Objectives and Key Results is a collaborative goal-setting tool first developed by Andy Grove at Intel. Later popularized by John Doerr's book "Measure What Matters," more and more organizations are using them. These organizations are finding that OKRs are not only a fantastic goal-setting tool; they're also a great way to create strategic alignment throughout the company. The methodology is used extensively at companies like Google, Netflix, and even non-profits like Code for America and The Gates Foundation. 

How do OKRs Work?

Objectives

The O in OKR stands for Objectives. Objectives detail an element of the company's strategic vision. They are intended to be written as simple, yet inspiring statements. They should be easy for anyone in the organization to understand. The best OKRs are challenging and aspirational, though there are times when organizations will use "committed" OKRs to represent elements of the strategy that are, as the name implies, committed. 

Key Results

The KR in OKRs stands for "Key Results." These are the elements we use to measure progress against our objectives. Key Results should be very specific and time-bound. It's also ideal if they are ambitious without being unrealistic. The idea here is to write OKRs that will challenge the organization while still being achievable with effort and focus. 

Health Metrics

It's fairly common with any measurement system for people to become blinded by achieving the metric and do things that may ultimately be bad for the organization. For this reason, it's often helpful to include health metrics in your Key Results. Health metrics are Key Results specifically designed to ensure that the organization is achieving the objective in a healthy and sustainable way. 

An example OKR for an insurance company might be:

Objective: Become the preferred insurance carrier for medium-sized businesses.

Key Result: Capture at least 40% market share in the category.

Key Result: Maintain a Net Promoter Score of at least 8.0 in the category. (health metric)

Key Result: Add a least two new products per quarter next year.

Measuring Success

OKRs are typically reviewed by the team responsible for them weekly to measure progress, then measured quarterly. OKRs, as developed by Andy Grove, are graded on a pass/fail basis. You've either achieved the Key Result, or you haven't. Most companies we work with have found it useful to use a modified method where each Key Result receives a grade somewhere between 0.0 and 1.0. This method can be especially helpful in organizations without a "safe to fail" culture. By using this scale, we can evaluate progress against a Key Result that wasn't quite achieved but came close. In this method, most companies aim for a score somewhere between 0.8 and 1.0. If you're always scoring a 1.0, you're probably not being ambitious enough. If you're struggling to achieve at least 0.8 regularly, you might need to consider how realistic your objectives are.  

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