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.
