The upsides, downsides, and everything in between, to consider around using OKRs to set goals as a manager.
I remember the first time I heard the term, “OKR” about five or so years ago. My initial reaction was, “Er… Okay what?” Turns out “OKR” is an acronym for “Objectives and Key Results” – a framework for setting goals as a manager within an organization that was popularized by Google. Today, OKR is used at a seemingly broad variety of companies, from larger established firms like Anheuser-Busch and Deloitte to younger tech companies like Eventbrite and Twitter.
If you’re anything like me, though, having never worked at Google (unlike my younger brother!), you might be confused as I about what OKRs exactly are, how they work, and – most importantly – if they work.
You’re not alone. When I talk to leaders, many of them ask me how to align their team and set goals within their team. And in particular, more and more of them ask me: “Claire, what do you think of OKRs?”
Based on the research we’ve done around goal-setting and team performance, and drawing from the insights of 1,000+ managers in our online leadership community The Watercooler, here’s my take on OKRs – and whether or not you should use them.
First off, what exactly is OKR?
OKR is a goal-setting methodology originally developed by Andy Grove, former CEO and Chairman of Intel. In his management classic, High Output Management, he describes OKRs as being the answer to two questions:
- Where do I want to go? (The answer provides the objective.)
- How will I pace myself to see if I am getting there? (The answer provides the key results.)
In short, the objective is what you want to achieve, and the key results are the benchmarks for how you’ll get to that objective. For example, here at Know Your Team, perhaps one of our objectives is for our software to be the #1 resource for new managers who want to become better. Accordingly, for this objective, a key result might be that “we have X number of users”, or that “Y% of users rating our software positively” – or both.
John Doerr, who learned OKR from Andy Grove while at Intel, was the one to teach and instill OKR at Google. He explains that the objective can be broad, aggressive, and even inspirational. But for the key results, the more specific, measurable, and verifiable, the better. He cited in his book about OKRs, Measure What Matters: “As prize pupil Marissa Meyer would say, ‘It’s not a key result unless it has a number.'”
Doerr recommends setting a limit of three to five OKRs per cycle, and generally, that each objective should be tied to five or fewer key results.
At the end of each cycle, you then grade each of the OKR, with roughly 70% being the ideal score to shoot for. Along the entire process, these OKRs are made publicly known to everyone within the organization.
Why do some companies choose to use OKRs?
At first brush, the appeal of OKR is obvious. It simplifies everything. By calling out objectives, you help your team identify and zero in on what matters most. With the key results, you create measurable benchmarks that help clarify what tangibly needs to happen, and likely hold folks accountable for those outcomes. And lastly, it’s probable that OKRs promote alignment and transparency across the team since everyone knows what each others OKRs would be.
This piece written by Niket Desai, who worked at Google for a handful of years, espouses how much he and his team benefitted from OKR. He also wrote a template that can be found here on how to roll-out OKRs in your organization.
Recommendations (and caveats) if you do decide to use OKRs
However, like anything, there’s nuance around how effective OKR are in practice. Doerr himself admitted that “goal setting isn’t bulletproof” and OKRs should not be blindly nor rigidly adopted.
In our Watercooler community, the managers who did roll-out OKRs had a some key learnings and caveats that they recommended that folks keep in mind.
Here are some of the biggest learnings from managers in the Watercooler community who use OKRS:
- Know why you’re implementing them. In order for OKR (and, well, most things in life) to work, you have to have a deeper “why” for how OKRs might help you achieve that performance. Most Watercooler members who implemented OKR discussed how their deeper “why” for instituting OKR was to achieve better team alignment.
- Quarterly cadence, with monthly reviews. Most of the Watercooler members who use OKRs share how they have an OKR every three to four months. Then every month, everyone in the organization reviews their OKR. Watercooler members remarked how this keeps everyone on the same page and accountable.
- Focus on supporting participation and fostering rhythm . One Watercooler member mentioned how, in rolling out OKRs, he asked employees to create their own personal OKRs, as a way to make sure buy-in was established at the most core level. He believed this helped with OKRs being positively adopted by his team.
- Emphasize it’s a very imperfect, iterative journey. Another Watercooler member mentioned how “we were not going to get it right the first time and it would most likely take us multiple quarters to really figure out how to make OKR’s work for us. We gave ourselves room to fail, re-do things, etc.”
- More isn’t always better. Most OKR resources have stated that you don’t want more than 3-5 objectives per time period, and you also don’t want more than 3-5 key results per objective. Watercooler members attested to this. Too many objectives or key results and a team’s focus becomes muddled.
- Spend the time to craft effective OKRs. Creating good OKRs can be somewhat of an art. Doerr wrote how Google CEO Sundar Pinchar admitted that “his team often ‘agonized’ over their goal setting process[… and] that’s part of the territory.” Using the precise words and phrases to frame your OKRs properly makes a difference, according to Watercooler members.
- Separate OKRs from compensation – and try hard to separate it from performance reviews. Tying OKRs to compensation can have deleterious effects, such as causing employees to purposefully set lower goals in order to achieve them. And, similarly, combining performance reviews with OKRs can be counterproductive, since a someone’s past performance is more nuanced than the binary result of whether or not the goal was achieved. Not to mention, it is always possible to get the goals wrong. However, Watercooler members, along with John Doerr himself, admit how hard it is to do this in practice. In fact, several Watercooler members mentioned how they realized that it’s nearly impossible to separate this from performance reviews: Someone who hits their OKRs is going to look better than someone who totally fails to hit them. As a result, it’s important to consider the unintended negative consequences OKRs might have on your team’s performance.
When setting goals (with or without OKR) backfires
These caveats and recommendations around OKR begin to reveal another side of truth of OKRs: They can also have detrimental side effects.
In a widely cited paper published in 2009 called “Goals Gone Wild,” scholars observed the unintended consequences of goals when overprescribed. Namely, goals can engender an outcome and a set of behaviors you’re not looking to create. An infamous example is Enron: Their executives had goals based exclusively on revenue, not profit, which led them to pursue unethical behavior and drive their company into the ground.
Specifically, the paper discusses a few notable pitfalls of indiscriminate goals:
- Missing the big picture – When goals are too specific, studies have shown how “goals can focus attention so narrowly that people overlook other important features of a task.” For example, new ideas or feedback that are brought forward can often be ignored or seen as irrelevant, when in fact they are salient to the task at hand.
- Optimizing for short-term, over long-term – Yes, goals give clarity, but their narrowness can come at a cost. It’s easy to react to immediate outcomes, and focus “myopically on short-term gains and to lose sight of the potential devastating long-term effects on the organization.”
- Dilution of focus – Research has shown that individuals are prone to focus only on one goal at a time. As a result, the OKR framework which recommends 3 – 5 objectives at a time, may prove to be distracting, since multiple goals are being pursued.
- Shifting risk attitudes – Interestingly, studies show how goals tend increase risky behavior. Depending on what domain you’re in, this could be positive – but if you’re in a negotiation situation (which is what the research centered around), higher propensity for risk harmed people’s negotiation performance.
- Promoting unethical behavior – Goal setting unfortunately can encourage cheating behavior. For instance, one study found that “participants were more likely to misrepresent their performance level when they had a specific, challenging goal than when they did not”.
- Harmful to learning, cooperation, and intrinsic motivation – Perhaps most startlingly, goals can detract from our ability to learn and cooperate – as well, as our intrinsic motivation to do a task well. Research has shown that narrow goals can “inspire performance but prevent learning.” Furthermore, goals can foster a culture of competition that can be adverse to an organization. And, lastly, goals are an external mechanism, and so, to be motivated by them increases our external motivation to complete a task at the expense of our intrinsic motivation.
The research is persuasive: Goals can do more harm than good, especially if overprescribed. This isn’t to say you should throw every semblance of goals out the window. There’s plenty of research that also shows the power of well-defined, thoughtfully instituted goals. More so, it’s enlightening to know the range of negative consequences so that we as leaders can consider (1) if a goal-setting framework like OKR would work in our own team and (2) how in general to think about setting goals productively in our team.
Why OKRs don’t work for some managers
Along with the research that’s been done on the negative effects of goals, I also was curious to understand the experience of managers who tried OKRs but decided it wasn’t for them. Based on insights from 1,000 managers in the Watercooler community, here’s why OKR didn’t work for some of them:
- Key results are hard to set in advance. This means, based on the experience of some Watercooler members, that most of them were imprecise and seemingly shots in the dark.
- The OKRs require a lot of micromanaging. The shared experience for many Watercooler members was that they ended up spending a lot of time in spreadsheets. One member talked about how “every member of our crew started to be annoyed by how we managed weekly priorities, percentages of progress and so on.”
- The OKRs are aspirational. Watercooler members remarked that because you can miss many of them, it made it very challenging to advance initiatives or do any planning.
- There are no outright consequences of not hitting key results or objectives, and so some Watercooler members wondered to what extent the framework was actually useful in shaping behavior.
- The OKRs instill a sense of rigidity and over-optimization for a small team. For Watercooler members who had teams or companies with less than 50 people, the constant calibration and refinement of objectives and key results was overkill. Smaller teams and organizations tend to have faster rates of change, and so for them, it felt like more work to manage the framework to stay nimble as a team, than to simply execute on the work itself. (This is why we don’t currently use OKRs ourselves, here at Know Your Team – we’re too small, in my opinion.)
What I find most compelling about OKR is the thinking it produces: Focus on what matters most, and think about clearly how you know if you’re going to get there. Whether that’s through the precise OKR framework – or not – is less important. That you’re articulating a vision of the future, and provide support and guidance for what progress looks like is what matters. It’s the only way progress is made after all.
I hope all these considerations are useful to you as you think through how to best support progress for your own team. Bon voyage!