The OKR Method Theory

OKR’s lineage can be traced back to Management by Objectives, first popularized by Peter Drucker in his 1954 book The Practice of Management. Management by objectives at its core is the process of employers/supervisors attempting to manage their subordinates by introducing a set of specific goals that both the employee and the company strive to achieve in the near future, and working to meet those goals accordingly. It involves 5 steps:

1. Review organizational goal
2. Set worker objective
3. Monitor progress
4. Evaluation
5. Give reward

MBO’s result in numerous unintended consequences in organisations that leads to detractors, for example encouraging workers to meet targets through whatever means necessary, which usually results in poor quality. Part of this issue is the connection of Objectives to rewards or monetary incentives. “Andy Grove described OKRs as a stopwatch, a personal tool so he could gauge his own performance. They are not meant to measure others. If you are using OKRs for compensation, you’re doing them wrong.”

The other aspects are the isolation of goals and objectives within an organisation’s silo without considering ‘systematically’ the whole and as described on Wikipedia:

There are limitations in the underlying assumptions about the impact of management by objectives.

• It over-emphasizes the setting of goals over the working of a plan as a driver of outcomes.
• It under-emphasizes the importance of the environment or context in which the goals are set.

Therefore the OKR Method has a set of principles which underpin the methods approach and the successful implementation of OKRs using the method must adhere to these principles for successful adoption. The principles can be found in the next section of the OKR Method Guide.

The OKR Method has been designed as an overlay specifically for Scrum and Scrum teams and as such embraces the approach detailed in the Scrum guide for “empiricism and lean thinking. Empiricism asserts that knowledge comes from experience and making decisions based on what is observed. Lean thinking reduces waste and focuses on the essentials.” Our recommendation is that any user of The OKR Method is familiar with inspection and adaptation within the empirical Scrum pillars of transparency, inspection, and adaptation. 

Finally and most importantly The OKR Method’s Core ideation is that OKRs are not Contracts. The are hypothesises for what impact you think you can make if all the stars align, which as we know are not as often as we would like to think. This is the biggest organisational shift from output-driven metrics to outcome-driven metrics that any organisation will face and has the greatest cultural impact.

Therefore the theory that supports the OKR Method are:

1. OKRs are not contracts, they are indicators of how successful our experiments are.
2. Empiricism and lean thinking are key to success with OKRs, therefore, transparency, inspection and adaption are essential.
3. The principles are required on whole to allow the Method to operate.