If I were to name one big idea in business that is (A) highly impactful, (B) under the radar and (C) trending up, my first pick right now would be objectives and key results, or OKRs between friends.
It is not a new idea by any means. The model’s methodological roots are in the Management by Objectives theory, which was made famous by the great Peter Drucker — and adapted at Intel for something that became to known as OKRs. Later on, Google used OKRs with evident success and inspired several of its contemporaries to follow suit. Of the more recent cohort of high-growth tech firms, ByteDance is a good example of an organization whose strategy execution is underpinned by OKRs.
I trust that is enough of a history lesson. What I want you to take away from here is the prediction that over the next couple of years OKRs will be spreading much further, both within tech and in verticals beyond it. There is a certain sense of Renaissance to it. Here’s my taken on the most important drivers for it:
Digital transformation and product management: If you accept the premise that software is still eating the world, then think about OKRs as its heartburn relief. As more enterprises pursue digital transformation, they often become under pressure to change how they approach strategy as well. Everything that has proven successful in software-first companies has natural appeal in that regard, including OKRs. In addition, many of these digital converts are also putting the notion of product at the core of their transformation. And since many of the software companies that have had success using OKRs have, in parallel, also been enabled by product centricity and modern product management, the growing interest in product-led strategy among the software-next “transformers” is leading them to discover OKRs. They are like two mutually reinforcing pillars.
Expansion of agile: Meanwhile, the continuing adoption of agile outside of development continues to gain pace, while creating its own challenges. It can be very difficult for organizations to make their strategic planning and execution more agile, across all business functions. OKRs have potential to be a sort of strategic fabric that allows different departments to respond to changing circumstances faster than they otherwise could. At the same time, the logic of OKRs inherently forces organizations to become more focused, by limiting the number of ideas and initiatives that can be turned into active business objectives.
Remote work and distributed teams: The disruption of workplaces and workflows triggered by the COVID crisis has clearly been another factor. Missing the safety net of physically co-located work, organizations have scrambled to find ways to determine and communicate their priorities more effectively to teams and individuals — often in an uncertain and rapidly changing external environment. Concisely defined and transparently applied OKRs that flow consistently across the organization have allowed many companies to keep their unexpectedly dispersed staff on the same page. With the trend towards remote work set to outlive the pandemic and its aftermath, OKRs have a role to play to in mitigating its downsides.
Improved software tools: What is making the administrative and logistical implementation of OKRs today rather different from how it was until quite recently is the availability of better tooling. If OKRs live only in spreadsheets, slides or internal wikis, it can be a cumbersome framework for managers to get off the ground — and, especially, keep in the air. Moreover, without any form of visual support the text-heavy nature of OKRs may start hindering buy-in and utilization. It adds to the process that small but dangerous dose of UX friction that may over time disincentivize team members from, say, checking what the adjacent teams are currently prioritizing. Purpose-built software tools that orchestrate, automate and visualize OKRs can make a world of difference on both counts.
Measure What Matters: Finally, it is more than appropriate to give a nod to John Doerr’s influential book from 2018. That is something that has no doubt got many executives previously unacquainted with OKRs interested in the methodology.
To advise Gartner’s product management clients on what OKRs mean from their perspective, Ron Burns and I have just completed a new report, Leverage OKRs to Improve Product Management’s Responsiveness to Change (subscription required). In the report, we use the following example to illustrate how product-focused OKRs of today would typically look like. The example is entirely hypothetical, albeit inspired by themes that many of our clients are tackling these days:
See how both the objectives (“what we want to accomplish”) and the key results (“how do we measure our accomplishment”) flow from one role to the next with increasing granularity. To keep the example simple, we have only used a single O and a single KR on each layer, but hopefully you will still get the gist of it. The objectives are meant to inspire and energize at every level, while the assigned key results borrow the principles of SMART: specific, measurable, achievable, relevant and time-bound. The SMART framework itself is an alternative to OKRs, but for defining the key results its criteria serve as useful guardrails.
Some other points we make:
- Outcomes outdo outputs (let alone inputs)
- The focus should be on driving strategy, not on employee performance
- Cross-functional alignment matters as much as the hierarchical kind
- Better analytics translate into better defined outcomes
It goes without saying that we are not talking about a strategic panacea. You can still struggle mightily and fail spectacularly even if all nooks and crannies of the organization are bubble-wrapped in OKRs. What you put into the model still matters more than the model itself.
That being said, by now there is starting to be enough evidence to argue that if a company has persistent problems with alignment and/or responsiveness of its strategy then OKRs are absolutely worth a look. Or possibly a rethink, in case they are already hard at work but hardly working — for the world has moved on in the past years, also in this field.