Read the updated post, Art of the OKR Redux instead! A lot has changed since 2014….
Original “Art of the OKR” below, for archival purposes:
I wrote a book on using OKRs called Radical Focus: Achieving Your Most Important Goals with Objectives and Key Results
As well, I run OKR workshops to get you started if you want to adopt this powerful technique. Contact me. me@cwodtke.com
The OKR approach to setting goals has been used at Google, Linkedin, Zynga, General Assembly and beyond and is spreading like wildfire across successful Silicon Valley companies. The companies have adopted the approach are growing like weeds. OKRs provide focus, united the teams behind a single strategy, and makes all goals into stretch goals. If want to get your entire company to execute like the hounds of hell are behind them and the gates of Valhalla are open before them, try the OKR approach out.
OKR stands for Objectives and Key Results. The form of the OKR has been more or less standardized. The Objective is qualitative, and the KR’s (most often three) are quantitative. They are used to focus a group or individual around a bold goal. The objective sets a goal for a set period of time, usually a quarter. The key results tell you if the objective has been met by the end of the time.
Before you set OKRs, it is critical your company have a mission. Without a sense of purpose AND a scope to accomplish it, anything you do is equally ok. I’ve written a bit on this in the North Star post.
But once you have a mission you a start attacking it in a methodical way. We do that by setting an objective.
Objectives
Your objective is a single sentence that is
Qualitative and Inspirational
The objective is designed to get people jumping out of bed in the morning with excitement. And while CEO’s and VC’s may jump out of bed in the morning with joy over a 3% gain in conversion, most mere mortals get excited by a sense of meaning and progress. Use the language of your team. If they want to pwn it or kill it, use that wording.
Time Bound
e.g. doable in a month, a quarter. You want it to be a clear sprint toward a goal. If it takes a year, your objective may be strategy or maybe even a mission.
Actionable by the Team Independently
This is less a problem for start-ups, but bigger companies often struggle because of interdependence. Your Objective has to be truly yours, and you can’t have the excuse of “marketing didn’t market it.”
For example, some good objectives:
- Pwn the direct to business coffee retail market in the south bay.
- Launch an Awesome MVP.
- Transform Palo Alto’s Coupon-Using habits.
- Close a round that lets us kill it next quarter.
and some poor objectives:
- Sales numbers up 30%.
- Double users.
- Raise a series B of 5M.
Why are those bad objectives bad? Probably because they are actually key results.
Key Results
Key results take all that inspirational language and quantifies it. You create them by asking a simple question “how would we know if we met our objective?” This causes you define what you mean by “awesome” “kill it” or “pwn.” Typically you have three key results. Metrics can be based on
- Growth
- Engagement
- Revenue
- Performance
- Quality
That last one can throw people. It seems hard to measure quality. But with tools like NPS*, it can be done. With KRs you can balance forces like growth and performance, or revenue and quality by making sure you have the potentially opposing forces represented.
“Launch an Awesome MVP” might have KR’s of
- 40% of users come back 2X in one week
- Recommendation score of 8
- 15% conversion
Notice how hard those are?
KRs Should be Difficult, not Impossible
One great way to do this is to set a confidence level of five of ten on the OKR. A confidence level of one means “never gonna happen my friend.” A confidence level of ten is also known as sandbagging. You are looking for a sweet spot where you are pushing yourself and your team to do bigger things, and where you have a 50/50 shot of failing.
Take a look at your KRs. if you are getting a funny little feeling in the pit of your stomach saying “It would take a miracle to hit all three of these…” then you are probably setting them correctly. If you look at them and think “we’re doomed” you’ve set them too hard. If you look them and think, “I can do that with some hard work” they are too easy.
What Makes OKRs Work?
OKRs Cascade
The company should set a OKR, and then each team should determine how their OKR leads to the company’s successful OKR. They can focus on a single key result or try to support the entire set. For example, engineering might decide satisfication is tightly connected with speed (and they’d be right.) So set an OKR like
Performance Upon Launch Equivalent to an Established Company
- 99.8% uptime
- <1 second response time
- Instantaneous perceived load time (measure by survey, 90% users say page loaded “immediately”)
(I’m not an engineer so please do not mock my KR’s too hard)
As you can imagine, some teams like product management can easily align their OKRs with the company OKRS, while others may have to dig a little deeply to make sure they are supporting the company goal. Much of the value in OKRs comes from the conversations on what matters, how it will be measured and what it means for the teams who are used to working from their own standards, apart from the business goals. Customer service, design and engineering often have to work a little harder to find meaningful OKRs that will move the business goal forward. But it’s worth doing. Can customer service upsell disgruntled customers to a better plan? Can design crate an onboarding flow that improves retention? Can engineer increase satisfaction with a better recommendations algorithm? No department can be an island.
As well, each individual should set individual OKRs that reflect both personal growth and support the company’s goals. If the company’s OKRs is around aquistion, a product manager might decide she wants to “Get great at sales.” She then might chose KRs of completing sales training with a high score as well as improving the conversation rate of the product she runs.
Individual OKRs are about becoming better at your job, as well as helping your product get better. It’s also a gift to managers struggling with a difficult employee. In the Individual OKR setting process, she can work with that person to set goals that correct those problems before they blossom into full disciplinary actions. By setting measurable KRs, she can avoid accusations of personal bias if things do not improve.
OKRs Are Part of Your Regular Rhythm
When people fail, it’s often because they set OKRs at the beginning of the quarter, and then forget about them until the end of the quarter. In between you are barraged by teammate requests, the CEO sending you articles, customer requests… there are always 101 interesting things to spend your time on that do not lead to success. I highly recommend baking your OKRs into your weekly team meetings (if you have them) and your weekly status emails. Adjust your confidence levels every single week. Have discussions about why they are going up or down.
Do Not Change OKRs halfway through your bounded time period.
Suck it up and either fail or blow past them, and use that learning to set them better next time. No team gets OKRs perfect the first time. You are aiming to achieve 1-2 of the three KRs for you objective. As well, changing them dilutes focus, and keeping teams focused is the entire point of the OKR. Some companies have two or three OKRS, but I recommend starting (and perhaps staying with) only one company OKR, and one supporting OKRs set per team.
Get Ready to Fail… BIG!
Let’s be honest: we hate to fail. Everyone in the valley gives lip service to failure, but really we still don’t like it. But OKRs aren’t just about hitting targets but about learning what you are really capable of. They are there to push you to do better. And honestly, if you missed the KR of 15% conversion but got 10%, are you heart broken? It’s a great metric, and you’ve learned a ton about what works and what doesn’t.
Compare that to the goal you thought you could make, maybe 2% conversion because you’d been reading the 80/20 articles. If you shoot for the moon, you may not make it but it’s a hell of a view.
Objectives and Key Results are a tested and powerful way to accelerate your company’s growth after you’ve found product market fit, or to focus the search as you explore. I recommend them highly for anyone who seeks to accomplish extraordinary things.
Buy Radical Focus: Achieving Your Most Important Goals with Objectives and Key Results
Watch a talk on OKRs in action
My posts on OKRs and Execution
- Execution is Everything
- Common OKR Mistakes (and how to fix them)
- The OKR Worksheet
- The Dreaded Weekly Status Email
- Use OKRs in your Personal Life
- Monday Commitments and Friday Wins
- Cascading Your OKRs
In a future post, I’ll answer some commonly asked questions about OKR’s. Feel free to ask your own in the comments.
…and others posts on OKRs
High Output Management by Andy Grove
How Google sets Goals: OKRs
Slides
FOOTNOTES!
* an approach originally laid out in The One Number You Need to Grow, NPS has been turned into a highly effective measurement of perceived quality. Startups, the short version is ask one question: How likely are you to recommend this to friends/family/colleagues on a scale from 1-10. if they say 9 or 10 you’re doing well. If they say 7 or 8 they aren’t talking. and if it’s less, they are probably badmouthing you.