MBO TO OKR: How John Doerr redefined the goal-setting process

MBO TO OKR: How John Doerr redefined the goal-setting process

Objective and Key Results is a fundamental goal-setting framework widely used by silicon valley giant in late 1960s.

Today, in the 21st century, it is practiced in various modern Fortune 500 company as well as budding startups. Companies have started focusing on their OKRs to fulfill their ambitious goals while having clear transparency among the organization.

OKR system skyrocketed from a basic acronym to a management system that is followed by trillion dollar companies like Google and Amazon.

History of OKR

How was OKR introduced as a tool to set-up ambitious goals and scale businesses?

A brief history of OKR.

“Management is a multi-purpose organ that manages the business and manages managers and manages workers and work.” - Peter Ducker

Deemed to be the most significant management guru in the 50s, Peter Ducker realized that manager goal could be a thing to attain business objectives. He introduced a framework called “Management by Objectives” (MBOs) in which management and employees brainstorm their objectives and define a way to attain them.

The idea behind it was that the manager would set goals and then rely on his team to accomplish it, eliminating micromanaging and traditional controlling approaches of management.

MBO considered as the forerunner of the OKR system.

Term OKR was introduced in 1968 by Intel president Andy Grove. OKR was traditionally created as Objective and Goals, and the concept was subjected to a time-bound frame.  Andy Grove, in his book “High Output Management,” talked about how manager goals are the transformational force for an objective. He reshaped the MBO system to answer two primary questions.

Where do I want to go?
How do I pace myself to see if I am getting there?

The first question states the Objective, and the second one indicates the steps to attain that Objective, Grove simplified the way we look.He believed that Objective should be chartered frequently to sustain with the fast-paced development environment.

Grove also insisted that OKRs should be aggressive,i.e., the goals should be challenging and impossible to achieve at the start. Thus, it would push the employees out of their comfort zone to align with the company’s Objective.

He instituted the infamous, 70% is the new 100%, which meant if you’re hitting 70% of your Objective is just as good as achieving a jackpot.

Another strong point of Grove’s OKR was its bottom-up process, wherein employees set up the goals to match with the company’s objectives. He believed that if employees are given an opportunity to provide insights, the company will achieve their goals faster organically.

OKRs widespread in 90s

In the late 90s, the entire concept gained momentum because of John Doerr, a venture capitalist at Kleiner Perkins Caufield Byers, one of the world’s leading venture capital firms.

While KP partnered with Intel, Doerr was acquainted with OKR, under the mentorship of Grove, he realized that OKR could create a management revolution.

So, he invested the methodology with a minor change at Google. He introduced Objective and Key Results by reforming goals.

Doerr used the formula.
“I will   (Objective)   as measured by  (Key Results)

This formula skyrocketed the growth from 40 employees to more than 60,000 today. Google’s pattern was quite similar to that of Intel; only they tweaked the life cycle of OKR into a shorter span, which led to their rapid development of one of the leading company of world today.

After Google’s massive success, OKRs got recognition in silicon valley. From a necessary acronym, it was widespread into multinational giants like Netflix, Amazon, Dell, Dropbox, Facebook, Samsung, and Twitter.

Today, OKRs are considered important management principle for SMBs to Fortune 500 companies.

OKR best practices.

The OKR method used at Google was not similar to that of Intel; every company should twist their OKRs to match with their goals. While formulating an Objectives and Key Results is not a tough task, but there are vital practices that should be involved so that your OKR works best for you.

  • Be ambitious
  • Maintain a limit of Objectives and respective Key Results
  • Set short cadences
  • Stretch Goals
  • OKRs should translate the company’s vision
  • Focus on the outcome, not a task
  • Keep a regular check