Measure What Matters is venture capitalist John Doerr’s guide to implementing the “OKR management system,” a goal-setting process he adapted from one used at Intel. The OKR system is used at LinkedIn, Disney, and Twitter, among countless other companies.
As its name implies, Measure What Matters helps you figure out what matters at your company and how to measure its success. The first step to knowing what matters is clarifying your OKRs, objectives and key results.
The objective is the goal: what the company, team, or individual aims to achieve.
Objectives:
Example: Hire new employees to meet the needs of the expanding organization.
Key results are benchmarks toward the objective.
Key results:
Example:
Objective: Hire new employees to meet the needs of the expanding organization.
Key Result #1: Meet with 3 candidates this month for the role of director of finance and hire 1.
Key Result #2: Meet with 5 candidates this quarter for the role of marketing manager and hire 1.
Key Result #3: Meet with 5 candidates this quarter for the role of product manager and hire 1.
Step 1: Identify your objectives. Start with the company’s biggest priorities. Ask yourself, “What are the most important tasks we need to accomplish in the next three months, the next six months, and the next year?”
Once you’ve identified your organization-level objectives, departments, teams, and individuals identify their own objectives. About half of an employee’s objectives trickle down from the top. The employee creates the other half herself.
Tips:
Step 2: Identify your key results. For each objective, ask yourself, “What steps do I need to complete to reach my objective?”
Tips:
Step 3: Decide on the length of your OKR cycle. Your team should operate on the same goal-setting schedule, or OKR cycle. For most companies, there are two simultaneous OKR cycles, quarterly and annual. Annual cycles are for long-term OKRs, and quarterly cycles are for short-term OKRs that support the longer-term objectives.
Step 4: Choose a cloud-based management system. To effectively track OKRs, you need a place to store and share them. A cloud-based system is best. (Shortform note: Cloud-based OKR systems include WorkBoard, Ally, Culture Amp, and Asana. You can also simply use shared documents.)
Step 5: Designate an “OKR shepherd.” For the OKR system to work, everyone, from the CEO to the lowest-level employee, has to take part. But you’ll likely encounter resistance and procrastination. It’s useful to put someone in charge of keeping the rest of the team or organization accountable for setting and working toward their OKRs.
Step 6: Set stretch goals. Eventually, in addition to “committed OKRs” (objectives that must be met for your company to function and thrive), you should create “stretch OKRs,” objectives that make you feel a little uncomfortable because you’re not sure you can accomplish them. Stretch OKRs push you to achieve more than you thought possible.
Step: 7: Check in with employees weekly or monthly, and continually reassess OKRs. If they’re no longer relevant, jointly decide to change or discard them, even mid-cycle.
Step 8: Score and reflect. At the end of each cycle, score your performance for each OKR. Reflect on how you did and what that means about the goals you set. What will you do differently next quarter?
Step 9: Repeat this cycle every month or quarter. Realize that hitting on an effective OKR system takes time, so be patient with yourself, your colleagues, and your administration.
The primary benefits of OKRs come from their four superpowers: focus, align, track, and stretch.
OKRs clarify your focus by limiting you to 3-5 objectives at a time. Remember that every time you commit to something, you make yourself unavailable to commit to something else, so choose your commitments wisely. Once you’ve chosen where to put your focus, commit to those objectives.
OKRs also clarify your focus by limiting you to 3-5 key results per objective. Because the success of your key results must result in the success of your objective, you need to create key results carefully. For example, the three sets of key results (KRs) below are all proposed paths toward the objective of winning the Indy 500, but only one set is focused enough to get you there.
| Weak KRs | So-So KRs | Strong KRs |
Objective: Win the Indy 500.
|
Objective: Win the Indy 500.
|
Objective: Win the Indy 500.
|
In the example above, the weak key results aren’t specific enough. The so-so key results are better because they’re measurable and specific, but they don’t specify how to decrease pit-stop time the way the strongest key results do.
OKRs are good at aligning companies because OKRs are always public. CEOs can look at the goals of their executives, managers, and junior staff, and junior staff can (and should) look at the goals of their bosses and the CEO. This allows people to coordinate their goals with those of the company and their peers.
Generally, there are two approaches to alignment: top-down and bottom-up. In the top-down approach, directives start with the CEO and cascade down through the ranks to the junior employees. In the bottom-up approach, junior employees working on the frontlines, the people who have the most access to customers and product issues, identify pressing needs and relay them up the chain of command to the CEO.
The most effective companies are aligned in both directions, with half of an employee’s objectives coming from the top and half set by the employee herself. If you’re assigning an objective to one of your employees, make sure you clearly demonstrate how the objective connects to the company’s top priorities.
Employees should set most of their key results themselves. People who choose their goals take more responsibility for reaching them.
OKRs are always measurable, and at the end of each OKR cycle you score them. These scores help you track your progress, and they indicate when you need to double down on a particular goal or when you should revise or abandon it.
During the OKR cycle, check-in with your manager weekly or monthly to discuss your OKR progress and decide among four options for each goal:
Option #1: Continue the objective or key result—If everything’s going well and you’re making progress, keep going.
Option #2: Revise the objective or key result—If changes in your environment or workflow have caused the goal to get off track, update it.
Option #3: Start a new objective or key result—As conditions change, you may need to add new goals. If you already have five objectives, put one or two on the backburner to make room for the new goal.
Option #4: Stop an objective or key result—Some goals become irrelevant or impractical. Don’t stubbornly cling to a goal just because you set it. If it no longer serves your larger purpose or the company’s, toss it.
At the end of the OKR cycle, you score and reflect on your OKRs. The wrap-up phase consists of three parts: objective scoring, subjective self-assessment, and reflection.
Objective Scoring
The employee and manager assign a score to the objectives. The simplest way to score an objective is to average the completion rates of its key results. One way to score is to use a scale of 0.0 to 1.0, based on how much of the key result was completed.
Subjective Self-Assessment
Objective data are important, but they don’t always tell the whole story. Low numbers could conceal a strong effort, and strong numbers could be inflated.
For example, let’s say your objective is to recruit more customers, and one of your key results is to make 50 phone calls to potential customers. You end up making 35 phone calls, for an objective score of 0.7. On paper, this looks like a success. But if you waited until the last minute and rushed through your calls, signing only 1 new customer, the objective score of 0.7 isn’t really indicative of your performance.
For this reason, it’s important to balance objective scores with subjective self-assessments. Work with your manager to compare objective scores with the circumstances that led to them.
Reflection
To learn from your experiences and scores, use these questions as a jumping-off point for group discussion and self-reflection:
Some of your OKRs should be especially challenging. Expect “stretch OKRs” to score between 0.4 and 0.6. Setting challenging goals allows your company to continue innovating.
This is how Google distinguishes between regular objectives (“committed objectives”) and stretch objectives (“aspirational objectives”):
Google doesn’t expect everyone to achieve their aspirational objectives, and failure is built into the process—in fact, the average rate of failure at Google is about 40%.
Your company’s balance of committed and aspirational objectives will depend on your answers to the following questions:
Regardless of your answers, every company should have at least one or two aspirational objectives. To determine yours, ask, “What would incredible look like for our company?”
Measure What Matters also explores the system of continuous performance management, an alternative to annual performance reviews. This system allows managers to give feedback regularly, help employees improve throughout the year, and address issues as they arise.
CFRs are your tools for implementing a continuous performance management system.
Conversations happen weekly or monthly, in both formal and informal environments.
As a manager, your conversations with employees cover 5 main topic areas (but you don’t need to cover all of them in one conversation):
In order to improve, employees need to know how they’re doing—often, they don’t have enough distance from their work and performance to make this call themselves.
You can elicit and guide feedback in one-on-one meetings with these questions:
Recognition should be both private and public and focused on actions. There are many ways to establish a “high-recognition” culture:
In one study, researchers found that “high-motivation cultures” depend on two elements: catalysts and nourishers.
Catalysts are elements of a company that support the work being done. These elements include goal setting, learning from failure, transparency, engaging in meaningful work, and freely sharing ideas. All of these elements are built into the OKR system.
Nourishers are elements of a company that support the interpersonal needs of employees. These elements include positive feedback, professional development, emotional support, psychological safety, and recognition. All of these elements are built into the CFR system.
In other words, OKRs are the catalysts of a positive workplace culture; CFRs are the nourishment that sustains it.
In 1999, Google was a small startup with an ambitious goal: to make the internet relevant and accessible to everyone. Unfortunately, founders Larry Page and Sergey Brin had zero experience managing a company, and there were already 17 other search engines competing for market dominance. Page and Brin had to figure out how to break down their broad, ambitious mission into manageable, measurable pieces, and they had to do it quickly. Luckily, venture capitalist John Doerr, who had a 12% stake in the company, had just the tool: a management system he’d learned as an Intel employee in the ’70s.
Doerr rechristened Intel’s process the “OKR management system,” and Doerr’s Measure What Matters is a guide to implementing this system. As its name implies, the book helps you figure out what matters at your company and how to measure its success.
OKR stands for Objectives and Key Results. They help companies, teams, and individuals set, measure, and reflect on goals in a structured, meaningful way.
The objective is the goal, what the company, team, or individual aims to achieve. In other words, the objective is the “what.”
Objectives:
Example: Hire new employees to meet the needs of the expanding organization.
Key results are benchmarks toward the objective. In other words, key results are the “how,” the steps you need to take to meet your goal.
Key results:
Example:
Objective: Hire new employees to meet the needs of the expanding organization.
Key Result #1: Meet with 3 candidates this month for the role of director of finance and hire 1.
Key Result #2: Meet with 5 candidates this quarter for the role of marketing manager and hire 1.
Key Result #3: Meet with 5 candidates this quarter for the role of product manager and hire 1.
Companies that use this system have OKRs at every tier: Top-line OKRs for the entire company, division OKRs, team OKRs, and individual OKRs. Everyone in the company creates OKRs, and everyone’s OKRs are visible to everyone else.
Your company likely uses a traditional management system with the qualities listed below. Compare it to the OKR approach:
| Traditional Management Systems | OKRs |
| Key question: What’s the goal? | Key questions: What’s the goal, and how will we get there? |
| Goals reviewed annually | Goals reviewed quarterly or monthly |
| Objectives are private | Objectives are public (even those of the CEO) |
| Alignment is top-down (objectives trickle down from the CEO to frontline employees) | Alignment is top-down, bottom-up, and horizontal |
| Success of objectives is tied to compensation | Success of objectives is (mostly) divorced from compensation |
| System encourages risk-aversion | System encourages risk-taking |
Part 1 of Measure What Matters covers the basics of the OKR system and how real companies have used OKRs and tailored the process to meet their unique needs. The first three chapters introduce OKRs, and Chapters 4-14 cover the four “superpowers” of OKRs: focus, align, track, and stretch.
Doerr includes real-life accounts of how OKR superpowers play out in giants like Google, medium-sized companies like MyFitnessPal, and startups like Zume Pizza. These stories demonstrate the benefits of the OKR system, but they also reveal common mistakes in implementing OKRs. Therefore, they serve as both inspirational stories and cautionary tales.
Part 2 of Measure What Matters explores the importance of a positive workplace culture and OKRs’ counterpart, CFRs (Conversation, Feedback, Recognition). OKRs and CFRs complement each other, and both contribute to establishing a company culture in which employees are engaged, aligned, and excited about their work.
Whether your business is large or small, OKRs can help. Learn to implement the same management system used by Google, Intel, LinkedIn, Disney, Spotify, BMW, Twitter, and the U.S. Department of Health and Human Services.
Doerr and Grove designed OKRs to be an improvement on traditional management systems. Whether or not you’re in a management position, examine the management system currently in place at your company and decide if the OKR system, or parts of it, could help your company function more efficiently.
What system of management is in place at your organization? What are its features? (For example, is there a clear goal-setting procedure in place? How often are the goals reviewed? Are they public?)
Do you know what objectives your boss expects you to meet this month? This year? If you’re a manager, how confident are you that your employees know what you expect of them? Why?
If you’re an employee, do you feel engaged and motivated at your job? Why or why not? If you’re a manager, do you think your employees feel engaged? How do you know?
Chapters 4, 5, and 6 introduce superpower #1, focus.
How to Implement OKRs for focus: Create OKRs at the organizational level, the departmental level, the team level, and the individual level. At each tier, create no more than 5 sets of objectives and key results. Limiting the number of OKRs keeps you focused on what matters most.
This OKR superpower has two facets: 1) focus on your priorities, and 2) commit to the OKR process. We’ll look at “focus” first.
There are 3 steps to creating OKRs that focus your attention
The first step of the OKR process is figuring out the “Os,” your objectives. Every individual and team in the company will have their own objectives and key results, but in order for these OKRs to be meaningful, they need to align with the organization’s highest objectives, so start with these.
To determine your organization’s highest objectives, ask, “What are the most important tasks we need to accomplish in the next three months, the next six months, and the next year?”
You can’t do everything. Answering these questions gets you focused on the few things that have to get done for the company to succeed. These are your objectives.
Your biggest priorities, the goals that everyone in the organization is working toward, are your organization-level objectives, or company-wide objectives.
Once you’ve identified your organization-level objectives, departments, teams, and individuals can identify their own objectives. These objectives often feed into and support organization-level objectives, so determining them is a matter of starting with the top objectives and figuring out what sub-goals you need to meet to achieve them. (We’ll cover how to create this alignment in the next chapter.)
At each tier, focus on three to five objectives. Any more than this, and your focus will be too dispersed.
After you know your priorities, your objectives, you can start to plan how to achieve them. Key results are the steps that get you there. For each objective, decide on three to five key results—sub-goals that are specific, measurable, and time-bound, and that collectively ensure you’ll attain your objective.
The three sets of key results (KRs) below are all proposed paths toward the objective of winning the Indy 500. What differentiates the strong key results from the weak and so-so key results?
| Weak KRs | So-So KRs | Strong KRs |
Objective: Win the Indy 500.
|
Objective: Win the Indy 500.
|
Objective: Win the Indy 500.
|
The Problem with the Weak KRs: These key results are measurable, but they aren’t specific. How much faster does your lap speed need to be to win the Indy 500? By how much time do you need to decrease pit-stop length?
The Problem with the So-So KRs: These key results are better because they’re measurable and specific. In the beginning, many of your KRs will look like these, and that’s fine. But there’s still a problem. Achieving a faster lap speed is relatively straightforward, but how do you decrease your pit-stop time? The strongest KRs answer how.
Pair “quantity OKRs” (make ten sales calls) with “quality OKRs” (earn two new orders). This ensures that you don’t sacrifice the quality of your product or service in the name of meeting your ambitious quantitative goals.
| Quantity Objective | Quality Objective | Result |
| Process 10x more vouchers this quarter | Make 10% fewer errors in voucher processing | Processing is more efficient |
| Custodial staff cleans 3,000 square feet per hour | Custodial staff receives an average quality score of 8 or higher. | Office buildings are cleaner and cleaning takes less time |
| Developers create three new product features by Aug. 14th | Testing finds fewer than five bugs per feature | Code for features is cleaner |
Once you’ve focused your priorities, you need to commit to the OKR process. Use this checklist to set up the OKR system and get your entire staff to commit to it.
Use the company’s mission statement and strategic plan to create top-line OKRs. There are three reasons to start at the top, and to start small:
While individual objectives may have their own deadlines, your team should be operating according to the same general goal-setting schedule, or OKR cycle. For most companies, there are two OKR cycles, quarterly and annual, running simultaneously. Annual cycles are for long-term OKRs, and quarterly cycles are for short-term OKRs that support the longer-term objectives.
A quarterly OKR cycle is appropriate for businesses in markets that change quickly, such as technology. The short time frame of three months per quarter helps create a sense of urgency and deter procrastination. But the timeframe of your OKR cycle will depend on your particular business and field. Your OKR cycle might be monthly or semi-annually.
In order to effectively track OKRs, you first need a place to store and share them. General-purpose software, such as Microsoft Word, can only get you so far. One Fortune 500 company had to completely revise their OKR system after starting with Word: They realized that quarterly goals in Word from all 82,000 employees resulted in 328,000 distinct Word files annually. These files were public, but did anyone have the patience to read them? If nobody knows your OKRs, are they really transparent?
A better system is a cloud-based OKR system, many of which include mobile apps, analytic tools, automatic updating, and integration with other services. (Shortform note: Cloud-based OKR systems include WorkBoard, Ally, Culture Amp, Asana, and many others.)
The benefits of a cloud-based OKR system:
In order for the OKR system to work, everyone, from the CEO to the lowest-level employee, has to take part. No one can opt-out. But you’ll likely encounter people who resist the system or procrastinate in setting their OKRs. It’s useful to put someone in charge of keeping the rest of the team or organization accountable for setting and evaluating their OKRs.
If you think a departmental OKR is so important that it could use company-wide support, elevate it to a company-wide OKR. If you think a particular key result is at risk of not being achieved on time, elevate it to the level of an objective and give it its own key results to make the path to its achievement clear.
The goal of the communication platform Remind is to create a secure texting system for teachers, students, principals, and parents. When the Remind team grew from fourteen people to sixty, the founders used OKRs to quickly focus each team member on the company’s key goals.
OKR Benefit #1: OKRs Helped Them Identify What Really Matters. In the company’s early days, before OKRs, the Remind team regularly set 7 or 8 ambitious goals and regularly failed to achieve them—their focus was too dispersed. The founders discovered that the OKR system helped them stand firm when their primary goals were threatened by things that seemed important but weren’t.
For example, many teachers requested a feature that would allow them to send a repeated message to their classes—say, to automatically remind students every Monday to bring their books to school. Although it was hard for the founders to say no to their primary users, they knew that this feature wouldn’t significantly impact user engagement and therefore wasn’t worth the time to make it a priority. Their OKRs kept them focused on the priorities they’d already established.
OKR Benefit #2: OKRs kept the team’s leader from micromanaging. Because he was clear about what his team members’ goals were and what his own were, he was less tempted to do others’ work for them and he could focus on his true priorities.
Healthcare technology company Nuna strives to improve America’s healthcare system by making healthcare more affordable and healthcare data more accessible. When they won a contract with the government to create its Medicaid platform, they needed to scale up quickly, and co-founder Jini Kim rolled out quarterly and annual OKRs.
But they didn’t stick. Some team members never set their OKRs, and many of those who did never looked at them again. No one was committed to the system. Employees viewed OKRs as merely an exercise because the executives weren’t public about their own commitment to the OKR system.
A few years later, co-founder Kim re-established the OKR system, but this time, she did three things differently:
Kim says the moral of Nuna’s “OKR story” is that you probably won’t get the OKR method right the first time you try. You might not even get it right the second or third try. In order for it to work for you, you need to commit to the process and find ways to make the process your own.
The first OKR superpower involves figuring out your priorities and committing to them. Use these questions as a guide.
Whether or not you’re a manager, you can use the OKR tools to focus your goal-setting process. What will the length of your OKR cycle be? (Monthly? Quarterly?) What cloud-based tools will you use?
Who will be your “OKR shepherd”? If you’re an employee and your management team isn’t implementing the OKR system, who can you ask to keep you accountable for reaching your goals?
What’s your company’s mission, its primary purpose? If you’re not sure, why is that, and where could you find it? If you’re a manager, how can you better communicate the company’s purpose and goals to employees?
What’s the most important task you need to accomplish in the next three months, the next six months, and the next year?
Chapters 7, 8, and 9 cover superpower #2, align and connect.
How to Implement OKRs for alignment: Everyone in the company makes their own OKRs, and everyone’s OKRs are visible to everyone else. This provides the transparency needed for people to connect their goals with those of the company and their peers.
Research shows that highly-aligned companies are twice as likely as non-aligned or badly-aligned companies to be top performers.
For employees to align their goals with their company’s goals, they need to know their company’s goals. This seems obvious, but, according to one study, only 7% of employees actually know what their company’s overarching strategy is and how they’re expected to contribute to its success. This is why the transparency of OKRs is so important.
In order for everyone’s goals to be aligned and contributing to the same ultimate objective, everyone’s goals, and their progress toward those goals, need to be transparent. The OKR system builds this necessary transparency into the process. CEOs can look at the goals of their executives, managers, and junior staff, and junior staff can (and should) look at the goals of their bosses and the CEO—everything is public.
Aside from alignment, there are other benefits of transparency:
Studies show that you’re more likely to achieve goals that you’ve made public, and OKRs are always public. Similarly, 92% of employees are more motivated to reach their goals at work if their progress is made visible to their colleagues, as it is in the OKR system.
If your colleagues know your goals, and they know how much (or how little) progress you’ve made toward them, they have a better sense of how and when to help. This fosters support among peers and strengthens workplace morale.
Additionally, your goals might be similar to a colleague's, and, consequently, you might have resources, strategies, or information that could help your colleague reach her goals. You can’t know which of your resources could be useful to your peers if you don’t know what they’re working on.
In large companies, people often work on the same thing, and toward the same goal, without realizing it. Making sure everyone knows everyone else’s goals helps keep employees from performing redundant tasks and, consequently, saves the company time and money.
Generally, there are two approaches to alignment: top-down and bottom-up. In the top-down approach, directives start with the CEO and cascade down through the ranks to the junior employees. In the bottom-up approach, junior employees working on the frontlines, the people who often have the most access to customers and product issues, identify pressing needs and relay them up the chain of command to the CEO.
There are benefits to both systems, and the most effective companies are aligned in both directions. However, there are more problems with top-down alignment than with bottom-up alignment.
The benefit of a top-down goal-setting system is that it ensures everyone’s goals are aligned with the company’s vision. But there are five problems that outweigh this benefit:
Before the manager can set goals for his team, he has to wait for the department head to give him his own goals, and the department head has to wait for her own marching orders from the executive team. This process of goal-setting can take weeks, and with markets that are constantly changing, companies need to pivot quickly.
Related to Problem #1, top-down goals are hard to change mid-cycle if they’re not working. If a department head realizes that he needs to adjust his goal to meet the needs of changing circumstances, all the employees in tiers below him will have to scramble to revise their own goals to align with his. This kind of system isn’t sustainable.
Often, employees at the lowest tiers have the most interaction with the market, and they may be the first to know that a company’s strategy isn’t working. A top-down system can marginalize these employees and make it difficult for them to communicate their concerns to those with the power to change things.
While these systems provide a clear path from the top of the organization to the bottom, they don’t connect people with employees from other departments. Consequently, the organization loses valuable opportunities to foster interdepartmental collaboration.
Because employees don’t have a say in developing their own goals, they take less responsibility for achieving them. You’re much more likely to reach a goal you set for yourself. Additionally, when employees don’t feel ownership over their goals, their bosses often find themselves micromanaging in order to get things done, and this keeps them from focusing on their own goals.
Top-down alignment isn’t all bad. In fact, about half of employees’ OKRs should come from objectives established by top management. At its best, top-down alignment makes cascading goals clear. Below, the head coach’s key results become the objectives of the coaches working under him. This is an effective use of top-down alignment. In turn, each coach has his own specialized key results that support his objective.
Objective: Win the Super Bowl
Key Result #1: Offense gains at least 300 yards per game
Key Result #2: Defense allows no more than 17 points per game
Key Result #3: Special teams unit earns a ranking in the top 5 for coverage of punt returns
Objective: Offense gains at least 300 yards per game
Key Result #1: Achieve a rate of 60% pass completion
Key Result #2: Allow no more than 2 interceptions per game
Key Result #3: Hire a quarterback coach by the end of July
Objective: Defense allows no more than 17 points per game
Key Result #1: Allow no more than 100 rushing yards in one game
Key Result #2: Raise sacks to at least 3 per game
Key Result #3: Train the new cornerback by the end of August
Objective: Special teams unit earns a ranking in the top 5 for coverage of punt returns
Key Result #1: Give up no more than 10 yards for each punt return
Key Result #2: Block at least 3 punts during the season
When objectives do come from the top, let employees give their input on the necessary key results. In the example above, the head coach might direct the special teams coach to make sure the special teams unit earns a top-5 ranking, but it’s up to the special teams coach to decide which key results will get them there.
The primary benefit of bottom-up alignment is efficiency. Companies with tens of thousands of employees, like Google, can’t wait for instructions and OKRs to make their way down the chain of command. Innovation requires speed and flexibility, and bottom-up alignment fosters both of these qualities.
The secondary benefit of bottom-up alignment is that it encourages a certain degree of freedom. Because employees get to choose many of their own goals, they feel ownership over them, they’re more motivated to achieve them, and morale improves. This freedom also fosters innovation, which studies show flourishes when employees don’t feel constrained by their managers.
OKRs help bottom-up alignment function smoothly. Individuals and teams are responsible for setting their own OKRs and making sure that these goals help further the company’s objective. Individual and team OKRs are public, so if anyone’s OKRs aren’t aligned with the top-line OKRs, it’s obvious.
Use these general guidelines to help your team or organization stay aligned.
MyFitnessPal is an app that lets users track what they eat and how they exercise. When their staff grew to a team of ten, they needed a system for increasing employees’ alignment and productivity.
Although the OKR system helped, it wasn’t a smooth transition:
Problem #1: Instead of creating organization-level OKRs first and then matching them to the employees in the best positions to achieve them, they created OKRs to fit each individual employee. Consequently, they had a bunch of distinct OKRs that weren’t aligned with an overarching goal.
Problem #2: When the team grew from ten to thirty people, productivity decreased. In an effort to speed progress, multiple engineers worked on the same project, but the strategy backfired: the leadership team spent much of its time finding ways to keep the engineers from overriding and negating each other’s work.
Problem #3: The engineering team was also confused by the competing demands of the various project managers. Often, the engineers didn’t know which projects or tasks to prioritize, so it usually came down to which project manager “yelled the loudest.” As the engineers switched back and forth between projects, their productivity tanked.
Problem #4: The marketing team failed to inform the engineering team of a key result that relied on their work. When the engineers found out about it, they saw this key result as just another demand on their time. The founders didn’t find out about the doomed OKR until the end of the quarter arrived and the OKR hadn’t been achieved.
Clearly, the MyFitnessPal teams needed to get on the same page. In order to increase alignment, leadership implemented frequent “integration meetings” during which everyone shared their goals, made it clear which other teams were needed to achieve those goals, and what exactly they needed from those teams. No one left the room until each project leader was satisfied that everyone was on-board with the proposed OKRs, that no one was overstretched, and that the objectives were realistic.
A common mistake leaders make when trying to improve alignment is confusing alignment with redundancy. Alignment does not mean that everyone works on the same thing; they’re just working toward the same goals. MyFitnessPal avoided this trap by ensuring that every OKR was the responsibility of a single person. No one could blame anyone else if an OKR failed. Even employees who were working on the same objective had different key results. It took the company a few quarters to work out the kinks, but they were left with a system of improved alignment and productivity.
OKRs helped smooth Intuit’s transition from offering desktop software to offering cloud-based software, and they highlighted alignment issues that might have gone unnoticed otherwise.
The transparency of OKRs made it clear that the IT department was juggling competing demands: On the one hand, they had to solve the problems of current users, who were using the old software. On the other hand, the leadership team expected them to create a cloud-based system that would be sustainable in the future. The IT team’s daily work wasn’t aligned with the company’s priorities.
Once this alignment issue became clear, the CEO clarified the department’s priorities and gave them permission to let some of the day-to-day issues slide in favor of prioritizing long-term initiatives. Colleagues and managers were also more understanding when IT occasionally dropped the ball—because their OKRs were transparent, everyone knew the goals and constraints of each team, so they understood why some tasks were given priority over others.
Today, employees align their OKRs both vertically and horizontally, connecting about half of their OKRs to those of their superiors and half to those of their colleagues.
OKRs have been especially valuable as Intuit becomes a global company with teams around the world. Whereas in the past, people working in satellites would wonder what goes on at headquarters, now, everyone knows what everyone else is working on, even people on the other side of the world.
Multiple studies show that employees do better work when they see how what they’re doing connects to their company’s high-level goals, but this connection can be particularly hard to make at remote sites. OKRs solve that problem. Now an employee in Bangalore can see how her OKRs align with those of the company’s mission.
Aligning your individual goals with your company’s goals is critical for your company’s long-term success. Reflect on how you can use communication and transparency to make your objectives more aligned.
Think of a time when you and a colleague or boss weren’t aligned. (Maybe you and a peer were unknowingly working on the same tasks, making the work redundant. Or maybe your boss had one set of expectations, and you had another.) What was the situation? How was it resolved?
How transparent are your goals? How transparent are the goals of your company? If your company lacks transparency, what steps can you take to increase it?
Write down one or two large projects you’re currently working on. How do these projects and their accompanying tasks directly connect to your company’s mission?
In addition to aligning your work with the company’s mission, are your goals and everyday tasks aligned with those of your colleagues, superiors, or direct reports? Where do you see potential areas of improvement? What steps can you take to be more aligned?
Chapters 10 and 11 cover superpower #3, track progress.
How to Implement OKRs for tracking: OKRs are always measurable, and at the end of each OKR cycle you score them. These scores help you track your progress, and they indicate when you need to double down on a particular goal or when you should revise or abandon it.
Unlike traditional business goals, OKRs aren’t set in stone. OKRs are “living, breathing organisms,” and there are three phases to tracking an OKR’s life cycle: setup, midlife tracking, and wrap-up.
The setup phase is when you decide what cloud-based system you’ll use to track your OKRs, determine the length of your OKR cycles, and designate your “OKR shepherd.” Refer to “Checklist: Focus and Commit” in Chapter 4. All of these actions will make tracking possible in the next phase.
Studies show that people are motivated by tangible signs of their progress toward a goal, and that making progress can be more motivating than receiving a bonus, receiving public recognition, or even achieving the goal itself.
But for progress to be motivating, people need to see it. This is why midlife check-ins are so important. During this phase, employees check-in with their managers to discuss their OKR progress.
Ideally, check-ins happen weekly, monthly, quarterly, and annually. The frequency of these check-ins will depend on the length of time needed to achieve each key result, the quality of communication in the team, the size of the group, how geographically spread out it is, and current business needs. In addition to one-on-one meetings with employees and managers, teams and departments should meet regularly to evaluate progress toward objectives they share.
At these check-ins, you and your manager check progress toward the OKRs, identify obstacles and potential obstacles, and refine key results. Discuss four options relative to each goal:
Option #1: Continue the objective or key result—If everything’s going well and you’re making progress, keep going.
Option #2: Revise the objective or key result—If changes in your environment or workflow have caused the goal to get off track, update it. You may need to alter your process or the goal’s timeline to get it back on track. You also may need to put other goals on the backburner so you have more time and resources to focus on this one.
Option #3: Start a new objective or key result—As conditions change, you may find you need to add new goals. If you already have five objectives, you may need to put one or two on the backburner to make room for the new goal.
Option #4: Stop an objective or key result—Some goals become irrelevant or impractical. Don’t stubbornly cling to a goal just because you set it. If it no longer serves your larger purpose or the company’s, toss it.
The wrap-up phase usually happens at the end of the OKR cycle. During this phase, you analyze your methods, evaluate your progress, and reflect on your successes and failures. The wrap-up phase consists of three parts: objective scoring, subjective self-assessment, and reflection.
The employee and manager assign a score to the objectives. The simplest way to score an objective is to average the completion rates of its key results.
At Intel, employees use a scale of 0.0 to 1.0 to score key results based on how much of the key result was completed.
If you’ve defined key metrics well, they’ll be quantitative and can easily be scored. Say your key metric was to find 10 new prospective clients; if you found only 7, your score would be a 0.7.
At times, you may find that you made zero progress on a task due to delays or complications. That key result would earn a score of 0.
Objective data are important, but they don’t always tell the whole story. Low numbers could conceal a strong effort, and strong numbers could be inflated.
For example, let’s say your objective is to recruit more customers, and one of your key results is to make 50 phone calls to potential customers. You end up making 35 phone calls, for an objective score of 0.7. On paper, this looks like a success. But if you waited until the last minute and rushed through your calls, signing only 1 new customer, the objective score of 0.7 isn’t truly indicative of your performance.
For this reason, it’s important to balance objective scores with subjective self-assessments. Work with your manager to compare objective scores with the circumstances that led to them. Let’s look at how this plays out in a few scenarios with the same key result:
Key Result: Acquire 10 new customers.
Objective Score: 0.7 (acquired 7 new customers)
Subjective Self-Assessment: The market slump made this a lot harder to achieve than I expected. Therefore, 7 new customers is an exceptional result.
Subjective Score: 0.9
Key Result: Acquire 10 new customers.
Objective Score: 1.0 (acquired 10 new customers)
Subjective Self-Assessment: I met this goal after only eight weeks, meaning that I set the bar too low.
Subjective Score: 0.7
Key Result: Acquire 10 new customers.
Objective Score: 0.8 (acquired 8 new customers)
Subjective Self-Assessment: My strong results were more the result of luck than hard work—one new customer I signed brought five other new customers with her.
Subjective Score: 0.6
Key Result: Acquire 10 new customers.
Objective Score: 0.9 (acquired 9 new customers)
Subjective Self-Assessment: After signing them, I realized only 2 of the 9 new customers would bring in significant revenue.
Subjective Score: 0.5
For employees who are too harsh or too lenient in their subjective self-assessments, you as the manager need to help recalibrate these subjective scores through dialogue about how to arrive at them. These one-on-one and team discussions are often more valuable than the scores themselves.
To learn from your experiences and scores, use these questions as a jumping-off point for group discussion and self-reflection:
Don’t forget to celebrate your progress and accomplishments at this stage. Celebrating success boosts morale and keeps you and your team motivated.
One focus of the Gates Foundation is vaccines. To make a broad, vague goal trackable, they used the 80/90 rule: 80% of the targeted districts will have at least 90% coverage through vaccination.
The foundation used tracking throughout the OKR cycle to decide whether to keep, revise, or pull certain OKRs. Sometimes, they realized they were using the wrong data set entirely to track their progress.
For instance, another Gates Foundation objective is to end world hunger. One of the foundation’s leaders describes this hypothetical situation: A key result toward the objective of ending hunger might be to double yam production in a particular area. Luckily, one of your partners has discovered a seed that has the potential to increase yam production. You measure progress by the number of yams produced. But if you find out that nobody will eat the yams from the new seed because they take four times longer to cook than traditional yams, the number of yams produced is irrelevant. You’ve been measuring the wrong thing. The Gates Foundation is quick to pivot when tracking allows them to see that their data and their objective aren’t aligned.
The third OKR superpower is tracking your progress to stay accountable. Take time to figure out how you’ll measure and track progress toward your goals.
Write down one to three of your personal or professional goals for the week, month, or year.
How will you track progress toward these goals? What kinds of measurements will you use? How will your objective scoring system work?
If you find that some of your goals aren’t trackable, how could you revise them to make them more specific and measurable?
Chapters 12 and 13 cover superpower #4: Stretch toward outstanding achievement.
How to Implement OKRs for stretching: Some of your OKRs should be especially challenging. Expect “stretch OKRs” to score between 0.4 and 0.6. Setting challenging goals allows your company to continue innovating.
This is how Google distinguishes between regular objectives (“committed objectives”) and stretch objectives (“aspirational objectives”):
Google doesn’t expect everyone to achieve their aspirational objectives, and failure is built into the process—in fact, the average rate of failure at Google is about 40%. In other words, Google considers its cycle’s aspirational goals a success if 60% of them are achieved.
Not many companies have Google’s resources, and therefore can’t risk a failure rate that high. Your company’s balance of committed and aspirational objectives will depend on your answers to the following questions:
Regardless of your answers, every company should have at least one or two aspirational objectives. If your company doesn’t stretch, it won’t be able to compete in the market.
Researcher Edwin Locke has found that, generally, the more challenging a goal is to achieve, the higher people perform trying to reach it. In Locke’s study, even though subjects with challenging goals failed more often than subjects with easy goals, the subjects with the hard goals performed at a higher level and achieved more overall. This shows that stretch goals are valuable regardless of whether or not people achieve them, because they inspire employees to work harder.
What not to do:
What to do:
In 2006, Google decided to create its own browser, Chrome. In order to achieve their vision, Google’s vice president of product development, Sundar Pichai, had to think big. Browsers were so difficult to make from scratch that there was no point in making one if it wasn’t dramatically better and faster than the browsers already available. Without an enormous goal, the whole endeavor was pointless.
A stretch objective needs stretch key results. The main key result was to reach 20 million daily active users by 2008.
Pichai acknowledged that setting this ambitious goal took courage—Pichai didn’t believe there was any way the team could reach 20 million users by 2008. But he felt he had no other choice—he had to set the bar that high. The only way to create something truly amazing is to set big stretch goals.
The target of 20 million users was relatively arbitrary. So was the target year. In a sense, the numbers didn’t matter, as long as they were wildly ambitious. These numbers made it impossible for Pichai’s team to become complacent. Every day, they had to rethink their process and strategies. The critical thinking and planning skills they developed were almost more important than the objective itself.
As Pichai expected, the team failed to reach its goal of 20 million users by 2008. But they kept moving forward. In 2009, they set the bar even higher, aiming for 50 million active users. When they failed to meet that goal, with 38 million users, they raised the bar again, to 111 million users. They celebrated the fact that 38 million users still beat their original key result of 20 million, and they reframed their failure as a way to figure out what they could do differently the following OKR cycles.
As the 3rd quarter progressed, it looked like they’d fail to meet their OKRs again. Then, they did something simple: they sent alerts to people who’d used Chrome in the past but were not currently active users. Their numbers shot up to 87 million users, then to 107 million, and finally to 111 million daily active users.
Today, there are more than a billion users of Chrome on mobile devices alone. Google got achieved this by setting progressively unrealistic goals that turned out to be realistic after all. They wouldn’t have gotten there if they hadn’t stretched for the impossible.
YouTube’s growth demonstrates both the power of stretch goals and the necessity of figuring out the right metrics—in other words, learning out how to measure what matters. Identifying the right metrics helps ensure your stretch goals matter.
By 2011, YouTube knew how to make money, but the team didn’t know how to increase viewership. This prompted them to ask, “Which is more important? Money or viewership? Should we measure success by dollars or viewers?”
In contemplating these questions, the team realized that what really mattered was how much time people spent watching videos on YouTube. Consequently, they abandoned the old ways of defining success: number of clicks, number of views, and revenue amount. Instead, they focused on one thing, and one thing only: increasing the number of hours people spent watching YouTube videos.
In 2012, leader Shishir Mehrotra set a hugely aspirational goal: “one billion hours in daily user watch time” by the end of 2016. This was a 10x increase in hours, and the number was largely arbitrary, chosen because it was simple and inspiring.
Framing a stretch goal to make it seem manageable and possible is key to achieving it. Mehrotra pointed out that although one billion hours of watch time a day was a huge goal, it still represented less than 20% of the total number of hours people spent watching television every day.
Although they were driven toward their goal, they weren’t “10x absolutists.” They made a few sacrifices of watch time in order to provide viewers with better-quality content. But even though the team occasionally made decisions that hurt watch time in the short term, they never made a decision without meticulously calculating how it would affect watch time and considering if it was worth the cost.
By 2016, with the end-of-the-year deadline looming, the team made 150 incremental changes that each made a mere 0.2% impact on watch time. But those 0.2% changes added up. By October, YouTube hit the billion-daily-hours mark, two months ahead of schedule.
What you measure matters, but that doesn’t mean a metric that mattered last year will still matter next year. You need to change your metrics as your business and the environment change, and you need to stretch in new directions.
Watch time was the right metric for YouTube in 2016. Today, YouTube is more focused on social responsibility, and their new metric is not watch time, but user satisfaction. To this end, they measure the “likes” and “dislikes” of videos in order to recommend quality content to each user, and in 2017 they added a “breaking news shelf” to the homepage to spread information from authoritative news sources.
Continually striving to achieve greater things is the fourth OKR superpower. Stretch yourself by creating your own ambitious goals.
Think of a time you set a big goal and achieved it. What attitudes and practical steps led to your success? What can you learn from the success?
Think of a time you set a big goal, and you failed to reach it. How comfortable were you with failure? How did you respond? How can you reframe the failure and learn from it?
Do you want your company to break into a new market, and does your company have some extra cash on hand? If so, what are the Big Hairy Audacious Goals that would transform your company’s offerings, and possibly even change the field?
What are your own Big Hairy Audacious Goals, the personal or professional objectives that seem almost impossible to achieve, but would motivate you and would drive your life or work forward?
Part 2 of Measure What Matters explores two workplace systems that the OKR management process doesn’t explicitly address: CFRs, the tools of effective performance management, and positive company cultures.
Most leaders agree that the traditional system of annual performance reviews doesn’t work: According to studies, only 12% think the process is “highly effective” and only 6% think it’s worth their time.
They’re probably right. Traditional performance review tools like rankings and bell curves, combined with recency bias, mean that annual reviews often aren’t measured well or fairly. They also don’t give feedback until long after it’s most useful.
In contrast, Doerr’s system of continuous performance management allows managers to give feedback regularly, help employees improve throughout the year, and address issues as they arise. Continuous performance management is more about managing and coaching than about judging employee performance.
| Annual Performance Review | Continuous Performance Management |
| Annual feedback | Continuous feedback |
| Based on compensation | Divorced from compensation |
| Manager directs | Manager coaches |
| Focused on results | Focused on the process |
| Focused on employee weaknesses | Focused on employee strengths |
| Bias prone | Fact-based |
Just as OKRs are your tools for implementing Doerr’s improved goal-setting system, CFRs are your tools for implementing a continuous performance management system.
OKRs and CFRs reinforce one another. You need both the hard data of OKRs and the interpersonal relationships fostered by CFRs for your company to thrive.
Conversations should happen throughout the year, in both formal and informal environments. The wrap-up stage at the end of the OKR cycle is also a good time for these conversations. At a minimum, managers and employees should meet once a month. A Gallup poll found that frequent one-on-one meetings with managers increase employees’ engagement levels by a factor of three.
As a manager, your conversations with employees cover 5 main topic areas (but you don’t need to cover all of them in one conversation):
Overall, the main dialogue focuses on five questions:
In order to improve, employees need to know how they’re doing—often, they don’t have enough distance from their work and performance to make this call themselves.
You can elicit and guide feedback in one-on-one meetings with these questions:
Feedback is only constructive if it’s specific. For example:
Both negative and positive feedback have their place, as long as the feedback is specific. As you and your team become more comfortable with feedback, aim to create a culture where everyone feels comfortable giving feedback to everyone else, whether a peer or manager.
Recognition should be both private and public, based on peer nominations, and focused on actions. Studies show that the voluntary turnover rate of “high-recognition” companies is 31% lower than that of “low-recognition” companies.
There are many ways to establish a “high-recognition” culture:
How Pact Uses Continuous Performance Management
Pact is an international trade and development nonprofit based in Washington, D.C. Its version of continuous performance management has four elements:
1. One-on-one meetings (monthly): These are informal opportunities for employees and managers to discuss progress and any roadblocks.
2. Review of OKR progress (quarterly): During these meetings, managers ask employees, “Did you reach your OKRs this quarter? What did you get done this quarter? What didn’t get done? Why? What do we need to change moving forward?”
3. Professional development conversation (semi-annually): Employees discuss where they’ve been in their careers, where they are now, where they want to go, and how their manager and company can help them get there.
4. Self-assessment and reflection (ongoing): Employees learn to seek out concrete feedback from managers and peers. For instance, if a peer compliments your presentation, rather than merely thanking her, you can ask her to tell you one thing she liked about it.
Whereas a traditional annual performance review uses the number and percentage of goals achieved as the basis for raises or bonuses, the joint OKR/CFR system functions independently of compensation. Discussions regarding compensation should happen at a different time, and on a different cycle, than continuous performance management conversations.
Inevitably, OKR scores will, and should, be part of the compensation equation. But compensation should never be entirely based on OKR achievements. At Google, OKRs account for less than a third of an employee’s overall performance rating.
Why divorce compensation from OKRs? Remember, objective scores don’t always accurately reflect reality. Employee A, who meets 75% of her ambitious stretch goals, and Employee B, who meets 90% of his non-stretch goals but doesn’t challenge himself, don’t deserve the same bonus.
Before implementing their “Check-in” system (Adobe’s version of continuous performance management), managers at Adobe devoted eight hours per employee during annual performance reviews, a total of 80,000 hours each year. Additionally, the process was demoralizing—every year, the annual review brought a spike in the turnover rate, as disappointed employees left for jobs where their talents might be more highly valued.
Adobe’s current Check-in system looks to the future, helping employees establish goals, understand what’s expected of them, and develop professionally. Regular Check-ins are separate from the annual “Rewards Check-in,” which addresses compensation.
Compare Adobe’s old system of annual performance reviews with the Check-in system.
| Then: Annual Performance Reviews | Now: Check-In System | |
| Goal setting | Employees set goals at the beginning of the year. Often, they didn’t revisit them until the end of the year. | Employees set goals at the beginning of the year and reflect on them and revise them regularly, in partnership with their managers. |
| Giving feedback | Managers spent many hours at the end of the year giving feedback and writing reviews. | Managers give feedback daily (informally) and every 6 weeks (formally). There’s no written documentation of feedback. |
| Compensation | Managers determined their employees’ salaries and equity by ranking them. This fostered competition among employees. | Managers determine their employees’ salaries and equity based on their annual performance. There’s no ranking or rating system. Employees work as a team rather than compete. |
| Meeting regularity | Feedback meetings didn’t happen regularly throughout the year. Employees would become more productive at the end of the year, as performance reviews neared. | Feedback meetings happen at least quarterly. Employees are consistently productive throughout the year. |
| HR role | HR processed all paperwork at the end of the year and made sure managers completed all the review steps. | HR supports managers and employees by providing them with the tools to have productive conversations. Paperwork is minimal. |
| Training and Resources | HR partners irregularly provided coaching and resources on providing feedback and evaluating employees. | A new Employee Resource Center offers training and resources to employees whenever they need it. |
After implementing Check-in, the number of employees who voluntarily left Adobe dropped significantly.
Conversations, feedback, and recognition are the keys to a successful performance review system. Reflect on how you can foster them at your company.
Describe your company’s performance review system. Is it constructive and motivating, pointless and demoralizing, or somewhere in between? Why?
What features of the continuous performance management system and CFRs (conversation, feedback, and recognition) would be most beneficial at your company? Why?
How can you seek more constructive feedback from your manager or direct reports?
How can you better recognize and celebrate the work of your peers or direct reports?
We’ve discussed the explicit benefits of OKRs and CFRs, but there are also benefits of using the OKR system that are more implicit. You gain these benefits just by working through the OKR/CFR process, irrespective of the process’s outcomes.
The goal of Zume Pizza is to use technology to quickly deliver cheap, healthy, delicious pizzas to consumers in the Bay Area. (Shortform note: In January 2020, Zume Pizza rebranded itself as Zume, Inc., a company that creates the technological infrastructures needed to make food production and delivery more efficient and less wasteful.) Zume Pizza is one company that recognizes the subtler benefits of using the OKR system.
When Zume co-founder Alex Garden worked as a general manager for Microsoft’s Xbox Live, he found that the objectives set by executives were often unrealistic or impractical because these leaders weren’t in touch with the day-to-day operations of the company.
Conversely, executives who use OKRs have to figure out what key results will lead to their objectives. They need to know the how, as well as the what. OKRs and CFRs provide leaders with a reality check.
Garden says that when you’re an employee, you’re often evaluated based on the volume of your contributions to the company. If you produce a lot, you’re promoted, and eventually, you find yourself in a manager position. Now, instead of being evaluated by the quantity of your work, you’re evaluated by the quality of your decisions. You’re paid to think, rather than do.
However, no one tells you that as a manager, working smarter matters more than working harder. Furthermore, no one tells you how to work smarter. Consequently, when problems arise, you just keep working harder and harder, because that’s what you’ve always done and that’s what’s worked in the past.
One major benefit of the OKR system is that it forces everyone, at every level of the company, to work smarter:
1) It forces everyone to align their goals with the company’s goals, and to understand exactly how their specific goals and activities contribute to the company’s success. In other words, it forces every employee to think like a manager.
2) It forces people to be specific about their priorities—you can only choose three to five goals, and you need to know exactly how you’ll achieve them and how you’ll measure their success. Again, employees learn to think like managers. Then, as a manager, she already knows how to make quality decisions and lead others to do the same.
3) It forces all employees to take ownership of their ideas and goals and to have a voice. In some organizations, only the loudest members are heard. In OKR organizations, everyone’s voice is heard because everyone’s goals are transparent. Everyone has to take on the essential leadership skills of setting goals, making them public, soliciting feedback, and defending their priorities.
Startups that don’t groom their members to become executives miss a valuable opportunity. They either end up promoting employees who don’t know how to lead, or they gradually replace the original team with outside hires. Neither is good for a company’s morale or success.
A “culture of consideration” is one in which each member of the team understands how his or her work affects others in the company. Members also understand how their work depends on the work of others.
For example, at a pizza delivery service like Zume, the delivery fleet manager, Mike, might have a key result of expanding the radius of the company’s pizza delivery by a certain date. But this goal depends, in part, on whether the manufacturing team can get all the vehicles ready for the expansion.
Let’s say the manufacturing team is running behind schedule. At another company, this might cause Mike to feel resentful and anxious—his ability to achieve his goal is at risk, and he feels out of control of the situation. He might confront the leader of manufacturing, Joe, pressuring him to hurry up. This interaction ends in hostility between Mike and Joe and, possibly, the failures of their respective goals.
However, in any company that implements OKRs, Mike can simply say to Joe, “This KR is at risk.” There’s no blame in this objective statement, and Joe likely already knows the KR is at risk: The KRs of all departments are transparent, and Joe has already agreed to this KR. Additionally, because Mike and Joe know their work is interdependent, they’ll advocate for one another—if Joe needs more resources from upper management to get his piece of the job done, it’s in Mike’s best interest to help him get them.
In Chapters 18, 19, and 20, we look at what a healthy company culture looks like, why it’s important, and how to build it with OKRs and CFRs.
Culture is a company’s beliefs and values, and the behaviors surrounding those beliefs and values. Most importantly, culture is a shared sense of purpose.
Research shows that companies with positive cultures outperform those without them. In one study, of the companies with healthy cultures, 96% received high scores for “systematic innovation” and 96% had “increased market share.”
This may be because employees understand their organization’s purpose and their purpose within the organization. When a company’s culture is cohesive and everyone knows its purpose, employees can make decisions quickly and reliably.
In one study, researchers found that “high-motivation cultures” depend on two elements: catalysts and nourishers.
Catalysts are elements of a company that support the work being done. These elements include goal setting, learning from failure, transparency, engaging in meaningful work, and freely sharing ideas. All of these elements are built into the OKR system.
Nourishers are elements of a company that support the interpersonal needs of employees. These elements include positive feedback, professional development, emotional support, psychological safety, and recognition. All of these elements are built into the CFR system.
In other words, OKRs are the catalysts of a positive workplace culture; CFRs are the nourishment that sustains it.
Implementing OKRs successfully requires transparency and accountability. These traits can often foster a positive workplace culture, but sometimes, a culture is too negative and distrusting for OKRs to work. If that’s the case, you need to first focus on building the company’s culture. Once you’ve established the foundation of trust, you can then implement OKRs, and they’ll help further deepen trust and interdependence in your community.
Lumeris is a tech firm that provides expertise, services, and software to health care providers and patients. When Andrew Cole, then head of HR, arrived at Lumeris, the company had already been using OKRs for a few quarters. But Cole quickly realized that their use was superficial—at the end of the quarter, people would just adjust the numbers on the OKR platform and say they’d met their goals. There was no accountability or buy-in. Many people didn’t even know their OKRs.
But the problem went beyond the way Lumeris used OKRs. The failed OKR system was the result of a negative workplace culture, which Cole needed to address before OKRs could be effective.
Problem #1: Executives had introduced OKRs in an attempt to merge the conflicting cultures of Lumeris (a risk-taking and transparent company) and their partner, health insurance company Essence (risk-averse and protective of their proprietary methods). As long as these two organizations remained separate entities, with two separate cultures, the OKR system couldn’t function successfully.
Problem #2: Lumeris’s stated values included passion, teamwork, personal ownership, and accountability, but many of Lumeris’s top leaders were autocrats, uninterested in reinforcing these values. This created a gap between the company’s stated values and its behavior, which created distrust among employees.
Problem #3: Although Lumeris’s new leadership team told employees that they had the right—the obligation, even—to hold executives accountable for living Lumeris’s core values, employees initially declined to give feedback to leaders. They were afraid of being punished for speaking too bluntly.
Problem #4: Many people in HR weren’t a good fit for the new culture Cole was trying to build. Many in middle management also weren’t on board with the new culture changes.
With the company’s culture now providing a strong foundation, HR was finally ready to reintroduce OKRs. Cole required everybody in the company to be retrained in OKRs, then instituted a 60-day pilot run with 100 employees. The division’s senior vice president held his employees accountable by reading their OKRs closely and calling employees out when the OKRs didn’t make sense or the metrics were misaligned with the current data. This prompted employees to take their OKRs seriously.
At the end of the pilot, 98% was using the OKR system and 92% said they now understood what their managers expected of them.
As they rolled out OKRs with the entire 800-person staff, Cole and his HR team focused on questions that linked OKRs to the company’s culture and values. They discussed with managers and staff:
At the end of the quarter, 75% of employees were engaging with the OKR system and voluntary attrition was down.
OKRs can also help you establish a new culture when you discover the failings of your current one.
After rockstar Bono established the ONE Campaign, an activist coalition, he discovered a problem in their culture: They were working on Africa rather than with Africa.
One of the organization’s objectives was to ease poverty and the ravages of AIDS in Africa. Bono and his ONE Campaign team felt they knew what Africans needed, but they collaborated not with African governments, but with governments in North America and Europe, the continents with the most money and power.
One day at a board meeting, John Doerr asked, “Who’s the client here?” When the board told him that the clients were the poorest and most vulnerable people in the world, Doerr asked if these people had a “seat at the table,” both metaphorically and literally. They didn’t. Their culture and goals were tainted by a messiah complex.
Bono and the ONE team used OKRs to change the organization’s culture:
ONE Campaign OKR Example:
Objective: Use the perspectives of Africans to guide ONE’s work, align ONE’s work with the priorities of Africans, and use ONE’s political capital to lobby for policy changes in Africa.
Key Result #1: Hire three African-based employees by April, and two African board members by July.
Key Result #2: Create an African Advisory Board.
Key Result #3: Develop relationships with 10-15 African thinkers and leaders who consult on ONE’s work.
Key Result #4: Take four trips to Africa during the year.
Once they started hiring African board members, the team realized that some of their priorities needed to shift. One new board member pointed out that corruption, which cheated developing countries of a trillion dollars annually, was currently a bigger problem than HIV/AIDS. Consequently, ONE shifted its objectives to lobbying for policies that increased transparency in governments and businesses.
As we’ve seen, the OKR system is adaptable. There’s no right or wrong way to use OKRs, and as your company grows, you’ll find the need to emphasize different elements of the system. For a new company, establishing priorities might be the game-changer you need. For more established companies, finding the right OKR cycle rhythm, be it quarterly or monthly, might be invaluable. Find the elements of the OKR system that will be most beneficial for your company today, and focus on those. Make the system your own.
For more resources on implementing the OKR system, and for how OKRs compare to and can complement other systems you may already have in place (such as the Entrepreneurial Operating System or the Objectives, Goals, Strategies, and Measures system), visit the What Matters website.
Your company’s values make up the foundation of your workplace culture. Reflect on your own values and whether or not they align with your company’s.
Why does your work and your company’s work matter? How does your work contribute to the company’s goals and values?
Why does transparency in a company matter? Why would you want peers from other divisions to know what your goals are?
Why does accountability matter? How can you both hold yourself and others accountable while remaining respectful of others’ failings and forgiving of your own?
Do you think your professional values align with your company’s values? Why or why not?
Although the OKR system is relatively simple, it can be hard to implement in the beginning. Review these tips to make OKRs work for you: