So we're delighted today to be joined by John Doerr, the Chair of the venture capital firm
Kleiner Perkins.
Now, saying John is a successful venture capitalist is a bit like saying Steph Curry is a successful
basketball player.
It's an accurate statement, but seriously understates things.
John has backed some the most successful technology firms ever, including Google, Amazon, Slack,
Compaq, Sun Microsystems, Intuit, and the list goes on and on.
John has also in his spare time just published a new book called Measure What Matters, in
which he discusses the power of objectives and key results, also known as OKRs,
a tool that he's introduced to a dozens of startups, many of which are now household
names.
So, John, thank you so much for taking the time to chat with us today.
Don, I'm thrilled to talk with you, right?
I daresay, you're quite an expert in this field.
I've been taken by the papers you've written and look forward to our conversation.
Oh, great.
Thank you.
According to a recent survey, more than % of organizations use goals in one form or another.
So many folks watching these videos will be familiar with goals, but not necessarily with
OKRs.
In a nutshell, what are OKRs, and how in your assessment do they differ from more traditional,
more common approaches to goals?
OKRs stand for objectives and key results, and it's a deceptively simple goal-setting
system that was invented in the s by one of the greatest managers of his or any other
era, Dr. Andy Grove.
Grove loved teaching, by the way.
He felt that the role of a leader and a chief executive is to be a teacher.
Andy was building the preeminent microchip company.
You know, in the semiconductor industry thousands of people have to get lines that are a millionth
of a meter wide exactly right, or nothing works and so—
He was kind of mentor of mine, and he grabbed me one day and said, you know, John it almost
doesn't matter what you know.
It’s execution that's everything.
And let me bring this back to OKRs.
Andy Grove invented a system, a scalable system for execution, where you write down what it
is that you want to have accomplished.
That's the objective.
And then the key results, which are how you're going to get it done.
What and how.
Objectives and key results.
And this system that he invented differed dramatically from the conventional goal-setting
systems of the days, which were management by objectives.
Those systems tended to be annual, Retrospective, backward-looking,
tied to goals, top down, hierarchical, and honestly not very effective.
Even Peter Drucker, one of the original proponents of those managements by objective systems
eventually soured on them.
So Andy turned that system upside down in inventing these objectives and key results.
And to this day, Intel uses them to great advantage.
I worked with him, for Andy, early on in my career.
And when I left Intel I took literally his slide set, that way of setting goals, to every
organization that I worked with.
Most of them adopted them.
Not all of them.
Everyone adapted them; that is, they tailored them for their own culture and their own particular
business needs.
But no organization has embraced them more fully
than Google has, and it's affected more than what they do.
It affects their culture, their language, their aggressiveness, their willingness to
stretch.
I'll sum this up by saying that there are five real key advantages that accrue
to a user of OKRs.
These are the payoffs.
The first is, you get exceptional focus.
The second is, because these are transparent, you get a high degree of alignment,
focus, alignment.
The third thing you get is an uncommon degree of commitment.
These goals end up being your kind of social contract between everyone in the organization
as they declare, I'm going to go for this key result that relates to these objectives,
and then you can track the progress through the course of days
and weeks and months in the life of an organization.
Finally, at Intel, at Google, this kind of a transparent goal system, which
importantly is not tied to compensation, it—you don't pay bonuses, people aren't promoted
based on them.
That allows you to really build a risk-taking culture, where it's okay
to stretch for something almost impossible to do and not quite make it, but still have
a considerable accomplishment.
Indeed, at Google, if you're achieving all of your goals, you're getting all greens as
grades, you probably weren't stretching far enough
or hard enough.
Now, that's all a matter of management judgment.
But those five payoffs—the focus, the alignment, the commitment, the tracking and the stretching,
are powerful.
They don't come with most other goal systems, and I like to remember them because they're
just the facts, f-a-c-t-s.
Terrific.
But let me if I could dig into a couple of elements that you mentioned there, John, around
how OKRs vary from the more traditional goal-setting approaches.
And one of them is this element of ambition.
The kind of conventional wisdom and goals, particularly as it’s embodied in
the so-called smart goal-setting, really focuses on having goals that are achievable and realistic.
In your book you talk a lot about the importance of ambition.
How do you see the relationship between ambitions and goals?
So, Larry Page put it best.
And he's probably the high priest of X goals.
Larry said, I would much prefer that a team set a goal to go to Mars and know that if
they fall short, they're still likely to achieve something extraordinary, like get to the moon.
So, the natural tendency, particularly when goals are the basis of promotions or bonuses,
is to be conservative.
And Jeff Bezos deeply, deeply believed that the natural tendency
as organizations grow is to grow more conservative, to grow more analytic.
He called this the “institutional no.”
And it was very important to Jeff that as Amazon grows, that they still be willing to
do bold, nearly unbelievable campaigns, initiatives.
And a lot of those will fail.
The fundamental question is, is it okay to fail?
Do you have a risk-taking, culture?
And that answer will vary by industry, by structure
of the market and the competition.
I for one have wondered a lot about this as it relates to health care
and hospital systems.
I think running a hospital is one of the most difficult jobs in the world, with enormous
pressures.
Lives are on the line and thousands of people are making tens of thousands of decisions.
Do we really want risk-taking in those institutions?
I recently talked about this work with the CEO of one of the nation's absolutely most
admired health care systems, and he said his number
one goal as the new CEO of this system is to get them to embrace and adopt objectives
and key results; that there are a whole host of dimensions in which he wants risk-taking
and stretching.
And then there's others in the parlance of Google where you must achieve % of the goals.
% will not be good enough and the wonderful engineers
at Google decided not only to measure accomplishments down to a tenth of a decimal point, but to
distinguish between aspirational goals, which would be stretched, and committed goals, where
the expectation is, % is what should be achieved.
And John, in your experience with the companies you've worked with, the executives, you've
talked to, how should companies think about that mix,
right?
Because the challenges—the hospital example gives a terrific one, where there's some activities
you really don't want doctors necessarily experimenting with; does it work to wash my
hands or not?
That's really more of an Atul Gawande checklist kind of
thing.
But in other cases, as the CEO you mentioned talks about, there's a need for stretch, a
need for innovation.
How have you seen companies strike that balance well?
How do you think about how executives and leaders to strike that balance?
I have a couple thoughts.
The first is that companies are in different phases at different times,
not just as they grow, but as their market conditions change.
So the book says there's times when you need to really batten down the hatches and execute.
Perhaps you have some really critical milestones to achieve before a financing of some sort.
And then the goals are going to tend to be less aspirational and more focused on
how we must execute in the here and now.
That's one thought.
But the other larger view is, OKRs are not a silver bullet.
They don't substitute at any point in time for
a strong culture or stronger management.
I like to say that good business judgment trumps this system, but when those fundamentals
are in place when you have a strong culture and stronger management,
this kind of goal system can take a team to the mountaintop.
I've seen it time and time again.
Yeah, I’d like to stick on that point about not being a silver bullet.
Every time I've heard you talk about OKRs you’ve been super explicit about that point,
that they’re a power tool, but not a silver bullet.
And their success depends on things like leadership and the culture.
As you think back about companies that have embraced OKRs and really harnessed their full
potential, what are the other complementary attributes or traits that allowed them to
make the most of the tool?
And/or on the other side, organizations that haven't kind of leveraged it to its full potential?
What maybe have they been lacking?
So here's why they most often fail.
And it's because the CEO or the leader of the function is not personally committed.
How do we measure that commitment?
Does the CEO write down her objectives and key results every quarter, the personal ones?
And are those different than the ones for the company overall?
And will she stand up in front of the entire organization—now, every quarter in an All
Hands meeting, and review their personal successes and failures?
Do they become part of the language, the rhythm of the operation?
Not just checked quarterly, but used in staff meetings, in one on one meetings.
Are they the basis on which the company communicates to the board?
Not just financial statements, but these all-important priorities.
Remember, OKRs are not the sum of all tasks.
They are the few things that we're trying to highlight and isolate because they deserve
special attention.
Does the leader of the organization, and for that matter, the organization itself, have
a system whereby they can cheer on the successes of colleagues and
nudge others forward, who are falling short?
These kinds of social signals you can find in modern scalable structured goal-setting
systems.
And they're super important.
When you really get the organization living and breathing it,
this doesn't become the soul of the team, but it's
the goalpost, it’s the milestones.
It can be the game plan.
There's a twin sister, if you will, for OKRs that I described in the book called CFRs,
which stands for conversations, feedback, and recognition.
And so the goals clearly lay out what it is we want to have accomplished.
I think of those in the football analogy as the objective is the goalposts and the key
results are the -yard markers as we march our way down the field.
But equally important are the huddles and the plays that we’re calling, and
feedback and course corrections along the way.
Those are what CFRs are.
Or in HR-speak, I think this is being referred to as “continuous performance management,”
as compared to doing annual performance reviews.
We're seeing more and more organizations, I think now something like % for the Fortune
, are just ditching the annual performance review altogether
in favor of more frequent feedback.
And this is especially important with millennial workers who want constant feedback.
They want to know how they fit in the big picture.
But they don't want to be micromanaged and so
CFRs, OKRs are powerful tools to both engage and make the most of their ambition.
These are terrific points, especially this notion of embedding the OKRs in ongoing conversations
around feedback, around review, and the importance of the transparency so
that they're not, as you rightly know, framed as kind of individual performance management,
an individual sport.
They're viewed as a team sport, that collectively we're going to execute and move down the hashtags
to the goalpost.
I wonder, another element that you mentioned, and I think it’s just going to be so surprising
to folks, it would be terrific if you could dig in a bit more.
A lot of companies, a lot of leaders pride themselves on pay for performance.
So the notion is, we're going to— people are going to set their goals, they’re
going to achieve % of their goals.
If they achieve % of their goals, they'll get a big juicy carrot, and if they don't,
they'll be hit with a big stick.
And that's a point of pride.
And it's deeply, deeply embedded and how a lot of managers think about motivation, about
execution, about getting things done.
You in the book argue very eloquently for an alternative approach.
If you could just expand a little bit on that, how that looks and feels in organizations;
what do you think the risks are of the traditional
approach, the benefits of the alternative approaches?
It’d be really helpful I think for folks to hear your point of view on that.
Sure, thanks for asking.
Just the simple decision to have all the goals in an organization be transparent
is radical for most of American or worldwide business.
Now, the notion that they be transparent and self-graded is a step further into uncomfortable
territory.
And then the idea that we wouldn't tie these to bonuses is almost heretical.
But the data is really very clear.
We know that organizations and teams, individuals, achieve much higher performance when they
have written and developed their own goals.
When they own those, when those are transparent.
And that intrinsic motivations— I have an objective to be healthy.
There's a big difference between my doctor telling me to run a marathon or me choosing
to run the marathon, and we know in business there's lots of right answers.
So this decoupling of the objective from the key results, the whats from the hows, and
having the individual contributors find their own right answer
is powerful.
It yields much better results.
Now, I'm often asked the question, John, how about sales?
We have quotas, we pay commissions.
Are you saying we shouldn't pay quotas and—no, I'm not.
No, indeed, a key result like revenues can live in an OKR system and also be the basis
for a simple set of bonuses.
But if you take the most important things in the company and you yoke those to bonus
payments, you'll find your organization grows risk-averse,
conservative, you don't get—for several reasons that I've just described.
Operating excellence.
Yeah, and just to underscore your point about intrinsic motivation, the most recent research
suggests for routine activities that people know how to do, about % of observed motivation
is extrinsic and % is intrinsic.
So it's almost / even for sales quota type things.
But if you go to activities that require creativity, it's about % intrinsic motivation.
And essentially for those kinds of activities— innovative activities learning activities—
extrinsic motivation is almost rounding error.
It's really not so critical.
So maybe we could dig in a little bit more to the relationship between OKRs and culture.
When you think about the organizations that have used OKRs really well, what would you
say were the cultural attributes or values that allowed them to embrace and
kind of harness the power of the tool?
So let's talk about culture.
First of all, I think about OKRs as transparent vessels
that are shaped from our ambitions.
What's really crucial are the values that we pour into those vessels.
OKRs answer the question, what it is I want to have accomplished, how I'm going to get
it done.
Values are expressed by the mission statement and the value statement.
And they answer the fundamental question why: why it is that we do the work that we do,
whether we're a for-profit or nonprofit organization.
Powerful organizations have a clear actionable, long-lived
mission and value statement.
I mean, look at some of them.
Let's just connect the whole world.
That's Facebook.
Or Google.
Organize all the world's information and make it readily available to anyone, anywhere,
anytime.
These mission statements, when
expressed by values statements—for example, the book has original value statements from
Intel: “We're going to be aggressive introverts.
We're going to confront problems, not people.
We're going to be system-oriented in our solutions.
We're going to check our egos at the door when we go to meetings so that the best ideas
win.”
Those sorts of value statement are especially important now.
And I want to share with you a passage from the book from Dov Seidman, who said, in the
past, employees just needed to do the next thing right.
In other words, follow orders exactly to the letter.
And culture didn't matter so much.
But now we're living, we're competing in a world where we're asking people to do the
next right thing.
Not the next thing right, but the next right thing.
A rule book can tell you what you can or can't do, but it's culture that's going to tell
you what you should do.
Culture.
They say culture eats strategy for breakfast.
And so called culture is the way you the way we can streamline actually take off the table
for discussion.
Thousands of decisions which your culture will allow you to
make quickly and correctly.
Yeah, and I think it's so nice that you emphasize this point because really, both OKRs and culture
are mechanisms for providing guidance to people without micromanaging or, as you talked about
earlier, trying to dictate from the top or codify in rule books how you should do everything,
which is just impossible for large complex organizations.
One thing I'd like to do is offer some context for this movement, for this whole book, because
I think we are, in fact, at a really critical moment in time.
A point in time where our leaders in some of our great institutions
are failing us.
You ask the question why.
Well, in some cases, it's because they’re bad or unethical.
But too often, it's because they've focused on the wrong objectives,
leading us to totally unacceptable outcomes.
Wells Fargo is an example of this, or Theranos.
And this has got to stop in every walk of our lives.
How are we going to fix this?
How are we going to get back on the right track?
In my work.
I've been able to see very talented teams choose the right objectives and the wrong
objectives, and to succeed and to fail.
And so what's really crucial is how and why we set meaningful, audacious goals.
How we set the right objectives for the right reasons.
And the choice of these matters a lot.
If you're Wells Fargo and you just set the goal as signing up new accounts without any
measure of quality, you'll get what they've got.
And so in every walk of our lives, I believe OKRs can go well beyond our businesses to
our nonprofits, our schools, even our governments, where accountability,
transparency—imagine if a city government used—
In the book you write about OKRs at the Bill and Melinda Gates Foundation.
I've over the past couple years worked with the Global Health bit of the Gates Foundation
on executing their strategy and one of the things that's really striking is
the audacity of their goals and their impatience for results.
So it'd be super if you could just talk a little bit about goal OKRs and how to use
them outside of the business context.
Sure.
Great question, and exciting territory for me in a place where I'm learning.
Learning a lot.
Bill Gates says in the Gates case study that too many nonprofits confuse their mission
with their objectives.
And therefore they never get the right objectives or crisp measures for key results.
And so I've been really pleasantly surprised by the interest from the nonprofit advocacy
sector, and this is not just charitable organizations but political
advocacy groups, causes writ large.
Banno has a warning in his case study that it's important to not over-institutionalize
a cause or an advocacy organization and it's a reflection, it's an echo I think of Jeff
Bezos’s admonition that we must be careful to avoid the “institutional
no.”
These are no more than a set of tools, but the satisfaction that you get, especially
for a mission-driven kind of cause, of having your whole team aligned is
powerful, and missing, I think, from too many nonprofits.
Yeah, no, I agree.
And the other thing I've seen with the Gates Foundation with their use of OKRs is, one,
by making the goals explicit and as you talk about in the book, verifiable, helps coordinate
an ecosystem of partners which cooperation is crucial for results.
The other thing is it helps to take, as their goal to eradicate malaria, take something
that's just kind of insanely ambitious and chunk it up
into the -yard lines that you talked about earlier.
But John, again, super conscious of your time and don't want to impose, but thank you so
much again for talking us through Measure What Matters, and beyond, of course; your
New York Times bestselling book about OKRs and how they can change the world.
Well, I've enjoyed this conversation immensely.
And I really think the paper that you've written that I have a draft of is a powerful
contribution to the field.
Well, thank you.
All right.
Take care.