Within a small company, it is fairly easy for different teams to stay coordinated around the common goals that everyone has to work towards to make the company successful. However, as the company grows in size, it becomes a really hard exercise to coordinate all teams to work towards common goals on a regular basis. If not managed properly, it becomes an exercise of "herding cats", spending a lot of time and energy to just keep different teams from duplicating efforts, or to prevent them from working on conflicting objectives that can risk confusing the customers and lead them to abandon the product or service provided by the company.
Luckily, there are frameworks and processes available that can help companies to avoid this situation. In this article, let's look into one such framework called "OKR" that has been popular with major companies including Google, LinkedIn, Twitter, and Uber.
What are OKRs?
Leadership means forming a team and working towards common objectives that are tied to time, metrics, and resources -
Russel L. Honoré
OKR stands for Objectives and Key Results, a framework to define objectives and track outcomes. They are meant to set and communicate strategy and goals for a specific period of time for an organization, teams and team members. At the end of the time period, OKR provide us a mechanism to evaluate how well the objectives have been executed. This feedback helps us to plan better moving forward. The primary goal is to connect company, team and personal objectives to measurable results. Key results are almost always defined with numbers to allow us to measure success. They don’t specify exactly how a team with achieve those numbers, just what the goal is.
Why OKRs?
Management by objective works - if you know the objectives. Ninety percent of the time, you don't -
Peter Drucker
Strong OKRs make it easy for everyone in the company to understand their contribution towards the firm’s success. It is an effective way to align the team or organization towards a common goal. OKRs provide a framework to explain the company’s goals and provide enough objectives that can be broken down into smaller components for the many teams involved in making it a reality. It helps teams to figure out what they should do next, and to know if it is yielding results.
On the other hand, it also serves as a fantastic communication medium for you and your team to communicate to the company how you intend to move forward and win within a specified time period.
When implemented well, the OKR framework provides the following benefits:
- OKRs discipline thinking at a company, team and individual level.
- They communicate goals and objectives accurately.
- OKRs help teams understand the big picture and align with other teams.
- They establish indicators for measuring progress.
- OKRs provide focus - they set easily digestible direction such that everyone in the company understand how they contribute to the vision.
- OKRs bring accountability - they set expectations among teams and the team members.
- OKRs encourage teams to set bolder, challenging goals that allow them to push the envelope.
- OKRs facilitate alignment and cross-functional cooperation between disparate teams in an organization.
- The bi-directional nature of OKRs foster better employee engagement with the company's objectives.
It all starts with set up the right objectives, at the company, team and individual level.
Objectives
Objectives are memorable qualitative descriptions of what you want to achieve at the company, team, or individual level. Objectives should be ambitious, qualitative, time bound and actionable by the person or team. They should also be short, inspirational and engaging. The best objectives motivate and challenge teams to stretch themselves and push the envelope.
Creating an objective is as simple as writing out what you or your team hopes to accomplish in a given period of time, so that you can easily tell if you have reached, or a clear path of reaching that objective. Ideally, the list of objectives is small (no more than 5 objectives).
Here are some examples of objectives:
- Create a world-class user experience in our core products
- YouTube: Increase average watch time per user
Once you write up your objectives, you have now set up your targets against a definitive goal. Next up, you need a mechanism to measure how much your team is able to achieve these objectives. Without measurement, objectives are just desires, and nothing else. This is where Key Results come in.
Key Results
Key results are numeric-based expressions of success or progress towards an objective. Expectations that are numerically defined produce results that can be quantitatively measured and stored. For this reason, key results should be quantifiable, achievable, lead to objective grading and be difficult, but not impossible. OKR results can be based on growth, performance, revenue or engagement.
The important element here is measuring success. Instead of making broad statements about improvement or progress (“Launch new training for sales team”), set up qualitative goals (“Train 50 sales team members”). This way, if you end up training only 10 team members, you can measure that you achieved only 1/5th of what you set out for originally. The general rule of thumb is to define no more than 4 key results per objective.
Let's outline some key results for the example objectives from the previous section:
Example 1
Example 2
In both examples, note how the objectives are ambitious, and that the key results are very specific and measurable, focusing on outcomes rather than activities.
But what does it take to write up good objectives and key results? Let's look at some helpful guidelines that can set us up on the right path.
Guidelines to writing good OKRs
Outlined below are some tried and tested guidelines to create good OKRs.
Understand your business well
To create effective and precise objectives, it’s important to have a firm understanding of your goals and how you can achieve those goals. The quality of the OKRs has a good correlation with the authors’ understanding of their business.
OKRs must be ambitious
Ideally, the OKRs should be ambitious, and make you or the team feel a tad uncomfortable. Ideally, your goals will stretch the capacity of your team - if you are always hitting 100% of your key results across all objectives, then you are not thinking big enough. Never be afraid to try big things.
Less is more
Limit your OKRs to a maximum of 5 objectives with 4 key results. The idea is not the quantity, but the quality of OKRs. Instead of creating OKR lists that begin to resemble to-do lists, ask yourself: “What outcome are we going to drive?”. Think about the key things you need to do to further goals or ideas. This helps us focus on three, two or maybe even one objective, which is totally fine. One great outcome is always better than six activities with no measurable success!
Don't turn your OKRs into a task list
It's very easy to fall into the trap of writing up tasks as OKRs if you are not careful. If all of your key results are activity-based key results, you are essentially creating a task list, not a value-based key result. Such key results simply measure the completion of tasks/activities or the delivery of a milestone. They usually start with verbs like launch, deliver, implement, define, release, etc. In these cases, simply completing the tasks will not necessarily result in success for you and your team.
If your key results turn out to be activity-based, then take a step back and ask what value you plan to deliver for the objective on hand. Ideally, key results should measure the delivery of value to the organization or its customers, and measure the outcome of successful activities. Value-based key results typically provide the baseline of where we are currently, and the target that we wish to achieve. Here are some examples:
- Increase NPS by 10%
- Increase active users from 15K to 20K.
Focus on creating value-based key results, and not a task list!
OKRs are public!
If it is not public, then it is not an OKR. Making the OKRs public means that you are open to feedback, you are sharing your lessons learned, tracking progress that everyone can ask questions about, allowing global teams to have a view into your team, you are being connected and preventing ambiguity.
Grade OKRs mid-term
Grading the OKRs mid-term helps to keep the team aligned and on track by identifying objectives that may require attention. It helps to highlight areas where the team is falling behind so that appropriate measures can be taken to change course or accept that trajectory.
Evaluating OKRs
Once you have defined your OKRs, made them public, received feedback, and made adjustments to the OKRs, the next step is to continuously track progress on the key results on a regular basis. You can update them every two weeks, every month, or after the completion of a sprint. This allows you to understand if the team is on track to achieving the objectives, and highlight areas where you need course correction.
The goal is to grade each key result on a scale between 0.0 to 1.0. You can use % values if that works best for your organization. After each key result for an objective has been graded, the average of those key results is used to grade the overarching objective. At the end of OKR cycle (which is typically between 3-4 months), we can see how much the team has achieved towards the stated objectives. Keep the following in mind when evaluating your OKRs at the end of the cycle:
- 0.6 to 0.7 is success: Lower scores indicate that the organization is under performing, while higher scores indicate that OKRs weren’t set high enough. Setting stretch goals might feel uncomfortable at first, but it enables an organization to reach greater heights.
- Below 0.4 is not necessarily a failure: Low grades might indicate a super ambitious goal or poor performance. Either way, it’s a useful data point to re-calibrate the goals & OKRs for the next cycle.
- Often times, you end up with certain key results that are incomplete. Continue with incomplete key results only if they are still important to the company's objectives.
- OKR grades are not performance evaluation! OKR is a management tool, and not an employee evaluation tool. OKRs are about the company's objectives and how each team contributes towards this shared objective. On the other hand, performance evaluations are about how an employee performed in a given time period, and should not be tied up with OKRs.
Let's wrap up by looking at a hypothetical evaluation of the OKRs we outlined in the previous sections.
Example 1
In this example, the team did really well on improving the net promoter score. However, it's possible that the team probably "sand bagged" their key results and did not set the OKRs high enough to be a stretch goal. On the other hand, the team did poorly on improving the repeat purchase rate. In this case, the team either underestimated the effort required to achieve this goal, or performed really poorly because of various reasons. In any case, this is a good input into how the team needs to fine tune its OKRs for the next cycle.
Next, we score the overall objective by taking the average scores for all the associated key results (0.57). Overall, the objective was pretty close being successful, and the team was able to identify couple of areas of improvement for the next cycle.
Example 2
In this case, the team seems to have hit the sweet spot for their key results. As a result, their overall objective has been a success in this OKR cycle!
Cascading OKRs
Finally, some companies and teams use the concept of cascading OKRs. The idea is to connect team and individual goals to the company goals via measurable results. The objective for each level is informed by the OKR from the previous level. What that means is:
- Company OKRs are the big picture, high level focus for the entire company
- Team OKRs define the priorities for the team that are shaped by the company OKRs. They are not a collection of all individual OKRs.
- Individual OKRs define what a person is working on. They are influenced by the team OKRs.
Here’s an example of a cascading OKR.
In this case, the General Manager's primary objective is to generate revenue for the owners. The General Manager wants to achieve this by filling the stands to 88% and win the Super Bowl.
The Head Coach aligns with this company objective by setting an objective to win the Super Bowl. In order to achieve this objective, the Head Coach wants to get to #2 in the defensive stats. On the other hand, the Public Relations Team sets up filling 88% of the stands as their objective, and starts to write up key results to achieve this objective.
This cascading effect continues until it reaches the individual level. The idea here is to ensure alignment of all individuals and teams with the company's overall objectives.
Parting Thoughts
Adopting the OKR process in your organization is a journey, and not an event. Teams and individuals will stumble initially when writing up OKRs. What's important is to learn from those stumbles, and refine your OKR process in the upcoming cycles. Eventually, teams should be aligned with each other, and more engaged with the OKR process, thereby resulting in valuable outcomes for the organization as a whole.
I hope you found this article useful. I referred a lot of resources when writing up this article. For the full list of resources, please look at the "References" section.
References
Video: How Google Sets OKRs, Google Ventures - The video is one hour long, but the crux of the message is available between minutes 8:35 - 15:00 and 33:00 - 56:00.
OKR: Objectives and Key Results, Weekdone Academy
Startup OKRs Template, Niket
The Fundamentals - Objectives & Key Results, Niket’s blog post on Medium
Product Management OKR Examples, OKR Examples
Here’s everything you need to know about OKRs, Alex Kracov, Lattice Blog
The Beginner's Guide to OKR, Felipe Castro
