(EN) The Evolution of Strategic Management—Objectives and Key-Results

In this fourth post on the evolution of strategic management, we will be looking at Objectives and Key Results (OKR). Like Management by Objectives (MBO), Objectives and Key Results is still frequently used, and often cited in connection with Hoshin Kanri. Hence, let’s have a deeper look at what Objectives and Key Results is.

History

Objectives and Key Results is a direct evolution from Management by Objectives. Intel CEO Andrew Grove was a fan of Management by Objectives. When he introduced Objectives and Key Results at Intel in the 1970s, its name was Intel Management by Objectives (iMBO). Like Management by Objectives, it tracked goals and used SMART goals (Specific Measurable Achievable Reasonable Time-Bound). He wrote about it in more detail in his book High Output Management from 1983, where in chapter 6 he still calls it „Management by Objectives“ but gives two key questions:

• Where do I want to go? (the objective)
• How will I pace myself to see if I am getting there? (the key result)

One of the people influenced by this Intel Management by Objectives was John Doerr, when he attended a course at Intel in 1975. Back then he was a minor salesperson at Intel, but two decades later in 1999 when working for a venture capital firm Kleiner Perkins, he introduced Google to the idea of Objectives and Key Results. Another two decades later in 2018 he also published a book on Objectives and Key Results called Measure What Matters. Doerr cites his experiences at Intel but already calls them Objectives and Key Results (OKR).

In any case, the concept fell on fertile grounds at Google. Larry Page, cofounder of Google, credited OKRs within the foreword to Doerr’s book:

OKRs have helped lead us to 10× growth, many times over. They’ve helped make our crazily bold mission of 'organizing the world’s information' perhaps even achievable. They've kept me and the rest of the company on time and on track when it mattered the most.

It also was Google that in 2014 started to use Objectives and Key Results on different levels of hierarchy, at the company, team, and individual levels. However, in 2017 the realized that having Objectives and Key Results on an individual level gets confused with the annual performance evaluation, and they stopped doing OKR for individuals but kept it for the higher levels.

Initially, Google used a quarterly cycle for the Objectives and Key Results, but they later found this to be too fast. In 2022, Google CEO Sundar Pichai changed this to a more manageable annual cycle for the reviews. Since Google is one of the role models for many other companies, Objectives and Key Results have spread throughout the industry, including LinkedIn, Twitter (now „X“), Uber, Microsoft, Zygna, and GitLab. Numerous different software tools are available to help with the use of Objectives and Key Results.

How It Works

With Objectives and Key Results being an evolution of Management by Objectives, it builds on the concept of setting goals (SMART goals) and then achieving them. However, there are a few major improvements. Probably most important is the alignment of the objectives with the general direction that the company wants to move (i.e., the Objectives of Objectives and Key Results). While often not numerical, they do give the overall direction. The overarching vision of the company defines the goals, which in turn help to reach this vision. While nowadays a vision is also often used for Management by Objectives, initially this was at least not clearly defined. Hence, in my view, Objectives and Key Results made a major step forward by formalizing this vision or direction.

The second part of Objectives and Key Results, the Key Results are basically the SMART goals toward the objective, and hence almost the same as Management by Objectives. However, there, too, you can find differences. Objectives and Key Results aims to be more ambitious than Management by Objectives. The goals are more ambitious, and Objectives and Key Results aims (according to Doerr) for a 70% success rate. The thinking behind it is straightforward. If you want a 100% success rate with your goals, then your goals are not ambitious enough and you miss out on potential in favor of a lot of green checkmarks. A second change was the move from a annual cycle for MBO to a faster paced quarterly cycle for OKR, again aiming for a faster implementation. However, this may be too fast, and, as mentioned above, Google rolled this back to an annual review again. (Note: Cycle here means how often to do a new Objectives and Key Results. The frequency of how often you look at the current state of your Objectives and Key Results can also vary from weekly to monthly or even less.)

Another important point is that Objective and Key Results tries to reduce the number of goals that are active at any one time. While this sounds counterintuitive to beginners (who think that more goals means more results), it is quite appreciated by experts (who know that more goals mean more overhead and less results!). Overall, Objective and Key Results aim for only three to five key results (i.e., goals).

Please do note that there is no single uniform and worldwide correct version of Objective and Key Results. Different companies do it differently, and there is no OKR police to check whether it confirms to the general standard. And, in fact, it should not. Like all tools, you need to adapt this for your own needs. Some companies use a quarterly cycle, some a semi-annual one, and other an annual one. Figure out which one is right for you. Similarly, the 70% success rate of the key results (the goals) may vary quite a bit among companies (e.g., some companies aim for 90%), as do the levels of the hierarchical Objectives and Key Results.

Criticism

Objectives and Key Results by itself is not bad, and it is definitely an improvement of the management by objectives. But like many tools, it can become too formalized, and you can find OKR-Master, OKR-Champion, OKR-Ambassador, OKR-Business-Coach, and many more fancy titles, whose necessity I would like to doubt. Similarly, it can also be misused and become a mere goal meat grinder, where checking the checkboxes is more important than actually doing the process. Comparing to Hoshin Kanri (see subseqent posts), it is also usually quite hierarchical and lacks the „catchball“ process.

But now, go out, align the key results with the vision and objectives of the company, and organize your industry!