Measure What Matters

by John Doerr

Continuous Performance Management: OKRs and CFRs

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 • 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.

“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 hand, if you don’t have goals, what the heck are you talking about? What did you achieve, and how? In my experience, people are more likely to feel fulfilled when they have clear and aligned targets. They’re not wandering and wondering about their work; they can see how it connects and helps the organization.”

the annual review with ongoing conversations and real-time feedback, they’re better able to make improvements throughout the year. Alignment and transparency become everyday imperatives.

It centers on five questions: • What are you working on? • How are you doing; how are your OKRs coming along? • Is there anything impeding your work? • What do you need from me to be (more) successful? • How do you need to grow to achieve your career goals?

Let’s say Contributor A set extreme stretch goals and somehow attained 75 percent of them. Does her outperformance merit 100 percent of her bonus—or even 120 percent? Contributor B, by contrast, reaches 90 percent of his key results, but his manager knows he didn’t push himself—and, what’s more, that he blew off several important team meetings. Should he get a larger bonus than Contributor A? The short answer is no, not if you want to preserve initiative and morale.

The supervisor should also encourage the discussion of heart-to-heart issues during one-on-ones, because this is the perfect forum for getting at subtle and deep work-related problems affecting his subordinate. Is he satisfied with his own performance? Does some frustration or obstacle gnaw at him? Does he have doubts about where he is going?

Based on BetterWorks’ experience with hundreds of enterprises, five critical areas have emerged of conversation between manager and contributor: Goal setting and reflection, where the employee’s OKR plan is set for the coming cycle. The discussion focuses on how best to align individual objectives and key results with organizational priorities. Ongoing progress updates, the brief and data-driven check-ins on the employee’s real-time progress, with problem solving as needed.fn3 Two-way coaching, to help contributors reach their potential and managers do a better job. Career growth, to develop skills, identify growth opportunities, and expand employees’ vision of their future at the company. Lightweight performance reviews, a feedback mechanism to gather inputs and summarize what the employee has accomplished since the last meeting, in the context of the organization’s needs. (As noted earlier, this conversation is held apart from an employee’s annual compensation/bonus review.)

“Feedback is an opinion, grounded in observations and experiences, which allows us to know what impression we make on others.”

In developing organizations, feedback is generally led by HR and often scheduled. In more mature organizations, feedback is ad hoc, real-time, and multidirectional, an open dialogue between people anywhere in the organization.

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.

Transparent OKRs make it natural for coworkers to celebrate big wins and smaller triumphs alike.

Individuals want to drive their own success. They don’t want to wait till the end of the year to be graded. They want to know how they’re doing while they’re doing it, and also what they need to do differently.

Everybody knows where they stand and how they’re contributing value to the company. Instead of lagging, the performance management process is leading.

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.”

HR leaders exist for the success of the business. Our role is to consult with other leaders on how to make all of our constituents successful in fulfilling the company’s mission. Success isn’t built by forms and rankings and ratings. It’s not driven by policies and programs that bog people down and get in their way. The true mechanisms for success are the ones that build capabilities and enable people to deliver for the company.

What’s neat about OKRs is that they formalize reflection. At least once each quarter, they make contributors step back into a quiet place and consider how their decisions align with the company. People start thinking in the macro. They become more pointed and precise, because you can’t write a ninety-page OKR dissertation. You have to choose three to five things and exactly how they should be measured.

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.

I like to start with three questions: What makes you very happy? What saps your energy? How would you describe your dream job?

Then I say, “Look, I want to tell you what my expectations are. Number one, always tell the truth. Number two, always do the right thing. If you meet those expectations, we’ll unconditionally back you, one hundred percent of the time.

A leader might say, “This goal seems very important to you, but you didn’t make a lot of progress on it the last two weeks. Why is that?”

standout performance correlated to affirmative responses to these five questions: 1. Structure and clarity: Are goals, roles, and execution plans on our team clear? 2. Psychological safety: Can we take risks on this team without feeling insecure or embarrassed? 3. Meaning of work: Are we working on something that is personally important for each of us? 4. Dependability: Can we count on each other to do high-quality work on time? 5. Impact of work: Do we fundamentally believe that the work we’re doing matters?

“when employees just needed to do the next thing right—to follow orders to the letter—culture didn’t matter so much. But now we’re living in a world where we’re asking people to do the next right thing. A rulebook can tell me what I can or can’t do. I need culture to tell me what I should do.”

“What we choose to measure is a window into our values, and into what we value,” Dov says. “Because if you measure something, you’re telling people that it matters.”

first you need to get “the right people on the bus, the wrong people off the bus, and the right people in the right seats.” Only then do you turn the wheel and step on the gas.

“OKRs are how we’re going to run the company, and we’re going to use them to measure your bosses.”

so every OKR is either green (on track) or red (at risk). There’s no bell-curve ambiguity, no place for problems to hide. The reviews run for three hours, with a dozen senior executives taking their turn. Little time is spent on people’s greens. Instead, they “sell” their reds. The team votes on the most important at-risk OKRs for the company as a whole, then brainstorms together as long as it takes to get the objectives back on track.

Ideas are easy; execution is everything.

We use OKRs to plan what people are going to produce, track their progress vs. plan, and coordinate priorities and milestones between people and teams. We also use OKRs to help people stay focused on the most important goals, and help them avoid being distracted by urgent but less important goals.

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

Objectives are the “Whats.” They: • express goals and intents; • are aggressive yet realistic;

The successful achievement of an objective must provide clear value for Google.

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.

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.

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.

Low Value Objectives (aka the “Who cares?” OKR).

LVO example: “Increase task CPU utilization by 3 percent.” This objective by itself does not help users or Google directly. However, the (presumably related) goal, “Decrease quantity of cores required to serve peak queries by 3 percent with no change to quality/latency/ … and return resulting excess cores to the free pool” has clear economic value. That’s a superior objective.

A classic example: “Launch X,” with no criteria for success. Better: “Double fleet-wide Y by launching X to 90+ percent of borg cells.”

Insufficient KRs for committed Os. • OKRs are divided into the desired outcome (the objective) and the measurable steps required to achieve that outcome (the key results). It is critical that KRs are written such that scoring 1.0 on all key results generates a 1.0 score for the objective.

Is it reasonably possible to score 1.0 on all the key results but still not achieve the intent of the objective? If so, add or rework the key results until their successful completion guarantees that the objective is also successfully completed.

Examples of classes of committed OKRs are ensuring that a service meets its SLA (service level agreement) for the quarter; or delivering a defined feature or improvement to an infrastructure system by a set date; or manufacturing and delivering a quantity of servers at a cost point.

• 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.”

“Improve sign-ups” isn’t a good key result. Better: “Improve daily sign-ups by 25 percent by May 1.”

To emphasize a departmental objective and enlist lateral support, elevate it to a company OKR.

For each objective, settle on no more than five measurable, unambiguous, time-bound key results—how the objective will be attained. By definition, completion of all key results equates to the attainment of the objective.

Smash departmental silos by connecting teams with horizontally shared OKRs. Cross-functional operations enable quick and coordinated decisions, the basis for seizing a competitive advantage.