Achieving corporate goals with the OKR method

In recent years, whole armies of managers have made a pilgrimage to Silicon Valley to be inspired by the IT and high-tech companies based there. And it is not uncommon for them to bring back from their travels supposedly completely new, revolutionary management methods that they present at home as the bringers of salvation.

This includes the "Objectives and Key Results" method, which, under the abbreviation OKR, has also been finding its way into companies in German-speaking countries for the last year or two. Today's Internet giant Google, among others, has been using this method for almost 20 years to achieve its ambitious (growth) goals. With this method of implementing corporate strategy, the definition of goals is not carried out on an annual basis with the involvement of employees, but as a rule in three-month intervals. Among other things, this is intended to increase the agility of the company.

The OKR History and Philosophy
But the OKR method is not the "new management magic bullet" that many management consultants like to present it as. It has been around since the 1980s. In them, Andy Grove, a former Intel manager, developed a concept for implementing such ambitious corporate strategies as "We want to become the market leader worldwide" on the basis of "Management by Objectives".

For him, the central requirements for such a system were:
- It must be simple and flexible and
- employees must be involved in the process of strategy development and implementation.

He considered the two simple questions to be answered by everyone in the companies to be the central key to this:
- "Where do I want to go?" (Objectives) and
- "How do I measure whether I have achieved my goal?" (Key Results).

In the 1990s, John Doerr, a friend of Grove's, introduced the OKR method to Google. He defined OKR as "a management method that helps focus all activities in an organization on the same, most important goals." Since 1999, Google has successfully used the method to set quarterly goals and priorities to achieve its ambitious goals. Therefore, other US companies such as LinkedIn, Oracle and Twitter adopted the method.

The OKR planning process
Working with the OKR method works as follows: Based on the strategy, the top management of a company sets five goals (Objectives) for the coming quarter, for example. These are operationalized by a maximum of four metrics (key results) to measure progress by the end of the quarter.

The "objectives" describe the "what" to be achieved. They thus set the direction and, according to the OKR philosophy, should be ambitious and motivating. The "Key Results", on the other hand, describe "how" the respective quarterly target is to be achieved. However, this description is not in the form of activities to be undertaken, but of measurable key results that provide information on progress and can be used to reflect at the end of the quarter: Were the Key Results achieved? These are, in effect, sub-goals that need to be achieved on the way to reaching the overall goal, i.e. the objectives.

Short-cycle planning of the OKR
The short-cycle planning in the OKR method meets the desire of many companies to increase the agility and reaction speed of their organization. In addition, managers and their employees must define for themselves when working with the method,
- what they plan to do in the coming quarter and
- what they definitely want to tackle during this time.
This ensures the desired prioritization and prevents bogging down.

Short-cycle planning has advantages and disadvantages. Some companies or divisions are difficult to manage with quarterly targets. However, experience shows that the deeper one penetrates into an organization, the easier it is to formulate goals with a short-cycle character in most cases. Therefore, the OKR method unfolds its advantages, especially when it comes to strategy implementation on the operational level - regardless of whether the goal is, for example, to develop a software solution in a defined period of time or to achieve a certain turnover in sales.

Target coordination: top-down and bottom-up process
Once the objectives and key results have been defined at the top level, they are broken down to the next level (e.g. the areas). In the OKR method, this is not done in a purely top-down process. Rather, managers and their employees are involved in the process. A rule of thumb is that about 60 percent of the goals come from the top and about 40 percent are defined from the bottom up. This means that, in addition to the goals that come from above, the next level can also define goals that it is convinced will help to achieve the overriding goal. This process leads to a kind of "negotiation" between the upper and lower levels, in which an agreement is reached on the objectives and key results to be achieved in the coming quarter, for example.

A central element of the OKR method is that all objectives and key results are published across divisions and hierarchies - also to prevent the objectives from being contradictory. The OKR philosophy recommends that the method should not be linked to the remuneration system - among other things because the defined objectives and associated Key Results should be very ambitious. A target achievement of 100 percent should be almost impossible, so that the employees are also animated to think about new ways of solving problems.

Implementation process during the year
The OKRs are designed to be very agile in terms of their in-year implementation. The idea behind this is: "Plan for the next period, implement and review the result, and deal with what you learned in the process." The chart shows how the in-year implementation process usually plays out. However, under no circumstances should one underestimate the time required to set the OCR (at each level) and reconcile them on a quarterly basis.

The cross-functional and cross-hierarchical alignment of the OKR is to ensure that all activities in the organization are aligned with the same and most important goals. In addition, companies usually try to achieve the following organisational development goals by using the OKR method:
- Breaking down strategic goals to the team and employee level,
- Agreeing inspiring and challenging goals,
- Creating a horizontal alignment (avoiding silo thinking),
- Reduction of central control, strengthening of self-organisation.

Influencing factors to be considered during introduction
When implementing the OKR method, the management of a company should consider the following factors:
-What is the general goal of OKR implementation in our organization?
-How high is their maturity level with regard to the topics of problem-solving and agility?
-What other systems for strategy implementation and target agreement already exist (e.g. balanced scorecard, management by objectives)?
-How do we tie the OKR to the existing KPI system?
-What mix of top-down and bottom-up targeting do we choose?
-Which hierarchy levels do we involve in the first step?
-Who is driving the OKR implementation process and how internally?
-How do we measure the success of OKR implementation?

Final evaluation
The OKR method is not a new magic bullet, neither for leading employees and teams nor for increasing the agility of companies. However, it is a proven method for strategy implementation, especially at the operational level.

However, two points should not be forgotten:
- Defining objectives and key results alone does not enable employees to achieve them - sometimes in new ways. Therefore, working with the OKR method requires a leadership culture in which managers see themselves as enablers or coaches of their employees. And:
-- Employees should be given tools such as the PDCA cycle or the A3 report with which they can practice solving problems systematically and independently.

Other advantages of the OKR method are: It can be easily linked to such management systems as Hoshin Kanri and the Balanced Scorecard, which tend to focus on achieving medium- and long-term goals. In addition, it harmonizes with the CIP and Lean concepts, since it is also ultimately about continuously improving and increasing performance.