I had made up my mind at the beginning of this year to write down the books I have read over the last two years. So, here I am since my previous book review was about a book called Inspired by Marty Cagan.
This time, I would like to talk about this evolutional goal-setting approach called OKR ( Objective Key Result), the book called Measure What Matters by John Doerr, which most top tech companies have implemented on this planet, including Microsoft, Google, Adobe, Facebook, and more. From a personal and career development perspective, I heard many people say, ‘work smarter, not harder’, but rarely does somebody decode the science behind this, which I found in this book.
What does this mean to startups ?
The story began in 1999, when a venture capitalist invested almost $12 million in a startup with fantastic technology, entrepreneurial energy, and sky-level ambitions but no real business plan. He introduced a revolutionary approach to goal-setting for this startup and with OKR at the foundation of their management. That startup grew from 40 employees to more than 15,000, with a market cap of $1.490 Trillion today. That startup was Google, and that capitalist was John Doerr, the author of the book: Measure what matters. To drive 10x growth by surfacing this simple idea of OKRs across the entire organization from entry-level all the way to CEO.
I have recorded the book review in the following video :
The key idea of OKRs
The key idea of the OKR is to define an objective and then measure them by results. OKR has two components, the Objective and the Key Results. Following the formulas of Doerr are the best way to explain the structure of an OKR:
I will (Objective) as measured by (this set of Key Results). ( no need to read – only showing on the screen )
Objectives are memorable qualitative descriptions of what you want to achieve. Key Results are a set of metrics that measure your progress toward the Objective.
An example of this could be: I will become 3 times more proficient in English reading within 12 months by completing 2 books per month. The result here is I will become 3 times more proficient in English reading, to achieve this, I will read 2 books per month, Which equals at least one book every two weeks. And I keep doing this within a timeframe of 12 months.
A typical company example would be: We want to double the sales of the Ninja product within 6 months.
Therefore they will set up the goal with timeframe. For instances,
We are increase x % sales of ninja product each month, and y % for the next 3 months, until we double the sales when time hits 6 months mark.
How to measure the key results
There are two variants of the OKRs : Committed OKRs and Aspirational OKRs
A robust set of key results are specific and measurable quality and quantity targets. The typical structure of a Value-based Key Result is:
Increase/Reduce ABC-metric from X to Y
Where X is the baseline (where we begin) and Y is the target (what we want to achieve).
Using the “from X to Y” model is better than writing a percentual change because it
conveys more information. You may find setting a goal and measure the results’ Increase NPS by 20%’ is less tangible than ‘ =Increase NPS from 40 to 48’, as the latter demonstrates your impact.
OKRs define success criteria for an organization, down to the individual units. It determines whether a person or a team achieved success. A results-focused culture and not one focused on tasks, even if we did all your tasks and nothing improved, is not success.
Success is not checking a box but about having an impact. The impact that’s showing we achieved the growth from X to Y.
Color Coding Check-ins
Color coding check-in is the system used to check in the key results. The rule covers 30% to 70% to measure your success where your key results and label each result green, yellow or red.
- Green means you are 70% to 100% on target, and you should continue with your current strategy.
- Yellow means you are 30% to 70% on target, and you need to develop a recovery plan and adjust your strategy.
- Red means you are 0% to 30% on target, and you need to develop a recovery plan or replace that key result.
When a company sets a goal to make sure doubling the sales number within a 6 months, we review the sales numbers every month, and see if we should continue our current strategy, then every 3 months, and until the market of 6 months, to see if we have achieve the goal, and we pivot our strategy as we go.
Goal-setting is motivational and driven. The CEO of Intel Corporation Andy Grove said there are so many people working so hard and achieving so little. I think OKR is not only an approach to help large organizations achieve tremendous business growth, the same rule applies to personal growth and career development. We could reduce costly errors and rework when we have quality and quantity key results, and demonstrate our impact according to the baseline we set in the planning stage. That’s what I believe the science of ‘work smarter’.