The psychology behind how OKRs work

Objectives and Key Results (OKRs) are now used by a number of companies, and there’s an excellent reason why they have gained popularity among startups and large corporations alike. The truth behind the power of OKRs, however, goes back to human psychology—the way that we think about goals in the OKR framework taps into some subtle yet powerful psychological effects that make them the most productive management framework.

The Psychology Behind Successful Goal Setting

Human behaviour is complex and nuanced. There’s no magic bullet for setting goals; no easy or obvious solution to making people take action. However, in his book, Scaling Up Excellence, author Robert Sutton notes that a key reason why many of us fail at reaching our goals and hitting our marks is due to our fear of failure. Our deeply held beliefs about what will happen if we try and fail holds us back from taking action, preventing us from achieving success. But by adopting a well-thought-out goal-setting methodology like Objectives & Key Results (OKRs), you can tap into some subtle yet powerful psychological effects to make them more productive and help you achieve your professional goals faster than ever before.

How OKRs Work

Set your objectives and key results (OKRs) to align yourself with human psychological drivers. Recent research by McKinsey and Google has shown that people are more productive when they know what is expected of them. By setting clear goals, teams have a much higher chance of success. So what makes OKRs so effective? The answer lies in human behaviour—specifically, in something called social proof. Social proof states that we pay attention to and learn from other people's behaviour. In other words, people will do things if they think that others are doing those things as well (think of a bird following a flock). People are also highly motivated to avoid making mistakes because it is socially undesirable; we want to show off our skills and not look stupid.

OKRs Tap Into Trust

When using OKRs, employees are transparent about their goals. This creates a sense of shared ownership and fosters trust within teams. If a team member knows that everyone else on her team is going to see what she’s working on, she’ll be more inclined to reach out when she needs help or get feedback. Because of that, all employees feel involved in—and committed to—their goals and ultimately, they deliver better results for it.

Experiments show that having a sense of higher purpose stimulates oxytocin production, as does trust. Trust and purpose then mutually reinforce each other, providing a mechanism for extended oxytocin release, which produces happiness. So, joy on the job comes from doing purpose-driven work with a trusted team.

A culture of trust can be fostered through OKRs, which help to make goals explicit and provide each team member with the resources they need to achieve those goals. To create an environment where everyone has a say on setting company goals, understands what the organisation is striving for, and has the freedom to choose how to work towards those goals, they can assist you.

What's the result of all of this? Employees who are happier and healthier tend to stay on your team longer.

OKRs Create Focus for Your Team

Getting people aligned on a big goal that’s broken down into realistic chunks is hard. There are always many things going on, and you don’t want to focus too much on just one thing to make sure you have enough time left over for everything else. That’s why it’s important to get your team focused on one area of priority (with some other priorities for your next level of focus). When everyone is working together toward a shared goal, they can help each other out. They can back each other up if someone gets stuck or needs more resources. And, most importantly, they all know exactly what success looks like so they know when they need to pivot or re-evaluate their approach.

OKRs Give Employees Safety to Express Ideas and Experiment

One of my favourite results from OKR is that it gives employees a safety net to try new things and express ideas, with minimal risk. If they fail, then their key result didn’t meet its target and can be improved. This means that people feel safer to experiment and try new ideas instead of playing it safe by doing routine tasks that don’t push their limits or make them uncomfortable. They are able to use every day as an opportunity to learn new skills, as opposed to doing things solely within their comfort zone. Employees with a healthy growth mindset respond well to being pushed out of their comfort zone in a supportive environment where they know if they have failed at something it is because they were given permission too take those risks.

OKRs Work Because They’re Rooted in the Human Psyche

Making a change doesn’t happen in a vacuum. You need to be fired up about your goal, you need to believe that you can accomplish it, and you need to believe that you will enjoy it when you achieve it. The way that we think about goals in an OKR framework tap into these psychological effects (seeing progress, constantly feeling like there is some kind of light at the end of the tunnel) in a way that makes them incredibly effective at producing change. It’s as if each company using OKRs has built its own, custom-designed human motivation hack. There are books written on some of these psychological tricks (see Psychology and Persuasion: How to Get What You Want Every Time by Robert B.

What makes OKRs so successful is that they take the principles that drive human behaviour and organise them into goals that make us more efficient.

OKRs are successful because of three main psychological traits:

  • Building a trusting environment

  • Focusing on the goals and why they matter

  • Creating psychological safety to encourage experimentation

Okay, now that you know what makes OKRs work, let's take a look at how you can implement them in your company. Contact us for more information.