OKRs are hyped right now; time to systematically describe the pros and cons. A SWOT analysis is a suitable tool in my view. In this article you will also find my assessment where and how OKRs can help. I keep the explanation „What are OKRs“ short because everyone, who intends to introduce OKRs, will analyze it broadly. The OKR model is booming, and therefore you will find a lot of information on the net, but after some research I think there is no SWOT analysis yet.
What are Objective Key Results?
OKRs are an instrument of corporate governance developed in the 1970s. It was made famous by Google. They have more than 20 years of experience with it, share knowledge about it and in the first footnote you will find information from Google. The OKR method separates into goals (objectives, what is made) and key results, which make the goals measurable and show the best ways how the goals can be achieved.
The OKR method provides a framework. Here are the main elements:
- A quarterly process that is cascaded from the CEO to the individual employee.
- Within this process, the objectives are also developed cross-functionally and determined both top-down and bottom-up; at least 60 percent of the objectives come bottom-up.
- Targets are mutually confirmed.
- Only measurable key results are allowed.
- Max 5 Objectives with maximal 4 key results on all levels
- The goal process is linked to an intensive communication concept.
- Complete transparency in the company across all OKRs
- Compared to management by objectives, the target range is between 0 and 100 percent, and a target achievement of 60 to 70 percent is considered good. All key results are equally important, equally weighted.
- Poor achievement of goals is seen as an incentive to break new ground, as an indication of a high level of ambition and not as a poor performance.
- No link to a bonus or performance review
In practice, there are the following deviations from this framework:
- It dominates the quarterly logic, there are also companies that work with 2- to 6-month-periods.
- In addition to the individual level, there are also goals at the team level or the process ends at the team level.
- The share of bottom-up targets is lower than 60 percent.
- Linking to a bonus system
My SWOT analysis shows the following chart.
The value of OKRs for companies in a dynamic/complex environment is obvious. For me, there is a huge benefit of OKRs if you assess the impact of unconscious biases, especially compared to management by objectives (see also my contribution to this in the footnote, article in German).  Especially the problems with the availability and confirmation bias can be significantly reduced with OKRs – by the short cycles, the mutual coordination process, and the transparency of the OKRs. The positive error culture in the system of OKRs helps against the unconscious retrospective bias, i.e., in the discussion for the OKR set of the next quarter.
OKRs fit into an agile environment or can help companies become more agile. However, the key to success is that you are aware in advance that the introduction of OKRs is a medium-term change topic, with all the consequences and prerequisites for a successful implementationthat you know from the change management. For example, if the top management is not 100 percent convinced of the topic, does not promise a persistent perspective and does not sit in the driver seat, you should not introduce this concept.
Clarity about the overall effort of the approach also means that your company will get along better with the concept, will learn faster, if the effectiveness of the individual goals and the overall process is checked at a central point with the help of data analytics. Companies that have huge knowledge in data analytics from their business are therefore particularly suitable for the OKR concept. In addition, in companies with a tech or engineering culture the implementation succeeds better since these companies are consistently working in processes.
Even if the temptation may be great, be sure to avoid linking OKRs to variabler compensation, performancereviews, or their talent management. Once you take a step in this direction, the goal process becomes a negotiating topic, OKRs can become a source of fear and a threat to cooperation in their company. As a result, potential is hidden and the level of ambition and performance in your company suffers.
OKRs are most discussed in the start-up environment or have been implemented for some time – which is not surprising due to the open and agile culture in many start-ups. In my view, the approach is also suitable for larger companies (if you do not have the above-mentioned obstacles). In the management of OKRs, it is usually argued that the concept must be used in the company. Especially for large companies, however, there is the opportunity to experiment with this approach in areas that are suitable for this due to the dynamics and complexity and agile requirements, especially in leadership.