Let’s start with a riddle: what do Google, Amazon, The Gates Foundation, and singer/songwriter Bono all have in common? I doubt this will win you any Jeopardy rounds, but the answer is that they all have utilized the OKRs methodology for continued success.
It’s no secret that Silicon Valley has a vernacular all their own, chock full of obscure acronyms. For now, we’ll work on decoding just a few of these.
What are OKRs?
OKRs stands for Objectives and Key Results. Sounds pretty straightforward, right? Setting goals and working to achieve those goals is intrinsic to human nature. But when OKRs are discussed in a workplace setting, there is a specific framework and set of considerations that are being referenced. Some history: originally developed Andy Grove at Intel, the OKR methodology gained enormous traction when legendary venture capitalist and Silicon Valley all-star John Doerr introduced them to the leadership at Google. Once co-founders Larry Page and Sergey Brin quickly recognized their value, a company-wide (at that time, 30ish people) OKR implementation followed.
Okay, okay - we know what the letters stand for, but why were OKRs so revolutionary? What’s wrong with just regular old goals?
Well, OKRs stand out because they put the emphasis on a system of shared objectives. Transparency is prioritized, ideally so the entire company can not only see the OKRs but also contribute to them. Additionally, this goal-setting framework does not require a traditional top-down management approach, which is particularly useful for non-traditional companies and the tech industry.
So, how do come up with successful OKRs that are well suited for your team or organization? To quote a part of Andy’s Grove’s book High Output Management, there are two questions you should always start with:
- Where do I want to go? This answer provides the objective.
- How will I pace myself to see if I am getting there? This answer provides the milestones, or key results.
To break it down even further: the OKR system is built to train focus, promote team and company alignment, and track goals.
Broadly speaking, Objectives are the what. They should be action-oriented and inspirational. They should also have a deeper level of specificity then just “hire more people for the sales team” or “increase readership every month for this quarter”. There should also be some interrogation as to why you need to hire more people, or what will happen if you increase readership every month?
Key Results are the how. They can include descriptive bullets, and should be specific, time bound, measurable and verifiable. KRs are usually quantitative. Some examples: increase conversion rates by 1%, reach 5,000 subscribers for our newsletter, grow gross revenue to 1 million - you get the idea. It’s fine if you have qualitative KRs as well, as long as there are ways to measure the result.
A good gauge on how well OKRs are working is if you and your team are always referring back to them. It’s both important to make them and reflect back on them. If there are other things consuming your team’s time, you may want to re-think the OKR to recapture that work. Don’t be afraid to redefine OKRs. And if you do end up needing to do this ahead of schedule, dig into what factors are causing the derailment: is it something responding to external factors (ie, a global pandemic), or is some serious backtracking needed? If it’s the latter, your team may want to return to the drawing board and spend some time with Learning OKRs/Learning Goals, where you can focus on testing assumptions, testing the market, and reevaluating. For a deep dive into the three kinds of OKRs, no one explains it better than the folks over at What Matters (a team lead by John Doerr himself).
Another benefit to using OKRs: it can assist with building a healthy company culture. We recently blogged about how important company culture is for remote teams, and the way OKRs can play a role is significant: if you can involve every person at your company or on your team to not only see the company’s vision, but also provide them opportunity to contribute to it, that’s an easy path to increased engagement, higher motivation, and better performance at all levels. A healthy organization should value input from all employees, no matter their title.
As far as timelines go, it’s important to survey your own individual use case. While setting quarterly OKRs is seen as a kind of default cadence, don’t hesitate to change that as you and your org sees fit.
What is a KPI? How is it Different from an OKR?
OKRs and KPIs go hand-in-hand. KPI stands for Key Performance Indicator, and it is widely defined across the Internet as “a quantifiable measure of performance over time for a specific objective.”It’s easy to get lost in the weeds here, because a KPI can start to sound like the same thing as the KR in OKR (ugh with the acronyms already).
So, once again, we will refer back to the team at What Matters, because they sum it up very succinctly: “Most organizations are familiar with KPIs, or Key Performance Indicators. KPIs can be great for measurement, but they’re standalone metrics — they may tell you when a measure is good or bad, but they don’t necessarily communicate context or what direction your team needs to go in. OKRs […] provide that much needed direction and context. We like to call them ‘KPIs with soul’. The Objective describes what you want to accomplish and the Key Results describe how you know you’re making progress. Since KPIs are measurable, they can make great Key Results. In other words, rather than talking about OKRs versus KPIs, we prefer to think of them as complementary.”
In this letter-heavy world of goal management, the critical thing to not lose sight of is this: you should lead with OKRs and manage with KPIs. OKRs capture more important things to get done, while KPIs are best used for the numbers, details, to-do style tasks, Jira tickets, etc.
Strategy first, OKRs second
Companies love growth. Larger companies translates to more customers, which of course begets more money, more word of mouth chatter, possibly bigger valuations. With this in mind, it’s absolutely crucial for teams and companies to understand the difference between strategy and OKRs. Strategy must come first. The Harvard Business Review has a great take on carving out company strategy: “In a nutshell, […] mission is about what will be achieved; the value network is about with whom value will be created and captured; strategy is about how resources should be allocated to accomplish the mission in the context of the value network; and vision and incentives is about why people in the organization should feel motivated to perform at a high level. Together, the mission, network, strategy, and vision define the strategic direction for a business. They provide the what, who, how, and why necessary to powerfully align action in complex organizations.”
Only after you have established the core group of tenets for your organization can you begin focusing in on OKR implementation.
“There are going to be times with rapid growth that you focus on just numbers, but in setting strategy, there are a lot of equally important measures before growth. Don’t forget to measure the other KRs needed for a stable and sustainable foundation.” -Ryan Panchadsaram, technical advisor at Kleiner Perkins and former Deputy Chief Technology Officer of the US
What are some Examples of OKRs?
It really depends on the organization.
Since Status Hero is creating and selling a software pro, a lot of our OKRs look something like this:
Objective: Assemble core team, establish processes, and prepare the product for growth.
Key Result: First product team: 2 engineers, 1 design 2. Head of Marketing hired 3. Company OS up and running
Another good practical example: a team that works in Sales. This is a department that runs on numbers, and it makes sense why percentages, projections and goal setting is number-focused. However, if you are already tracking quotas and hard data for your team in another place, you don’t need to use implement OKRs for those same metrics. Instead, take a step back with your team and look at a bigger, more holistic picture — what do we need to get done, what can make us most effective, and how do we measure that? Maybe it’s how many campaigns were sent, how much/how many average customer satisfaction scores went up — the OKR framework should be used as a continual improvement device. Let quota sheets do harder numbers, use OKRs for leading where you want to go as a team.
Tips/Tools for writing OKRs
We’ve found the best way to start is just a blank sheet of paper (well, okay, what we really mean is an empty word processing doc). Everyone can access this document, and company and teams/depts can layer and brainstorm OKRs.
If that sounds too intimidating, templates are available online to help you start the OKR process.
A few reminders to let percolate before you jump in:
- The best OKRs are just out of reach — they’re meant to inspire. Chances are good that you won’t hit 100% of your Key Results. That’s completely normal. There is cause for celebration even if you make it to 65% as long as the company and employees are energized and moving in the right direction. We always refer back to this advice from Google: “The sweet spot for OKRs is somewhere in the 60-70% range. Scoring lower may mean the organization is not achieving enough of what it could be. Scoring higher may mean the aspirational goals are not being set high enough. For organizations who are new to OKRs, this tolerance for “failure” to hit the uncomfortable goals is itself uncomfortable.”
- One of the reasons OKRs have become ubiquitous particularly in the tech realm is because they allow for aspirational goals, not just “business as usual”. At least one of your Objectives should be what’s considered a “stretch goal” — an aim that’s ambitious, difficult, but still achievable.
- OKRs need to align your entire organization toward your most critical objectives. Individual departments and teams shouldn’t have competing priorities. On the flip side, it’s fine if OKRs overlap (and many times they will!) among different departments. Different individuals and team members should take ownership of certain OKRs and KPIs that that encompass the overlay, provided they communicate clearly between said teams/departments.
- OKRs are not the same as a To-Do list. A common mistake companies make is turning OKRs into a list of tasks that need to be completed. Your Objectives and Key Results should be about impact, not micromanagement.
- Expect a learning curve. It’s unreasonable to expect team members to be an expert at crafting OKRs or even adopting new habits right away. Expect that it will take some time investment for your company to learn and successfully roll out OKRs into your existing workflow. If you are a start up with a small group, the whole org can learn together. At a large company, though, you may want to assign or have specific team volunteer to test out this methodology before adopting throughout the organization. The small team will discover how the system works for them and can distill takeaways and best practices to the rest of the company.
- Ideally, you want no more than three to five Objectives at each level of your organization.
If you think you want a guide or template for your first time creating OKRs, the team over at Atlassian has laid out a great three step exercise for this very task.