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Every business relies on goals to achieve results. These goals could relate to revenue, human resources, product development, marketing, sales; and growth hacking. When a business meets and exceeds its goals, it is headed in the right direction. When it does not, it can either implement corrective measures or try harder going forward.
However, achieving goals is often complicated by the “how” of achieving them. As a small business, you may have clear goals but aren’t quite sure how to achieve them. In this guide, we look at OKRs, a goal-setting framework or methodology; used by companies like Google, Intel, and LinkedIn.
What are OKRs?
Brief History of OKRs
OKR stands for Objectives and Key Results. It is a goal-setting framework popularized by Intel CEO Andy Grove in his book titled High Output Management. In the book, he explains how Intel was going through a transition from a storage a microprocessor company and how he needed a framework that would align the entire organization in this new direction.
By introducing the OKR framework, he was able to transform Intel from a deflating storage industry and establish it in the fast-growing microprocessor industry. Later, John Doerr, a former Intel employee and early Google investor introduced the framework to Google, which has gone on to use it to build the billion-dollar organization we know today.
Breaking down OKRs
OKRs are divided into three components:
Objectives are high-level goals or aspirations that your business wants to achieve. They define the “where” a company wants to go and are often strategic in nature. For example, a small carpet cleaning business may set an objective to increase monthly recurring revenues. Such an objective sets the “where” the company wants to go and is aligned with a broader vision of helping the company grow from a small business into a mid-sized one.
Key Results are specific outcomes of any efforts the company undertakes to achieve an objective. Think of Key Results as the sum of all the tasks you do each week or month. For example, key results that may help the small carpet cleaning business achieve increased monthly revenue can include:
KR1 – Increased marketing conversion rate from 0.5% to 1.5%.
KR2 – Generated 20% more leads from social media marketing.
KR3 – Cleaned 15% more carpets per day.
From this example, you can see each KR takes the business closer to the objective. That is, KRs give you the “how” of achieving objectives. By focusing on achieving Key Results, you can be certain that you are moving closer to achieving your objectives.
The third component of OKRs is scoring. To know how well you are doing, you need to know how you have scored on each Key Result. To do this, you need to score each KR on a scale of 0 to 1, in 0.1 increments.
From the example above, each KR is scored from 0-1 and averaged to give the Objective Score. According to Google, scores between 0.6 and 0.7 are the sweet spot – anything lower means the goals are either too ambitious, or the team is not performing, while scores above either show the team is performing well or that the goals are not ambitious enough.
.3 = you missed the mark by quite a lot
.7 = you didn’t hit your target but made great progress
1 = you hit your stretch target
OKRs, while popularized by large companies like Google, can be used as a goal-setting framework for businesses of any size. They can even be used for personal goal-setting. However, to successfully implement OKRs in your small business, you need to first get some context on how such a corporate-level tool can be adapted to a small business. Next, we look at how OKRs can work for a small business next.
Can OKRs Work for a Small Business?
Google, Intel, and LinkedIn are just a few of the many massive companies using OKRs. While impressive, this list can discourage small businesses interested in using OKRs. Do OKRs need massive resources to implement? Do they need elaborate organizational structures to work? I’m a solopreneur – can OKRs work for me? To answer these questions, let’s look at some small business objectives:
- Small e-commerce shop – Objective: Sell more merchandise this year.
- Local grocery store – Objective: Get more repeat customers (increase customer loyalty).
- Specialty restaurant – Objective: Get consistent 5-star ratings on Yelp!
Now let us look at some objectives for large businesses operating in the same industries as the examples above:
- Amazon – Objective: Sell more merchandise this year.
- Wholefoods – Objective: Get more repeat customers (increase customer loyalty).
- Dominos – Objective: Get consistent 5-star ratings on Yelp!
See some similarities?
What this shows is that no matter the size of business, there are overarching reasons for existing – to grow, make profits, and make customers happy. OKRs are uniquely equipped to help businesses of any size achieve this. There are, however, some exceptions to applying OKRs to small businesses.
Large organizations often have layers of OKRs to cater to different departments with different objectives. Although they may have overall organizational objectives, these tend to cascade down the entire organization. For a small business, this wouldn’t work.
Although there are marketing, accounting, sales, and other functions within a small business, it is best to set business-wide OKRs to keep track of everything. Such an approach would also make it easy for everyone to work towards the same things, instead of fragmenting already limited resources.
While large organizations typically review OKRs every month or quarter, as a small business, you can afford to have weekly reviews. This is great because it can help you identify issues and deal with them faster than if you were a larger organization. This agility can help you become more efficient and grow faster.
Small businesses can and should consider adopting OKRs as they offer a foundation on which to build a successful business. Although not always easy to implement and stick to, OKRs do offer small businesses several advantages, some of which we will cover next.
11 Benefits of Using OKRs for Your Small Business
If the fact that companies like Google and Intel use OKRs hasn’t got you excited about using them in your small business, these eleven benefits may very well inspire you to take the leap. Here are eleven benefits of using OKRs in your small business:
1) Increase productivity – When everyone knows what overall objective they are working towards, it’s easier for your team to become more productive.
2) Offer clear direction – If you and your team often get lost in getting tasks done, OKRs can give you the much-needed direction to focus on.
3) Track progress – Although it can be easy to track progress in a small business simply by looking at the bottom line, OKRs can help you see how much progress you’re making at a process level.
4) Better-informed decisions – If your business is not making progress, and you need to make good decisions, OKRs can give you valuable insights to help you make better ones.
5) Greater transparency – OKRs help you know, at any given time, what is happening in your business and whether you are headed in the right direction.
6) More outcomes and less output – If you currently measure output (hours worked, phone calls made, emails sent), OKRs can help you track outcomes instead (productivity per hour, leads gained per number of phone calls, open rates per email campaign).
7) Better team alignment – Instead of your team coming to work just to complete tasks, OKRs can help them buy into a grander vision and see the big picture.
8) Boost enthusiasm and engagement – OKRs will empower your team to work on tasks that matter to them, and to the overall vision of the company.
9) Improved resource allocation – By focusing only on what matters, you can get rid of activities that cost your company money but have a small or non existent impact on your strategic objectives.
10) Faster learning – Existing and new employees learn what matters faster through OKRs, enabling them to gain focus quickly.
11) Enhances accountability – Because OKRs are shared companywide, it is clear who is responsible for what, which creates a culture of accountability and ownership.
While this list is not exhaustive, it shows how OKRs can help boost your efficiency as a small business and achieve your goals better and faster. So how do you go about creating OKRs for your small business?
Create Small Business OKRs in 7 Easy Steps
Step 1 – Lay the Groundwork
Teach your team about OKRs and what they could mean for your business. Even if you are a solopreneur, take some time to relearn the concept, terminology and scoring system. Remind your team and yourself that OKRs are meant to be a bit uncomfortable.
OKRs cheat-sheet checklist:
Put the customer first
Don’t skimp on ambition
Tie OKRs to larger company goals
Just a few Os and KRs is enough
If you can’t measure it, it’s not a good KR
KRs are outcomes – not tasks
Assign KR owners
Step 2 – Pick Objectives
Start with the question, “What is the most significant impact we need to make this month/quarter/year?” Brainstorm different ideas and write them on a whiteboard. Distill these ideas down into 2 to 5 aspirational objectives.
Step 3 – Identify Key Results
How do you know you are advancing towards your objectives? KRs answer this question by describing specific outcomes or results. Remember, these are not tasks (e.g., post five times to Facebook per week), but outcomes (consistent posting to Facebook increased our lead generation results by 5%).
Step 4 – Be Aspirational
Before confirming the objectives and key results, ask yourself, “Are we ambitious enough?” OKRs are meant to be ambitious and to make everyone a bit nervous about how they will be achieved. You must also ensure that there specific target numbers, to avoid ambiguity.
Step 5 – Establish the Next Steps
You finally have OKRs! But, what’s next? Before executing, ensure any dependencies are addressed. For example, if you work with an SEO company, you may need to communicate your OKRs to them to ensure they are aligned with your ambitions. Once dependencies are addressed, agree with everyone on the team what the next steps will be. For example, have follow up meetings with individuals to discuss specific tasks and duties related to OKRs.
Step 6 – Monthly Check-ins
Although it is recommended to score and review OKRs every three months, monthly check-ins are also highly recommended. During these check-ins, identify any issues that may hinder you from scoring 0.7 and above at the end of the quarter.
Step 7 – Review and Scoring
The final thing to do is to take a step back at the end of the first three months and review and score your OKRs. How well did you do? Were your objectives ambitious enough? Were you able to measure your KRs? Where the OKRs followed or were they forgotten? Why? Did having OKRs have a significant impact on your business?
OKR creation is a closed loop – once you reach step seven, it should help you start off at step one again with better insights and better focus. If you feel you are not meeting your OKRs month after month, you may need to try some OKR hacks, which we will discuss next.
How to Meet and Exceed Your OKRs Month after Month
Now that you have created some OKRs, how do you make sure you hit and exceed them each month? How do you stay committed and focused so that your business benefits from the defined OKRs? Here are some OKR hacks you can use:
Hack 1 – Assign a Key Result Owner
Creating OKRs is great but if no one is ultimately responsible, then no one will take responsibility. Once created, assign a member of your team, or yourself, each KR. Their responsibility will be to champion that KR and to ensure it scores well during review.
Hack 2 – Create SMART Objectives
OKRs are about ambitious but not impossible objectives. Ambitious objectives may inspire your team, but impossible ones will only serve to demotivate them. Use the SMART goal setting framework (Specific, Measurable, Achievable, Relevant, Time-bound) to create ambitious yet practical objectives.
Hack 3 – Fit OKRs Into Daily Activities
OKRs work best when they become part of the rhythm and heartbeat of your business. When aligned with what you do daily, then it becomes easy to incorporate them and work towards achieving them. Avoid OKRs that create bottlenecks in your processes or take people away from their daily tasks.
Hack 4 – Learn from Both Poor and Great Scores
Poor OKR scores tell you there’s a problem that needs addressing. Great scores show you have a great team and that you are capable of even more. One thing to avoid when analyzing scores is punishing poor scores or rewarding good scores. Instead, create a separate evaluation process and keep OKRs as a strictly goal-setting and learning process.
Hack 5 – The Customer is Always Right
Never set OKRs in a vacuum. Let customer data drive your OKRs so that what you come up with serves the customer first and your business second. The best OKRs focus on serving customers better and making them happier.
If your OKRs are not working out, it could be that the OKRs are not well written or defined or that there isn’t enough buy-in from your team. Whatever the case, you should be confident that using OKRs has set you on the right path, as the next section will explain.
3 Billion-dollar Companies that Use OKRs
If you do chose to use OKRs, you will be in good company. To help you see the benefit of OKRs to a real business, here are three billion-dollar companies that have successfully used (and still use) OKRs:
In the late 1970s, Intel was the testing ground for the very first OKRs. Then CEO Andy Grove described the methodology in his book High Output Management. As the DRAM (dynamic memory chips) market became saturated, Andy Grove used OKRs and other principles to help transition Intel into the growing semiconductor industry. Today, Intel is considered the birthplace of OKRs and continues to use them to sustain and grow its billion-dollar business.
In early 2000, John Doerr, a former Intel employee who worked under Andy Grove, introduced OKRs to Google’s leadership. Seeing the benefit of the framework, OKRs were implemented organization-wide. Since then, OKRs have helped Google remain aligned with its strategic vision, and grow into a billion-dollar business. One thing Google is known for, which grew out of its use of OKRs, is “Moonshots” – ambitious and near-impossible objectives it gives its teams each year. By setting ambitious moonshot OKRs, Google continues to outperform other businesses in the industries it operates in.
Growing from ten users in 2003 to over three hundred million in 2013, LinkedIn has used OKRs to achieve phenomenal growth. Recently purchased by Microsoft for $26.2 billion, the company emulated Intel and Google by implementing OKRs companywide.
Other organizations that use OKRs include Facebook, Twitter, Accenture, Zynga, Anheuser-Busch, Department of the Navy, Gap, LG, Microsoft, Sears, Spotify and a host of others.
OKR Software – Would Your Small Business Benefit?
We live in a world of automation, so you may be asking, “Is there a tool or software that automates OKRs?” Yes, there are tools for this. Companies like Weekdone and Atiim offer OKR software that helps organize, visualize and automate OKRs. While these tools are useful, can they really add value to your small business? Here is a brief list of the pros and cons of using OKR software as a small business:
OKR Software Pros
- – Reduces the learning curve by organizing everything into an easy-to-use workflow.
- – Helps visualize your OKRs in simple and powerful ways, something a spreadsheet or document cannot do.
- – Offers a shared platform so your entire team can collaborate on OKRs from one place.
- – Can scale easily as your business grows and you add more employees and develop more complex organizational structures.
- – Provides a single view of all the business’s OKRs making it easy for people to stay updated.
OKR Software Cons
- – Most solutions target enterprise customers, so they are tailored to cater to complex organizational structures. This makes them inappropriate for small businesses.
- – Enterprise focus also means they come with a hefty price tag, which most small businesses cannot afford.
- – Training your team on how to use the software takes time, costing you much more than if you were to simply create a spreadsheet.
- – OKR software is generally not mainstream, meaning vendors predominantly offer highly specialized tools that may not cater to the needs of a small business.
As a small business, your best bet is to use simple tools like a printable OKR PDF template or an OKR spreadsheet template. Once you get the hang of using OKRs and your business has grown, then you can turn to OKR software to help support your growing company.
3 OKR Alternatives and How They Stack Up
The OKR framework is considered a favorite of Silicon Valley companies. However, OKRs are not the only goal-setting framework available. Other frameworks like SMART goals, Key Performance Indicators (KPIs) and Balance Score Card (BSC) also achieve good results. So, how does the OKR framework stack up against these others?
OKRs vs. KPIs
While OKRs and KPIs have a lot in common, they differ in one fundamental way. KPIs describe and measure existing processes and outcomes and seek to maintain this performance (the status quo). For example, by spending X dollars on advertising (KPI), a company can maintain Y market share (objective). OKRs, on the other hand, are more aspirational and seek to challenge the status quo to push the company to greater heights.
OKRs vs. SMART
The SMART goal methodology provides a framework for defining goals. While closely related to OKRs, SMART addresses goals in isolation. Although it describes a goal, it does nothing to tie this goal to business processes, culture and vision. OKRs extend what SMART achieves by offering actionable ways to tie an objective to the daily activities of a team. This brings goals closer to workers and enables grassroots buy-in.
OKRs vs. BSC
Balance Score Cards are popular in most big companies. They offer a framework to evaluate individual employee performance and cascade this upwards to the overall organizational objectives. BSCs are set within rigid structures and are often difficult to implement in small companies. Conversely, OKRs operate on shorter time-frames, are not fixed to certain parameters, and can be changed easily to accommodate changing customer needs or an evolving business environment.
5 OKR Mistakes to Avoid
Getting started with OKRs will inevitably lead to some degree of teething pains. These challenges may involve setting objectives, describing key results or scoring. Nevertheless, the important thing to remember is that it is a learning process. To get you started on the learning curve, here are five OKR mistakes to avoid:
1. Setting vague objectives or key results.
Former Yahoo CEO Marissa Mayer said:
“If it does not have numbers then it’s not a key result.”
Without specific numbers, you will not know if you are making progress on your OKRs.
2. Describing activities instead of outcomes.
It is extremely important to note that KRs are not tasks. KRs are outcomes or results of the tasks you complete. So, while “Participating in X project” is a task, “Getting 10 leads from participating in X project” is a key result.
3. Creating status quo OKRs.
If your OKRs do not challenge the status quo and push you and your business to its limits, then you are not using them correctly. Great OKRs are aspirational and help your business advance.
4. Scoring with your gut.
How did you feel you did on a key result? Really? If you resort to gut feelings to score your OKRs, you’ll soon find it difficult to get any meaningful results. For OKRs to work, they must have specific measurable indicators.
5. Scoring 1s on all objectives.
It sounds counterintuitive, but if you are scoring 1s on all your OKRs, then you have a problem on your hands. It could mean your objectives are not ambitious enough or there’s a problem with your key results. Either way, you should aim to score a maximum of 0.7 on your OKRs.
If you can avoid these mistakes, you’ll be well on your way to implementing OKRs correctly in your small business. In the last section, we look at OKRs for personal goals.
Using OKRs for Personal Goals
Unlike other organizational goal-setting frameworks, OKRs are versatile enough to be applied in both a business setting and a personal setting. In this section, we look at tips for applying OKRs in your personal life.
Fitness, relationships and hobbies are areas in which we would all like to excel. We all want to have personal lives that are full and fulfilling. OKRs can help achieve this. Let’s look at a fitness goal, for example:
Objective – Lose X pounds by the end of the year.
Key Result 1 – Hit my calorie intake target of X daily.
Key Result 2 – Burn X calories at the gym daily.
Key Result 3 – Maintain a healthy diet by avoiding low nutrition junk foods.
By clearly articulating the objective and what key results will lead to it, it makes the goal seem more realistic and achievable, even though it remains ambitious.
As a small business owner, you are an employee in your company meaning you also need to meet professional goals. If your goal, for example, is to close more sales, you can use personal OKRs to help you achieve this. Here’s how they would look:
Objective – Close X more sales by month X.
Key Result 1 – Get X% more leads by making more sales calls.
Key Result 2 – Get X in-person sales appointments each week.
Key Result 3 – Increase customer satisfaction rating by X%.
Because OKRs are flexible and scalable, they can be used to achieve almost any kind of goal you can define. Learning to swim, climbing a mountain, running a marathon – OKRs can help you achieve each.
Your journey to small business success is made up of a series of goals. As you hit each goal, you advance to the next step. OKRs offer an effective and easy framework to achieve more goals more consistently. Instead of trying to figure out how to get from point A to B, using OKRs gives you a clear map of how to do so. Although you may get lost along the way, they are also flexible enough to be adjusted to compensate for any hurdles you may encounter.
What companies like Google, Intel, LinkedIn and others have learned is that having clear goals that everyone can commit to serves to improve overall employee performance. OKRs help clearly define objectives, and this helps you challenge the status quo through ambitious and specific goals. By implementing OKRs in your small business, you will not only join the ranks of these big companies, but also grow your business to levels you never thought possible.