Measure What Matters: OKRs: The Simple Idea that Drives 10x Growth, by John Doerr
Author John Doerr began his career under the tutelage of the great Andy Grove, CEO of Intel, who transformed that company into the world's largest manufacturer of semiconductors. It was Andy Grove who turned a simple method, 'OKRs', into a devastatingly effective business tool that became the lifeblood of Intel.
In 1978, Intel had developed the first high-performance, 16-bit microprocessor, the 8086. Soon it was getting overtaken by Motorola’s 68000, which was easier to program. Using OKRs, Intel launched 'Operation Crush' to deal with this threat. The results were fast, focused and effective.
"When we smacked Motorola between the eyes," Doerr writes, "A manager there told me, 'I couldn’t get a plane ticket from Chicago to Arizona approved in the time you took to launch your campaign.'"
Doerr left Intel to join the venture capital firm at Kleiner Perkins Caufield & Byers, and became an early investor in Google. There he managed to entrench Andy Grove's business tool to great effect, and it is acknowledged as a key contributor to Google’s success. The results have made Doerr the 105th richest man in the US.
This book describes how to use this tool.
Execution is everything
John Doerr is the current evangelist for OKRs. OKR stands for Objectives and Key Results. As a strategist, I know the importance of knowing where you are going, or as Yogi Berra pithily said: "If you don’t know where you’re going, you might not get there."
However, as Doerr writes, and as you and I know, "Ideas are easy. Execution is everything."
OKRs are for executing. An "objective" is simply what is to be achieved, no more and no less. Key results benchmark and monitor how we get to the objective. The difference between 'key results' and 'key performance indicators' are very different. I may really be impressed that you performed well, but your efforts are only useful if you achieved the results I need.
Marissa Mayer would say of OKRs, "It’s not a key result unless it has a number." With a number attached, OKRs are either met or not met. There is no grey area, no room for doubt.
The time frame for an OKR can vary from a month to a quarter or more, but at the end of the period, they have either been met or they have not.
When the objective is clear and specific, it produces far better results than when it is vaguely worded. 'Performance excellence' or 'customer satisfaction' are very different when expressed as '98% error-free', or 'delivered within 12 hours'.
Aside from Google and Intel, OKR adherents include IT firms such as AOL, Dropbox, LinkedIn, Oracle, Slack, Spotify, and Twitter. But adherents also include firms such as Anheuser-Busch, BMW, Disney, Exxon, and Samsung.
Complex role, simple execution
The simplicity of the design of OKRs hides the complexity of implementing the method. When the OKR is formulated, it will undergo iteration – this is inevitable. And this is not the problem. The problem is the commitment of the most senior managers to the discipline that is required.
Without the most senior managers' commitment this will fail, much as your previous systems have failed to produce the promised result. In a meta-analysis of seventy studies, high commitment to managing the company by objectives showed a productivity increase of 56%.
Where that commitment was low, productivity increases were a mere 6%.
The problem with getting results is compounded when we are employing people to think. On an assembly line, it’s easy enough to distinguish output from activity. It gets trickier when employees are paid to think.
In a thinking environment, many of the benefits of OKRs are highlighted. A particular challenge for many in such an environment is separating the person from the activity. All too often, feedback becomes very personal, leading many managers to avoid confronting non-performance. When the focus is on unequivocal results that can be tracked, then non-performance can move to an analytical discussion. After all, a performance management system is a tool, not a weapon.
The OKR is formulated as: "We will achieve a certain objective as measured by the following key results. This begins at the highest appropriate level of the organisation, and then all below can align their OKRs to this meta-OKR."
Turning on a dime
When Bob Noyce and Andy Grove began the 'Crush' project, the directive to Intel’s management level was simple and clear: "We’re going to win in 16-bit microprocessors. We’re committed to this."
This objective was given to the top one hundred people at the meeting. It was conveyed to the next level in 24 hours. Intel was close to a billion-dollar company at the time, and "it turned on a dime" – through a clear, aligned, objective and a clear required result.
The 'Crush' project included top management, the entire sales force, four different marketing departments, and three geographic locations—all working together as one. It was proof of Andy Grove's assertion that "[b]ad companies are destroyed by crisis. Good companies survive them. Great companies are improved by them."
Great companies are not great because they have a great idea, but because their execution is great. There are no exceptions. Those who do not have excellent execution are an accident waiting to happen. Using OKRs, a successful organisation can focus on the handful of initiatives that can make a real difference and defer the less urgent ones.
The very act of formulating the objective makes communication with clarity possible. Focusing on results rather than activities allows people to adjust their activities to meet the results, rather than to slavishly following performance indicators, as the environment changes.
Consider this horrifying finding: In a survey of eleven thousand senior executives and managers, a majority couldn’t name their company's top priorities!
"There are so many people working so hard and achieving so little," Andy Grove noted. To address this issue will require commitment to making the OKR process effective, and this commitment should not be understated, which is why it has to start from the very top.
If you are a leader of your business, your commitment should start with a reading of John Doerr’s book, and then share it with your colleagues.
My personal experience with the process is best summed up by actress Mae West’s famous statement: I never said it would be easy, I only said it would be worth it.
Insights High ---+- Low
Practical High +---- Low
*Ian Mann of Gateways consults internationally on strategy and implementation and is the author of the recently released 'Executive Update'. Views expressed are his own.
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