8 Myths about Objectives & Key Results (OKRs)
In this article, we're going to address some of the most common myths we've seen in different companies regarding Objectives & Key Results - or OKRs for short.
I believe it is extremely important to address these myths because unfortunately, similar to the application of Scrum or Kanban, too many companies make too many mistakes with OKRs due to a lack of understanding. As a result, they fail to achieve their goals as a company and mistakenly build up frustration with OKRs.
What are the most common myths we've come across?
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OKRs are new and therefore part of New Work
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OKRs are a replacement for a company's strategy or even mission
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OKRs are created by teams
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OKRs are created by management for the entire organization
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OKRs work in every environment
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All of our work must be reflected in OKRs
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OKRs can also be used for performance reviews
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OKRs are the reason why Google is so successful
I will address all of these myths in more detail later in this article.
In late 2022, I also presented this topic as a keynote at Product Owner Day... You can watch the keynote here - it is in German though.
Myth 1: OKRs are new and therefore part of New Work
Just because some people have recently heard of OKRs, they think that Objectives & Key Results are something completely new. This is not the case. OKRs have their origins in 1954 and were finally formulated in the 1970s.
The "O" in OKRs stands for Objectives and comes from Peter Drucker's 1954 book, "Practice of Management". In this book, Drucker explains a concept called Management by Objectives (also known as Management by Results).
This concept was taken up and expanded in the 1970s by Andy Grove (then Intel's Chief Operating Officer). From Grove's perspective, it was very helpful to set objectives and give employees the freedom to decide how to reach the goal.
However, Grove felt there was a missing element in measuring the achievement of goals-especially larger ones-along the way. Those indicators are the key results.
Using OKRs, Intel was able to transform itself from a memory (RAM) manufacturer to a processor (CPU) manufacturer. There are several books written by Grove himself, as well as books written by others about him. I will provide a list of recommended books at the end of the article.
What are OKRs?
Objectives & Key Results is a method for articulating goals. These can be corporate goals or personal goals. Below I will give an example of each.
Example 1: OKRs for personal goals
Objective: I want to live to be 100 years old and be in a fit state
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Key Result 1: My blood pressure is in the lower normal range (120-80)
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Key Result 2: My LDL cholesterol level is less than 100 mg/dL
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Key Result 3: I can run 10 km in less than 1 hour
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Key Result 4: I can complete the 300 Challenge (100 push-ups, 100 squats, 100 pull-ups) in less than 10 minutes
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Key Result 5: My body fat percentage is less than 15%
Example 2: OKRs for company goals
Objective: As a company, we want to increase our impact sustainably
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Key Result 1: We generate €2 million in revenue per year
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Key Result 2: More than 50% of our revenue comes from our scalable offerings, such as our online courses
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Key Result 3: We generate less than 20% of our revenue from our largest customer
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Key Result 4: We have a Net Promoter Score (NPS) of greater than 90 on all of our products
Of course, these are just examples, and a whole range of other Key Results can be listed. However, it is helpful to have no more than 1 objective and no more than 3-5 key results. I will cover this in more detail in another article.
Myth 2: OKRs are a replacement for a company's strategy or even mission
All too often, we see companies that have not formulated a mission or a clean strategy and yet want to implement OKRs. In many cases, some clever consultants have told the management team that OKRs are a replacement for these missions and strategies.
This is not the case!
On the contrary, OKRs require a clean mission and strategy. The mission usually leads to the big objectives, and the strategy helps describe both the objectives and the key results.
No matter which OKR experts you consult - from my perspective, these are primarily Christina Wodtke and John Doerr - they all assume that a company has formulated a mission and a strategy before deriving OKRs.
Google's mission was and is: "To organize the world's information and make it universally accessible and useful."
From this mission, a strategy can be developed that covers the topic of search (Google's core business), email (Gmail), or even acquisitions such as YouTube. OKRs are then created based on the strategy.
What tools and techniques are used to develop mission and strategy?
As always, there are a variety of tools and techniques that can be used. Ultimately, it comes down to individual preference. Personally, I like Simon Sinek's Golden Circle concept for developing a company mission.
If you want to learn more, you can watch the video of Simon himself:
For strategy development, I can refer to my mentor Roger Martin. Roger is perhaps the greatest management thinker since Peter Drucker. He has published numerous books. When it comes to strategy development, I always recommend Playing to Win - see also the book recommendations at the end of the article.
The two key questions for developing a solid strategy are "Where to Play" (what field are we on) and "How to Win" (how do we increase our chances of winning). Below is a more detailed outline of Roger's framework for developing a strategy. Steps 2 and 3 are the questions I mentioned earlier.
I had the pleasure of interviewing Roger about agile strategy development in March 2022. You can watch it here.
Myth 3: OKRs are created by teams
Well... Teams should definitely be involved in creating OKRs. However, this does not mean that teams or even individuals should define goals for themselves alone (whether using OKRs or not).
In addition to setting goals, OKRs are primarily an alignment tool. This means that a company that uses OKRs wants to focus the entire business on a few strategic initiatives.
For example, Intel used OKRs to align the entire organization toward microprocessor development. This also meant that all team OKRs had to be aligned to the company's objective.
To enable teams and individuals to define OKRs, management must do three things
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Management creates alignment to the company's major goals. In our case, for example, this would be the development of scalable business models.
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Management sets the standards for the company. In our case, this means that we continue to operate in the premium segment. Everything must be subordinate to these standards, otherwise we will not have a clear positioning and thus differentiation in the market.
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Management creates the framework. This framework may consist of clear roles and responsibilities. It definitely includes the available budget and a variety of other things.
Once these things are in place, teams can be involved in creating OKRs. We will look at the skills teams need for this in the next section.
Myth 4: OKRs are created by management for the entire organization
Although management - see previous section - creates the foundation for OKRs, we do not want management to define OKRs for the entire organization. Unfortunately, there are many companies where parts of management do nothing but create OKRs for other people and track their progress. In my opinion, this makes little sense.
What is the alternative?
Teams are involved in creating OKRs. This requires, on the one hand, that management has done its homework beforehand - see mission, strategy, alignment, standards, and creating the right framework.
But it also requires that teams bring two important skills with them. First, if teams are going to set their own OKRs, they have to be cross-functional, and second, they have to be self-managed. Those of you who have experience using agile frameworks such as Scrum will already be familiar with these two characteristics.
Why self-managed?
Self-managed means that a team can not only perform its work, but also plan and control it. OKRs can enable a team to do this. But if a team does not have this ability at all, then they will not be able to create OKRs on their own. They will definitely need support from their leader or an external coach. Want to learn more about self-managed and how to get there? Check out this article.
Why is cross-functionality necessary?
Cross-functionality (or x-Functional) means that a team has all the skills and capabilities to achieve a goal. This can be the development of a product or something else. Without this ability, the team has too many dependencies and cannot define OKRs, especially when it comes to fulfilling them within a certain time frame.
Myth 5: OKRs work in every environment
This may be true in theory. But as they say, in theory there is no difference between theory and practice... in practice there is.
It is the same with OKRs. OKRs could theoretically work anywhere...but only theoretically. It takes a whole bunch of things to make OKRs actually work.
We mentioned some of these things as part of the other myths. At this point, I would like to mention two more.
Empiricism
OKRs require or assume that a company operates empirically. Whether according to the principles of Lean Startup - i.e. build, measure, learn.
Or whether you use Lean terminology - namely Plan, Do, Check, Act - is completely irrelevant. Companies using OKRs must (!!!) work empirically. Why? Because for each key result we create a set of activities. Each of these activities is a hypothesis or an experiment that we want to use to achieve the Key Result and ultimately the objective.
Returning to our personal example, a hypothesis for the Key Result "My blood pressure is in the lower normal range (120-80)" could be derived from not drinking alcohol or following a vegetarian diet. Only by inspecting and adapting will we know which of these hypotheses actually works.
So OKRs are not just a tool for defining goals and tracking them over time. OKRs are also a tool for systematic learning. We learn how to set better goals, but we also learn what works and what doesn't. With this experience, we are much stronger in the future.
Psychological Safety
All companies that are successful with OKRs place a high value on psychological safety. Psychological safety, in my opinion, is best defined by Tim Clark as "a culture of rewarded vulnerability."
Why is this important when it comes to OKRs? OKRs should not only be used to set goals, but we want to set ambitious goals. We want to go beyond our limits.
For teams to set ambitious goals, they need to feel safe. If there is a penalty for not meeting a goal, a team will not be ambitious. It is not without reason Google, Intel and many other companies aim for a Say-Do-Ratio (how much of the goal do we achieve) of 70%.
If we regularly achieve 100% of our goals, these companies would argue that our goals are probably not ambitious enough.
Read more about psychological safety here.
Myth 6: Our entire work must be reflected in OKRs
Short answer: No! OKRs relate to major strategic initiatives. We all know that there is also the so-called day-to-day business. We have administrative issues, we have systems to maintain, we have emails to answer. None of those things are reflected in OKRs... and that is fine.
With OKRs, we don't want to show how busy we are. We want everyone in the company to be clear about what the strategic issues are. Everyone should think about how they can contribute to those issues.
And yes, if our day-to-day business prevents us from working on the OKRs, we need to communicate that. That is a matter of prioritization at the company level. But please do not make the mistake of trying to define an OKR for every little activity just so you can say at the end of the quarter that you have achieved your OKRs. With this approach, you will never stop creating OKRs. And at the same time, you ensure that the really important things do not get the special attention they need to get.
Myth 7: OKRs can also be used for performance reviews
Again, a big NO! In his book Measure What Matters, John Doerr brilliantly describes why OKRs should not be used to measure individual or team performance. Achieving certain key results or objectives is only partly dependent on our work. A variety of other things contribute.
Here's a nice story. A few years ago, my sister was in charge of MS Teams at Microsoft. Every year there were growth targets that no one could understand. Sometimes they were achieved and sometimes they were not. By the way, personal bonuses depended on these goals.
Then came the pandemic. And without working more, harder, faster, or smarter, the growth target was blown out of the water. Instead of 14% growth, there was 300% growth.
This example shows very well that teams have limited control over success. That doesn't mean they should stop working and rely solely on big market changes.
This means, above all, that we should not use OKRs to evaluate performance. By the way, Google, Amazon and many other innovative companies differentiate exactly at this point.
Myth 8: OKRs are the reason Google is so successful
After reading all this, you already know the answer. OKRs are not the reason for Google's success. If it were that simple, every company would be using OKRs.
At best, OKRs are the famous icing on the cake. Christina Wodtke mentioned the following sentence in our interview, which I will not forget:
"OKRs are a vitamin, not a medicine!"
This means that healthy companies can get a boost through OKRs. Sick companies, on the other hand, are not healed by the introduction of OKRs. In these cases, you need to create all the framework conditions first, such as a solid strategy.
Once you have done these things, your company can benefit from OKRs. With OKRs, you can achieve higher alignment, more focus, and most importantly, systematic learning. But remember, do not take the second step before you take the first.
Where can you learn more about OKRs?
An easy next step can be my interview with Christina Wodtke. You can find it here.
In addition, I have listed some books on the topic in the next section. And yes, we also offer workshops on OKRs and support companies in creating the framework and implementing OKRs.
If you would like some non-binding advice on this, please feel free to contact my team: team@agile-academy.com
Book recommendations
If you want to learn more about OKRs, you should definitely read the following books:
1 - High-Output Management by Andy Grove
2 - The Practice of Management by Peter Drucker
3 - Radical Focus by Christina Wodtke
4 - Measure What Matters by John Doerr
5 - How Google Works by Eric Schmidt
6 - Work Rules by Laszlo Bock
7 - Start with Why by Simon Sinek
8 - Playing to Win by Roger Martin and A.G. Lafley