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Objectives and Key Results (OKRs)


Vishwadeep Khatri
Message added by Mayank Gupta,

Objectives and Key Results (OKRs) is a goal setting framework used by organizations, teams and individuals to set challenging objectives (goals) and their related key results (how the success of a goal will be measured). This approach was developed by Intel CEO Andrew Grove in the 1970s.

 

An application-oriented question on the topic along with responses can be seen below. The best answer was provided by Ousmane Fall on 16th Mar 2024.

 

Applause for all the respondents - Anish Mohandas, Ousmane Fall, Lalit Ratnani, Jayanth Sura, Jay Nanwani, Rahul Ganapathy.

Question

Q 652What is the OKR framework? How does it compare with Hoshin Kanri for organizational goal setting?

 

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In an organization context, the Objectives and Key Results (OKR) framework is a goal-setting technique that helps set and trail objectives and their related expected outcomes.
Here we are talking about primary objectives that the company wants to achieve. These said goals are SMART. By SMART we mean:
S: Specific
M: Measurable
A: Achievable
R: Realistic
T: Time-bound
These objectives are in line with the company's vision and overall strategy. They provide information on expected achievements.
These major expected results indicate progress toward achieving the objectives. They are quantifiable and tell us how far or close we are to the goals. These results confirm or refute the effectiveness of the actions taken to achieve the objectives.
One of the condition for the OKR framework to work is the establishment of periodic reviews not exceeding every six months. in fact, in general, the objectives are annual and by carrying out quarterly or half-yearly reviews, the company will have more or less time to correct or even change its operational strategies and tactics. In addition to scheduled reviews, there may be occasional reviews at the request of top management. To enable these spot reviews, dashboards with real-time analytics are needed.
The Objectives and Key Results framework is a good example of the implementation of the PDCA (Plan Do Check Act) quality wheel.
When it comes to goal setting, the OKR framework and Hoshin Kanri satisfy the same needs but with different approaches. Below you will find a comparison table contrasting the two approaches.

 

 

OKR Framework

Hoshin Kanri

Generality

Focus on results as indicators on the achievements

Strategic focus on policies and strategies deployment

Timeline

Year

Multi-year horizon

Force

Flexibility

Long-term planning

Approach

Bottom-up

Top-down

 

The flexibility of the OKR framework pushes many small and medium-sized businesses to adopt it. This type of company needs to control the results about the objectives previously set.
On the other hand, for hyper-structured companies that already have a certain control over their results, the Hoshin Kanri approach would be more appropriate. The Hoshin Kanri Matrix or X matrix clearly shows the the links and correlation between  Strategic goals, Annual objectives, Top-level and improvement priorities and Key performance indicators. At the same time, the X matrics makes sure that someone is taking an action.

However, nothing would prevent both approaches from being carried out at the same time if adapted to the need.

Edited by Ousmane FALL
Further idea.
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OKR Framework:

The OKR (Objectives and Key Results) Framework is a strategic tool that numerous organizations across various sectors, including industry leaders such as Google, Intel, Airbnb, Uber, Twitter, and LinkedIn have adopted to drive success and innovation. This framework is structured around two core elements: Objectives, which articulate the goals an organization aims to achieve, and Key Results, which define measurable outcomes that indicate success.

 

Below is an illustration of the OKR framework designed for the Banking and Financial Sector

Objectives

Key Results

Enhance Customer Satisfaction

Key Results 1: Achieve a Strategic NPS of 75% points by the end of Q4’24 for Mass and Affluent segment.

Achieve a strategic NPS of 82% points by the end of Q4 for High net worth segment.

Key Results 2: Reduce customer service time to less than 2 mins in all branches by Q3’24

Key Results 3: Increase credit card customer retention rate by 30% by Q3’24.

 

Increase Operational Efficiency

Key Results 1: Automate 40% of manual process in Central Operations by Q3’24

Key Results 2: Reduce operational expenses by 10% through process optimization and technological enhancements by Q4’24.

Grow Revenue Streams

Key Results 1: Expand mortgage loan volumes by 20% by Q4’24.

Key Results 2: Augment Credit Card volumes by 20% by Q4’24.

 

Key Results 3: Launch two new financial products targeting millennials, achieving a market penetration rate of 10% by Q3’24

Strengthen Compliance and Risk Management

Key Results 1: Achieve 100% compliance with the latest regulatory requirement before the next Central Bank Audit.

Key Results 2: Implement a new fraud detection system reducing External Fraud cases by 75% by Q3’24.

Improve Employee Engagement and Satisfaction

Key Results 1: Increase employee engagement scores by 20% as measured by the annual employee survey.

Key Results 2: Reduce employee turnover rate by 10% by enhancing work life balance options and flexibility.  

 

Hoshin Kanri: 

Hoshin Kanri, a Japanese term, is a top-down, bottom-up, systematic, and structured strategic planning process that engage all levels of the organization, while creating measurable and aligned goals that imbue the concept of continuous improvement through use of the Plan- Do – Check – Act cycle.

Here is the generalized flow of Hoshin Kanri process which begins with key inputs from SWOT (Strengths, Weaknesses, Opportunities, Threats) and PEST (Political, Economic, Social, Technological) analyses. These tools offer comprehensive insights from both internal and external viewpoints. Additionally, the process actively seeks contributions from customers, employees, and stakeholders to ensure a well-rounded planning approach. Strategies are built in Planning stage and prioritized in the Do stage. Plans are cascaded downward throughout the organization in a systematic manner. Plans, metrics, and score cards are reviewed in the check stage. Finally, the entire planning process is reviewed, and lessons are gathered and incorporated as improvements into the following year’s planning process.

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Hoshin Kanri Vs. OKR for goal setting:

OKR Framework

Hoshin Kanri

OKR is developed in the tech industry, popularized by companies like Intel and Google.

Hoshin Kanri is Originated in Japan, with roots in Total Quality Management principles.

OKR is a goal setting framework which consists of Objectives and Key Results. Measurable goals create alignment. Focus of OKR is to Set ambitious goals to drive performance beyond current capabilities

Hoshin Kanri is a goal setting framework which combines long-term objectives with annual objectives and improvement priorities with metrics and KPI. It Focuses on achieving a unified direction through alignment and consensus.

OKR is typically set and reviewed quarterly, allowing for rapid adaptation and iteration.

Hoshin Kanri is planned annually with monthly or quarterly reviews for alignment and adjustment.

Cascades goals top-down but allows for bottom-up feedback to adjust and align objectives.

Emphasizes top-down goal setting with bottom-up feedback to ensure alignment and consensus.

OKR is Flexible and adaptable, suitable for fast-paced and rapidly changing environments.

Hoshin Kanri is Systematic and structured, with a strong emphasis on planning and process.

OKR focuses on measurable key results to track progress towards objectives.

Hoshin Kanri uses metrics and targets within detailed action plans to measure progress.

OKR encourages employee engagement by connecting individual contributions to broader company goals.

Hoshin Kanri engages all levels of the organization in the planning process to ensure alignment and commitment.

 

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Although the end objective of both OKR & Hoshin Kanri is to provide and effective framework for setting and achieving goals, the way the two go about with it is different.

 

OKR:

 

OKR as a goal setting framework has enabled company’s like Intel & Google to become industry leaders. OKR as the name suggests utilizes objectives and the associated Key Results to determine the progress the company is making towards achieving its goals. Achievement of objectives through specific and measurable actions is the key deliverable of OKR.

Most often than not, the company leadership sets the company OKR and there is some flexibility for the staff and managers as to how to go about with achieving their goals.

 

Typically, every quarter, the key results are utilized as milestones to track the progress being made towards  the goal and whether any adjustment is required both in the goal or the way the execution is being handled. Meeting the key results is a binary deliverable and there is no scope for an in between result.

 

Hoshin Kanri:

 

Quite often than not, an employee is not aware as to how his/her personal goals align with those of the organization. Hoshin Kanri tries to bridge the gap by ensuring that a company's strategic goals drive progress and action at every level within that company.

 

This typically starts with the top management defining the future state and mission of the company from a long term perspective. To achieve this long term goal, medium & short term goals are set along with the other employees and managers. This method aligns an organization’s long term goals to its day to day activities to ensure everyone is working towards the same objectives. Typically,, Hoshin Kanri is a process that starts with establishing the future state , define the objectives to achieve the future state, converting the long term objectives into yearly objectives, executing them and reviewing the progress on a regular basis.

 

Thanks.

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Goal Setting Powerhouses: OKR vs. Hoshin Kanri:-

 

Both OKR (Objectives and Key Results) and Hoshin Kanri are frameworks designed to help organizations set goals and track progress. Imagine navigating a vast ocean. On one hand, you have a high-powered speedboat i.e., the OKR (Objectives and Key Results) framework. It's agile, steers quickly, and gets you to your short-term destinations with laser focus. On the other hand, you have a majestic ocean liner i.e., Hoshin Kanri. It charts a steady course for the long haul, ensuring all passengers (departments) are aligned and working towards a shared vision.

 

Let’s delve a bit more on each one of them.

 

OKR (Objectives and Key Results)

OKR excels at setting SMART goals (Specific, Measurable, Achievable, Relevant, and Time-bound). It operates in shorter cycles, typically quarters or a year, allowing for rapid adaptation and course correction. This framework thrives on transparency and communication, encouraging ambitious objectives that push boundaries, even if not fully achieved.

 

Example: -E-commerce Company Boosts Mobile App Engagement

 

Objective: Increase user engagement with our mobile app.

This objective is clear and ambitious, but it needs measurable results to track progress. Here are some key results (KRs) that could be used:

  • KR1: Increase daily active users (DAU) on the app by 20% within the quarter. (Specific & Measurable)
  • KR2: Double the average time spent per session on the app from 5 minutes to 10 minutes within the quarter. (Measurable)
  • KR3: Achieve a 4.5-star rating on app stores by the end of the quarter. (Measurable)
  • KR4: Launch two new in-app features designed to improve user engagement (achievable & time-bound).

These KRs translate the objective into concrete, measurable goals. They provide a clear picture of what success looks like and allow the team to track progress throughout the quarter.

 

Some additional consideration for this OKR as per organizations:

  • The specific KRs chosen will depend on the company's unique goals and priorities.
  • KRs should be challenging but achievable. Stretching for ambitious goals can lead to greater innovation and results.
  • Tracking progress towards KRs is crucial. Regular check-ins and adjustments can be made as needed.

Hoshin Kanri:

Hoshin Kanri, in contrast, takes a top-down approach. It meticulously cascades strategic goals from leadership throughout the organization. This ensures everyone is rowing in the same direction towards a long-term vision, usually spanning 3-5 years. 

Hoshin Kanri fosters a culture of continuous improvement with a structured approach that breaks down strategic objectives into actionable plans.

 

Example: Manufacturing Plant Reduces Production Waste

Strategic Vision: Become the industry leader in sustainable manufacturing.

Hoshin Kanri translates this vision into actionable steps throughout the organization. Here's how it might play out in a manufacturing plant:

Department: Production

Annual Objective: Reduce production waste by 15%.

 

Breakdowns:

  • Implement a "5S workplace organization" system to improve efficiency and identify potential waste (specific tactic with clear timeframe).
  • Analyze production line data to identify bottlenecks and areas for improvement (specific tactic with clear timeframe).
  • Train employees on lean manufacturing principles to minimize waste (specific tactic with clear timeframe).

Metrics:

  • Track monthly production waste percentage (monitors progress towards objective).
  • Monitor the number of "Kaizen events" (improvement workshops) held per month (indicates employee engagement).

This example demonstrates how Hoshin Kanri cascades the strategic vision into a departmental objective with specific tactics and measurable metrics.  This ensures everyone in production understands how their daily work contributes to the company's long-term vision of sustainable manufacturing.

Here are some additional points to consider for this Hoshin Kanri example:

  • Hoshin Kanri is an iterative process. Progress is reviewed regularly, and adjustments can be made to tactics or metrics as needed.
  • The success of Hoshin Kanri relies heavily on strong communication and "catch ball" - a collaborative approach where management and employees discuss and refine goals.

 

Here's a table summarizing the key differences:

 

Feature

OKR

Hoshin Kanri

Focus

Specific, ambitious goals

Long-term strategic vision

Timeframe

Short cycles (quarterly, yearly)

Long-term (3-5 years) with annual plans

Strengths

Transparency, communication, agility

Strategic alignment, continuous improvement

Weaknesses

Short-term focus, may not be ideal for complex initiatives

Bureaucratic, less flexible

 

 

 

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Objectives and Key Results (OKR) is a framework for goal setting that was popularized by John Doerr, one of the earlier investors in Google. This framework is designed to align organizational objectives (Qualitative) with individuals and teams throughout the organization with measurable (Quantitative) outcomes.
This framework is used when the objectives set by an organization are very ambitious and aspirational and that needs to be achieved in a very short time frame.
Examples of such objectives could be, to improve customer satisfaction, increase market share, reduce go-to-market TAT, etc.
Such objectives will answer to the question “What do we want to accomplish”?
Key results are the SMART outcome that indicates progress achieved towards the set objective. It is a quantifiable metric that reports feedback on the results of the execution plan derived after the objective setting.
These Key results answer the question “Have we achieved our objective?”

Key results along with Objectives are aligned and cascaded throughout the organization with all the employees and team, focused at all the levels of the organization for aligned collaboration and aim towards achieving objectives in time bound manner.

Comparing the OKR framework with Hoshin Kanri will make us understand the fundamental distinction between both the goal-setting approaches.

Hoshin Kanri is a Japanese management methodology of policy or strategy deployment focusing on principles of long-term vision, Catchball process, and PDCA cycle.
OKR and Hoshin Kanri are distinct in terms of the Scope of an objective. In Hoshin Kanri objectives considered are of a long-term nature which sets up the direction for the organization. OKRs are usually focused on short-term, more tactical goals typically set on a quarterly basis. These are more agile and flexible in nature enabling organizations to adapt quickly to changing market conditions.
OKRs emphasizes alignment and transparent execution with clarity into org. goals and progress it makes. It promotes CFT coordination and collaboration and fosters a sense of ownership and accountability.
Hoshin Kanri utilizes Catchball process to establish alignment and communication in an organization. It promotes constant dialogue between the strategic team, middle management/Tactical team, and operational team to ensure goals are understood and supported at all levels
OKRs are more flexible and encourage teams to experiment and innovate in the process. It allows for iterations in goal-setting and goals are continuously refined incorporating learning from failures.
While Hoshin Kanri has provisions for some adjustment, it follows a very structured and defined approach for goal deployment and execution. It may be less agile and responsive compared to OKR’s

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Companies like Google popularized the goal-setting process known as the OKR (Objectives and Key Results) framework, to monitor progress towards goals, it details establishing quantifiable key results and ambitious, qualitative targets. Usually established and updated every three months, OKRs encourage flexibility and agility in businesses. The OKR framework makes goals and important outcomes accessible to all members of the organization, which promotes accountability, transparency, and alignment across teams.

 

Conversely, Hoshin Kanri is a Japanese strategic planning process that aims to match an organization's long-term goals with its day-to-day activities. It emphasis on a top-down strategy in which senior management cascades strategic goals and objectives to lower levels of the organization. A rigorous annual planning, deployment, execution, and evaluation process is incorporated into Hoshin Kanri, tools like the X-matrix are frequently used to visually show the alignment of goals, strategies, measurements, and activities.
There are some significant differences between Hoshin Kanri and OKR, even though both frameworks seek to promote performance improvement and align organizational goals:

 

1. Flexibility vs. Rigidity: OKR offers flexibility through more regular reviews and shorter-term goal setting, enabling quick adjustments in response to shift organizational goals or market conditions. Hoshin Kanri, on the other hand, adheres to a more rigorous and regimented yearly planning cycle, which could restrict flexibility in changing circumstances.
2. Emphasis on Metrics: OKR lays a lot of emphasis on quantifiable key results because they are objective measures of development. While Hoshin Kanri also uses metrics, it might not give them the same priority as OKR.
3. Goal Hierarchy: To ensure alignment across the entire organization, Hoshin Kanri usually uses a hierarchical cascade of goals from top-level strategic objectives to departmental or individual goals. OKR may not place as much emphasis on hierarchical goal formulation as it does on alignment.

4. Cultural Differences: Silicon Valley and tech-oriented organizations, which require lot of experimentation and quick iterations, are the main areas where OKR has gained appeal. Japanese management philosophy Hoshin Kanri might be better appropriate for hierarchical organizations that value stability and long-term planning.
In conclusion, organizational goal formulation can be effectively facilitated by both Hoshin Kanri and OKR, each has advantages and disadvantages based on the structure, culture, and strategic priorities of the company. Hoshin Kanri offers a more structured approach to strategic planning and execution, whereas OKR gives flexibility and agility. In the end, the specific demands and goals of the organization should guide the decision between the two frameworks.

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