OKR stands for Objectives and Key Results. It is a collaborative goal-setting protocol for companies, teams, and individuals. OKRs are not a silver bullet. They cannot substitute for sound judgment, strong leadership, or creative workplace culture. But if those fundamentals are in place, OKRs can guide you to success.
A brief history of OKR. Andrew Grove popularised the concept of OKR during his tenure at Intel. John Doerr has made it a formal process and helped organizations like Google etc successfully. Doerr published a book about the OKR framework titled Measure What Matters in 2017. Grove’s simple but effective concept is explained by John Doerr in his book. Many organizations used this approach for strategy execution and to achieve breakthrough results.
A brief explanation of the terminology:
- An Objective is what we want to achieve in the future. This sets a direction and destination. This should be very clear and easily understood.
- The Key Result is a measurable outcome required to achieve the objective. It contains a measure and metric with a target value. Key Results tell you how close you are to achieving the Objective.
- The Initiative is a project which will be performed to achieve a Key Result.
Benefits of OKR:
- OKRs are very powerful when used properly and result in business impact.
- OKR helps organizations to break the cultural barriers and created a transparency and aligned organization.
- OKR helps managers and employees to align their efforts toward common objectives.
- OKR creates a focus on the organization and everyone’s focus on a particular outcome makes the results very much achievable.
- OKR creates the focus for the employees as they can see what their contribution to the completion of the objectives and the impact on the organization is.
OKR Journey in the organization:
- OKR methodology should be launched with a proper understanding of the methodology and organizational readiness
- The owner of the program should be a top leader in the organization who is the Ambassador of the program
- The key part is to define the Objectives which are connected and drive the results for the organization. This is a clear business understanding and how the value is delivered by the objectives should be clearly defined and understood by all
- Once we define the Objectives the owner should be identified for each objective and the team who is responsible for delivering it
- Key Results are to be identified for each Objective which could be from 3 to 5 depending on the type of Objective
- Key Results should be measurable very clearly and we should know how to report the measure data clearly and correctly without any ambiguity
- The target and actual gap of Key Result numbers should be assessed and Initiative/ Projects need to be defined which has clear start and end dates with a budget and project manager assigned
- The Initiatives close the gap of Key Results and which in turn ensure the achievement of Objectives
- The sequence of Objective and the timing is very important
- The Ultimate Goal is very important. All the Objectives should be directed toward the Ultimate Goal of the Organization
- The time period of OKR is usually 1 to 3 years. The Objectives should create clear outcomes expected usually 3 to 4 achievements in 12 months
- We need to have the Team OKRs and Individual OKRs cascaded down so that team and individuals know what they have to do to achieve a particular objective to realize the strategy.
- Key characteristics of Objectives are aligned, high impact, and time-bound
- Key characteristics of Key Results are specific, high impact, and high influence
- Key characteristics of Initiatives are specific, within control, properly funded
Examples of OKR:
Objective: Increase net sales to $10 million from $ 6 million
- Establish quotas for 10 sales executives of region A to reflect an increase in net sales of $ 2 Million
- Increase sales pipeline by 15% for each quarter which should increase $ 2 Million in sales
- Increase $2 Million in sales by reselling to existing clients
- Generate new leads through digital marketing and increase the closures by 2%
- Conduct two training sessions on new product sales
- Awareness program for key customers about product features and value
Objective: Reduce raw material losses from 2.5% to 1.25% by the second quarter
- Reduce variation in moisture loss from supplier specifications target to actuals which should reduce the losses by 0.5%
- Wastage of raw materials and reworks should be reduced through optimization of grinding and dosing which should reduce the losses by 0.5%
- Reduce storage losses by following the FIFO process and inventory recycling and this should reduce the losses by 0.25%
- Establish a process to measure the losses in supply chain nodes and links precisely through the ERP system.
- Establish a Supplier Certification Process to ensure quality standards
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