What are OKRs?
OKRs - Objectives and Key Results is an approach to setting goals that helps organisations connect strategy to execution. OKR was created by Andy Grove at Intel and popularised when John Doerr shared the framework with Google. Now it is widely used in technology organisations and beyond.
The framework is simple to grasp. It consists of two elements:
| What is an Objective? | Key Results |
|---|---|
| The O is for objective, a description of something you need to achieve. The objective does not contain a numeric target. | The KR is for Key Results, a set of metrics to measure progress towards the objective. They are expressed as starting value, the baseline and a target. |
| One Objective | 1-5 Key Results, with 2-3 the most common. |
We set the goals for a defined period, typically a quarter, but you should adjust the duration to your context.
Outputs, tasks, initiatives and projects
A little more terminology. The actions we take to achieve OKRs can have various names. I’ll refer to the things we create as outputs. A new module, feature, competitor analysis or ad campaign are examples of outputs. When we build something, we undertake tasks like interviewing a customer or writing a test. You will also see terms like initiative or projects. These are all examples of things we do rather than things we achieve.
Let’s move on to an example.
My fictitious company is an online learning organisation it helps people pass public exams by providing self-paced lessons.
Their OKRs might be:
| Objective | Key Results |
|---|---|
| Help remote learners achieve public qualifications | • Increase enrolment from 2,000 to 3,500 per month |
| • Increase the pass rate from 73% to 85% |
Let’s dive into the components and see what makes this a good OKR.
Our objective is short, memorable and inspirational. This example connects to the company vision and has the user at the centre. Notice that the objective does not include numbers. It’s a purely qualitative description of what we want to achieve.
The key results are phrased as moving a metric from X to Y. This is a helpful structure for key results as it conveys a lot of information. They also connect to our objective. By attracting more users and helping more of them pass, we help more remote learners achieve their qualifications.
Key results must describe an outcome.
Outcomes are measurable beneficial effects for your customer, business or employees and always have a number. They should never be a task, output or initiative.
At the heart of the value of OKRs is the shift from focusing on outputs to outcomes. We concentrate and talk about the things we are trying to achieve rather than just what we do.
We cannot be sure if a new feature or module will lead to more sales. We don’t know if a marketing campaign will create more leads or trial users. Don’t take my word for it. Microsoft say that 1/3rd of their ideas have a positive impact, 1/3 have a negative impact and 1/3rd have no impact. Google says that 20% of ideas have the desired effect, and booking.com put the ratio at 10%.
When we focus on outcomes, we accept this fact. It encourages us not to commit to long-term initiatives with uncertain outcomes. It leads us to adopt short feedback loops to build evidence that we are heading in the right direction. This change in mindset makes us much more likely to achieve what we want.
The value of the framework goes beyond this mind shift. It also has positive implications for the organisational culture.
Making our most important outcomes explicit sends a message to the whole organisation. It tells them what to focus on and gives them a frame of reference for alignment conversations.
Alignment is crucial when we need people and teams to collaborate. If teams have different views of the organisational priorities, it is hard for them to agree to help each other. OKRs help them look beyond their immediate context and see how they can work for the greater good.
Focus is equally important and is the superpower I’d endow on any organisation or team. When we focus, we achieve more. We shift context less frequently and are more readily available to collaborate with our teammates. When a team is chasing multiple goals, people are less likely to be available when needed to contribute.
An additional benefit of creating OKRs at the team level is the assistance it gives to empowerment. When a team is told what to achieve, rather than how to achieve it, it gives them the agency to use their experience and knowledge to work out the best approach. People closer to our customers and the day-to-day are better positioned to choose the best course of action. When we agree on a set of activities, we remove that agency to decide how to solve a problem or opportunity.
We’ve seen that the framework can have a significant impact, but what are some things we must do to make that happen?
Firstly a quick reminder. OKR is a strategic execution framework, and as Michael Porter says, the essence of strategy is deciding what not to do. Our decisions about what not to do are reflected in the OKRs we select. They represent the most important things you need to achieve and should be limited in number. We don’t get the benefits of focus and alignment when there are too many OKRs.
I recommend one objective and 2-4 key results at any level, including the company level. Circumstances may dictate a variance, but this is a good starting target.
When we set OKRs, we should do so with the people responsible for achieving them. It’s part of the empowerment. Leaders may decide what opportunities a team focuses on but should discuss the goals and specific targets with the teams. People who help set targets are more engaged.
Restricting the framework to our most important goals has an important implication. Not everything is an OKR. Some organisations struggle with this and try to ensure everybody’s work is covered. In effect, we are saying that everything is a priority, but in truth, this means that nothing is a priority.
You have to accept that some work, sometimes a lot of work, will not roll up to a company OKR. It does not imply the work is unimportant, just that it’s not our main area of outcome focus for this period. We still need recruitment to hire people and accounts payable to pay suppliers. Without these activities, a company will soon fold. We are simply making our most important outcomes explicit.
Whilst we are on the topic of strategy, OKRs represent our next step in executing our strategy. When we set them, this thought should be front and centre. Often you see organisations struggling to select the goals for the next quarter. Spinning your wheel at goal setting is a sign that a connection to strategy is missing or that there is no real strategy.
My single most important lesson for implementing OKRs is to start small. Goal setting is a jigsaw piece for a puzzle that isn’t the same in any two organisations. You can learn from experiences elsewhere but must adapt the jigsaw piece to your puzzle.
Start with leaders and a small vertical pilot because:
A focused set of outcomes at the organisation’s top benefits everybody. It can bring a strategy to life in a new way.
Leaders have to make the most significant journey in terms of behaviour. They need to understand and apply outcomes thinking and how it applies to the organisation.
You can start to see how the new focus works for one team. You can learn what cadence works best at the company and team level.
You can make mistakes and learn lessons in a narrower space.
When you broaden the implementation, you do so with leadership knowledge.
Think big, start small, learn fast remains one of the best phrases for guiding innovation.
How to set OKRs effectively
People regard goal setting as a necessary evil or a waste of time. The time spent creating OKRs needs to be effective to avoid this sentiment.
Start with pre-reading. Meeting culture topic of its own, but a goal-setting session isn’t the best place to share your new strategy. The people in the session should arrive at the meeting well informed of the company’s direction. If you don’t have a baseline of strategic knowledge, sort this out before you think about goals.
When people come to the session aware of the strategy, the conversation is more fruitful. We can focus on identifying and agreeing on the most critical outcomes for the next period, which is the purpose of the session.
Our strategy should ask questions such as ‘how do we know our hypothesis is sound?’, a question OKRs can help answer.
When we complete our session, we should have answers to some key questions:
What’s our objective for the period, and how do we know we’re on track to achieve it? - Our key results.
For each key result, we should also state why this is important at this point. It’s a great question to ask and will help everyone understand why other goals were not chosen.
We need to define how a key result is measured at the meeting or shortly after. Without a repeatable measurement, the key result is valueless. Teams often miss this part and then struggle to agree if progress is being made or what progress means.
Good key results have these qualities.
The team can influence them. This is most common when we have genuinely cross-functional teams.
They can change in a reasonable timeframe, given the goal cycle. If we set a target for a quarter and the metric changes on a four-month cycle, it doesn’t help us.
It’s good practice for each key result to have an owner. Assigning an owner does not mean the owner is solely accountable for achieving it. It means someone has the lead role in helping the team get there. They’re the person who leads the conversation on the key result when we hold our regular OKR review.
What do after the goals are set
Whether OKRs can change is a frequent question and is sometimes answered incorrectly by self-proclaimed experts. The heart of the framework is to shorten our feedback loops and learn quickly. Sometimes we realise that our targets are not appropriate. If so, re-set them. We may even find that the objective or key results aren’t fit for purpose. Perhaps a fundamental hypothesis is wrong, or we can’t influence a KR the way we anticipate. If so, change them.
None of this is an excuse to give up and frequently flip-flop between goals. Changing your goals is a big decision, but it’s a decision you sometimes need to make.
Some common mistakes to avoid
Creating too many OKRs and undermining focus.
Using OKRs for performance management. If you measure a team solely by their attainment of goals, they will set conservative goals.
OKRs at the individual level. We can never precisely align individual and team goals. It also takes a lot of time to set personal goals. In a team of 8, this means creating 8x as many OKRs.
Creating Key Results that are outputs or activities. Key results must be outcomes (measurable beneficial effects). Don’t use OKRs to manage tasks or tell teams what to build.
A quick note about KPIs
Many organisations already use KPIs. They mean different things to different people. Generally, they are a metric we track. Some will give you elaborate definitions of why KPIs and KRs can never address the same metric. People like to have nicely compartmentalised terms, but the world isn’t always so simple. OKRs are our most important goals and our most important metrics. KPIs in this context are generally other things we are tracking. At times a KPI may require primary focus. For example, we may regard churn as a KPI. Then churn increases, making it a focal point for our work. We turn churn from a KPI to a KR for a defined period in this instance. Hopefully, we will resolve the problem, and churn will be returned to a KPI only.
Four levels of metrics:
Key results - our most important goals
Health metrics - metrics we track and review regularly but aren’t our current outcome focus
KPIs are other metrics we sometimes review.
Everything else. Things like product instrumentation that we capture but don’t generally look at except in exceptional circumstances.
What you’ll observe when OKRs are working well:
People know exactly what the most important outcomes are for the current period
Teams agree to collaborate without needing to escalate to leaders
A better sense of progress on a shorter cadence
People can articulate a clear connection between their work and the company strategy
I hope this is a helpful introduction to OKRs. To learn more, consider joining my cohort based training, where you will learn with a group of peers and be ready to launch a successful OKR implementation.