Book summary: Measure what matters

John Doerr's recent book Measure what matters described a simple framework for goal setting, tracking and continuous learning. You can watch his 12 minute TED talk for a quick overview. This post summarises the key ideas without the examples.

What is OKRs?

OKRs, Short for Objectives for Key Results. It's a collaborative goal-setting protocol for companies, teams and individuals. OKRs are not silver bullet. They cannot substitute for sound judgement, strong leadership, or a creative workspace culture. But if those fundamentals are in place, OKRs can guide you to the mountaintop.

OKRs is a management methodology that helps to ensure that the company focuses efforts on the same important issues throughout the organisation.

An OBJECTIVE is simply WHAT is to be achieved, no more and no less. By definition, objectives are significant, concrete, action oriented, and (ideally) inspirational. When properly designed and deployed, they're a vaccine against fuzzy thinking --- and fuzzy execution.

KEY RESULTS benchmark and monitor HOW we get to the objective. Effective KRs are specific and time-bound, agreesive yet realistic. Most of all, they are measurable and verifiable.

What are the benefits?

OKRs surface your primary goals. They channel efforts and coordination. They link diverse operations, lending purpose and unity to the entire organisation.

Many companies have a "rule of seven," limiting managers to a maximum of seven direct reports. In some cases, Google has flipped the rule to a minimum of seven. The higher the ratio of reports, the flatter the org chart --- which means less top-down oversight, greater frontline autonomy, and more fertile soil for the next break-through. OKRs help make all of these good things possible.

Psychology professional Edwin Locke: "Hard goals" drive performance more effectively than easy goals. "Specific hard goals" produce a higher level of output" than vaguely worded ones.

A two-year Deloitte study found that no single factor has more impact than "clearly defined goals" that are written down and shared freely ... Goals create alignment, clarity, and job satisfaction.

Acute focus, open sharing, exacting measurement, a license to shoot for the moon --- these are the hallmarks of modern goal science.

The Father of OKRs - Andy Grove from Intel

"Expertise was very much valued (at Fairchild)," Andy explained. "That is why people got hired. That's why people got promoted. Their effectiveness at translating that knowledge into actual results was kind of shrugged off." At Intel, he went on, "we tend to be exactly the opposite. It almost doesn't matter what you know. It's what you can do with whatever you know or can acquire and actually accomplish [that] tends to be valued here." Hence the company's slogan: "Intel delivers."

The two key phrases ... are objectives and key result. And they match the two purposes. The objective is the direction: "We want to dominate the mid-range microcomputer component business." That's an objective. That's where we're going to go. Key results for this quarter: "Win ten new designs for the 8085" is one key result. It's a milestone. The two are not the same ..."

The key result has to be measurable. But at the end you can look, and without any arguments: Did I do that or did I not do it? Yes? No? Simple. No judgements in it.

Now, did we dominate the mid-range microcomputer business? That's for us to argue in the years to come, but over the next quarter we'll know whether we've won ten new designs or not.

The Objective and the Key Results strike a balance of long- and short-range planning, informed by data and encriched by regular conversations among colleagues.

Andy sought to "create an envrionment that values and emphasizes output" and to avoid what Peter Drucker termed the "activity trap": "Stressing output is the key to increasing productivity, while looking into increase activity can result in just the opposite."

OKRs superpowers - Focus

Measuring what matters begins with the question: what is most important for the next three (or six, or twelve) months? Successful organisations focus on the handful of initiatives that can make a real difference, deferring less urgent ones. Their leaders commit to those choices in word and deed. By standing firmly behind a few top-line OKRs, they give their teams a compass and a baseline for assessment.

Wrong decisions can be corrected once results begin to roll in. Nondecisions --- or hastily abandoned ones --- teach us nothing. What are our main priorities for the coming period? Where should people concentrate their efforts? An effective goal-setting system starts with disciplined thinking at the top, with leaders who invest the time and energy to choose what counts.

While paring back a list of goals is invariably a challege, it is well worth the effort. As any seasoned leader will tell you, no one individual --- or company --- can "do it all." With a select set of OKRs, we can highlight a few things --- the vital things --- that must get done, as planned and on time.

Leaders must get across the why as well as the what. Their people need more than milestones for motivation. They are thirsting for meaning, to understand how their goals relate to the mission. And the process can't stop with unveiling top-line OKRs at a quarterly all-hands meeting. "When you are tired of saying it, people are starting to hear it."

To safeguard quality while pushing for quantitative deliverables, one solution is to pair key results --- to measure "both effect and counter-effect". From Andy Grove:

The paired counterparts should stress the quality of the work. Thus, in accounts payable, the number of vouchers processed should be paired with the number of errors found either by auditing or by our suppliers. For another example, the number of square feet cleaned by a custodial group should be paired with a ... rating of the quality of work as assessed by a senior manager with an office in that building.

OKRs superpowers - Alignment

If you tell everybody to go to the center of Europe, and some start marching off to France, and some to Germany, and some to Italy, that's no good. Not if you want them all going to Switzerland. If the vectors point in different directions, they add up to zero. But if you get everybody pointing in the same direction, you maximise the result.

Research shows that public goals are more likely to be attained than goals held in private. Simply flipping the switch to "open" lifts achievement across the board. In a recent survey of one thousand working U.S adults, 92 percent said they'd be more motivated to reach their goals if colleagues could see their progress.

In an OKR system, the most junior staff can look at everyone's goals, on up to the CEO. Critiques and corrections are out in public view. Contributors have carte blanche to weight in, even on flaws in the goal-settings process itself. Meritocracy flourishes in sunlight.

Once top-line objectives are set, the real work begins. As they shift from planning to execution, managers and contributors alike tie their day-to-day activities to the organisation's vision. The term for this linkage is alignment. According to Harvard Busienss Review, companies with highly aligned employees are more than twice as likely to be top performers.

To avoid compulsive, soul-killing overalignment, healthy organisations encourage some goals to emerge from the bottom up. Salespeople understand shifting customer demands before management does; financial analysts are the earliest to know when the fundamentals of a business change.

Micromanagement is mismanagement. A healthy OKR environment strikes a balance between alignment and autonomy, common purpose and creative latitude.

An optimal OKR system frees contributors to set at least some of their own objectives and most or all of their key results. People are led to stretch above and beyond, to set more ambitious targets and achieve more of those they set. When our how is defined by others, the goal won't engage us to the same degree. By loosening the reins and backing people to find their right answers, we help everybody win.

As business becomes more intricate and initiatives more complex, interdependent divisions need a tool to help them reach the finish line together. A transparent OKR system promotes this sort of freewheeling collaboration once people across the whole organisation can see what's going on.

OKRs superpowers - Track for accountability

One underrated virtue of OKRs is that they can be tracked --- and then revised or adapted as circumstances dictate. OKRs are living, breathing organisms. Their life cycle unfolds in three phases.

The setup phase gives OKRs a home, where they are connected on a daily basis with people. Without frequent status updates, goals slide into irrelevance; the gap between plan and reality widens by the day. Contributors are most engaged when they can actually see how their work contributes to the company's success.

The midlife tracking phase tracks and shows how everyone is progressing. Research suggests that making measured headway can be more incentivising than public recognition, monetary inducements, or even achieving the goal itself. Regular check-ins --- preferaby weekly --- are essential to prevent slippage. As Peter Drucker observed, "Without an action plan, the executive becomes a prinsoner of events. And without check-ins to reexamine the plan as events unfold, the executive has no way of knowing which events really matter and which are only noise."

The wrap-up phase consist of three parts: objective scoring, subjective self-assessment, and reflection.

The simplest, cleanest way to score an objective is by averaging the percentage completion rates of its associated key results.

  • 0.7 to 1.0 = green. (We delivered.)
  • 0.4 to 0.6 = yellow. (We made progress, but fell short of completion.)
  • 0.0 to 0.3 = red. (We failed to make real progress.)

In evaluating the performance, objective data is enhanced by the goal setter's thoughtful, subjective judgement. Say the team's objective is to recruit new customers, and your individual key result is fifty phone calls. You wind up calling thirty-five prospects, for a raw goal score of 70 percent. Did you succeed or fail? By itself, the data doesn't afford us much insight. But if a dozen of your calls lasted several hours apiece and resulted in eight new customers, you might give youself a perfect 1.0. Conersely: If you procrastinated, rushed through all fifty calls, and signed only one new customer, you might assess your performance at 0.25 --- because you could have pushed harder. (And on reflection: Should the key result have prioritised new customers, rather than calls?) In the end, the numbers are probably less important than contextual feedback and a broader discussion within the team.

Reflection is the intentional attempts to synthesise, abstract and articulate the key lessons taught by experience. Asks the questions

  • Did I accomplish all of my objectives? If so, what contributed to my success?
  • If not, what obstacles did I encounter?
  • If I were to rewrite a goal achived in full, what would I change?
  • What have I learned that might alter my approach to the next cycle's OKRs?
  • What did I learn that I didn't foresee at the beginning of the quarter? How will I apply this lesson in the future?