The OKR system stands for Objectives and Key Results. It was developed by Andy Grove for Intel. However, many companies have since adopted the system. This includes industry giants such as Google, among others.
Now, what exactly is the OKR system? Well, the basic premise is simple. It starts with setting Objectives. The system implies that the company is only successful in achieving Objectives if Key Results are achieved.
The system has gained traction throughout the decades because of its quasi-quantitative approach. This is mostly because the larger ideas set as Objectives do not necessarily have to be measurable. But, at the same time, the Key Results outlined do have to be quantitative.
When broken down, the Objective is the end goal. Meanwhile, the Key Results are milestones that help signify progress. The company then outlines the necessary steps that it will have to take to achieve each milestone and eventually reach the end goal.
Take for example a company whose objective is to “diversify revenue sources within the fiscal year”. They can set their Key Results as “establishing at least one new revenue stream capable of bringing in $1,000 on a weekly basis”. The company can now figure out what kind of actions they can take to make this happen.
OKR systems come in handy for setting goals and as a guide to ensure proper workflow.
The Problem with the OKR System
Substantial Investment Requirement
For an OKR system to work, everyone, from the top down to the bottom, needs to understand how the system works. More importantly, everyone should be informed of the rationale behind its implementation.
Doing this alone requires a substantial investment.
But, that’s not all. A company that plans on using an OKR system needs to bring in a team of experts to help them ease their way towards using the system. This includes leadership learning how to set up their priorities and how to set challenging yet realistic OKRs. At the same time, management must be prepared to give leeway for growing pains as the company learns the ins and outs of the OKR system.
For this very reason, many experts believe that OKRs are best utilized only by bigger companies that can afford such an investment.
Inflexible and Rigid
While startups are discouraged from implementing an OKR system, they’re very much welcome to try it out. In which case, however, they must be prepared for the challenges involved in integrating the system.
Case in point, in startups, stability has yet to be achieved. This means that goals should be, at the very least, malleable if not open to a complete change. But, by using the OKR system, a startup opens itself up to the possibility that their progress becomes evaluable based on a previous goal set months ago.
Because OKRs are incredibly detailed and involved, small changes can look “worse” and failures are magnified.
Many companies circumvent this by investing more time in planning short-term OKRs. This is why some companies have annual, bi-annual, quarterly, monthly, and weekly, as well as daily, OKRs in which they use to measure performance. However, this brings us back to the previous point of the system requiring heavy commitment.
Misaligned Goals and Priorities
The OKR system is a powerful tool that companies can use to measure performance and goals. Thus, if a company uses revenue-based objectives, the majority of the decisions made for a set period of time will be framed almost exclusively based on how much revenue is made. This might lead to possible complications, especially if multiple considerations are at odds with each other when it comes to revenue.
Because the company will base its decisions and measure its performance using the OKRs, the whys and hows of the OKRs will need to be carefully outlined to help minimize if not prevent delicate issues from happening down the line.
The Bottom Line
Simply put, adopting an OKR system gives everyone in the company more work to do. This goes for everyone. This includes top-level management and low-level employees. If not fully on board, employees might see OKRs as another unnecessary added expense. The lack of support from leadership, in particular, can quickly turn the OKR system into a foolish expenditure.
This doesn’t mean that OKR systems do not have their place though.
A healthy OKR program helps everyone within the company feel that they are personally connected and invested in something bigger than themselves.
The only issue here is getting to that point. However, if a company is capable and willing to put in the time and monetary investment necessary, everyone will be able to see the big picture eventually and appreciate the OKR system for what it is.
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