OKRs: The Fundamentals
Everybody is using OKRs, but not everybody is succeeding with them. With my fundamentals series you get the insights that have helped startups, scale ups and unicorns to achieve their most important outcomes.
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OKRs 101
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How to succeed with OKR: 5 key OKR lessons
The first question I have when looking at an initiative is, ‘why are we doing this?’ OKR implementations are no different.
When I talk to clients the first questions I ask are:
What problems are you trying to solve with OKRs?
If your implementation is successful, what will change, what will you observe?
As with product management, you need to fall in love with the problems you’re trying to solve. OKRs might be able to help, but you need to assess that and be sure that they are.
Keeping the answers to those questions in mind is the single best advice I can give you as you consider an OKR implementation. Developing the ‘Why?’ habit is something you and your organisation must do.
With these questions answered, there is some advice I have. Some of these lessons will not be things you want to hear. Sorry for that.
Lesson One: Start with the leaders
OKR is a framework that creates interest at all levels of an organisation, but unfortunately, it’s not a movement that lends itself to grass roots only adoption. OKR has to start with leaders.
In my experience of outcomes-oriented change, leadership intent is by far the most important ingredient. Unless leaders intentionally adopt the framework as the heartbeat of the organisation, teams will find limited benefit in adoption.
Briefly, leadership intent means keeping focused on a limited number of OKRs. It means tracking progress towards OKRs, not activities. It means putting outcomes, in the form of OKRs, at the centre of the discussion within the organisation.
Why is leadership so important?
When done right, OKRs act as a multiplier for empowerment. They can provide the context for empowered teams to make significant contributions to the organisation and its customers.
Without empowerment, teams will still have to report progress in the same old ways, they will still have to build the features leaders tell them to. In this environment OKRs are at best an overhead. Implementations like this are one of the reasons OKRs get a bad reputation. They are doomed to fail.
Okay, so lesson one out of the way.
Lesson Two: Think Big, Start Small, Learn Fast
We have leadership support. What next?
Think about your context. Where change is concerned I like to quote Chunka Mui Think Big, start small, learn fast. What does this mean for OKRs?
Think big: Consider the end game, what will a great OKR implementation look like?
Start small: Start with a limited number of teams, but give them the maximum leadership support. Ensure their leaders are part of your program and receive the same training.
Learn fast: Or in simple terms, get on with it. Sadly the wealth of bad advice for OKRs makes this tricky. The leading book is full of terrible examples and there isn’t another book I’d recommend to help implement OKRs. Either get somebody in a leadership role who has done it before or hire a good coach. Get going, iterate quickly. Don’t be precious about your process or the OKRs themselves to start with. Be open and transparent about your learning, be prepared to adapt and change.
Then get ready to roll the framework out wider. Remember for each new team or division, the leaders have to go first in the learning.
With our implementation approach outlined, let’s touch on a few other factors critical to our success.
Lesson Three: Strategic context
Without context OKRs will not help you deliver outcomes.
By its nature context is a moveable feast, but strategy is a universal element for OKRs. A great strategy provides direction for teams and is described in terms of business and customer outcomes. It has a longer term vision, but also includes waypoints you’re aiming for. A good strategy makes creating OKRs much easier. Sadly many companies have little or no strategy.
Lesson Four: Focus
Learning how to focus is probably the single biggest gift I’d give to the organisations I’ve worked with.
No matter how well you execute, no matter how good your strategy is, without focus you are doomed to failure.
In one organisation I worked with we had a portfolio of 180 projects and initiatives for one division. Ironically, they were called the ‘big rocks’, implying that there was a lot more pebbles and sand in the mix! That organisation continually failed to realise significant outcomes from its investment. It’s not unusual, almost every organisation I’ve worked with has a portfolio of too many spinning plates. Focus allows you to achieve more, not less. We all know this, but it seems so hard to put it into practise.
Lesson Five: Don’t set and forget!
Aligned to focus is the concept of the regular check in.
Teams should have OKRs front and central. Successful teams demonstrate this by checking in on their OKRs weekly. They have a hypothesis of how the work they are undertake will contribute to their goals. When they check in, they discuss those connections and their learning. OKRs provide most value when teams learn in these fast feedback loops.
Understand the importance of Bi-Directional conversations is another thing I look for. Leaders are ultimately responsible for setting the strategy and deciding what problems teams need to solve, but they need to take teams on the journey. Ideally teams will work on problems they love, but at the least they should be a partner in defining the key results they’re aspiring to.
A final word (for now) on successful OKR implementations:
Don’t go looking for a blueprint, the Google way or any other shortcut. OKRs have to work in your context. It is part of a bigger picture of capabilities that you’ll need to have to succeed. A great coach can help guide and support you, but OKRs are about change and adaptation, not following a plan.
Let the context guide your OKR aspiration
We're all aware that our key results should be aspirational or uncomfortably exciting, as Larry Page puts it. One factor that I don't hear talked about much is the time available to the team owning the OKR.
Goals are time-bound, often quarterly, but not all quarters are created equally. For example, nobody does as much in Q4.
When coaching teams, a common theme is their desire to shoehorn their commitments into OKRs. This desire takes the form of turning a task that has been assigned to them into a key result. We know that tasks are a form of output, not outcome, so they don't make good key results.
In some cases, we can work backward to the why and uncover a meaningful outcome, but it's not always the case. Sometimes teams just have to do stuff that's mandated.
An example from one organisation was a migration to an enterprise code repository.
It wasn't a trivial task, and it promised to eat some serious time. For the team, it wasn't driving anything related to their product, it wasn't solving a customer problem, and it didn't even improve their delivery metrics.
We can all think of many time-consuming tasks like this one. 'We just need to get this done.' That's not to say that they're meaningless tasks, they matter for the organisation, they're just not related to the team's focus.
What I advise teams to do now is to list those commitments and come up with a rough and ready estimate of the time they will take.
This information doesn't belong in the OKRs, but it does help the team, and their leaders understand the working context.
In some cases, teams estimated that 60% of their time is already accounted for over the next month. This reduction in time is bound to limit the aspiration of your OKRs and the level of outcomes the team will achieve.
Sometimes teams have multiple commitments of this kind. Sharing the context with leaders creates an opportunity for discussion. Leaders may even help the team avoid or delay the commitments to help them focus on what matters most.
Next time you're setting OKRs, consider the stuff you committed to doing that isn't OKR-related. You might be surprised just how much time is already spoken for.
You can handle this one of two ways with your OKR setting:
Ask people in advance to document any non-routine commitments for the next period. Also, ask them to create a rough estimate in person-months of how long it will take. I'd suggest doing this asynchronously in something like Google Sheets. The advantage of using a collaboration tool is that people can build on each other's input. This is my chosen approach. It protects the precious workshop time.
Spend 10 mins at the start of the meeting brainstorming the commitments and creating the estimates.
Be clear about the amount of non-OKR/top focus work you have in the upcoming quarter. Use that information to help set the aspiration level for your targets.
Leading, lagging and proxy metrics
A worked example
This is a short article, with a worked example, explaining the use of leading, lagging and proxy metrics.
TL;DR There is a reason that Netflix spends up to 6 months identifying a metric. Metrics can have an enormous impact on your business. Leading metrics inform your decisions in a timeframe to power shorter feedback loops. They require more work to identify, but create far more usable insights.
Although the base concepts of OKR are simple, making it work for your organisation is another matter. Bad advice is one of the reasons. While researching my recent post on KPI v KRs I came across plenty of bad articles. This is one of the reasons OKR is so difficult.
My job here is to create some clear and concise articles, that I improve over time.
Why metrics?
The purpose of metrics in business is to inform decision making. Good metrics tell us whether the actions we are undertaking are driving the outcomes we desire. The challenge is to identify metrics that provide insight to future success in a timeframe that allows timely course correction.
Let’s start with some basic definitions:
Types of metric
Lagging metric a measure of something that reacts slowly to our activities. Usually something of high importance to the organisation.
Example: Average LTV of a new customerLeading metric a measure of something that changes more rapidly as a result of our activities. Useful because it predicts subsequent changes to a lagging metric.
Example:Proxy metric a metric used instead of the thing you really want to observe. Used because it’s expensive or very difficult to measure the desired metric.
Example:
These definitions are useful, but the relationships between metrics are often complex and multi-faceted. I’ll cover some of that in this simplified example.
The Learning Centre - An example
For the purpose of this illustration I use an online learning platform which helps students pass public exams. The students can find lessons, pay to add them to their library and use them. They can also purchase a monthly or annual subscription for all lessons.
Success for The Learning Centre (TLC) is predominantly measured in sales and subscriptions. The organisation needs a continuous flow of new students as current students move out of the education system.
The most important commercial metrics are usually lagging.
Subscriptions and lessons purchased are the key metrics for TLC’s success. These are both lagging. They react slowly to our activities.
The problem with lagging measures is that you have little or no idea if your current activities are improving them. It can take many months for changes to take effect and by then the money and time is gone.
This is where leading measures come in
The usual purpose of a leading measure is to predict a lagging measure. So let’s drill down on TLC’s goal of subscriptions.
What leads to a subscription? The cross-functional team looked at their data and found that most users complete two lessons successfully before subscribing. Great, but lessons completed is still a lagging measure. It doesn’t change quickly.
Taking a deeper look at the metrics they discovered a leading metric for completing lessons. They noticed that before registering for their first lesson most non-referred users undertook a successful topic search. Successful meaning that they clicked through to the lessons details.
This is less lagging. The product team can focus on getting more users to have a successful search. Many factors may decide whether a search is successful and the team can build their hypothesis and run experiments to decide what they need to change.
The team also carried on with their analysis and identified site visits as a pre-cursor to a topic search. One further step back was achieving a good marketing contact.
The marketing team can test their ideas to create great marketing contacts, particularly in target markets.
Side note, there is a useful simple metric framework called the AARRR (or pirate) Framework. It can help your thinking about the job of metrics. Several of the metrics in my example relate to it. I think the HEART Framework is more useful, but that’s a longer discussion.
Using this working backwards approach the team found a couple of key leading metrics to work on this quarter. Neither marketing contacts or topic searches are meaningful outcomes for the TLC business, but they are important leading metrics for the things they value.
What about proxy metrics? We’ve looked at acquiring users via marketing. Another route that TLC use is what we call a viral loop. A big source of new users for TLC is referral from one student to another. A referred user who completes a lesson, short cuts our acquisition journey.
In their search to understand how many of their subscribers are likely to refer them, the TLC team runs a NPS study. The NPS score is a proxy for referrals, it measures intent, not behaviour. In that respect its value is limited, like many proxy metrics.
Note: NPS receives a lot of valid criticism. It is a good example of a proxy metric and their limitations.
A general rule, when thinking about metrics: Those that represent behaviour are more reliable and useful than those that measure intent.
The complexity
As with KPIs and KRs, the status of a metric can change. The border between a lagging and a leading measure is a matter of perspective. Clearly, things like sales and churn are always lagging- but other metrics might be considered lagging at the team level, but leading at the organisation level. Teams work in much shorter feedback loops than organisations.
The OKR Check In
Holding regular check ins is the single biggest indicator of success with OKR. The most successful teams hold them weekly.
The purpose of the OKR check in is quite simply to help us achieve our OKRs. We review progress and decide what we can do next to give us the best chance of success. First and foremost it’s a conversation.
Here are the key steps of a good check in:
1. Update your key results in your tracker
If they never change, is that because they are lagging metrics, do you need leading metrics? Will they change before the end of the period?
2. Discuss how confident you feel of achieving your key results.
Green, we are on track and we’re confident of achieving our goal
Amber, there are doubts we will meet our goal
Red, unless we do something significantly different, we will fail
3. What’s next? The critical part of the conversation.
It’s important that no matter how confident we are, we’re intentional about our actions. What will we do this period and why?
What do we expect to learn, what results do we anticipate?
If we are amber or red, we think about alternative approaches. Is there something more fundamentally flawed about our hypotheses or are impediments slowing the team down?
What are we learning, what are we testing, what are we building?
4. Looking further down the line, what’s our 1-3 month horizon looking like?
e.g. Is there user research or other things we need to plan in advance etc.
The check in shouldn’t be a long drawn out affair, but at the end you should have a shared understanding of what you’re doing to achieve your OKRs in the next period.
The Top 5 OKR Mistakes & Bad Advice
1. Lack of Focus aka too many OKRs
Why is it a problem? One thing that the agile community got right is that if you start less, you finish more. This is true at the organisation, business unit or team level. It’s the most common and destructive problem I see.
How do I avoid it? Simple. Limit your goals to as few as possible. Concentrate the bulk of your work on those goals.
2. Set and forget
Why is it a problem? You have no idea if the things you’re doing are the right things. In most cases you’re probably doing stuff without any idea how it connects to your goals.
How do I avoid it? Check in on your progress weekly. Set measurable key results.
3. Use OKRs as an activity tracker
Why is it a problem? OKRs are the things you achieve, not the things you do. If all you track are outputs, you will have no idea if you’re hitting your goals. Ignore the examples in Measure What Matters. Most are not outcomes.
How do I avoid it? Create measurable key results that represent an outcome. Remember an outcome is a measurable beneficial impact for your customer, your business, or your employees.
4. Not realizing it’s a big change
Why is it a problem? Getting organizations and people to work and think differently is difficult. Teams and people will revert to the old ways of working unless you support their journey to the new way.
How do I avoid it? Plan your implementation. Think big, start small, learn fast.
5. Dogma
Why is it a problem? OKR is not a blueprint or a method. If you don’t adapt it to your context it will cause friction. This includes being willing to change your OKRs when they aren’t working.
How do I avoid it? Avoid dogma, we are as far away from SAFe as we can be. Find what works for you and continuously improve it.
Bonus Mistake: Using individual OKRs
Additional Resources On the Blog
Adopting individual OKRs is a mistake that threatens alignment, is time consuming and distracts from the real job of the manager. Find out why.