What is OKR - CFR and How it works



The recent trend in Performance Management is moving away from Annual Performance Review to the process of regular Check-ins. The main reason behind this trend, as Laszlo Bock says: "The major problem with performance management systems today is that they have become substitutes for the vital act of actually managing people."

There’s this so-called Pearson’s Law which says: “When performance is measured, performance improves. When performance is measured and reported back, the rate of improvement accelerates.” A similar quote by Peter Drucker says, "What gets measured gets managed” & even Louis Gerstner says the same thing, "People don’t do what you expect but what you inspect." Hence it is important to Measure what matters.

Recently I read the book by John Doerr  ( Measure What Matters, 2017). Let’s see what is OKRs ( Objectives and Key Results ) & How this ‘Goal setting system works'.

Origins of OKRs:

During his tenure at Intel, Andrew Grove devised & implemented this system in 1971 as stated in the book. He was inspired by the eminent management legend Peter Drucker & his 1954 book, The Practice of Management.

"Management by Objectives" became the foundation for the system devised by Grove which then was named "iMBOs" ( Intel Management by Objectives ). Except for name (iMBOs) it was distinct from the earlier system.

The term Key Results was coined by Grove and was used while discussing Objectives. However, John Doerr promoted the term "Objectives and Key Results".

Intel, Google, Uber, AOL, Dropbox, LinkedIn, Oracle, Slack, Spotify, Twitter, Anheuser-Busch, BMW, Disney, Exxon, Samsung, & many other companies are using OKRs these days.

OKRs are simple goal setting system. John has emphasized to have ‘Goals’. Even Laszlo Bock in his book ‘Work Rules’ says that “the topic of goals, the academic research agrees with your intuition: Having goals improves performance.” However, one must make sure to set the correct goals. “Goals allow you to control the direction of change in your favour.” – Brian Tracy

Image 1: The definitions of OKR & CFR. 


OKR stands for Objectives and Key Results. Objectives are ‘what’ you want to have accomplished. And Key Results are ‘how’ you are going to get it done. In simple words, when we successfully achieve all our Key Results, that automatically results in achieving respective Objective. However, it is subject to properly describing that objective in the first place. “The results must be specific, measurable, and verifiable; if you achieve all your results, you’ve attained your objective.” – Laszlo Bock

The unique feature of the OKRs System is that it’s transparent, even the most junior staff can look at everyone's goals, on up to the Top Management. As John says, "Meritocracy flourishes in sunlight.”

Generally one can have 3 to 5 Objectives every quarter, ( and 3 to 5 Key Results for each Objective) since that helps to focus your efforts on specific goals. Obviously, it is easy to ‘focus’ on a few objectives, that help us to be on the same page while moving in the right direction. OKRs also prevent us from moving in the wrong direction. You may consider adding Objectives and Key Results if they fit into the established agenda while asking one simple question, “What matters the most”.

John says that "quarterly OKR cadence is best suited to keep pace with today’s fast-changing markets... The best OKR cadence is the one that fits the context and culture of your business.”  Even Josh Bersin advocates the quarterly cadence. John suggests that it’s the shorter-term goals that drive the actual work.

Although to know about the achievement of the Key Results, they must be measurable ( Numeric ) and verifiable to provide concrete  ( Yes/No ) answer without any arguments or judgment. John says that “Effective KRs are specific and time-bound, aggressive yet realistic.” Depending on the nature of the Objectives they can be rolled over for a year or longer, however, Key Results evolve as the work progresses. One must consider Quality as well as quantity so as to cover the vital elements.

As with any important initiative in your organization OKRs need conviction & buy-in from Top Management. John says that “OKRs require a public commitment by leadership, in word and deed.” Successful implementation of OKRs hinges on “Effective Communication” from Leadership. To enhance employee participation, motivation and support Leaders should clearly and regularly articulate “What” are we trying to achieve and even important “Why”.

John says that OKRs are not a silver bullet. OKRs cannot be a substitute for sound judgment, strong leadership, or a creative workplace culture.

Categories of OKRs:

There are two categories of OKRs as described in the book, namely 1. Committed objectives & 2. Aspirational objectives.

1-Committed objectives: These are regular objectives pertaining to product releases, hiring, turnover etc. Management sets them at the company level, employees at the department and individual level. These are supposed to be achieved in full  (100%) within a specified time limit. 

2-Aspirational Objectives: These are the  ‘moon shots’ as Larry Page calls them. They are radical, revolutionary and innovative ideas generated at any level in the organization. They aim to mobilize the entire organization. Obviously, they are not easy to achieve, and even Google has a 40% rate of failure. However, one must remember that not every organization has culture and failure appetite like Google and it is better to be cautious while setting aspirational objectives.

John says that “By definition, objectives are significant, concrete, action-oriented, and (ideally) inspirational.” According to Andy Grove’s standard, and even at Google aspirational OKRs are set at 60 to 70 percent attainment. Even though performance is expected to fall short at least 30% of the time, that is considered a success.

Alignment– Cascading OKRs:

Once the Company objectives are set the next important step in the process is setting cascading goals down the line. Here alignment of the OKRs becomes imperative for strategic implementation. Companies with highly aligned employees are more than twice as likely to be top performers as per Harvard Business Review.

Cascading OKRs:

In line with the company OKRs everyone else is expected to set their individual, teams, and functional OKRs. Your supervisor’s Key Results become your Objectives; you may also set your own Objectives congruent with the company’s Objectives. Then you set 3 to 5 Key Results for each objective. Your Key Results becomes Objectives for your subordinates.

Since the OKR system is transparent they can be shared without cascading them in standard procedure. One can skip several layers of hierarchy if it serves the larger purpose. For example, top management Key Results may become Objectives for Line Managers or the C-level Key Results become Objectives for front-line employees.

Alternatively, as John says, “the company’s leadership might present its OKRs to everyone at once and trust people to say, ‘Okay, now I see where we’re going, and I’ll adapt my goals to that’.”

Unlike traditional waterfall approach, OKRs provide latitude for ‘Bottom Up’ goal-setting. The system provides essential flexibility and encourages front-line employees to come up with much-needed insights which otherwise goes unnoticed. Since these are the people who are close to and first to notice developments in the external environment. In healthy organizations, it also avoids over-alignment and enhances employee engagement and participation. Employees are more likely to go after objectives set by themselves.

Laszlo Bock says that you can immediately notice the outstanding performers, as well as the underperforming employees. That helps you to take quick actions. The transparency creates clear signals for everyone.

The following quote by John rightly sums up the point, “In business, I have found, there is rarely a single right answer. By loosening the reins and backing people to find their right answers, we help everybody win.”

Cross-Functional Collaboration:

To address the drawbacks of the waterfall approach OKRs system provides lateral cross-functional connectivity, peer-to-peer and team-to-team. It also removes silos and fosters teamwork, innovation, and advanced problem-solving.

John says that “To grab a competitive advantage, both leaders and contributors need to link up horizontally, breaking through barriers.”

The isolated efforts are reduced with cohesive synergistic teamwork since everyone is working on the same objectives. It also results in organizations becoming nimble and quick to respond to the developments in the external environment.

OKR Shepherd:

To facilitate the change management process like every other OD initiative. John suggests appointing an ‘OKR Shepherd’ ( Change Agent / Champion ) during the implementation process. That would foster OKR adoption throughout the company. The effectiveness of the OKR system hinges on successful adoption by each and every employee. These shepherds are responsible for notifying employees and providing necessary support for effective implementation.

Tracking OKRs:

John says that according to the research, making measured headway can be more incentivizing than public recognition, monetary inducements, or even achieving the goal itself. “The single greatest motivator is ‘making progress in one’s work.’ The days that people make progress are the days they feel most motivated and engaged.” - Daniel Pink.

The software tools provide visual cues on the dashboard like % completion with the green color that indicates achievement of respective OKRs. However, employees must check in regularly to avoid delay. John suggests weekly check-ins to prevent slippage.

The most underrated virtue of OKRs is that they can be tracked, adapted or modified according to the circumstances. During the tracking process we have four options: Continue, Update, Start & Stop.
  • Continue: It’s a Green Zone  (on track)
  • Update: Modify a Yellow Zone (needs attention)
  • Start: If needed launch a new OKR
  • Stop: Red Zone  ( drop OKR )
The real-time dashboard indicates progress journey by quantifying goals and highlighting improvement opportunities. One has to be cautious while dropping the OKR during the quarter and inform everyone involved in the process.

Wrap-up:

In both one-on-ones and team meetings, these wrap-ups consist of three parts: 1 - Objective Scoring, 2 - Subjective Self-assessment, and 3 - Reflection. This wrap up can provide us valuable insights through evaluation and analysis. It’s one of the important benefits of implementing a data-driven system.

Objective Scoring: The objective scoring provides us with the numeric representation of our achievements. It also tells us what we are doing right and areas for improvements. In case of low scores, carry out reassessment to figure out if the Objective is worth pursuing and the quick actions needed for course correction.

The OKR Software tools provide inbuilt dashboard which automatically calculates these scores. John says that “The simplest, cleanest way to score an objective is by averaging the percentage completion rates of its associated key results.”

Google uses a scale of 0 to 1.0:
  0.7 to 1.0 = Green.* (We delivered.)
●  0.4 to 0.6 = Yellow. (We made progress, but fell short of completion.)
  0.0 to 0.3 = Red. (We failed to make real progress.)

Subjective Self-assessment: The missing insights in objective scoring can be highlighted with subjective self-assessment by the employees. It provides them an opportunity to explain their outstanding efforts hidden in the low scores as well as achievement of significant scores without putting in much of efforts.

Examples: Scoring and Assessment

OKR
Bring in ten new customers.
Progress
70%
Score
0.9
Self-assessment
Due to a slump in the market, the OKR was significantly tougher to achieve than I’d thought. Our seven new customers represented an exceptionally good effort and outcome.

There will always be employees who are either too lenient or strict in their self-assessment. In any case, the team leader will jump in and help them to recalibrate. The contextual feedback and broader discussion within the team are important in the process.

As rightly concluded by John, “Where OKR scores pinpoint what went right or wrong in the work, and how the team might improve, self-assessments drive a superior goal-setting process for the next quarter.”

Reflection: It helps us to ponder over insights we gained in the process. Things we managed well and insights that we realized can be used for further improvements. John suggests that "for best results, OKRs are scrutinized several times per quarter by contributors and their managers. Progress is reported, obstacles identified, key results refined."

For this, the employees and managers can meet together during one-on-ones according to the cadence. Teams and departments can hold regular meetings to review progress and chart the future course of action towards shared objectives.

The OKR system is inherently action oriented. Employees are expected to set aggressive goals and achieve most of them. Then pause to ponder over the insights gained, celebrate achievements and carry on the process. 

John says that “OKR wrap-ups are retrospective and forward-looking at the same time.” During the Wrap-up, we may carry forward the unfinished Objectives to the next quarter with revised Key Results. Once in a while, we may drop the Objective after thorough analysis followed by ‘reflection’ about what we learned and how can we use that in the future. You may Continue, Update, Start or Stop while asking one simple question, "What matters the most".

CFR  ( Conversations, Feedback & Recognition )

According to the book, it was Doug Dennerline (BetterWorks) who pioneered the concept of using CFR tools along with OKRs. They brought both the tools ( OKR & CFR ) to cloud and Smartphones to revolutionize the Annual Review process. This combination provides us with a new HR model for the new world of work. The definitions of CFRs is given above in the ‘image 1’. John says that "Like OKRs, CFRs champion transparency, accountability, empowerment, and teamwork, at all levels of the organization.” They are a complete delivery system to measure what matters.

Image 2: Comparison between Annual Review v/s. Regular Check-ins


When companies Annual Reviews are accompanied by regular Check-ins and real-time feedback they are in a better position to make progress throughout the year. It also brings in better alignment and transparency to the entire process. John says that "OKRs and CFRs are mutually reinforcing." While moving to regular Check-ins, OKRs provides us purpose and clarity and CFRs give us the energy we need for this journey.

Considering the pace of developments in the field of technology  (AI, ML, RPA, Bots, Analytics) we may need to revamp many HR practices. While moving to regular Check-ins John suggests that we must separate rewards conversations from development discussions. I came across this concept first while reading “Talent” (2008) by Edward Lawler and then “Work Rules!” (2015) by Laszlo Bock. John says that "As companies transition to continuous performance management, OKRs and CFRs become mostly independent from compensation and formal evaluations.” Let us look at CFRs in detail.

Conversations: The employee and his superiors are supposed to regularly meet (one-on-ones) and discuss the OKR as per the predefined schedule. However, John suggests that the employee must set the agenda and proceedings of the meeting. And the supervisor should provide coaching, guidance, and support necessary for employee development and achievement of the Objectives. The conversation must focus on future improvements and development instead of negative criticism.

The one-on-ones may be arranged Weekly, Monthly or Quarterly depending on the circumstances. However, these meetings should discuss things in detail apart from the day to day work. John says that "As workplace conversations become integral, managers are evolving from taskmasters to teachers, coaches, and mentors.”

Based on BetterWorks’ experience with hundreds of enterprises, five crucial areas have emerged for conversations:

Image 3: Five areas of Conversations


Feedback: It reminds me of a quote by Bill Gates, “We all need people who will give us feedback. That's how we improve.” Effective feedback foster performance improvement, however, it has to be specific and integral part of the process. John says that in developing organizations HR has the responsibility for delivering feedback according to the schedule. Whereas in mature organizations feedback is multidirectional, ad hoc, and real-time open discussion between people anywhere within the organization. There are some organizations using 360° feedback as an additional tool for continuous performance management. 

When it comes to effective problem-solving in the cross-functional team environment, constructive feedback enhances connections and team bonding. It also results in eradicating silos in the organization and foster teamwork within departments.

However, one has to be cautious while providing negative feedback to the employees. It is relatively easy to provide favorable feedback. There is ample material available online on "How-to" effectively deliver feedback. There are many software tools available these days with an option to provide anonymous feedback as well. John says that "Feedback is a listening system”. According to Josh Bersin, in addition to annual surveys, we are moving towards regular pulse surveys for real-time feedback. The latest software tools have this inbuilt feature.

Recognition: “The ultimate trigger for activating an employee’s strength is recognition.” – Marcus Buckingham. Recognition these days is horizontal and based on performance. Using the inbuilt system anyone can cheer anyone else's goal regardless of the Function, Department or title. John says that it crowdsources meritocracy. “Simple public recognition is the most effective and most underutilized management tools.” – Laszlo Bock

There are few guidelines given in the book for effective recognition:
  • Institute peer-to-peer recognition. To foster the culture of gratitude, employee achievements should be consistently recognized by peers.
  • There must be clear criteria for providing recognition. Employee efforts and results must be recognized at the moment of completing projects, achieving company goals and while displaying adherence to the company values.
  • The heroic tales of employee achievements ( recognition stories ) should be circulated through Newsletter, Blog, and Intranet.
  • Try to enhance the frequency of recognition by making them attainable. Make sure that even the smaller efforts are being recognized to create the ‘Hoopla, Celebration and Verve’ as suggested by Tom Peters. 
  • There has to be a clear line of sight between company goals, strategies, and recognition. Organization priorities should be supported with timely shout-out i.e. Cost Cutting, Teamwork, Innovation etc.

“Celebrating makes people feel like winners and creates an atmosphere of recognition and positive energy.” – Jack Welch. Peer-to-peer recognition is the inbuilt feature of the OKR system. Recognition and feedback work as energy boosters for achieving the goals every quarter while highlighting the areas for adding value. John sums up the point by saying, “mark this: Every cheer is a step toward operating excellence, the crowning purpose of OKRs and CFRs.”

Culture:

John has written an entire section to cover the importance of right ‘culture’ for successful implementation of OKRs. According to Tom Peters, it was Ed Schein (1986) who first underscored the importance of ‘Culture’ to enhance the effectiveness of strategy implementation.

“Culture is who you are and what you stand for. Culture is a product of the collective attitudes, values, beliefs, and behaviors of the people who work within an organization.”  Michael Bergdahl

An important feature of the culture is that it's impossible to replicate. Even Andy Grove says that “Whatever success we have had in maintaining our culture has been instrumental in Intel’s success in surviving strategic inflection points.”

John suggests to first have the right culture; even there is a story about “Lumeris”, where culture change initiated before OKRs were deployed. He says that OKRs and CFRs are effective tools for initiating a Culture change. He further says that OKRs and CFRs provide a blueprint to develop a positive culture. They facilitate to bring in the culture of transparency.

To develop a vibrant and value-driven Culture, OKRs and CFRs provide top-down alignment, bottom-up autonomy & engagement, and Team-first networking. "In fact, management doesn't change the culture. Management invites the workforce itself to change the culture." - Lou Gerstner, IBM. And hence, OKRs and CFRs become an effective tool available to all the employees to change the culture.

As correctly concluded by John, “Healthy culture and structured goal setting are interdependent. They’re natural partners in the quest for operating excellence.”

OKR Softwares:

You may use general purpose Softwares ( MS Word, Spreadsheets or PPT ). However, experts suggest using advanced, robust, dedicated, and cloud-based OKR management software. ( This article clearly articulate the drawbacks: Top 9 Problems of Using Spreadsheets to Track OKRs [ And Why You Absolutely Need OKR Software] )

John says that "The best-in-class platforms feature mobile apps, automatic updating, analytics reporting tools, real-time alerts, and integration with Salesforce, JIRA, and Zendesk.”

Using such software one can easily create, track, edit and score their OKRs navigating dashboard with just a few clicks. You may check out this BetterWorks demo ( https://youtu.be/1eqn54DLN68 )

Image 4: Benefits of implementing Software



OKR Softwares:


For in-depth details about features and other specifications, you may compare various software at http://okrsoftware.com or visit www.getapp.com and type OKR in the search box.

Trends in Performance Management software:

Josh Bersin has published a comprehensive report on trends in HR Technology. ( Talent Trends – HR Technology Report 2018 ) It has a section covering developments in the area of Performance Management. Especially moving away from Annual Reviews to Continuous Performance Management. He says that it’s the most pervasive transformations we've seen in HR over the last decade.

He further says that "Nearly every major company is looking at this next generation of tools, primarily because they are designed around teams, they are generally easy to use, and they can be used on mobile, social, and conversational interfaces.”

Today, ERP vendors ( SuccessFactors, Workday, ADP, and Oracle ) are in various stages of building all of this functionality. Even the Talent Management Suite Solutions providers  ( CornerstoneOnDemand, Lumesse, PageUp People, PeopleFluent, Saba + Halogen, SilkRoad, SumTotal Systems, Technomedia Talent Management Solutions, and Ultimate Software) are all doing similar things. A fast-growing set of exciting new tools has also entered the market. This category includes companies such as Alliance Enterprises, BetterWorks, Reflektive, 7Geese, HighGround, Impraise, Small Improvements, TINYpulse, NEOGOV’s Perform, Zugata, and others, as well as new solutions from Globoforce and O.C. Tanner.

To conclude Josh says, “The market is very hot and companies are seeing tremendous value in these types of systems... the ERP vendors have lots of work to do, which is why many are investing in this area.”

Following quote rightly conclude this article: "Where OKRs take root, merit trumps seniority. Managers become coaches, mentors, and architects. Actions—and data—speak louder than words." - John Doerr 




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