OKR stands for Objectives and Key Results, a goal management framework that helps companies implement the strategy.
OKR’s started from Andy Grove at Intel and spread to other Silicon Valley companies thanks to John Doerr. Google adopted OKR in 1999, and it supported Google’s growth from 40 employees to 100,000+.
Some of the companies that use OKRs include LinkedIn, Airbnb, Spotify, Dropbox, Amazon, Twitter, Booking. But it’s not only for tech startups. OKRs are widely used in other industries, for example, Dun and Bradstreet, OpenX, Adept Media, etc.
OKR formula (according to John Doerr) is:
I will _______ (Objective), as measured by _______ (Key Results).
Objective — is a memorable description of a goal to be achieved in the future. It’s short, aspirational, engaging, designed to give direction, provide motivation and challenge the team.
Key Results — are metrics that measure progress towards an Objective. For each Objective, you should have 2 to 5 Key Results. This is not a step or a plan, it’s only the most important metric that would signify you’ve successfully achieved your Objective.
Key Results are scored 0.0 to 1.0 (or 0% to 100%). The Objective progress is the average of the KRs progress.Key Result is NOT a task. It's a qualitative metric of how far you're from your desired destination. OKRs deliver the value for the team; it should pass the "So what?" test.
The specific steps you’ll make to influence your OKR are beyond the OKR framework and are called Tasks or Initiatives. OKRs are not about listing all your steps or plans. It’s about setting the direction and measurable metrics about your progress towards that direction!
Inspirational. Objectives should inspire and motivate them to contribute and create an understanding that it indeed matters. Powerful Objectives are like small mission statements.
Attainable. Even though Objectives should be bold, they should also be realistic and possible to achieve within the timeframe.
Significant & Meaningful. Objectives should not be small operational tasks or to-do items. They should matter.
Short. Not more than 7-10 words. Short Objectives make them easy to remember.
Controllable. The executor needs to be able to impact everything that's needed to achieve the Objective directly.
No buzzwords or jargon. Objectives should be easy to read and understand by anyone, including newcomers. Avoid any abbreviations and buzzwords.
Without numbers. Numbers, percentages, KPIs are for the Key Results. Let Objectives set the direction first before specifying the metric.
Qualitative. If Key Results don’t contain a number, most likely it's a bad Key Result.
Outcome-focused. Key Results should not measure the output (number of emails, number of articles, etc.), but the outcome (revenue, increased referrals, client/team satisfaction, etc.).
Controllable. As with Objectives, you need to be able to make an impact on the Key Results you set.
Aligned. Make sure your Key Results align with each other. For example, growing the client base 2x and profit 2x in the same period is probably unrealistic.
Moonshot. Key Results should motivate the team to achieve more than they previously have done. It's ok to miss them for a bit.
Holistic. Together, Key Results should describe the progress towards your Objective. When you achieved all your Key Results - you've completed your Objective. There should be no other interpretation.
Assigned to the owner. When everyone is responsible, then no one is. Make sure you assigned the person who understands and accepts the ownership of the Key Result.
Updated regularly. It's essential to update the Key Results along the way, not only at the end of the period — the best way to do it - during the weekly/bi-weekly OKR check-ins.
SMART. Overall, Key Results should target to be SMART goals.
0-30%
Underperforming
Significantly underperforming
30-60%
Average pe rformance
Underperforming
60-80%
Great result
Average pe rformance
80-100%
Not ambitious enough goals
Great result
“If it does not have a number, it is not a Key Result.” - said Marissa Mayer, former Google VP.
Key Results should be measurable and tied to tangible milestones.
OKRs are straightforward, easy to understand. They do not list all the everyday activities or routine tasks. They display only the most important focus of the organization at any given moment!
The traditional top-down goals cascading is not about OKRs.
OKRs use a simultaneous top-down and bottom-up approach. The company (usually C-level) sets the strategic OKRs (top-down) that each department and individual team member should use to draft their own OKRs (bottom-up).
A good rule of thumb is that at least 60% of the OKRs should be created bottom-up. It gives autonomy and personal responsibility for them.
All the OKRs, CEO to the front-line employee, should be visible to all team members. So that anyone can check it and have a holistic view of how the company goals cascade. It also gives a sense of social accountability when your goals are always visible to everyone.
OKRs are not about “set and forget until the end of the year”.
To leverage the strategic and tactical approach, OKRs have typical rhythm:
At the end of each period, teams grade the OKRs update strategic if needed and set the next cycle OKRs. It’s usually done during the strategic sessions.
KPI (Key Performance Indicator) evaluates the performance of the process or activity. That means that KPIs evaluate past success; they are metrics of how well your organization is going.
You might be thinking that OKRs and KPIs are identical. Especially KPIs and Key Results. That's true, and they are similar. But they also have significant differences:
In most cases, you'll need both KPIs (to monitor the performance overall), and OKRs (to set goals, align the team, and achieve a positive shift in performance). Often, one or several KPIs will become Key Results for the Objectives when the team would decide to focus on improving a particular trend.To better understand this difference, let's consider an example.
The marketing team created an excellent landing page that delivers the product value and converts visitors into customers. Now the team wants to acquire more users to increase the income.
The OKR for the team will be:
Objective:
Bring new inbound leads to the website
Key Results:
1. Increase the monthly visitors to the website from 3k to 7k
2. Increase the trial signups from 250 to 500
At the same time, the marketing team has a lot of KPIs to monitor:
DAU/MAU
Conversion Rate
Customer Acquisition Cost
Domain rating
Bounce rate
Visitors by country/browser/language/etc.
The marketing team continually monitors all the KPIs. But depending on where they would want to focus their attention, they set OKRs to improve several of these KPIs. In the example above - it is user acquisition. Still, it as well can be conversion rate, social media followers/comments, time on the website, customer acquisition costs, funnel optimization, etc.
As we see, both KPIs and OKRs have a context of use and work best together. KPIs serve the role of measuring past performance. OKRs help you achieve your future goals. They are both about focusing the team on what matters. The fewer goals and metrics, the higher team performance. And when everything is a priority — nothing is.
Even though the OKR framework looks simple, it’s easy to implement it wrong and not achieve the benefits.
Understanding why you want to adopt OKRs will help you and your team keep moving forward. The common OKRs benefits are:
Alignment
Focus
Transparency
Accountability
Engagement
Achieve beyond expected
Define the most important reasons why you want to adopt OKRs and be ready to explain team how OKRs will help improve your business.
OKRs help companies achieve their goals, but OKRs would be useless if team members don’t know where the company is going. It should be not only about money. Having a higher purpose would allow each team member to align their efforts in the same direction.
OKRs won’t work unless you have a healthy culture inside the organization. Team members should trust that everyone is working towards common objectives, and not to get the biggest piece of the pie for themselves. Healthy culture would allow team members to give and accept constructive feedback, and would encourage collaboration between team members and departments to achieve higher team OKRs (and not just individual).
Recommended reading: Google’s Project Aristotle
OKRs won’t work if the organization doesn’t have the top-management (Board Members and all C-level) buy-in. The strategic OKRs and overall company direction come from them. And if they don’t give it enough focus and priority, the OKRs would be forgotten soon.
When something is everyone’s responsibility, it is no one’s responsibility. The OKRs master would be responsible for making sure the OKRs are implemented correctly. Think about him/her as a Scrum Master for agile teams.
OKRs help companies achieve their goals, but OKRs would be useless if team members don’t know where the company is going. It should be not only about money. Having a higher purpose would allow each team member to align their efforts in the same direction.
The role of the OKRs master is to:
It’s crucial to train your team members if they have no prior knowledge about this collaborative goal-setting technique. You can hold an OKR workshop or presentation that covers introductions to OKRs and their basic principles. By the end of the intro to OKRs session, your team members should have mastered the basics of writing actionable OKRs.
Set up regular OKRs review meetings and communicate OKRs regularly. Weekly or bi-weekly meetings are just fine to sync about OKRs and resolve blockers. They should be quick and effective (like scrum stand-ups). Not all team members should be required to participate in such meetings (but recommended).
To set and align the first OKRs it’s best to conduct strategic sessions among the company's key people (up to 10 max). We also recommend conducting it regularly every year and a shorter version every cycle (quarter).
During the strategic session you:
Recommended reading: HBR on Strategic meeting
Unless your team consists of five or fewer people, it is always a good idea to select a few people to be your pilot group.
You can try OKRs within the function team (like Sales) or management. Both approaches have their pros and cons. Selecting a management team will help you align OKRs with strategic goals and see the results faster. While choosing a functional team will not require involving all top management which can be more timely and complicated.
Decide on the length of the OKR period (cycle): from our experience, teams need 2 to 4 months to train on OKRs and see the first results before scaling to the whole company.
Define the criteria that will make the pilot successful.
Bringing your team together weekly or bi-weekly for an OKR health check is helpful. You don’t want to risk veering too far off the track that correcting the course becomes costly, both in time and resources. Holding regular sessions of OKR check-ins helps every team member refresh their commitment, cross-check progress, and make appropriate adjustments to achieve the OKRs.
Weekly check-in template in Plai
Whether your team has achieved the goals or not, a thorough review at the end of the OKR cycle provides valuable insights to all members. It also strengthens the perception that you’re placing great importance on OKRs as a strategic collaborative tool.
During the OKR reporting, credit the successes to the respective team members. This helps them move towards larger goals, stay motivated, and strive harder in the next cycle. It’s also an excellent opportunity to review and find opportunities for improvements in other unfulfilled objectives.
Moonshot - stretch targets, beyond the threshold. of what the team thinks possible.
Among Google's "Ten things we know to be true" is also: "We set ourselves goals we know we can't reach yet because we know that by stretching to meet them we can get further than we expected." Google's OKR methodology later reflected this principle with moonshot goals.
Roofshot - the goals that teams target to achieve by 100%. They are still hard goals, but achievable.
Moonshot goals are essential and fundamental to the success of the OKR methodology. However, they are much harder and require a certain level of team maturity to handle them properly. Especially in the beginning, we highly recommend starting with roofshot goals only.
Below is a comparison table when to use a moonshot and when to use a roofshot.
Description
Stretch targets, beyond the threshold of what the team thinks is possible.
Still hard goals, but the team likely did something similar before and think it is achievable.
Success criteria
Success is achieving 60-70%
Success is achieving 100%
Alignment requirement
Low - for independent goals
High - for interdependent goals
Applicable context
R&D projects. Research in the new field. Ambitious target to hit un the critical moment.
Regular goals. For interdependent goals, to unblock other teams or hit a critical deadline. Operational, accounting, or other regular work.
% distribution
~30% (1 in 3 Objectives or i in 3 Key Results is a moonshot)
~70%
In practice, there are usually 3 levels of OKRs:
Each level has 2-4 Objectives.
Some companies drop individual OKRs and decide to focus just on the company- and department-level OKRs (e. g. read why Spotify decided to ditch individual OKRs).
It’s important to align your OKRs between levels, but don’t overthink and overcomplicate it. OKRs are transparent, you should trust your team members to sync with each other if something needs to be adjusted along the way!
“Having goals improves performance. Spending hours cascading goals up and down the company, however, does not. It takes way too much time and it’s too hard to make sure all the goals line up.” — said Laszlo Bock, former Google VP.
See some examples of the OKRs you might use for inspiration on the following pages.
Objective 1:
Achieve record financial results
Key Results:
Objective 2:
Improve culture and employee engagement
Key Results:
Objective 1:
Improve customer satisfaction with our support team’s work
Key Results:
Objective 2:
Improve customer support operations speed
Key Results:
Objective 1:
Hit quarterly revenue of $3,000,000
Key Results:
Objective 2:
Increase the upsell deals
Key Results:
Pro tip: check more ideas of Sales OKRs & tips on bonuses calculation
Objective 1:
Bring new inbound leads to the website
Key Results:
Objective 2:
Boost customer acquisition on the website
Key Results:
Pro tip: check more OKR ideas for SMM, PR, PPC, and Content Marketing
Objective 1:
Skyrocket team performance
Key Results:
Objective 2:
Create an effective leave management system
Key Results:
Objective 1:
Simplify user onboarding
Key Results:
Objective 2:
Increase user engagement
Key Results:
Objective 1:
Improve the quality of our product
Key Results:
Objective 2:
Accelerate the development team speed
Key Results:
Objective 1:
Achieve record revenue and profitability
Key Results:
Objective 2:
Improve culture and employee engagement
Key Results:
While the big companies that successfully adopt the OKR methodology, early-stage startups operate in a different environment. For early-stage startups before the Product/Market Fit the main goal is learning and iterating. It’s harmful to them to prematurely optimize any processes, as they are not sure yet if the process is the right one at all. That’s why some people argue that OKRs work only for 25+ people teams, and only after the Product/Market fit. For example, Andrew Chen, an investor at Andreessen Horowitz, claims that “OKRs are almost certainly harmful for pre-P/M fit startups.”
But is it true? Which of the OKR principles early-stage startups don’t want to have? Don’t they want to have transparency around the ambitious goals? Don’t they want to measure their progress? Don’t they want to allow autonomy (even for small teams below 10 people)? I believe that NO. Any size of the organization would want to have the benefits of the OKRs. The only problem with the standard OKR methodology for early-stage startups I see — that quarterly OKR cycle is too big for the startup. And it seems to be the only objection of Andrew Chen as well.
Here are some tips on how to adopt OKRs for the pre-Product/Market Fit startups based on my experience working with startups at Uptech.
Even as small as 2 weeks if needed. Startup priorities might indeed change fast. But you need at least some level of certainty before turning your ship around.
If you figure out the new info and you want to pivot immediately — that’s ok for startups. But likely you won’t do it too often. It would still be best for your team to finish the goals in most cases and measure the outcome. So that you make data-informed decisions. Unless you finish your iteration and measure the results, you might be repeating the same activities and mistakes.
For early-stage startups, you’d best set OKRs that would allow you to validate your hypothesis as fast as possible. Such Key Results as “talk to customers” or “conduct user interview” would help you do the right thing in your startup.
Having these Objectives written down would help you maintain focus and NOT do the other less-important things. And maintaining focus is essential for startups. So that you don’t end up endlessly polishing your MVP with “just this last small improvement.” The proper time-bound goals would help you stay on track and focus on what matters.
Some might argue that if you make these changes, it’s no longer OKRs. Well, where is the holy unbreakable definition of OKRs? Even organizations that preach OKRs don’t use them in the same manner. In Google, every team adopts the methodology for their needs. As long as the main principles are maintained, it is still the same methodology.
Again, OKR is just a framework that should only be used if it helps. In case you’re a 3-people startup, sit in the same space and feel like you’re all on the same page — you probably don’t need OKRs. But as soon as you think that your team might be more focused and aligned — OKRs will help you, regardless of the size of your organization.
At a glance, OKR is a goal-setting and measurement system that focus on individuals, while Agile is a developmental approach that prioritizes team mobility. Professionals have difficulty figuring out how to fit OKR in Agile or vice versa.
It is vital to understand that OKR and SAFe are not mutually exclusive. At the moment of writing, SAFe recommends using OKR to measure and grow business processes at various levels in the organization. Below are some reasons why it’s a good idea to use OKRs and Agile together.
SAFe emphasizes streamlining the collaboration of multiple teams. It helps the entire organization move forward from one milestone to another and adapt to market changes. While Agile principles promote operational efficiency, it lacks a definitive framework that aligns collaborative effort along the vertical chain of command.
This is where OKR comes in. OKR provides a framework that promotes goal transparency amongst team members. It answers the ‘why’ specific tasks are done and spurs the teams toward shared goals. Together, OKR Agile allows teams to create smaller and measurable goals that align with the company’s broader direction. Setting goals and constantly reviewing key results ensure that Agile teams do not lose sight of the bigger picture.
By sticking to the Kanban method, team members are empowered with self-autonomy in setting goals and tracking progress. Merging the OKR Kanban board with the OKR chart helps promote transparency as every member is aware of which tasks are pending, in progress, and accomplished. This encourages team members to organize themselves around the commonly-agreed objectives.
Kanban’s principle of pursuing incremental and evolutionary change overlaps with Agile fundamentals. Teams go through Kanban cadences at specific intervals to evaluate strategic objectives and align operational tasks. Meanwhile, OKRs provide the substance for teams to realign their efforts towards organizational goals.
Applying OKRs can be quite straightforward for Agile teams familiar with Scrum practices.
Scrum is result-oriented, and so is OKR. Each member must agree on what success or ‘done’ mean within a Scrum team. Likewise, OKRs define success with measurable objectives, albeit focusing on broader goals rather than product-specific ones. A product team that practices OKR Scrum sets strategic goals to guide the incremental effort for the product.
Both OKR and Scrum emphasize timeliness where teams strive to accomplish specific milestones within the stipulated period. In OKRs, the team conducts regular reviews to synchronize progress in quick and frequent meetings. This is similar to Scrum standups, where the core team members update each other on progress and resolve blockages.
A designated leading role is equally vital for Scrum and OKRs. In the former, the Scrum Master ensures that the team workflow adheres to Scrum principles. Likewise, OKRs master plays a leading role in coordinating goal settings and objective tracking amongst team members.
Agile teams are used to working in small sprints or iterative cycles that enable them to achieve incremental goals. Compared to the conventional waterfall method, Agile ensures that product teams are highly responsive to changing situations and can realign quickly with retrospective, backlog, and scrum meetings.
Likewise, OKRs are highly flexible and go hand-in-hand with Agile’s principle. OKR uses a lightweight, adaptive framework that allows team members to meet up frequently to realign goals and increase efficiency. It replaces conventional long-term strategic meeting, which is deemed less effective and has no place in Agile practices.
Instead, team members meet up at different intervals to discuss strategic and tactical OKRs. Teams usually set a 1-year horizon for strategic OKRs while reviewing tactical OKRs at least every quarterly. During the reviews, team members evaluate current results and pivot their operations accordingly to the OKRs.
Most companies have no problem implementing OKRs on the team level but struggle to scale them in SAFe implementation across the organization. Agile OKR is only effective if organizations have a clear top-down view of the interconnected relationship OKRs for every level.
In SAFe implementation, OKRs cannot be treated as an isolated goal-setting approach within a specific team. Instead, every goal must be purposeful toward high-level OKRs. For example, individual goals must align with the team’s OKR, while managers must work towards results that spur the company in the right direction.
Automated OKR solutions can solve the complexity of visualizing and coordinating organizational-wide OKR. Instead of manually tracking cascading OKRs that span several levels deep, using Plai lets you build a spider-web-like OKR connection that traverses vertically and horizontally. It tightly couples strategic goal settings into the rapid workflow that Agile teams are accustomed to.
Alignment of annual goals with shorter cycles in Plai
OKR & the performance appraisal methodologies have their pitfalls and may even be harmful to teams if done wrong. Learn about the common mistakes and why OKRs & performance reviews haven't worked for your team yet.
OKRs are not for everything you do in the organization. Routine everyday tasks should not be included in the OKRs. They are about the most important focus where extra effort is needed. Too many Objectives or key results do not allow focus and make it hard to align.
Key results are about measuring how far you’re from your destination, from your Objective. The key Result should be a metric. They should not be treated as tasks or To-Do lists. Even though Key Results might include some activity-based tasks (e. g. conducting a speech at the conference), but this is an exception rather than a rule.
OKRs should be created bi-directionally to leverage personal accountability. Don’t set them silently behind the closed door. Set them together and communicate openly.
It’s a widespread mistake. Review and update OKRs regularly to monitor if the team's progress is on track. Without getting back to OKRs, it’s easy to lose focus.
OKRs can be one of the sources of information for performance reviews, but they should not be the main or only source for evaluation. If you’ll directly connect OKR results with compensation, the team members would just set less ambitious goals to make sure to achieve them. Team performance would suffer significantly from such an approach. Learn more about it from this article.
Some people argue that OKRs work only for 25+ people teams and only after the Product/Market fit. We at Plai don’t believe that it’s true, as we’ve been helping small businesses and startups successfully adopt OKRs for over 4 years. However, there are some differences in how such companies should adopt OKRs to make them work. Learn about it from this article.
Any hints of punishment during the assessment will shut down the communication channel with the employees. This is even more so if they have traumatic experiences with previous reviews. So, choose your words wisely when providing feedback to employees. Learn about how to make appraisal less stressful for employees from this article.
Have patience - everyone fails with OKR the first time. We don't know any organization that got them right from the very beginning and implemented them effectively from day one. Understanding the process, figuring out what matters, setting the right Objectives, and relevant, measurable Key Results focused on delivering value is hard. Have the patience to try the OKR approach for at least 2-3 cycles before making the final decision whether to keep with them or not. The real value of adopting OKRs can take as much as a full year to become evident to the whole team.
Set these expectations correctly from the very beginning when you introduce the methodology. Don't expect miracles to happen from day one.
Read the success stories of other companies for inspiration and be prepared for a marathon, not a sprint. As a result, you will build a powerful team that will grow your business with you throughout the years of tenure.
OKR & the performance appraisal methodologies have their pitfalls and may even be harmful to teams if done wrong. Learn about the common mistakes and why OKRs & performance reviews haven't worked for your team yet.
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