Both on a global scale and at regional and national level, the economic conditions in numerous industries, sectors, and markets have already changed significantly, and there is no end to these dynamic developments in sight.
New megatrends such as digitalisation, Industry 4.0, sustainable economic activity, big data, and connectivity and networking are forcing companies to undertake sometimes extensive transformation processes. In both the organisational structure and the operational processes of many companies, sometimes far-reaching changes are necessary in order for them to remain competitive in dynamic markets with ever-shorter product life cycles, high innovation pressure, and rapidly changing conditions.
More and more companies are therefore replacing hierarchically structured, continuity-based processes with flexible and agile structures with short decision-making paths. The management method Objectives and Key Results (OKRs), developed by Andy Grove in the 1970s, is frequently considered in this context as a modern and future-oriented alternative.
For this reason, in this article we provide an introductory overview of what exactly lies behind the acronym OKR and how the concept works. Building on this, we identify the advantages of OKRs, but also address the potential disadvantages and risks that the approach can bring with it.
What are OKRs?
Objectives and Key Results, or OKRs for short, are a management and goal-setting system that connects qualitative goals (objectives) with measurable key results at all organisational levels of a company. The OKR concept is based on an iterative cycle that is continuously repeated. The aim is to translate the long-term strategy of a company into shorter-term OKRs - and to do so in as transparent a manner as possible. OKRs can be continuously adapted and further developed based on the results and insights of the most recently completed cycle. This enables a regular and at the same time flexible adaptation of the corporate strategy to changes in the market environment - a key advantage of OKRs compared to the strategy concepts used up to now, which are designed for long-term continuity and stability.
The history of the OKR method
The OKR method was developed in the 1970s by Andrew Grove, one of the co-founders of the US semiconductor manufacturer Intel Corporation. During this period, the market in the areas of computers, semiconductors, and microprocessors was gaining enormous momentum. Grove foresaw that the management methods used up to that point would not be suited to a market environment characterised by extensive growth, high innovation pressure, and a steadily increasing number of competitors.
In the course of this rapid development, Intel also had to transform its business model from the production of memory chips to the manufacture of microprocessors and semiconductor products. In order to keep pace with the fast-moving and dynamic nature of the market and to manage the internal transformation process as well as possible, Grove developed the OKR concept.
OKRs first gained widespread popularity through John Doerr, who began his professional career at Intel in 1974 and adopted Grove's innovative management method. Doerr then moved to the venture capital firm Kleiner Perkins Caufield & Byers in Silicon Valley in 1980. With Doerr as investment manager, Kleiner Perkins invested in Google in 1999 — at that time still a small start-up with only 40 employees. Doerr convinced the two founders Larry Page and Sergey Brin of the OKR method, and they immediately integrated the concept into the company's operations. The at that time still relatively unknown management approach was then continuously further developed and remains part of the company's DNA to this day. In the meantime, numerous further companies have recognised the advantages of OKRs and adopted the concept, including mymuesli, LinkedIn, Uber, BMW, and Siemens.
OKRs: an innovative strategy concept for modern and dynamic corporate management
OKRs are a framework for modern corporate management. They connect qualitative and outcome-oriented goals (objectives) with quantitative and measurable key results. Typically, OKRs are:
• Ambitious - not easy to reach but also not unrealistich
• Forward-pointing - aligned with mission, vision, strategy, and annual planning
• Outcome-oriented - place the benefit in the foreground (outcome thinking)
• Time-bound - should be completed by the end of a defined cycle
With regard to the level of ambition of the OKRs, the right balance must be found between challenge and overload. If the goals are too easy to reach, tension, intensity, and motivation may be lost. If they are set too high, this can lead to overload and resignation.
Objectives
An objective names a corporate goal that is in alignment with the overarching mission of the company, thereby advancing the implementation of the corporate strategy and making a positive contribution to the company's mission and vision.
An objective therefore answers the question: what is to be achieved?
Objectives typically have the following characteristics:
• Qualitative - cannot be quantified or measured
• Memorable - easy to remember, formulated in complete sentences
• Inspiring - not a standardised phrase
Key Results
A key result is a quantifiable key outcome that objectively and clearly indicates whether a goal has been reached. Key results can be tasks, measures, and activities that contribute to reaching the objective.
A key result answers the question: what needs to be done in order to reach the objective, and how can the degree of goal achievement be measured?
Key results typically display the following characteristics:
• Measurable - can be represented numerically
• Concrete - clear description of the task
• Independent - individual key results do not influence each other and do not build on one another
OKR formula
For the formulation of objectives and their associated key results, the following OKR formula by John Doerr has proven helpful:
We will [objective] as measured by [set of key results].
The formula can also be used to check whether goals and key results fit together, are aligned with one another, and work in terms of content.
OKR sets
An OKR set refers to one or more objectives together with their associated key results.
How do OKRs work?
For the OKR concept to unfold its effect sustainably, both a structured introduction into the company and disciplined, continuous application over time are of decisive importance.
OKRs are a multidimensional concept for managing corporate strategy at all organisational levels of a company.
If regular OKR management is implemented incorrectly or incompletely, or is neglected, the corresponding OKR advantages generally cannot be maintained while any OKR disadvantages or risks will impair the implementation of the corporate strategy, direction, and goal-setting.
Defining objectives and key results
OKRs are a goal-oriented management concept. The approach is therefore intended to help the company reach its goals. The overarching goal-setting of a company is anchored in its vision and mission, which should accordingly be clearly defined and understood.
From this mission, the corporate goals and the underlying corporate strategy for the coming one to five years are then derived. Objectives and key results typically define the goal-setting for the next two to six months within an OKR cycle.
For one OKR cycle, between two and five objectives should be defined, each of which is in turn subdivided into two to four key results.
When defining OKRs, the central question is always how and to what extent an OKR set contributes to the corporate strategy and the achievement of goals.
Implementing the OKR concept at all organisational levels
As a rule, the entire company is involved in the development of the goal-oriented OKR concept. Some companies prefer a top-down approach, so that OKRs cascade down to departments, teams, and employees. On the other hand, there is the bottom-up approach, in which OKRs come from the teams and the content is carried upward through the hierarchy. Often a balance of both approaches is the most effective way forward.
For a company to benefit sustainably from the advantages of OKRs, however, it is essential that every employee:
• has understood the company's mission (vision, mission, strategy, goals)
• has understood the OKRs derived from it
• has access to all OKRs implemented within the company
Ideally, employees are given the opportunity to modify or supplement the proposed OKRs of colleagues and, beyond that, to propose their own OKRs. This makes them feel valued and allows them to actively help shape the OKRs, which as a rule leads to a stronger bond with the company and higher motivation with regard to achieving the goals.
Transparent communication of the OKRs is also very important. Knowing the OKRs of colleagues makes it possible to avoid potential overlaps and to better understand more complex interdependencies. This not infrequently leads to interdisciplinary exchange and constructive communication between teams and departments.
Ideally, all employees of a company know not only what they are doing, but also why. Because those who recognise the meaning and purpose of their work, and who through the OKR method are aware of how their work performance contributes to reaching the corporate goals, ultimately develop intrinsic motivation from within themselves.
The OKR cycle as an evolutionary element of the OKR concept
A key advantage of OKRs is the agility of the approach as well as the maintenance of a continuous learning process and the ongoing evolutionary further development and improvement of the concept. The aspects mentioned are very helpful both in a dynamic market environment and for internal corporate transformations.
The foundation for the OKR advantages mentioned is the iterative cycle of the management concept. The OKR cycle repeats continuously and the insights from the completed run are taken into account in the implementation of the following cycle. A continuous and evolutionary development and improvement process is the result.
The duration of an OKR cycle, also called cadence, typically varies between two and six months. Companies often also install several cycles. For example an annual strategy cycle and a shorter quarterly cycle of three months.
The OKR cycle consists of three phases:
1. Planning phase
2. Execution phase
3. Closing phase
The OKR cycle begins with the planning phase
A cycle begins with the determination of the OKRs. Objectives and key results are as a rule aligned with the company's mission and defined in a goal-oriented manner. Beyond this, there are further options that can be drawn upon as reference points for the definition of OKRs, such as:
• Key Performance Indicators (KPI)
• OKRs of other colleagues
• Other long-term goal-settings
To avoid overlaps and duplications, the OKRs are also aligned and coordinated with those of other departments and teams.
OKR execution in the execution phase
In the execution phase, the OKRs are put into practice and realised. Progress and development are measured and monitored. In addition, the current status and next steps are on the agenda in regular meetings. These so-called check-ins can take place every week, every two weeks, on a three-week cycle, or once a month. Ideally, these check-ins are integrated into already existing team routines.
Evaluation in the closing phase
Once the execution phase is complete, the final scoring of the OKRs takes place on the basis of the progress achieved and the data collected, and the degree of goal achievement is determined. A retrospective also takes place to clarify why goals were not reached and what things can be improved in the next cycle. The insights gathered are documented and managed in a suitable tool and drawn upon for the planning of the next cycle. The result is a continuous learning process and the underlying work processes are steadily improved.
Advantages of OKRs: shaping the company's future as a unit with engagement, focus, and clarity.
The advantages of OKRs for companies that wish to face a constantly and ever more rapidly changing market environment and continuously develop themselves has been summarised by John Doerr as follows:
"[…] truly transformational teams [departments, companies, organizations] combine their ambitions to their passion and to their purpose, and they develop a clear and compelling sense of why."
The OKR approach promotes this ideal of an agile and dynamically operating company on several levels.
OKRs connect corporate strategy with measurable and focused goals
A further important benefit of OKRs is the creation of transparency and the associated improved alignment and coordination within the company. OKRs are first established and defined in a planning phase.
This typically happens first in a top-down process, in which the company leadership together with the heads of the business units defines OKRs that are derived from the medium to long-term corporate strategy. This is followed by a further breakdown of the OKRs to the departments and teams of the respective business units.
Through feedback rounds, employees can then ideally contribute their own ideas to the process, which ultimately concludes with the finalisation of the OKRs.
The finalised OKRs are then implemented transparently. Several methods are available for this, including:
• a simply structured OKR list including an overview
• OKR-specific software
• a self-developed tool
What is ultimately important is that the set OKRs are accessible and visible to every employee at all times. Using this approach and structure, interfaces and coordination needs at all levels can be more easily identified.
This in turn facilitates the uniform alignment of all business units and teams toward the common "big picture." In addition, the willingness to cooperate and support one another, both between individual teams and between separate business units, can be increased.
When all employees know what tasks and goals their colleagues in the company are working on, this can also lead to a healthy competitive culture with motivated employees and an increased level of performance.
OKRs encourage disciplined thinking and lead to clear communication
The application of the OKR method makes it easier for employees to think and work in a structured manner, thereby accelerating internal coordination processes. With clear and measurable goal specifications, every employee knows at all times where they stand. With regard to work structuring and organisation, OKRs provide support in the following ways, among others:
• Projects and tasks that contribute nothing to the agreed objectives are identified early.
• Tasks and behaviours associated with unnecessarily high time expenditure or disproportionately high costs are restructured or eliminated.
• A lack of willingness to make decisions is counteracted.
OKRs show in an objective manner how and for what purposes the resources of work and time are being used. This can make it easier for employees to prioritise tasks important for reaching the goals and to put aside or decline relatively unimportant tasks and additional work requests with a clear "no."
A shared understanding of goals based on clear and transparent OKRs also leads to more efficient and productive communication, both within teams and between different teams, departments, and business units. Regular, candid, and outcome-oriented communication and the associated sharing of information, ideas, and experiences is a fundamentally important aspect of a healthy and trusting working atmosphere and a basic prerequisite for efficient and productive teamwork.
OKRs break up established behavioural patterns and establish an agile corporate culture
A key advantage of OKRs compared to numerous other management instruments is the comprehensive approach. Ideally, every employee working on strategic topics is actively involved in the process throughout the entire OKR cycle. A classic top-down structure in which management and superiors delegate work assignments downward is not the aim.
Rather, employees at every organisational level are inspired toward active, self-organised, and independently responsible participation. It is not managers and superiors who lead employees, but tasks and goals. With the help of a clear and simple shared language in the form of OKRs, employees develop a shared understanding of goals across team and departmental boundaries.
Ambitious and outcome-oriented goal-setting keeps motivation, commitment, and work performance at a high level. A constructively oriented error culture and regular feedback from different reference groups offer, as an overall package, enormous development potential for every employee. A healthy mix of support and challenge can therefore also be cited as a key advantage of OKRs when compared with top-down-structured strategy approaches that give individual employees little influence and say in the company's direction.
OKR disadvantages and risks: the concept does not work the same way in every organisation
Objectives and Key Results have established themselves as a modern instrument, at the latest since the Google success story. Particularly in a globalised, dynamic, and highly networked economy, the advantages of OKRs and the dynamic and agile concept behind them are apparent.
What is all too often overlooked in this context is the comprehensive influence of the concept on a company and the immense significance of the human factor for the sustainably successful introduction, implementation, and application of the method. If individual aspects in this regard are neglected, left out, or even rejected, OKRs can also bring disadvantages and risks with them.
Faulty introduction of the OKR concept minimises prospects of success from the outset
OKRs and the concept behind them are normally introduced comprehensively across the entire company. The introduction of the new management model therefore affects all employees, teams, and departments. Beyond this, OKRs influence the way of working, the organisation of work, and established process structures.
For the successful introduction and implementation of the OKR approach, a structured and step-by-step approach is therefore of paramount importance. A major problem in this context is frequently a coordinated and sustainable transfer of knowledge.
If one wishes to avoid the workforce associating OKRs with disadvantages and risks from the outset, the appropriate specialists should be entrusted with the introduction and implementation of the concept from the very beginning. At the same time, it must be ensured that the organisation absorbs this knowledge and carries it into the teams.
Particularly at the beginning, the introduction of a new concept involves a high expenditure of time. Intensive training is recommended for the initial transfer of knowledge.
Holding on to familiar structures: resistance to change
People frequently resist change and prefer to hold on to what has proven itself in the past. This behavioural pattern will also be encountered among a portion of the workforce with regard to the introduction of OKRs.
Accordingly, an advantage of OKRs for some people can also be perceived as a disadvantage, even though this is precisely the reason why the concept is often introduced: agility. OKRs as a goal-oriented and communicative approach demand constant, active, and committed effort from employees.
Such agile approaches and models often initially require a corresponding cultural shift within the company before the implementation of such concepts generates added value for the company.
In many cases, however, a lack of knowledge and missing information also play a decisive role in the rejection of new structures and processes.
A reluctant attitude toward responsibility and goal-setting
When employees reject independently responsible working and prefer structured, routine work processes along with hierarchical obedience and authoritative leadership, approaches such as OKRs will in principle have a difficult time.
The advantages of OKRs only come into effect when the company as a whole works in a goal-oriented manner. Goal-setting in general can sometimes be perceived as stressful and is partly associated with additional workload.
Leaders do not model the OKR concept or engage only half-heartedly
For the lasting introduction of new concepts such as OKRs to have any prospect of success, it is particularly the leaders who must show conviction that the change is necessary. If leaders do not live up to their function and responsibility in the context of a fundamental change to the company's processes, employees will also initially approach new things with scepticism.
Leaders too often find it difficult to let go of previously proven structures, processes, and habits and to embrace new ways. It is therefore all the more important that the key figures of a company in particular develop the necessary understanding for a change and communicate the resulting added value clearly and with conviction throughout the company. If this does not happen, or happens only insufficiently, the company in question experiences OKRs as a disadvantage, since the additional expenditure of work, resources, and time is not compensated by an adequate added value.
The responsible OKR master does not convey conviction
The OKR master, who is responsible for the introduction process of the OKR method, also plays a key role with regard to the successful implementation of the approach. Integrating such a comprehensive concept requires a great deal of additional working time and instructing colleagues demands an elevated degree of patience.
At least in the initial period, OKR masters must bring an elevated degree of discipline and commitment in order to successfully establish OKRs as an operational strategy instrument within the company.
Regardless of the position of the OKR master, a lack of or steadily declining discipline in the application of the OKR method is one of the main reasons why OKRs can fail in the long term as an operational application in companies, or at least fail to bring the hoped-for OKR advantages.
Conclusion: the OKR concept as a future-proof strategy instrument for companies in dynamic business environments
Objectives and Key Results is a modern management approach to goal achievement that, owing to its iterative and cyclical process, is suited to companies operating in dynamic and volatile markets.
Also with regard to the transformation processes triggered by megatrends, OKRs are a proven concept for restructuring a company and its corresponding structures and processes, thereby ensuring the company's competitiveness in the future.
The comprehensive and employee-oriented design also harbours potential for long-tenured, highly motivated, and committed employees who continuously develop and improve themselves through the continuous learning processes integrated into the OKR concept.
Due to the transfer of knowledge, a time-intensive introduction, and consistently high demands on disciplined action, the OKR framework sometimes requires considerable attention.
If a company's employees are not fully and sustainably convinced of OKRs, the disadvantages of OKRs also emerge relatively consistently and the method loses its advantage over statically structured corporate strategies.
For the new introduction of the OKR concept into already existing corporate structures, the involvement of an external consultancy specialising in this concept and staffed by practically experienced experts is in any case recommended. In particular, the initially extensive transfer of knowledge to employees and the resulting understanding of the meaning and necessity of this new type of goal-setting is a decisive factor for the sustainable and long-term success of the OKR method.
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