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Table of Content

What are Objectives and Key Results (OKR)?

Why MBO Remains a Strong Alternative to OKR

Why OKR Matter

Tips for implementing effective OKRs

Introducing OKRs to your organization

Additional Resources

About UpRaise

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Introduction
Over the years, managers have turned to a variety of approaches to improve
employee performance, with some of the most intriguing management techniques
evolving within the tech space. With its preponderance of knowledge workers,
business leaders in the tech industry have discovered that a goals management
approach—which directly links employee actions to larger organizational goals—
tends to be embraced with great enthusiasm.

In this short guide, we will review two goal management approaches, Management
by Objectives (MBO) and the slightly more recent, Objectives and Key Results
(OKRs).

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This guide is designed to help you:

Understand what Objectives and Key Results are and how they can help
transform your workplace culture
Appreciate how to use Management by Objectives to enhance employee
performance
Effectively introduce and implement OKRs into your organization

We hope that you find this information useful in strengthening employee

performance at your company.

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What are OKR?
It’s natural for people to focus on the products or services that companies produce
to meet important customer needs. However, a high-performing company also
pays attention to its internal processes, on what they are doing to ensure that their
employees are channeling their energy to further advance the organization’s goals.

That is where setting Objectives and Key Results (OKR) comes into play. OKRs are a
goal management technique designed to align teams and individual employees
around specific corporate goals.

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OKR goals rely on S.M.A.R.T. principles to create time-bound, actionable, and
ambitious goals.

Specific

Measurable

Actionable

Relevent,Reasonable

Time-related

The desired outcome of OKRs is not necessarily to reach the stated objective
(although that would be great!), but to encourage employees to take a creative
approach towards solving a challenging problem that is important to the
organization.

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OKRs are usually set up as “stretch” goals. In other words, a goal that is not easy to
achieve. Instead of focusing on reaching a specific outcome (and only rewarding
employees if they meet that goal), OKRs recognize that success happens along a
continuum. This perspective encourages teams to celebrate actions that keep them
moving in the right direction, bringing the company closer to meeting desired goals.

The benefits of implementing OKRs in your organization

When done well, OKRs increase communication and boost employee engagement
across all levels of the organization. They become the glue that holds a company
together even in the midst of enormous change.

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A short history of OKRs

OKRs have been around since the 1970s. This management technique began in Intel
at a time when they were transitioning their business to microprocessors, a move
that would completely transform the computer industry. This evolution was a game-
changing moment for the company, resulting in a decades-long dominance of the
microprocessor industry and the famous “Intel Inside” marketing campaign that
turned the company into a household name.

A transition of this scope, involving thousands of employees located worldwide,

required Intel to change how they structured their goals. They settled on a set of
strategies designed to make it easier for employees to stay focused on a specific,
clearly identified set of priorities. The OKR system played a crucial role in helping
Intel employees to see how their individual actions had a measurable impact on the
organization.

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Google eventually enthusiastically embraced this management approach when
their employees realized that this technique would provide them with a quantifiable
way of measuring progress towards meeting their very ambitious plans.

To this day, every employee at Google—from the CEO down—is expected to identify
their major objectives (goals) on a quarterly basis and to list the results that they
will use as a benchmark to determine if they have been successful. This goal setting
exercise not only increases accountability, it helps employees to assess at a glance
how they are making a tangible difference not just to their team, but also to the
company itself.

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Why MBO remains a Strong
Alternative to OKR?
Management by Objectives (MBO) is another management technique that is
commonly used by technology companies. MBO is a process in which a manager
and an employee agree upon a set of specific performance goals, or objectives, and
jointly develop a plan for reaching them. To work well, the objectives need to be
clear and achievable. The plan also typically includes a time frame and criteria for
evaluating success. For example, a salesperson might set a goal of increasing
customer orders by 15 percent over the course of a year.

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Unlike OKRs however, MBO tend to be private (as in only the manager and the
employee know what they are) and they are not always directly linked to specific
corporate goals. Instead, they are often linked to specific responsibilities associated
with the employee’s official job description.

MBOs are primarily used as a tool for strategic planning, employee motivation, and
performance enhancement. Since MBO are designed to provide a concrete link
between pay and performance, they are typically used as the basis for employee
evaluations.

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How to set up MBOs

Most MBO programs require each employee to identify five to ten specific,
measurable goals. Each goal is then broken down into an underlying series of steps
that should lead to the successful completion of the goal. The employee typically
creates their goals once a year during a formal evaluation period. The employee
usually writes down their goals in advance of meeting with their manager. The goals
are then discussed in person where they are later approved with or without
modifications.

Comparing OKRs and MBOs

Unlike OKRs, the manager is responsible for ensuring that employee goals are
consistent with the targets set by the department and the company.

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The manager is also responsible for comparing the employee's actual performance
with his or her stated goals on a regular basis in order to identify any problems and
take corrective action as needed. In contrast, OKRs encourage every employee to
take greater personal responsibility for not only ensuring that their top goals are in
alignment with corporate initiatives, but for identifying potential obstacles and
coming up with solutions.

Navigating potential MBO pitfalls

The Activity Trap

Let’s face it. Managers are generally busy people. So it’s very easy for them to lose
sight of their objectives (or what they really need to have employees working on)
because they get too involved taking care of their day-to-day activities. This is
particularly true in teams where there is always a “new crisis” or “emergency.”

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While this behavior may be understandable, for some people becoming deeply
engrossed in their current work is actually an avoidance tactic, a pattern of
behavior that they have allowed themselves to fall into as a means to avoid dealing
with demanding or uncomfortable truths about their organization's larger
corporate challenges.

Setting Vague Goals

Some organizations allow their managers or employees to set goals that are far too
vague to be measured or too ambitious to be achieved within a reasonable amount
of time. The results are MBOs that fail to drive useful action or inspire motivation.

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Why OKR Matter
Generally speaking, reaching a significant corporate milestone is not something
that happens by accident. It’s the result of thousands of individual actions that have
been coordinated to achieve a specific result. But if you have spent any length of
time in the business world, you know how easy it is for internal departments and
individual employees to work at cross-purposes.

When this happens you end up in situations that will pull you off track and away
from your desired outcome. Here are some examples of the outcomes that can
result when a company is not able to get their employees to work together
effectively:

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 Cost overruns that cut into (or entirely eliminate) your desired profit margins
Scheduling slip-ups that put you behind schedule
Quality issues that result in recalls or product returns as well as angry end
users who leave bad reviews

When you allow your departments or teams to function in “silos” they often begin
to compete against each other. They become so concerned with hitting their own
internal targets that they lose sight of larger, overarching corporate goals.

OKRs emphasize the main purpose behind employee

actions

No one wants to feel like their efforts don’t matter, and yet most businesses seem
to forget this simple truth.

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When they fail to help their employees connect the dots between their actions and
larger corporate goals, they miss out on a crucial opportunity to satisfy a basic
human need: the desire to do purposeful work that matters and brings joy.

Mission-oriented employees are not just happier they are also more productive.
Clearly outlined goals inspire action because you know exactly what’s the target
that you are aiming for. They energize our lives and our work.

This sense of purpose is something that is unfortunately often left out of goal-
planning exercises, but they provide your team with a common framework around
which you can organize and channel behaviors.

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Here are three factors that make OKRs particularly powerful.

Employees are expected to make progress on their OKRs over a short time
span.
Every key result is associated with a number to better simplify measuring
how well you achieved your goal.
OKRs are publicly shared throughout the organization so that everyone can
understand your top priorities and help hold you accountable for reaching
your goal.

OKRs promote a proactive mindset

OKRs encourage employees to monitor their progress against a tangible benchmark

and to become aware of emerging patterns and trends that can influence their
success.

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When employees get in the habit noticing emerging trends, they get better at
making critical adjustments while there is still time to affect the end result.

How OKRs work

Let’s pretend that one of your employees has just realized that they are trending
away from a desired goal. If you did not have an OKR system in place, they might
not have understood that they were in danger of not reaching their stated goal until
it was too late to do anything about it. But with OKRs, your employee is in the habit
of continuously assessing their progress. He or she can discuss what is causing them
to move away from their goal and brainstorm ways to get back on track.

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Promoting a heightened awareness of emerging trends can eliminate the tendency
that some employees have of casting blame when things go wrong or of feeling
paralyzed and overwhelmed when a goal suddenly seems too difficult to reach.

In other words, OKRs not only provide a sense of purpose, they also have an
empowering effect by showing employees how their choices can directly impact
critical outcomes.

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Tips for implementing
effective OKRs

Guidelines for setting effective OKRs

Part of the appeal of OKRs is that they can provide an easy way to assess employee
behavior and determine if that behavior is achieving desired results. The intent is
not simply to make sure that employees perform their jobs, but to encourage them
to pursue objectives that feel like a “stretch,” in other words, objectives that will
push them out of their familiar comfort zone.

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The underlying reason behind wanting to push employees past their normal
boundaries is this: employees that are performing tasks where they have already
attained expert status and are completely comfortable (a/k/a “they could perform
a task with their eyes closed”) are employees that are not taking risks and are not
learning anything new. And in today’s competitive environment that’s a dangerous
attitude, one that can lead to stagnant business growth and lost opportunities.

Visualize the OKRs in your company as rungs on a ladder.

You should be able to identify the links that connect individual employee goals to
larger goals at the team, department, and corporate levels.

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In other words, your employees should be working on projects that in some shape
or fashion are helping to support or meet the OKR goals set by your senior
managers for the company itself.

Use OKRs as an opportunity to develop consensus around top priorities.

It’s very easy to get distracted in modern workplaces. There is always more to do
than there are hours in the day. The process of developing and updating OKRs on a
regular, ongoing basis can help you to keep your team’s energies and attention
focused.

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Because OKRs are the result of mutual negotiation between managers and
employees, they provide a great opportunity to focus attention on what you, as a
company, are trying to achieve and how close (or how far) you are to reaching your
objectives. The goal is to find a happy medium where employees identify projects
that they want to work on, which they find personally interesting, and that can also
help to advance important departmental or corporate goals.

Set a limit on the number of objectives each employee is responsible for.

To get the best results, you will want to limit the number of objectives that you
focus on per quarter. A good rule of thumb is to select no more than three to five
objectives. Any more than that, you run the risk of stretching your people too thin
and reducing their effectiveness.

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The components of effective key results:

Achievable

Quantifiable

Can be Objectively Graded

Set limits on the number of key results you will track per objective.

Once you’ve decided on the objectives that you want to focus on, you need to
identify between two and four key results per objective. The key results must be
quantifiable; in other words, they need to be associated with a number. Here is an
example: “Increase sales of ABC product by 15%.”

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The number you select should be carefully considered. You don’t want to select a
goal that you could never, even in your wildest dreams, achieve. That would only
serve to demoralize the employees. However, you also don’t want to pick a target
that is too easy to reach. The right goal is a “stretch.” One that will push an
employee to be more creative, or “out of the box,” as they work to find a solution
that will help them achieve that key result.

Here is an example of an OKR for a software development team.

Objective: Successfully launch new version of ABC Product

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Key Results
Reach 10,000 daily active users of the free version
Increase the conversion rate from free to paid customers to 15%
Reach a Net Promoter Score of 80%
Increase engagement: 70% of users complete a full profile

Make your OKRs public.

While performance reviews are generally private, OKRs should be publicly shared
throughout the organization. This helps to increase team cohesion as employees
gain greater awareness of how their efforts impact other departments. It also
makes it easier for employees to see when they are working on related initiatives.

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Review your OKRs on an ongoing basis

Unlike traditional evaluations that are set once a year and never looked at again
until the following year’s evaluation, OKRs are meant to provide a mechanism that
drives ongoing conversation and behavior.

Most organizations that have implemented OKRs reassess and measure progress
on a quarterly basis. However, some organizations prefer to implement OKRs in
shorter cycles, such as every six weeks. This is particularly useful with startups that
are dealing with quickly evolving situations and opportunities. For them, three
months can seem an eternity.

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Keep the process of grading OKRs simple.

One of the key values of using OKRs is the discipline it instills throughout the
organization. Creating OKRs not only forces you to think about your major goals, it
provides a simple way to let everyone know what you consider important. The
grading system is designed to demonstrate how far you’ve come towards meeting
specific goals. It’s an indicator for measuring progress, not a means for punishment.

That’s why it’s important to keep the process of grading relatively straightforward.
It’s not a good idea to complicate the issue by creating formulas that add artificial
weights where one key result is considered more important than another.

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Grade your OKRs at the end of every quarter.

Given how busy most people are these days, it’s easy to get distracted and work on
projects that won’t make an impact on the key results you identified as your top
priorities. That is why you will want to get in the habit of continuously reviewing
your OKRs throughout the quarter. Use it as a touchstone to keep you focused.

At the end of the quarter you’ll want to assess your progress for every key result
you identified. The OKR grading system ranges from 0 to 1.0. (View the example to
see how this might look.)

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Objective: Successfully launch new version of ABC Product .65
Key Results
Reach 10,000 daily active users of the free version .7
Increase the conversion rate from free to paid customers to 15% .5
Reach a Net Promoter Score of 80% .6
Increase engagement: 70% of users complete a full profile .8

You’ll notice that every key result was assigned its own grade. The grade for the
objective is a simple average of the grades given to the individual key results.

.7 + .5 + .6 + .8 = 26 /4 = .65

You’ll want to go through this exercise for all your OKRs. One you’re done, you
might want to also to calculate the average of all your objectives to get a quick
snapshot of your progress for the quarter that just ended.

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Explain why you graded yourself the way you did.

Unlike school where the goal was to receive a flawless 100% score, the OKR
approach is designed to encourage employees to pursue “stretch” goals, in other
words, goals that will not necessarily be easy to reach. In OKRs, getting a grade that
is a .6 or .7 (or 60-70%) is actually considered good. If you consistently grade your
key results with a 1, then it’s likely that you set a target that was too easy to reach.

Use what you’ve learned to create new OKRs for the next quarter.

Once you have determined your grades, you’ll want to understand why you scored
it the way you did. Identify what got in your way of doing better and use that insight
to make adjustments for the upcoming quarter.

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It’s important to keep in mind that a low score should not be seen as an automatic
failure. Instead, it provides an opportunity to identify what happened to prevent
you making the progress you had hoped for and to use that information to figure
out what to change or what to continue doing more of.

It might also be an indicator that the goal may actually no longer be important or
relevant and should be dropped altogether.

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Introducing OKRs to your
organization
Here is a short list of activities that you might want to consider to help you
introduce OKRs into your organization.

Conduct research into software that can simplify the process of easily
capturing OKRs and make them shareable throughout the company

Communicate corporate goals for the current quarter

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 Gather your senior managers together and walk them through the
process developing OKRs for the organization.
Conduct training sessions with department or team leaders and walk
them through the process of developing OKRs that align with the
corporate OKRs for their departments or teams.
Create sample OKRs as training guides for managers and employees
Have all the remaining employees in the company do a first draft of their
OKRs.
Steep your employees in the importance of OKRs by using that as the lens
through which progress is measured during team meetings.
Hold company-wide meetings where senior managers share their OKR
results and explain why they graded their OKRs the way they did and what
they will be focusing on next.

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Additional Resources
Beginner’s Guide to Continuous Feedback

Beginner’s Guide to Performance Reviews

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About
UpRaise for Employee Success, is a comprehensive Employee Performance
Management platform that is natively developed for JIRA as a plug-in. With
enterprise grade features such as Objectives Management, Continuous Feedback
& Performance Reviews - UpRaise helps organizations achieve operational and
intellectual excellence.

Employees adopt UpRaise like no other platform because of its tight integration
with JIRA. Enhance your JIRA with UpRaise - Together, Rise.

Learn more here (http://upraise.io)

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