OKR – the Concept



OKR – The Concept

As a Human Capital Strategist, when we started helping companies adopt OKR methodology, transforming how they set goals. I had a few questions on my mind:
1)   What is the best approach for implementing OKR, for high impact organizations, especially startups, where things are lot more fluid – characterizing a very high degree of VUCA elements.
2)   How do you use OKR at a scale?
3)   How do we connect OKR and Agile? It is an obvious fit, but how do you do it in practice?
Having deployed this framework at high impact startups, most of them need their time to adopt, adapt, and internalize the entire process.  

It is a journey, not an event. Being a mental model, OKR requires a deliberate shift in cognitive & behavioral space.  

This read, supposedly serves as an implementation guide, guiding the ‘OKR to-be’ organizations in the right direction, along with the pitfalls to avoid.

First developed by legendary Intel CEO Andy Grove, Objectives and Key Results (OKRs) is a collaborative goal-setting system that has been adopted by many high performance organizations, as an inherent leverage in achieving high growth & impact. OKRs have helped countless organizations not just build products rapidly, but also stay focused, engaged, and aligned with their company goals.

OKRs translate your company strategy into a digestible way that allows every team member to know they’re working on the right thing.

Even better, OKRs are dead simple. At least in theory.

In practice, there are a few best practices and pitfalls you need to watch out for if you want to get the most out of bringing OKRs to your business.
So, if you’re tired of hitting the finish line only to realize you were working toward the wrong goals, sick of feeling like the work you do each day isn’t moving the needle, and want to get your team more aligned with company goals and strategy, OKRs are for you.

What are OKRs?
Like their name implies, OKRs are made up of two distinct parts:
1)     Objectives: What you want to accomplish
2)     Key Results: How you’re going to measure the success of your work
Sounds simple, right? On their own, an Objective and Key Results are easy concepts to understand. But it’s when you bring them together that magic happens. To clarify what we’re talking about, let’s tell a little story:
Way back in the early days of Google, venture capitalist John Doerr paid a visit to the company’s Mountain View HQ to talk about their future.
Doerr had previously worked under Andy Grove at Intel (the creator of OKRs) and had joined just as Intel was transitioning from a memory company to a microprocessor company. A pivot is no small feat for any company. But one the size of Intel? To keep all of their teams in line as they went through these changes, Grove came up with the idea of OKRs, which he described through a simple formula:

We will accomplish _________ when we achieve _________

That formula was what kept Intel in check as they successfully changed their business model. And it was what Doerr wanted to show the founding team at Google.
If you think about it, a proper goal isn’t just a statement of what you want to achieve, but a road map of how you’re going to get there. The “as measured by” in Grove’s formula is what makes a goal a goal (otherwise you just have an aspiration).
This formula is the best way to describe what an OKR really is:

We will accomplish _________ when we achieve _________

In this context, we can expand the definitions of each part of the OKR to something like:
1)     Objectives: Memorable, qualitative descriptions of what you want to accomplish in a given time-frame (such as quarterly). Objectives should be ambitious and feel somewhat uncomfortable. They should also be short, inspirational, and public so everyone knows what everyone else is working on.
2)     Key Results: A set of 2–5 metrics that measure your progress towards the Objective. They should describe an outcome, not an activity (i.e. they shouldn’t include words like “help”, “consult”, or “analyze”). Once they are all completed, the objective is necessarily achieved.
The power of OKRs, as Doerr describes, is in having a “North Star” every quarter by which you can set your priorities. As well as being able to see how it fits in with everyone else’s goals and priorities:
“It was incredibly powerful for me to see Andy’s OKRs, my manager’s OKRs, and the OKRs for my peers. I was quickly able to tie my work directly to the company’s goals. I kept my OKRs pinned up in my office and I wrote new OKRs every quarter, and the system has stayed with me ever since.”

Instead of simply being another task on your list, an OKR is an ambitious goal that’s supported by concrete actions that you need to take to hit. As Google explains on their re:Work blog, Key Results should be numerically based and easy to grade with a number (they use a scale of 0–1) with the “Sweet spot” for OKR success being somewhere around 60–70%.

If someone consistently fully attains their objectives, their OKRs aren’t ambitious enough and they need to think bigger.
When used this way, OKRs enable teams to focus on the big ideas and accomplish more than they thought was possible. All without the usual fear of the repercussions of “missing” a goal.
It might seem strange to purposefully set goals you don’t think you’ll hit. But when aiming high, even failed goals result in substantial progress. This is where the nuances and skills behind writing a good OKR becomes apparent.

What is an example of a good OKR?
So what does this all look like in practice? Let’s run through an OKR example to solidify our understanding of their fundamentals before moving on.
Let’s say your business, like many others, relies on giving a better customer experience than your competitors.
So, your quarterly objective might be something along the lines of “create an awesome customer experience”. But how do you know if you’re succeeding in doing this?
You need some form of measurement to make this an OKR you can actually work towards. But what shows you’re creating an “awesome” customer experience?
For one, you could look at your NPS, or Net Promoter Score (a tool that can measure what people think of your brand) as well as your customer churn rate (how many customers you’re losing a month).

A great experience would mean people both say nice things about you and stick around.
Sounds good? But it’s not the full story.

Before we get going, let’s think about these Key Results for a second. By saying we want to improve our NPS score and lower churn, it sounds like we’re willing to do whatever it takes to make our customers happy. But to run a sustainable business, we need to keep costs under control. Which is why we should add a third Key Result around cost as a countermeasure.
So, that OKR would look like:
Objective: Create an awesome customer experience
Key Results:
1)     Improve Net Promoter Score from X to Y
2)     Reduce Monthly Churn Rate to X%
3)     Maintain Customer Acquisition Cost of under $X

Now we have an ambitious objective aligned with our company’s strategic goals and a small number of measurable key results that will tell us if we’re doing the right things to get there.
At the end of the work period (typically a quarter), your OKRs provide a reference of how well you did, where you succeeded, and where you need to focus more attention in the future.

Best practices for designing OKRs
The above examples should give you a good idea of how to write good OKRs. But if you’re still unsure when you try to use them in your own business, here’s a few questions you can run through:

Does the OKR align with my company’s main business strategy and goals? Once the organization knows what it’s focused on and how it will measure success, it’s easier for individual team members to connect their projects with the company objectives.

Is the objective supported by everyone at the company? Once everyone agrees what the most important objectives are, it can be easier to say no to the less important ideas. With OKRs, saying no isn’t a political or emotional debate. It becomes a rational response to a commitment that the entire organization has already made.

Is the OKR adaptable and agile? OKRs are ambitious because they want to leave room for experimentation and growth. If you’re too committed to a single path to success, you might be limiting your team’s creativity and missing out on big opportunities. Remember to make sure your Key Results are adaptable and agile enough that they can be completed in many ways.

Does it have a clear deadline? OKRs can be incredibly motivating. As long as they have a strict time frame. Set a strong deadline and then check in weekly, monthly, or quarterly on progress (whatever works for your team and your communication style.)

Are your Key Results measurable and progress-based? Can you put a numerical value on the result you want to see? If not, you don’t have a good Key Result. The team should focus on setting Value-based Key Results instead of tasks

Is it aspirational? Does your OKR get your team excited? Can you set them off towards a moonshot idea where even moving the needle a bit can be seen as success? With OKRs, the goal isn’t to always hit 100%. Make sure you’re pushing your team while staying within the bounds of what’s realistic.

If your OKRs aren’t ticking all of those boxes, you might want to spend some more time with them before hitting “go”. It’s always worth it to spend more time upfront devising the best possible OKRs than to send people down the wrong path.

OKRs are a powerful tool. But they’re not a silver bullet for goal setting.

Every methodology has its upsides and downsides and OKRs are no different. What makes OKRs different is that they’re not simply just a way to set goals.
OKRs communicate strategy and priorities from the highest level right down to each individual team member.
They allow team leaders to push groups in the right direction while giving them constraints to make sure work gets done. They’re fantastic tools not just for moving the needle, but for focus, prioritization, and clear communication (some of the biggest issues facing most businesses today!) On top of that, OKRs are special in a number of other ways:

1) They’re simple: OKRs are pretty simple to understand and make day-to-day tasks easier as everyone knows what they’re working towards. They help you reduce the time spent setting goals so you can work more on achieving them (not analyzing them).

2) They’re agile: By working in short cycles and with clear goals, OKRs let you measure the work you’re doing, see how it’s stacking up against company-wide goals, and adjust your approach on a regular basis.

3) They bring a level of transparency: As we just said, OKRs are a form of communication. At Google, all OKRs are public from the CEO down, which means at any time you can see how the people that work around you are helping the company’s cause.

4) They help workers find meaning and purpose: Studies have shown that feeling a connection and purpose in the work you do makes us happier, more productive, and more motivated to work. By showing your team how the work they do is tied into the company’s goals you’re helping give them the purpose they need to push forward.

5)  They’re the link between strategy and tactics: Rather than having a lofty company mission with no way to know if you’re getting there. OKRs let you choose tactical objectives that work towards your overall goal.

However, there are also a few potential downsides you should understand before adopting OKRs:
1) You need to know where your company is headed: As Andy Grove wrote in High Output Management: “The absolute truth is that if you don’t know what you want, you won’t get it.” OKRs help you move forward quickly and if you’re not pointing people in the right direction, or your teams aren’t aligned, they can do harm rather than good.

2) You need to commit the time to planning proper OKRs: Just because OKRs can be simple, doesn’t mean they’re easy. Team leaders and founders are busy. You’re hiring, strategizing, and putting out fires. But the success of OKRs depends on putting in the proper time to plan and strategize what they should be.

3) You need a good understanding of how success IS measured: Again, that “M” word comes up. If you don’t know what success looks like and the right metrics to tell you if you’re reaching it, there’s no point in trying to use OKRs.

What it all comes down to is that OKRs work well when you have a clear strategy and know where your company is headed.
Like any goal-setting exercise, the more you know about the final destination, the better chance you’ll actually get there.

How to adopt OKRs for your company
Bringing OKRs to your company isn’t just a matter of copying the way a company like Google uses them. Google isn’t the average company, and they’ve spent almost 2 decades growing, scaling, and experimenting with how their internal goal-setting structure works. Because of that, how they use OKRs will be incredibly different than how you will.

That’s because at its core, OKR isn’t a methodology. There’s no set path or steps you take for bringing it into your workplace. Instead, it’s a set of practices and ideals that you should understand and customize for your teams.

If you want to start experimenting with OKRs, however, there are a few best practices you should follow:

Train the team on the “Why” and the “What”
Too many unsuccessful OKR implementations start the same way. An executive sends an email saying “We are going to adopt OKR, please watch this video from Google.”
OKR is straightforward, easy to understand but hard to master. Your team is going to need more than that to get started.
Either using an external consultant or not, your company needs to educate the team:
1) Teach people about what motivated the adoption of OKR, explaining its benefits. Understanding the “Why” behind the OKR initiative increases the team motivation and engagement.
2) Selecting Key Results is hard, so educating the team on how to choose them and set measurable goals is key. Too many individuals lack the proper training to set goals and to coach the team to develop theirs.

Start small and iterate
According to OKR coach Felipe Castro, it’s important to understand the tradeoffs you’re making when you adopt OKR. Which means it’s probably a good idea to start small and iterate as you understand how it works in your company.

In Google’s own guide to introducing OKRs, they suggest starting with the basics:
1) What are OKRs? Explain the basics of OKRs to your team and how they work.
2) Why use OKRs? Review your current approach to goal-setting and any limits or issues you’ve had with that approach. This is a good time to highlight how OKRs connect everyone’s work to the company’s purpose and mission.
3) How do OKRs work? Explain the timeline of your OKR cycle (it’s good to start with shorter ones. Around 30–45 days.) What is expected of each person. What the major milestones will be. And what success looks like. Remember, you’re not shooting for 100% every single time. And it might take some time to get your team to accept that 60–70% is totally fine.

Focus on communication and prioritization
One of the most important aspects of OKRs is that they’re public. Which isn’t always an easy thing for teams to do. However, making it clear where you can see what other people are working on and what metrics they’re chasing is an important part of adopting OKRs.
As former Googler and former Twitter CEO Dick Costolo explains:
“As you grow a company, the single hardest thing to scale is communication. It’s remarkably difficult. OKRs are a great way to make sure everyone understands how you’re going to measure success and strategy.”

Use regular check-ins to stay disciplined
Because of the agile nature of OKRs, it’s important to set and stick to regular check-ins. And that doesn’t just mean at the start and end of an OKR cycle. You might want to set a cadence that includes:
1) OKR planning sessions: Bring together a small group of people that work together to plan and talk through objectives and key results for the next cycle.
2) Weekly check-ins: A team-level meeting focused on tactical updates to ensure everyone is working on the right priorities and isn’t being blocked.
3) Mid-quarter/cycle review: A quick step back to reassess the OKR, add or eliminate Key Results or adjust targets, and define action plans for addressing OKRs that are below your goal.
4) All-hands meetings: A company wide meeting where you can communicate and reiterate your strategy and goals to make sure everyone’s still aligned and excited.

Don’t go all in on OKRs until your whole company is ready
Change is hard. And it’s probably not a good idea to just drop OKRs on your entire team. Instead, choose to either integrate them horizontally or vertically:
  • Horizontal: Start with one team and add additional ones each cycle or quarter.
  • Vertical: Start with company OKRs and senior management and then add new layers beneath each cycle or quarter.

The most common mistakes teams make with OKRs
How your company handles OKR will be unique to you. And the more you add them and work with them, the better you’ll be at aligning your teams and measuring results. However, early on in your path to adopting OKRs there are some common pitfalls you should watch out for:

Miscommunicating “Stretch Goals”
At Google, OKRs are used to go after stretch goals. Or, goals they don’t necessarily think they can hit. And while this is a fantastic way to motivate your team to look for unique and innovative solutions, if not communicated properly it can cause some serious headaches.
Once OKRs have been adopted across multiple teams, you’ll need to be very aware of the other team’s goal-setting philosophy. If part of your project depends on another team’s Objectives, make sure you know whether they’re most likely to deliver you something at 95% or 65% of their stated OKR.

“Business-as-usual” OKRs
If your current goal-setting philosophy is to be conservative with what you’re going after, this isn’t going to jive with OKRs. To test this, look at your team’s current work as well as requested projects and rank them in terms of value versus effort required. If the OKRs you’ve chosen have anything other than top effort tasks you should drop them and re-assign the resources.
Of course, there are some Objectives that will stay the same each cycle (especially around maintenance or upkeep). This is ok as long as the Objective is high priority and brings in business value. But always try to make sure your Key Results push the team to evolve and look for new ways to be more efficient.

“Sandbagging”
If a team is consistently hitting their OKRs without using all their bandwidth, they may be hoarding resources or not pushing their team (or both). This can kill the morale of other teams who are going after stretch goals. Make sure you have a consistent, company wide philosophy around how difficult Objectives should be and what success looks like.

Not enough Key Results for an Objective (i.e. a lack of clarity)
We can’t say enough how the OKR secret sauce comes down to measurement. And if the Key Results for an Objective don’t represent everything that’s needed to fully achieve it, you’re not setting your team up for success. Take the time during the planning phase to determine exactly what that objective needs to be successful.

The way you set goals says a lot about your company. Are you concerned with just getting through the day? Or are you looking 10 years down the road?
With OKRs you can do both. OKRs not only help you communicate the big vision stuff that builds behemoths like Google and Twitter. They also make sure every person doing their daily work and putting out fires is in alignment.

But they take work. As John Doerr wrote in Wired:
“OKRs are not a silver bullet. They cannot substitute for sound judgment, strong leadership, or a creative workplace culture. But if those fundamentals are in place, OKRs can guide you to the mountaintop.”
It doesn’t matter how quickly your company grows if it’s going in the wrong direction. But if you do the work upfront to dial in your strategy and vision, OKRs can be the super fuel you need to blow past your goals.