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  • 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, ityou 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 payoffsthe 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 theinstitutional 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 challengesthe 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 organizationnow, 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 ascontinuous 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 topeople 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 andno, 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 getfor 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 activitiesinnovative 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 statementsfor 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,

  • transparencyimagine 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 theinstitutional

  • 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.

So we're delighted today to be joined by John Doerr, the Chair of the venture capital firm

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