Why Use OKRs

Introduction

OKR is a framework that offers significant benefits when used for the right opportunities. In the simplest terms, OKR helps us achieve our most important outcomes because it encourages certain kinds of behaviour. Beyond that, it helps with the following challenges:

Improve focus

Lack of focus can be a hidden problem or at least one that remains unconfronted.

Struggling to focus is an individual problem, but it affects teams and organisations similarly.

Let’s examine a simple scenario. We have a product team consisting of five engineers, a product manager and a designer. They have lots of ideas to improve the user experience, and they are working on five of them.

The engineer is working on a new search algorithm and requires input from the product manager (PM) and the designer.

The designer is creating a new flow for the registration, and the Product Manager is working on a new feature a few users have mentioned.

The engineer asks her PM for help, but she’s busy, deep in their work. Eventually, the PM finds some time but realises the designer has to contribute, and they’re both stalled. It takes much longer to complete the new algorithm.

This simple example is commonplace, with variations occurring in most teams.

A lack of focus makes everything take longer, and it can result in poorer quality work. Maybe the PM decides to go ahead without consulting the designer.

How does OKR help us?

When we define and commit to a small number of important goals, we make our focus explicit. It tells every individual what they should prioritise.

It’s a straightforward concept, but increased focus has a huge impact. We work to move one vital needle rather than divide our attention between multiple ideas.

We can all ask two simple questions when we meet as a team and discuss what we’re working on.

1. How does the planned work connect to our goal?

2. How confident are we that the work will have the desired effect?

These questions help us intentionally connect our work to our current focus.

Increase alignment

When misaligned, our activities are not coordinated and do not connect back to our strategy in a purposeful way. A reminder that OKR is a strategic execution framework. It connects our actions to our strategy via our goals.

There are two kinds of alignment that OKR can help you achieve.

1. Strategic alignment

In all but the smallest startups, strategy is multi-faceted and multi-levelled. What this means in practice is that the work of separate teams comes together to help execute our strategy. Each team is responsible for some element of the strategy, but success depends on how well the parts are aligned.

Let’s take a simple example of a funnel. One team is responsible for driving sign-ups and onboarding for our product. Another is responsible for creating the first customer value. If the sign-up team’s strategy isn’t attracting the right users, the first value team will struggle to do its job. In this simplistic example, our strategy is misaligned.

OKR can help here by focusing both teams on the goal of getting users onboarded and to the first value. They are still focused on separate elements of the opportunity but have a collective responsibility for success.

2. Execution alignment

Increasing collaboration is a perennial opportunity for many organisations. Execs will wonder why teams don’t collaborate. The problem is, no frame of reference for changing direction. When one team needs support from another, they can’t say why it’s crucial to the organisation. OKRs make that priority explicit. It makes it easier for a team to step in and help another without endless leadership debates.

In the example above, the two teams have a shared goal and can have an informed discussion when one team needs support from the other.

Measure progress

The most important metrics for an organisation tend to be lagging. Over time, things like turnover, churn, customer recommendations, profit and market share result from many separate and distinct actions. We cannot easily see when or how they will change.

This lag creates a severe challenge for leaders. How do we know if our strategy is working? How do we know if we’re doing the right things to win?

It’s too late to change direction when we get to the end of the year, and we’ve underperformed on our critical measures of business performance.

When we set OKRs well, we identify leading measures of success. These are metrics that predict a movement in our measures of business performance. Most importantly, these metrics will change more readily in response to our actions.

Once again, a sales funnel is a simple place to find an example. Let’s imagine our user acquisition is primarily product-led.

A SAAS presentation platform creates new potential customers when somebody sees somebody else’s presentation. The growth comes from within the product. From there, we hope they sign up for a trial and then build a presentation of their own.

Reviewing our data, we notice that users who share at least two presentations often go on to become paying customers. In other words, a user creating their second presentation is a leading metric for sales.

The connection between our leading measures and business performance is a series of hypotheses. We must continually evaluate them. This evaluation helps us focus beyond the current metric and towards the larger goal it supports.

Shorter feedback loops

Most of our ideas will not succeed. This simple, brutal truth is central to commercial success. We will fail if we don’t separate good and bad ideas quickly.

The quicker we can do that, the more time we can spend exploiting successful ideas. It sounds self-evident when written like that, but even today, many businesses work on initiatives defined by what they will create. They commit to the long-term creation of features and products without properly assessing what will work.

OKRs help because they provide evidence that our approach is working. When we identify leading metrics and measure ourselves against them, it creates a focus on an outcome. Spending nine months before releasing a new module won’t move your OKRs.

To achieve our goals, we are encouraged to employ shorter feedback loops. To learn what has an impact quicker. Reducing our feedback loops is one of the most critical levers any business can pull to improve outcomes.

Validate our strategy

The final primary benefit of OKRs comes from their positioning as a strategic execution framework. Our leading metrics represent the hypotheses underpinning our strategy. When the connection between the leading and lagging metrics is broken, we have a flawed hypothesis.

By focusing the goals on our hypothesis, we have helped validate or, in this case, invalidate part of our strategy.

We can go further and explicitly use OKRs to test our strategy. For example, we believe brand awareness is foundational in increasing our user base. We can create a goal that measures the connection between brand awareness and user acquisition.

We’d identify a narrow segment of our target market to assess the idea. We don’t want to run a massive marketing campaign to find the hypothesis is flawed. As an OKR, we may have brand awareness in a small segment. Depending on the acquisition lead times, we can see if the acquisition matches our expectations related to brand awareness.

We are testing our marketing approach, but we’re also testing our base hypothesis. Increased brand awareness increases user acquisition.

I hope this is a helpful introduction to the opportunities to solve with OKR. 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.