OKRs are an old staple of business management, rebranded, repurposed, and tweaked to 21st century necessities of companies and professionals.It all started with the fathers of management: Taylor, Ford, and the sorts, who began treating business like a science. How so? They figured they could measure output, and then formulate hypotheses as to how they could improve output.
Back then that meant productivity, as measured by output per employee. These guys figured out optimum work schedules, break times, and lightning arrangements for factories. They also started streamlining production, adding specialization to the factory floor. These practices all brought incredible, tangible improvements.In the 50s, a fellow named Peter Drucker, who’s believed to be the greatest management guru that ever lived, figured out that managers goals could be a great thing. Now, not only they had to improve their numbers, as Taylor and Ford had suggested, but also to aim at specific target outcomes from time to time.
Drucker called this framework Management by Objectives, or MBO, a concept introduced in his seminal book The Practice of Management.
Today, practically every modern Fortune 500 company practices some sort of goal setting. It’s proven to bring better results than not having goals . Some companies set them once a year; some companies set them twice a year. A number of them tie variable compensation to reaching your goals, and another number of them perform some sort of performance review based on these goals and results.
The term OKRs was introduced by Andy Grove, a de facto cofounder of Intel (he joined the company on the day of its incorporation, but is not listed as a cofounder,) and its former CEO, in his great management book High Output Management. Grove didn’t bring any transformational insight to MBOs, but spoke about appending key-results to goals, and calling goals objectives.
But making key-results an integral part of the MBO process is very important: it brings clarity to how goals can and should be attained, and makes this “how” evident and transparent to everybody.In Grove’s view, key-results had to be chronological milestones that took professionals in the direction of reaching their goals: a one-year goal could be broken down into 12 monthly key-results, or 4 quarterly key-results. He treated them specifically as “milestones.”
That use was attuned to Intel’s 80s reality: a large company, already on the top of its game, looking to translate its strategic planning into actionable goals and milestones for the whole organization.Another Grove tweak to MBOs was his belief that goals (objectives) and key-results had to be set in a bottom-up process, from the employee up, so as to bring buy-in and empowerment to the process. Before that, companies would shove goals down the organization, from the Board to the CEO, down to VPs, and so on.
Grove enabled employees to set their goals according to a broad guidance from the company, to be then calibrated with direct managers.Last, but not least, Grove insisted that OKRs be aggressive, meaning – very – hard to achieve, what he called “stretched.”
He went further along, and instituted 70% as the new 100%, meaning that achieving 70% of your goals was as good as hitting them, since they were purposely baked very hard.In the late 90s, OKRs spread out to other Silicon Valley companies, through the inspiration of Jon Doerr, a partner of Kleiner Perkins Caufield Byers, one of the world’s foremost venture capital firms.
Doerr had worked for Intel under Grove’s leadership, and got acquainted with its use of OKRs, later thinking it could be adapted to other companies of KP’s portfolio. That’s how Google, and later on Zynga, became fierce advocates of OKRs, tweaking the tool to their specific needs.But what made Google’s version of OKRs different from Intel’s? Not much. Google shortened – a lot – the OKR cycle, making it a quarterly process.
That means the company, its senior executives, and basically every employee, sets his or hers objectives and corresponding key-results quarterly, a practice more attuned to the incredibly fast-paced reality of web 2.0 technology companies. Google enforced Grove’s position that goals should not be cascaded down the organization in a top-down manner, and greatly expanded upon it, according to Laszlo Bock, its SVP of People Operations:
“Having goals improves performance. Spending hours cascading goals up and down the organization, however, does not. It takes way too much time and it’s too hard to make sure all the goals line up. We have a market-based approach, where over time our goals converge, because the top OKRs are known and everyone else’s OKRs are visible. Teams that are grossly out of alignment stand out, and the few major initiatives that touch everyone are easy enough to manage directly.”
That means at Google, everyone’s OKRs are set by themselves, and made public via its intranet. Google ensures that individual OKRs are aligned with its own through a mix of supervisor oversight, peer pressure, and psychology.