Understanding OKRs - What They Are and How To Set Them
OKRs stand for Objectives and Key Results. It’s a popular goal management method used by companies to implement strategies and achieve corporate goals.
The key advantage of this method is its emphasis on measurable results and increased precision. An OKR is made of the main objective or general idea and a few key results. These key results are small milestones leading up to your main business objective.
In this guide, we’ll cover:
- What are OKRs
- Importance of setting OKRs for small businesses
- 5 OKR best practices
If you’re in the initial stages of getting your business off the ground, this guide will help you create realistic plans to achieve your goals.
What Are OKRs?
OKRs are made up of three main components – objectives, key results, and initiatives. Objectives are the overall idea of what progress looks like for the company. They are vague and not time-specific.
Key results, however, are measurable results that help you achieve your objectives. These are time-specific mini steps that lead the way to the fulfillment of objectives.
The third part of OKRs is the initiative. Initiatives are the practical small steps, projects, and jobs you need to complete to achieve key results.
For example, the objective of a hair salon franchise could be to optimize sales. The corresponding key results can increase sales and net profit by 10-15% in the coming year.
The brand will launch a new discounted model and hire influencers to market the brand to achieve this. They could also put together a team to look for money pits within the business. These are the initiatives that’ll help the brand reach its target in the given time frame.
Why Should Small-Business Owners Learn About OKRs?
Success depends upon a solid objective. If you’re unaware of what you want from your business, how can you achieve it? A common problem plaguing most small businesses is trying to achieve too many goals simultaneously, leading to a lack of focus, divided attention, and wasted resources.
Objectives and key results help businesses actively focus on their objectives. Using these can make it easier for you to measure success and troubleshoot your mistakes at each step. OKRs also help small businesses in the following ways:
- Track individual and collective progress toward attaining set objectives
- Create alignment between all departments
- Encourage engagement around measurable goals
- Make informed decisions based on buy-in from different departments
- Turn company missions into departmental milestones
OKRs are about setting distinct objectives and specifying ways to measure success. They take the guesswork out of planning and allow you to measure accomplishments within your company.
This strategic method helps all team members align their focus and work together toward the common goal.
5 OKR Best Practices
OKRs can be highly effective for bridging the gap between planning and execution of goals. Here are five best practices that you should apply when creating OKRs for your business:
1. Set Bold Yet Specific OKRs
While you’re setting your goals, make sure that they’re aspirational but still tangible and achievable. Specific goals lead to clear expectations and better results. This helps your teams stay motivated enough to aim higher while also making their jobs manageable by clearly explaining each employee’s role.
Objectives and Key Results Example: If your business objective is to increase revenue by 25% over the next quarter, you could begin by dividing it into specific goals. This could include setting smaller goals for each department, such as a 5% increase in revenue from marketing, 10% from sales, etc. Then these departments can take initiatives on their own to achieve the set objectives.
2. Set Up Small Milestones Within Your Key Results
It’s a good practice to break the key results further down into smaller, doable steps. This can help you track progress and fix issues promptly. It also sets the team up for success by boosting confidence whenever they achieve a milestone.
Example: A company wants to improve its brand image (key result). To do that, they can set up smaller goals such as getting influencers on board to test products on social media, redesign the packaging, start an awareness campaign, and revamp their website.
3. Work From the Bottom -Up
You should involve employees in the goal-setting process by encouraging them to set their own goals. This can increase accountability, compel your teams to think strategically and motivate them to find ways to improve their performance.
You need to ensure their goals align with your key results and that you have a system to measure results regularly. You can always review their goals and suggest changes as needed.
Objectives and Key Results Example: Objective: increase sales during the holiday season. Method: Allow team members to suggest a plan of action to reach the target. And reach a final decision after getting the employees’ buy-in.
4. Report Progress
Getting regular status updates can help you to identify roadblocks quickly. Reports provide data that allows each employee to determine how they measured up against the department’s key results.
You can also use these update sessions to ask department heads if they need more resources or to reflect on your approaches and adjust them if required.
Example: If your objective is to increase Christmas sales, having weekly check-ins with your team will help you determine if they are on the right track to complete this objective before it’s too late.
5. Communicate Business OKRs Clearly to Your Teams
You should always define your objectives in measurable terms so that they can be crystal clear for your teams. It’s best to focus on no more than three to five objectives at a time. This helps keep the team focused and avoid confusion.
Example: ‘Expansion in business’ can be broken down as ‘we aim to open three new stores in the coming quarter.’ Your teams can then create key results to achieve this. That could include creating marketing campaigns to hype up the new stores or starting the hiring process early to find the best employees.
Follow OKRs Methodology to Achieve Your Goals
OKRs work because they provide a practical framework to achieve your ambitious business goals. The beauty of OKRs lies in their simplicity in setting, tracing, and measuring objectives.
This is the methodology that helped make Google what it is now. It can help motivate your team and increase productivity. Objectives and key results (OKR) allow companies to reach their goals in a more streamlined fashion by helping them set up a road map for success.
If you’re having trouble creating or executing your business goals, make sure to check out how StrategyX can help.