mercanix research

January 2014

How Executes Strategy 3

Case Studies

There’s nothing quite like learning from other’s successes and mistakes; that’s why we love Case Studies. After all, if you can learn something from someone else’s hard won efforts isn’t that smarter than having to go through all the pain yourself?

We offer Case Studies as a way to shine a spotlight on the good practices of other great organizations. While these can be very useful, we do not intend to portray these accounts as complete or definitive in any way. As we all know, in business there are thousands of moving pieces and decisions being made every day so giving a definitive historical account of anything is problematic.

These Case Studies are offered with the “It’s simple, it just isn’t easy!” viewpoint in mind. 3 Case studies

Google

Google is perhaps the highest performing, metrics-based company in the world. Interestingly, they have been analyzed and critiqued from many perspectives, but relatively little has been written on their management system and how it has been a critical part of their ability to scale their op- erations and workforce while continuing to produce profits.

The metrics-based management system they used is called OKRs, or Ob- jectives and Key Results.

A Brief History of OKRs

Objectives and Key Results (OKRs) is an management operating approach which evolved from Peter Drucker’s Management by Objective (MBO) originally introduced in the 1954 book The Practice of Management and refined and implemented by Andy Grove at under the banner of High Output Management (HOM) during the 1970’s and 80’s.

After seeing the system utilized at Intel, Venture capitalist John Doerr of Kleiner, Perkins, Caufied and Byers (KPCB) has evangelized the framework with his investee’s and convinced Google to adopt it in 1999. At the time, Google had fewer than 20 employees. Google has been using and refining the approach since then and continues to manage their business with OKRs with their 58,000+ employees.

OKRs is used at large companies like Google and Intel on the large enterprise spectrum and small startups on the low end. Google Ventures (the arm of Google) teaches and implements OKRs with all of it’s investee startup companies. 4 5 Case studies

How does the OKR Process Work?

Simply put, Objectives and Key Results are defined and managed through a collabora- tive process that starts at the Senior Leadership Team level and cascades down to each individual employee. Everyone gets aligned and focused on work that drives the perfor- mance of the company while balancing personal autonomy and input.

Keys to OKRs

OKRs are:

• Set quarterly and annually - for company, team and personal levels • Measurable - precise numbers, indisputable (externally verifiable where possible) • Publicly available to entire company (best practice) • Graded each quarter (best practice) • Monitored and managed monthly

Company-wide Objectives & Key Results

Senior Leadership meets and collaborates on creating, clarifying and measuring the key objectives that the organization must achieve in order to generate meaningful performance and progress for the company. These are the “big picture” top- level focus of the entire company.

Duration: 1 year to 3 years Limit: 5 Company-wide Objectives maximum Process: All must mutually agree - no dictating

Team Objectives & Key Results

Using the Company-wide Objectives and Key Results as a framework, (ie. If the Company wants to do Objective/KR 1, what would we need to do as a team to bring about those results?) you can now create your own Objectives and Key Results that will help deliver on the Company OKRs. Team OKRs de- fine the priorities for the team, not just a collection of all individual OKRs.

Duration: 1 Quarter - 1 year Limit: 5 Team Objectives with 4 Key Results per Objective maximum Process: 60% of total number of Objectives must come from bottom up (ie. from Team and Personal levels); all must mutually agree - no dictating 5 Case studies

Personal Objectives & Key Results

Personal OKRs define what the person is working on and how they are go- ing to measure their progress. These are created in collaboration with their direct manager on an annual and quarterly basis.

Duration: Quarterly and Annually Limit: 5 Personal Objectives with 4 Key Results per Objective maximum Process: OKRs developed in 1:1 meetings with direct manager; both must mutually agree - no dictating.

Results?

In a word; spectacular. We won’t suggest the OKR system is the only reason for this success, but it undoubtedly helped control, manage and foster it.

Fiscal Year Revenue Net Income Head Count Profit/Employee

2001 86,426,000 6,985,000 284 24,595 2002 439,508,000 99,656,000 682 146,123 2003 1,465,934,000 105,648,000 1,628 64,894 2004 3,189,223,000 399,119,000 3,021 132,114 2005 6,138,560,000 1,465,397,000 5,680 257,992 2006 10,604,917,000 3,549,996,000 10,674 332,583 2007 16,593,986,000 4,203,720,000 16,805 250,146 2008 21,795,550,000 4,226,858,000 20,222 209,022 2009 23,650,563,000 6,520,448,000 19,835 328,734 2010 29,321,000,000 8,505,000,000 24,400 348,565 2011 37,905,000,000 9,737,000,000 32,467 299,904 2012 46,039,000,000 10,788,000,000 37,544 287,342 About Mercanix mercanix was founded on belief that transformative leadership has the power to help people Perform Better and Go Home Happier.

We help transformational leaders to develop, deploy and embed Evidence-based Management practices and tools throughout their organizations. mercanix offers research, consulting, software development services, and beacon, our cloud-based software platform for Performance Transformations.