OKR Concepts
OKR stands for
Objectives and Key Results, a goal-setting model popularized by Google.
OKR has its roots in the earlier works of Peter Drucker who invented the framework called Management By Objectives (MBO). Andrew Gove and John Doerr, of Intel, developed the OKR framework and later introduced it to Google.
What is an Objective?
Objective is:
something your organization wants to achieve in the future.
Objective sets the direction without telling how it will be achieved. It is the "What" element of OKR. Objectives are defined in simple terms e.g.
Retain customers
Reduce delays in operations
Create innovative products
Beat your competitors with best prices
Objectives can be further broken down into a hierarchy. Objectives are defined to be inspirational, setting direction or guardrails, and challenging.
What is a Key Result?
Key Result is:
an outcome which can be measured and helps your organization to achieve objectives.
It is the "How" element of OKR. Examples of Key Results are:
Objective: Retain customers
Key Result: Improve NPS to 90 within 6 months
Key Result: Introduce 5 new services on the mobile app in 3 months
Key results are defined to be specific, measurable, ambitious, relevant and time-bound.
There are two more important elements of OKR model: Initiatives and KPIs
What is an Initiative?
Initiatives are
projects or undertaking to achieve key results
Projects are temporary, with a start and end date.
What is a monitoring KPI?
Key Performance Indicators (KPI) are
quantifiable measurement used to gauge an organization's overall long-term performance
KPI can be measured in many different ways including count, sum, average, ratio or percentage. KPIs are used to monitor the progress of key results.
Example:
OKR Concepts
Cadence - in business vocabulary cadence means "how often a scheduled thing happens". In OKR vocabulary it means "how often the OKRs are set". There is no set rule. However, the general practice is to set organizational level or strategic OKRs annually
Type of OKR: Aspirational or Committed. Aspirational OKRs are challenging, ambitious or ground breaking. You are trying to achieve something transformational with lots of risks involved. Therefore bar for its success is set low. Committed OKRs are more business as usual type outcomes, with low risk and generally agreed by stakeholders to be achievable. Therefore it is expected to be fully achieved.
Expected Score: It defines what is the expected outcome of an OKR. As a best practice it set at 0.7 for aspirational and 1.0 for committed OKRs.
Run, Grow or Transform OKR: OKRs may be classified in several different ways. One model classifies them into three categories: Run, Grow or Transform. Another model uses two categories: Committed or Aspirational. Different expected scores can be assigned to each type of OKR e.g. Run=1.0, Grow=0.85 and Transform=0.7 or Committed=1.0 and Aspirational=0.7
Models to determine status of Themes and Objectives
Following are the three status for theme or objective
On Track - score is above 2
Keep Watch - score is between 1.0 - 1.99
Delayed - score is below 1.0
The above thresholds are configurable and stored in system parameters.
The status of objectives are calculated based on its key results. A weight may be assigned to key results based on its type type e.g. run, grow or transform, as stated in OKR concepts above.
Objective status = status of key results x weight assigned to key result
An example is provided below. Assume objective 1 has following key results:
Objective 1
Key Result 1
Run (1.0)
On Track (3)
3/1 =3
Key Result 2
Grow (0.85)
Delayed (1)
1/0.85=1.2
Key Result 3
Transform (0.7)
On Track (3)
3/0.7= 4.3
Key Result 4
Transform (0.7)
Keep Watch (2)
2/0.7= 2.85
Total Score
11.35
Average Score
2.84
Status
On Track
Another example. Assume Object 2 has following key results:
Key Result 1
Grow (0.85)
On Track (3)
3/0.85 =3.5
Key Result 2
Grow (0.85)
Delayed (1)
1/0.85=1.2
Key Result 3
Transform (0.7)
Delayed (1)
1/0.7= 1.43
Key Result 4
Transform (0.7)
Keep Watch (2)
2/0.7= 2.85
Key Result 5
Run (1.0)
Delayed (1)
1/1=1
Total Score
8.98
Average Score
1.8
Status
Keep Watch
The status of the theme can be worked out as follows:
Theme = Total score of all key results / # of key results = (11.35+8.98)/(4+5) = 2.25 (On Track)
Further Reading
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