Amazon does not use OKRs or KPIs. Instead, Amazon uses a simple, flat list of goals with no hierarchy. Each goal has a single owner and objective pass/fail criteria. Here is how this approach works so well for Amazon:
Amazon’s goal-setting process is simple. Every year, through the OP-1 planning cycle, teams generate a list of SMART goals (specific, measurable, achievable, relevant, and time-bound). These goals fall into two categories: initiatives (things you want to build or complete) and metrics (things you want to achieve).
These goals are not aspirational statements or vague ambitions. They are written with such precision that there is no debate at the end of the timeframe: a goal is either met or not met.
For example, a goal might read, “Achieve TP 95 1-hour delivery to any business in the Los Angeles metro area (see zip codes here) by September 15th for 200k items, including the top 75% business items.”
You either did that, or you didn’t. There is no room for debate.
Roughly 10 to 20 percent of the goals created in the OP-1 are elevated to S-team (senior executive/c-suite) goals when a senior executive says, “This should be an S-team goal.” That designation doesn’t change how the goal is written; it just adds more rigor to how progress is tracked.
For S-team goals, owners must report status monthly or quarterly using a simple red/yellow/green system. Green means on track. Yellow signals risk. Red indicates you will not meet the goal unless you make a significant change. At the end of the goal’s timeframe, the goal is marked as “met” or “not met”. There is no partial credit and no scoring system, just pass or fail.
One of the most interesting aspects of Amazon’s approach to goal setting is its strong emphasis on team-controlled levers that, if improved, will lead to better business outcomes.
This means goals rarely say “Generate X revenue”; instead, they say something like “Increase on-time delivery by X percent” or “reduce receive cost per item by X dollars and cents.”
This goal-setting method is often misunderstood. A senior executive at another large company once asked me, “At what level do Amazon leaders start managing the real stuff, like revenue and profit?”
The answer is: there is no such level because the expectation is that you operate at all levels. Input metrics, the nitty-gritty things that the company controls that can impact the customer experience, are the “real stuff”.
Ultimately, this goal system works because it’s brutally simple. There’s no cascading structure, no weighted scorecards, and no project management software required to track it.
If you own a goal at Amazon, you’re responsible for hitting it.
