “horizontal” OKRs (projects that need multiple teams to contribute) have supporting key results in each subteam.

OKR writing tips

Continuous performance management is a two-part, interwoven process. The first part consists of setting OKRs; the second entails regular and ongoing conversations, tailored to your needs.

Continues performance management

Four Superpowers of OKRs Focus and Commit to Priorities Align and Connect for Teamwork Track for Accountability Stretch for Amazing Continuous Performance Management Importance of Culture

Four superpowers of OKRs