What are OKRs? Summary of all information about the OKR model

In an increasingly competitive business context, businesses need an effective target management system to achieve success. Among them, OKR (Objectives and Key Results) is considered one of the most popular and popular methods. So what are OKRs ? How do OKRs work? Let's find out with 1C Vietnam in the article below.

1. What are OKRs?

Currently, OKRs are increasingly chosen by many businesses to create connections between levels within the organization and promote innovation. Immediately refer to the detailed content below to learn specifically about the most basic and necessary information of this useful method:

1.1. OKR concept in business management

OKR is a management method based on goals and results, helping to link the goals of individuals and teams in the organization to ensure that all employees in the business are working towards the same goal.

1.2. OKR structure

What does OKR stand for? This is a management method abbreviated from Objective Key Results. OKR helps internally link organizations and individuals within the company, by determining two main elements: Objective and Key Result. In there:

• Objective: Objective O is a concise statement of what the organization wants to achieve. The goal will need to be determined within a certain period of time.
• Key Results: Key Results KR are specific metrics to evaluate an organization's progress toward goals. The general requirement when setting key results is that they need to be specific, measurable, challenging and time-bound.

1.3. Operating principle of OKR

Besides the concerns about what OKR is or what OKR stands for, the operating principle is also something that many businesses are interested in and researched. OKR goals are always set clearly and challenging, higher than the employees' current capabilities. This is to promote working spirit and creativity, helping to maximize employee potential. However, OKRs are not used to evaluate staff productivity.

In addition, OKR key results are an important factor that helps connect ambition and reality. However, businesses need to note that it is not easy to accurately determine this result. Therefore, organizations need to tie key results to specific milestones that can be quantified and measured.

1.4. OKR classification

Used to set, track and evaluate progress toward organizational, team or individual goals, OKRs can be divided into two main types: commitment OKRs and extended (aspirational) OKRs.

Committed OKRs are goals that an organization, team or individual can achieve within a set period of time. These are the objectives used to evaluate the success of the organization in achieving its primary and core goals. To determine committed OKRs, it is necessary to answer the following questions:

• Does this goal bring real benefits to the organization, team or individual?
• Is this goal feasible in terms of time?
• Can this goal be quantified into specific metrics?

Expanded (aspirational) OKRs are OKRs that an organization, team or individual has ambitions to achieve but 100% completion is almost impossible. Expanded OKRs are used to stimulate innovation and creativity, often determined through the following questions:

• Can this goal be considered a breakthrough and innovation?
• Is this goal achievable with available resources and time?
• Is this goal related to and positively contributing to the main goals of the organization, team or individual?

2. Example of OKR

The OKR model is a goal management system in which each goal is divided into key results for measurement and evaluation. This model is widely used in businesses ranging from large to small, helping organizations achieve their goals effectively.

OKR example:

Applying the OKR goal management method, a technology company proposed an OKR model in the first quarter of 2024 as follows:

• Company-level goal: Become a leading technology company in the software field, trusted and highly appreciated by customers and partners.
• Key result 1: By the end of the first quarter of 2024, increase revenue growth by 20% compared to the fourth quarter of 2023
• Key result 2: By the end of the first quarter of 2024, increase the number of new customers from online sources by 10%.
• Key result 3: Complete research and development of 3 new products before March 31, 2024.
• Departmental goals: Develop new product A, meet the needs of target customers, bring profits to the company.
• Key result 1: By the end of the first quarter of 2024, complete the development of new product A, meeting the requirements for features, quality and time.
• Key result 2: By the end of the first quarter of 2024, attract 10,000 people to try new product A from accessible sources.
• Personal goal: Develop new function S for product A, meet user needs and improve usage experience.
• Key result 1: Complete the development of new function S for product A by the end of the first quarter of 2024.
• Key Result 2: Achieve customer satisfaction with new functionality S 5/5 stars as of March 31, 2024.

3. What benefits do OKRs bring to businesses?

This is a popular method that many businesses trust and choose during their operations, so if you clearly understand what OKR is , its advantages and disadvantages, and apply the correct method, it will help bring important benefits to the organization. like:

• Focus on essential issues: OKR helps businesses clearly identify important goals that need to be achieved within a certain period of time. This helps employees proactively prioritize and focus on solving important problems to accomplish goals.
• Close internal linkage: This method allows the entire company to share the same direction and goals. Through this, OKR can promote coordination and cooperation between departments and divisions, contributing to improving business performance.
• Increase transparency: OKRs are built publicly and shared with all employees in the business. This helps employees clearly understand the common goals of the organization, improving their sense of responsibility and cohesion.
• Empower employees: OKR indicators allow employees to be proactive in setting goals and performing assigned tasks. From here, employees have the opportunity to develop proactive creativity and improve work efficiency.
• Increase labor productivity: OKRs are often set higher than actual capacity. This motivates employees to make more efforts to achieve goals, thereby improving labor efficiency and creating outstanding results.
• Measurable progress: OKR management solution is monitored and evaluated regularly. Through that, businesses can grasp the progress of achieving goals, thereby making timely adjustments if necessary.

4. 8 steps to build and deploy effective OKRs

The OKR management method is chosen by many businesses thanks to its ability to help business units focus on important goals, link levels within the organization and motivate employees. To successfully deploy OKR and achieve the above outstanding benefits, organizations need to fully follow the following 8-step process:

4.1. Step 1: Identify goals and key results

Objective is the general, directional goal for the business. Key Results are specific, measurable results that need to be achieved to achieve goals. When determining Objective and Key Result, units need to pay attention to the following principles:

• Objectives need to be clear, specific, measurable, and time-bound.
• The Key Result needs to have a direct relationship with the Objective, be measurable, have a time limit, and ensure it is challenging but achievable.

4.2. Step 2: Choose an OKR management system

Businesses can use existing OKR management software or build their own management system. This system needs to meet the following requirements:

• Easy to use, quick information updates.
• Monitor and evaluate the progress of effective OKR implementation.
• Closely linked with other management systems in the enterprise.

4.3. Step 3: Outline your goals

This is an important step to collect opinions and perfect the OKR strategy. During the meeting, the following issues should be discussed:

• Business goals in the short and long term.
• Key results that need to be achieved to achieve the goal.
• How to deploy OKRs in each department.

4.4. Step 4: Disseminate OKRs to the entire enterprise

After agreeing on the OKR strategy, it needs to be disseminated to all employees in the business. This helps employees clearly understand the goals and results to be achieved, thereby being proactive in their work.

4.5. Step 5: Outline personal goals

In each department, the department head will deploy work to employees. After that, the two sides will analyze the work together, share opinions and desires to agree on suitable tasks for each individual.

4.6. Step 6: Connect, stratify and present OKR

After deploying OKRs for employees, department heads will summarize opinions and send them to the board of directors for approval and agreement on implementation time. Next, the OKR will be presented in a company-wide meeting and specific directions will be developed to achieve the expected results.

4.7. Step 7: Monitor and manage personal OKRs

Tracking and evaluating individual OKRs is an important step in the OKR implementation process. This helps each individual work effectively, proactively and autonomously at work, thereby increasing work productivity.

In the early stages of OKR implementation, management levels need to regularly monitor and adjust during employee implementation. Then when employees clearly understand the process and are proficient in how to implement OKRs, the company can choose to monitor and evaluate through OKR management software.

4.8. Step 8: Evaluate the OKR model

OKR scoring is the process of evaluating the level of goal accomplishment based on Key Results. The average score of the Key Results will be used to determine the level of Objective completion. Based on a scale of 0 - 1.0, the specific way to evaluate OKRs is as follows:

• 0 points: No part of the goal was achieved
• 0.1 - 0.5: Did not meet the target
• 0.6 - 0.7: Satisfactorily achieved the goal
• 0.8 - 0.9: Excellently achieved the goal
• 1.0: Completed goal

5. Common errors when building OKR models

OKR is an effective goal management solution, but not all businesses apply it successfully. Here are some common mistakes when implementing OKRs:

• Not understanding OKRs clearly

This is the most common mistake, leading to ineffective OKR implementation. Many businesses and individuals do not clearly understand the concepts and principles of OKR, leading to setting inappropriate, unmeasurable goals or having no connection between department levels.

• Excessive ambition

OKR goals should be challenging goals that help drive growth and innovation. However, businesses still need to ensure feasibility, avoiding too many difficulties that will make people discouraged and give up.

• There are too many OKRs

OKRs should focus on a maximum of 3 most important goals each quarter. Setting too many OKR goals will make it difficult to achieve all of them and can lead to forgetting some important results that need to be achieved.

• No cohesion between levels

Objectives and key results (KRs) at different levels of the organization need to be linked together like bricks in a building. If each brick is not in its correct position, the building will not be strong and tall.

• Not regularly monitored and evaluated

Regular monitoring and evaluation is an important activity in the process of setting and implementing OKR goals. This helps businesses grasp the progress of achieving goals, detect arising problems early, and take timely corrective measures. Without regular monitoring, the company will be slow to grasp the actual situation, leading to the risk of failure in achieving goals.

• There is no commitment from leadership

Leadership has the role of inspiring, directing and facilitating OKR implementation. If leaders do not commit to and support OKRs, it will be difficult to create consensus and active participation of employees, leading to ineffective OKR implementation.

6. Some businesses successfully apply OKR

OKR (Objectives and Key Results) - a goal management method used by many large businesses around the world, helps guide strategy, focus resources, promote innovation and measure performance. Below are the top 3 business units that have successfully applied OKR:

VNG

As a multinational technology corporation with many famous products and services, VNG has applied OKR since 2014. By linking personal goals with the company's overall goals, OKR has helped VNG accelerate decision-making, increase transparency and drive innovation.

Grab

Previously, Grab, a transportation and electronic payment technology company, had an unclear goal management system, making it difficult to focus resources and improve performance. Then in 2014, the company decided to apply OKR, thanks to which Grab identified the key goals to focus on, helping the business achieve rapid growth in scale and market share.

Google

John Doerr, one of the world's most famous venture capitalists, introduced the OKR (Objectives and Key Results) system to Google in 2000. With the approval of senior leaders, he created helping Google successfully apply this system, contributing to the company's outstanding development. Currently, Google uses OKRs to guide and measure the performance of the entire organization.

Intel

Andy Grove, joined Intel as CEO in 1974 and immediately realized that Intel needed to shift its business focus to microprocessors. On this basis, he introduced the OKR management method to the company. However, it was not until 1975 that this method was applied comprehensively.

OKRs have helped Intel achieve this transformation goal effectively, allowing Intel to focus on the most important goals, while creating cohesion and coordination among work teams. The success of OKR at Intel is also one of the important factors that helped Andy Grove become one of the greatest CEOs in history.

Thus, 1C Vietnam has analyzed the definition of what OKR is as well as suggested steps to build OKR for businesses. To successfully deploy OKR, businesses need to be carefully prepared in terms of ideology, culture and resources. Currently, with the development of technology, businesses can also apply powerful digital transformation solutions such as 1C:Company Management software. This is software that automates management work for SMEs manufacturing enterprises, connecting all departments in the organization through many superior and smart features. For more information about this solution, please contact 1C Vietnam today. Our team is ready to advise and support businesses 24/7.