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

by John Doerr

While conceptually simple, Andy Grove’s regimen demands rigor, commitment, clear thinking, and intentional communication.

Many companies have a “rule of seven,” limiting managers to a maximum of seven direct reports. In some cases, Google has flipped the rule to a minimum of seven. (When Jonathan Rosenberg headed Google’s product team, he had as many as twenty.) The higher the ratio of reports, the flatter the org chart—which means less top-down oversight, greater frontline autonomy, and more fertile soil for the next breakthrough. OKRs help make all of these good things possible.

Acute focus, open sharing, exacting measurement, a license to shoot for the moon—these are the hallmarks of modern goal science.

Then come the four OKR “superpowers”: focus, align, track, and stretch.

Most deadly of all, MBOs were commonly tied to salaries and bonuses. If risk taking might be penalized, why chance it?

MBOs vs. OKRs MBOs Intel OKRs “What” “What” and “How” Annual Quarterly or Monthly Private and Siloed Public and Transparent Top-down Bottom-up or Sideways (~50%) Tied to Compensation Mostly Divorced from Compensation Risk Averse Aggressive and Aspirational

I’d never worked at a place where you wrote down your goals, much less where you could see everybody else’s, on up to the CEO. I found it illuminating, a beacon of focus. And it was liberating, too. When people came to me mid-quarter with requests to draft new data sheets, I felt I could say no without fear of repercussion. My OKRs backed me. They spelled out my priorities for all to see.

Leaders must get across the why as well as the what. Their people need more than milestones for motivation. They are thirsting for meaning, to understand how their goals relate to the mission. And the process can’t stop with unveiling top-line OKRs at a quarterly all-hands meeting. As LinkedIn CEO Jeff Weiner likes to say, “When you are tired of saying it, people are starting to hear it.”

Objectives and key results are the yin and yang of goal setting—principle and practice, vision and execution. 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.”

Besides, each key result should be a challenge in its own right. If you’re certain you’re going to nail it, you’re probably not pushing 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.

Accordingly, an [OKR] system should set objectives for a relatively short period. For example, if we plan on a yearly basis, the corresponding [OKR] time should be at least as often as quarterly or perhaps even monthly.

But to paraphrase Voltaire: Don’t allow the perfect to be the enemy of the good.* Remember that an OKR can be modified or even scrapped at any point in its cycle. Sometimes the “right” key results surface weeks or months after a goal is put into play. OKRs are inherently works in progress, not commandments chiseled in stone.

In most cases, the ideal number of quarterly OKRs will range between three and five.

For structured goal setting to prosper, as our company learned the hard way, executives need to commit to the process. It

Yet at most companies today, goals remain secrets.

In a recent survey of one thousand working U.S. adults, 92 percent said they’d be more motivated to reach their goals if colleagues could see their progress.

Transparency seeds collaboration.

Once top-line objectives are set, the real work begins. As they shift from planning to execution, managers and contributors alike tie their day-to-day activities to the organization’s vision. The term for this linkage is alignment, and its value cannot be overstated. According to the Harvard Business Review, companies with highly aligned employees are more than twice as likely to be top performers.

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:

To avoid compulsive, soul-killing overalignment, healthy organizations encourage some goals to emerge from the bottom up.

Innovation tends to dwell less at the center of an organization than at its edges.

An optimal OKR system frees contributors to set at least some of their own objectives and most or all of their key results. People are led to stretch above and beyond, to set more ambitious targets and achieve more of those they set: “The higher the goals, the higher the performance.” People who choose their destination will own a deeper awareness of what it takes to get there.

Unlike traditional, frozen, “set them and forget them” business goals, OKRs are living, breathing organisms.

Research suggests that making measured headway can be more incentivizing than public recognition, monetary inducements, or even achieving the goal itself. Daniel Pink, the author of Drive, agrees: “The single greatest motivator is ‘making progress in one’s work.’ The days that people make progress are the days they feel most motivated and engaged.”

Love this one.

As noted in chapter 4, the simple act of writing down a goal increases your chances of reaching it. Your odds are better still if you monitor progress while sharing the goal with colleagues—two integral OKR features. In one California study, people who recorded their goals and sent weekly progress reports to a friend attained 43 percent more of their objectives than those who merely thought about goals without sharing them.

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.

Few entities have Google’s resources to fall back upon when a moonshot crashes. Organizations have a range of risk tolerance, which may change over time. The greater the margin for error, the more a company can extend itself. For example, a 40 percent OKR failure rate might seem too risky—and too discouraging, no matter what leadership says. For high achievers, anything shy of perfection can sap morale.

In my view, it’s better for leaders to set at least a modest stretch. Over time, as teams and individuals gain experience with OKRs, their key results will become more precise and more aggressive. There is no one magic number for the “right” stretch. But consider this: How can your team create maximum value? What would amazing look like? If you seek to achieve greatness, stretching for amazing is a great place to start. But by no means, as Andy Grove made clear, is it the place to stop: You know, in our business we have to set ourselves uncomfortably tough objectives, and then we have to meet them. And then after ten milliseconds of celebration we have to set ourselves another [set of] highly difficult-to-reach objectives and we have to meet them. And the reward of having met one of these challenging goals is that you get to play again.

What business leaders have learned, very painfully, is that individuals cannot be reduced to numbers. Even Peter Drucker, the champion of well-measured goals, understood the limits of calibration. A manager’s “first role,” Drucker said, “is the personal one. It’s the relationship with people, the development of mutual confidence . . . the creation of a community.” Or as Albert Einstein observed, “Not everything that can be counted counts, and not everything that counts can be counted.”

In short, we need a new HR model for the new world of work. That transformational system, the contemporary alternative to annual reviews, is continuous performance management. It is implemented with an instrument called CFRs, for: Conversations: an authentic, richly textured exchange between manager and contributor, aimed at driving performance

Key to the process we are proposing

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

To hazard another football analogy: Let’s say objectives are the goalposts, the targets you’re aiming for, and key results the incremental yard markers for getting there. To flourish as a group, players and coaches need something more, something vital to any collective endeavor. CFRs embody all the interactions that tie the team together from one game to the next. They’re the Monday videotape postmortems, the midweek intrasquad meetings, the preplay huddles—and the end-zone celebrations for jobs well done.

Table 15.1: Annual Performance Management Versus Continuous Performance Management Annual Performance Management Continuous Performance Management Annual feedback Continuous feedback Tied to compensation Decoupled from compensation Directing/autocratic Coaching/democratic Outcome focused Process focused Weakness based Strength based Prone to bias Fact driven

For companies moving to continuous performance management, the first step is blunt and straightforward: Divorce compensation (both raises and bonuses) from OKRs.

Important point

But when goals are used and abused to set compensation, employees can be counted on to sandbag. They start playing defense; they stop stretching for amazing. They get bored for lack of challenge. And the organization suffers most of all.

Amen

Lightweight, flexible, and transparent, with minimal structure and no tracking or paperwork, Check-in features three focus areas: quarterly “goals and expectations” (Adobe’s term for OKRs), regular feedback, and career development and growth. Sessions are called by contributors and decoupled from compensation. Forced-distribution stack rankings have been replaced by an annual Rewards Check-in. Managers are trained

What we are proposing

to scale compensation based on employees’ performance, their impact on the business, the relative scarcity of their skills, and market conditions. There are no fixed guidelines.

How to manage compensation

To explain how the new process worked, we kicked it off with the first of a series of thirty-to-sixty-minute web training conferences. We rolled them out to senior leaders, then managers, then employees. (We had a 90 percent employee participation rate.) Each quarter we’ve addressed a different phase of Check-in, from setting expectations to giving and receiving feedback.

From Adobe’s experience, I’d say that a continuous performance management system has three requirements. The first is executive support. The second is clarity on company objectives and how they align with individual priorities—as set out in our “goals and expectations,” which equate to OKRs. The third is an investment in training to equip managers and leaders to be more effective. We’re not shipping people out to courses. We’re steering them to one-hour sessions online, with role-played vignettes: “Do you need to give difficult feedback? Here are the steps.”

As continuous performance management rises to the fore, once-a-year employee surveys are giving way to real-time feedback. One frontier is pulsing, an online snapshot of your workplace culture. These signal-capturing questionnaires may be scheduled weekly or monthly by HR or made part of an ongoing “drip” campaign. Either way, pulses are simple, quick, and wide-ranging. For example: Are you getting enough sleep? Have you met recently with your manager to discuss goals and expectations? Do you have a clear sense of your career path? Are you getting enough challenge and motivation and energy—are you feeling “in the zone”?

Listening strategy