What is an OKR? Meaning, Definition, and Examples for 2023
Did you know that according to research shared by Harvard Business Review, up to 95 percent of a company’s employees aren’t aware of or don’t understand its growth plans?
This is why many businesses set goals but end up underachieving as they get stuck during the execution process. Learning OKR meaning can help you avoid this scenario.
Companies nowadays turn to goal implementation strategies such as OKRs to develop clear roadmaps for defining goals and tracking the progress of completing them.
Today, you’ll learn all about OKR meaning and how you can use this framework to establish and meet business goals.
Table of Contents
The acronym OKR stands for “Objectives and Key Results”, which is a goal-setting framework that helps individuals or teams set goals and track the progress of achieving them by creating engagement and alignment around measurable metrics.
OKRs represent a strategy that enables leaders to provide employees with precise, comprehensive layouts of company goals and the plan to achieve them.
The OKR methodology allows for effective setting and communication of expectations.
OKR is an acronym. The ‘O’ is short for “Objectives” and the ‘KR’ is short for “Key Results”.
OKRs are frameworks used to achieve goals by aligning them with strategic objectives and measurable goals. The main purpose of OKR is to make sure that all members of an organization are working towards a common direction at a constant pace with clear priorities.
The objective of an OKR strategy is simply what you want to achieve. It describes ambitious goals and a vision that’s concrete, significant, and action-oriented.
As for the key results, they’re the benchmarks that tell you how to reach the objective. To be as effective as possible, a key result should be measurable, verifiable, time-bound, specific, realistic, and challenging.
You should be able to either meet a key result or not at all — no gray zones. Once all the key results are completed, you’ve accomplished the objective.
The OKR methodology originated at Intel; the technology giant. Andy Grove, the third CEO of Intel, is the person responsible for creating OKRs.
Who uses OKRs
One of the prime examples of successful companies that adopt the OKR framework is Google.
The company implemented OKR across its department ever since 1999, within just one year of its foundation. OKR strategies helped Google’s organization grow from just 40 employees back then to over 185,000 today.
In addition to Google, other companies that implement OKRs include Target, LinkedIn, Walmart, Spotify, The Guardian, Twitter, Airbnb, and ING Bank. As you can tell, OKR isn’t just beneficial for digital companies.
OKR meaning in Agile
Agile is an iterative approach to project management composed of multiple incremental stages or steps that lead toward completing a project. In other words, the Agile life cycle provides gradual phases that eventually end with delivering a project.
Combining the OKR framework with the Agile philosophy of work management can help leaders and managers align their teams’ efforts with the company’s goals, improve employee engagement, and increase productivity.
Not only can OKR and Agile coexist, but they can also complement each other for even better results.
For one, using OKR and Agile together helps align more strategic metrics with more strategic goals. Adopting the Agile approach when formulating OKRs is an excellent way to make the company’s visions, missions, processes, and tasks a lot more meaningful.
Throwing iteration in the mix allows for improved collaboration and proactiveness on both an individual and departmental level. As such, embracing the proposed objectives becomes easier and achieving the prospective key results becomes smoother.
Additionally, combining OKRs with the Agile approach is an effective solution to maximize transparency across the entire organization.
When every employee is able to view the company’s goals, it only serves to boost awareness of business values, enhance collaboration, and raise their sense of accountability for the work done.
OKR meaning in HR
OKRs in HR is a simple tool that helps HR teams develop data-driven goals and quantify their results.
The OKR methodology provides a structured framework for setting human resource objectives, monitoring key outcomes, and executing goals within the HR operation that, in turn, affect the general goals of the organization.
HR OKRs use objectives to represent the direction that an employee should go. They’re measurable actions you need to take to achieve a goal down the road.
Additionally, HR OKRs rely on key results to determine the set of metrics needed to measure how well an employee is progressing toward completing the objective. In other words, key results answer the question “where are you with (insert goal)?”
HR OKRs also include the use of initiatives. These are tasks and activities and tasks that make it easier for employees to accomplish the key results.
Typically, HR teams create annual objectives and then set the key results to a quarterly timeline. Leaders should make sure that the formed OKRs are challenging and ambitious enough to take the organization’s growth to the next level.
OKRs vary widely depending on the area you’re looking to develop in.
You can use OKR methodology in professional fields across various departments from sales, marketing, and HR to customer service, finance, and engineering.
You can even apply OKR strategies in your personal life to achieve goals such as losing weight, spending more quality time with your family, or even committing to a hobby.
The following are some examples of OKRs in a range of departments. Go through them to get an idea of how OKRs look.
OKR examples in HR
For talent management:
- Objective: enhance employee retention
- Key results:
- Achieve an offer acceptance ratio of more than 85 percent
- Bost employer brand recognition by 15 points to 50
- Increase compensation to at least 70 percent of the industry benchmark
For learning and development:
- Objective: make our current leaders better/develop a leadership performance improvement plan for managers
- Key results:
- Get 100 leaders to enroll in a strategic future program by Q3
- Devise and carry out an effective leadership development program
- Register at least 80 percent of senior managers in a coaching/mentor program
For HR Compliance:
- Objective: effectively manage risk
- Key results:
- Have all HR staff complete GDPR training
- Make sure that 70 percent of all HR compliance training is done by Q3
- Reach an 80 percent rating in the annual HR audit
For employee relations:
- Objective: improve overall satisfaction with internal relations
- Key results:
- Cut down the turnaround time for resolving internal complaints from 10 days to 4 days
- Design and provide at least 70 percent of line managers with a conflict management tool by Q4
- Make sure that 100 percent of employees complete training on workplace safety
OKR examples in customer service
For customer relations:
- Objective: delight customers
- Key results:
- Increase NPS from 7.0 to 9.0
- Cut down Chun rate from 10 percent to 5 percent
- Design and stabilize the customer onboarding process
OKR examples in finance
For debt status:
- Objective: improve the debt status on the balance sheet
- Key results:
- Evaluate debt requirements every month
- Increase capital assets that generate income from 50 percent to 65 percent
- Cut down the long-term debt from 15 percent to 10 percent by the following year
For budget status:
- Objective: reach fiscal sustainability
- Key results
- Cut down the general funding budget variance from 12 percent to 6 percent
- Spend 90 percent of grants from previous fiscal years for grants
- Spend 90 percent of capital project funds by the end of the fiscal year
OKR examples in personal life
- Objective: run a distance of X in under Y minutes by Z timeline
- Key results:
- Go for a run twice a week for at least A minutes
- Increase the running distance by B miles every week
- Up the mile speed by C seconds every week
For healthy dieting:
- Objective: eat less junk food
- Key results:
- Increase days of cooking dinner at home to 5 days per week
- Pack homemade lunch to work at least 3 days every week
- Go grocery shopping at least 2 times a week
OKRs are used to set goals and track the achievement progress by meeting and assessing measurable metrics.
KPIs, however, are the metrics themselves. They’re used to measure performance; show how well you’re doing a certain activity such as programs, products, projects, and other initiatives. One thing to note about key performance indicators is that they have to follow the SMART criteria.
KPI is an acronym that stands for “Key Performance Indicator”. These key performance indicators are critical to each objective and let you monitor the progress of certain aspects within the goal.
In other words, KPIs can break down OKRs into specific metrics to track progress.
According to Harvard Business School, organizations often succeed in coming up with strategies but fail when it comes to the execution process. Experts estimate the failure rates to range between 60 and 90 percent.
To support the successful growth of your company and accomplish effective strategy execution, you must align your key management methods.
One way to do this is by implementing OKRs. They effectively shift focus on goals that matter, align the efforts of individuals and teams to a common goal, and allow for accurate and continuous tracking of progress.
OKR strategies also serve as methods for employee engagement and development. The more you apply OKRs to your company processes, the more efficient and productive your employees will become.
One of the things that make OKRs so attractive and effective is that they’re flexible. OKRs don’t come from closed boardroom meetings, but rather from everyone’s input regarding what the objectives should be and how they think they can be achieved.
As such, when OKRs succeed, every employee in the company does as well.
To help you create good OKRs for your company that can work at an organization, team, and employee level, follow the steps below:
1. Understand your company’s vision
Writing great OKRs begins with you thoroughly understanding the vision of your organization.
Being clear on that allows you to comprehend the company’s grand goals and then break them down into actionable team-level missions using OKRs to further your business growth.
2. Pick the right tools
Think of writing OKRs as a project that requires proper tools to brainstorm ideas, monitor progress, and achieve results.
These tools can include a wide range of instruments from whiteboards and goal libraries to continuous performance management solutions and tracking helpers such as google sheets.
3. Get the whole team to chip in
Just as we said earlier, OKRs shouldn’t be developed by just one person or a group of isolated individuals as all of the components in an OKR should ladder up into one other. Individual OKRs are derived from team OKRs which come from well-strategized company goals.
This ensures that everyone is aligned and works in the same direction.
You can describe writing OKRs as a bi-directional process where each member of the team should contribute with their input on the objective and how to make it happen. This will solidify the sense of shared ownership and responsibility within your team.
So after fully understanding your business goals and choosing the right tool to carry out the project, schedule a meeting for the whole team to start brainstorming and refining the OKRs for the quarter.
After that, make sure to have some one-on-one time with each team member to talk about how their individual OKRs integrate into the grand mission.
From that point and as the quarter goes on, you want to continuously provide the team with insights on the progress so they stay in the loop and up to date on the impact of their work individually and as a unit.
4. Draft the objective statement
A lot of the time you may be tempted to write the key results first since they’re the quantifiable aspect of the OKR, which means they’re usually easier to come up with.
However, a great OKR will happen only when you start with your objective.
Objectives act as destinations for your and your employees’ efforts. So it only makes sense to know where you’re heading before taking off on the journey.
Before the key results and initiatives, write your objectives in the form of one sentence each. You can include a short description if necessary.
Your objectives should be challenging to push the company to a higher level.
As such, don’t worry if you feel somewhat nervous or uncomfortable when coming up with them. Otherwise, you may end up setting the bar too low without realizing it.
However, this doesn’t mean that you should make them so ambitious that they’re unachievable.
5. Set key results
As we explained earlier, key results are the metrics that enable you to measure progress toward achieving the objective. Think of them as the route to get to your destination.
Key results should be relevant to the objective and possible to measure with a number. They should follow the MECE principle, which means you need to make them mutually exclusive and collectively exhaustive.
You want each set of key results to be unique yet cover as many aspects of the plan as possible.
6. Add the initiatives
The last thing you need to do to finalize your OKR framework is to add initiatives. If objectives are the destination and key results are the routes, initiatives are the supplies you’ll use during the journey.
For example, if your objective is to become a highly successful remote work company and your key result is to reach an eNPS score of 50, one of your initiatives would be conducting eNPS surveys with your employees every month.
7. Closely track the OKRs
Once you have your OKRs ready and you put them into action, you want to stay on top of things by reviewing and tracking them consistently. Remember, it’s not enough that the OKR template looks nice, they need to deliver just as well.
So how can you do this? Well, it depends on the way you do things.
Fitting OKR reviews into your process can happen in weekly team meetings to track team or individual OKRs. It can also be a quarterly thing for reviewing company OKRs during town hall meetings.
8. Celebrate the imperfection
Part of creating good OKRs is to make them challenging.
Leaders may lose sight of this and forget that OKRs are meant to be just out of reach. So when objectives aren’t 100 percent achieved, they get disappointed and deem it as a failure.
It’s like shooting for the stars but getting upset when you land on the moon. That’s why celebrating imperfect success is very important; it reminds you that your work amounts to a level of success even if it’s not the highest.
Can KPIs replace OKRs or vice versa?
No, KPIs aren’t a replacement for OKRs nor the other way around.
To put it simply, KPIs and OKRs serve different purposes; KPIs are metrics to measure performance whereas OKRs are a framework to set and achieve goals.
You can use KPIs to track the progress of your OKRs or you can use OKRs to manage your KPIs.
How often should you update OKRs?
To update OKRs, you’ll need to perform check-ins on your key results.
Typically, you want to do check-ins once a week or every two weeks. This will help ensure efficient communication of all updates across team members and reliable recording of all learnings.
Check-ins can be completed depending on the frequency that works best for your team.
How many objectives should OKRs have?
To make sure you effectively capture the goals of your organization, keep the number of objectives in your OKR program at a maximum of 5.
How many KRs should an objective have?
Ideally, each objective set in your OKR program should have between 3 and 5 key results.
Make sure that your key results are collectively exhaustive and mutually exclusive. This way, each key result is designated to track an important process or indicator while simultaneously pointing to the completion of your objective upon achieving them.
When businesses set goals but fail to achieve satisfactory results, one of the main reasons is the fact that the employees don’t fully comprehend your expectations. As such, they readily get stuck during the execution process.
Learning about OKR meaning and how to implement this strategy in your workplace can help clearly establish and complete company goals.
To monitor your objectives and keep track of the progress of your key results, try our Conversations® performance development tool to generate and receive structured feedback and assessments, efficiently creating a culture of connection and continuous growth.