Objectives and Key Results (OKRs) are a method of setting objectives and tracking key results. It aligns teams and people inside an organization and allows employees to focus on the most important goals.
Table of contents
- Why should you use OKRs?
- How to start?
- How to create objectives
- How to create key results
- Checklist for setting OKRs
- 5 steps to set up OKRs
OKRs have helped lead us to 10x growth, many times over. They’ve helped make our crazily bold mission of “organizing the world’s information” perhaps even achievable. They’ve kept me and the rest of the company on time and on track when it mattered the most. And I wanted to make sure people heard that.Larry Page, a Co-founder at Google
Why Should You Use OKRs?
By using this method a company achieves:
- Focusing on the top priorities – an employee understands what matters for the job and might find a better way of achieving it;
- Aligning the team – transparent and openly shared Objectives and Key Results connect everyone in the team. The organization begins to play like one team because everyone knows the top priorities of every person or team and understands what’s going on in the company;
- Avoiding micromanagement – a manager can concentrate on the strategic questions while building the culture of a high-performing team.
Objectives and Key Results (OKRs)
An objective is WHAT should be achieved. It’s a big, significant, action-oriented, and ideally an inspirational goal.
Key results track HOW we achieve the objective. They are specific, measurable, time-bound, and aggressive.
Each objective has key results. There should be no more than 5 key results for an objective. Less is more. Also, don’t create more than 5 objectives in a quarter.
Objective: Launch an awesome product
- Get 5,000 signups by the end of Q3 2020
- Achieve 10% visitor to trial conversion rate
- Achieve 50% trial to customer conversion rate
OKR is the hierarchical goal-setting system where a company’s goals connect with teams’ objectives. At the same time, a team’s goals affect individuals’ initiatives or even personal OKRs.
Hierarchy might not be only vertical. For instance, some teams can set united or related goals. If you want to learn more, check out this article: What is OKR and why everyone talks about it.
How to Start?
Creating OKRs is an open process and everyone participates in it. There 3 types of communication:
- Top-down – company’s goals transform into teams’ and employees’ OKRs. This scenario calls on creating goals based on the company’s needs.
- Side-by-side – different teams cooperate across departmental lines to create common OKRs. For instance, development and support teams might set mutual OKRs for reducing production defects. This is a cross-departmental scenario.
- Bottom-up – a great individual idea might turn into a team’s or even the company’s OKRs. It was with Gmail, which began as a personal project of one of Google’s employees. If we understand that we can make something valuable, then let’s do it as a team goal. It creates goals based on a solution.
Setting Objectives and Key Results is a joint process when half of the goals are created top-down and the other half bottom-up. It’s crucial to achieve a total understanding of the most important goals between everyone in the team. It allows the team to focus on the most important objectives and say no to the less important goals.
How to Create Objectives
When setting up Objectives, you should take the time to discuss your top priorities with the team. It brings your team to the next level of alignment and understanding of what matters. For setting the right objectives, follow these next principles:
OKRs should be ambitious. It must be hard to achieve the objective. At the same time, it should be possible to accomplish the Objective. Don’t set an objective everyone will not believe in. Here are several of the most ambitious OKRs in history:
- Landing human on the Moon – ambitious goal in 1969;
- Building the plane that can fly – an ambitious goal for Wright brothers in the 1900s.
Ambitious OKRs inspire people and motivate them for high results. People often prefer to set simple goals to be sure that they are able to achieve it. An ambitious and hard objective is the challenge that requires innovations and persistence. Even if you will not achieve this objective, the outcome will be much better than usual.
Don’t create more than 5 OKRs. It’s crucial because it allows the team to focus on these OKRs. The more goals you create – the less focus you have. Also, it builds more productive communication inside the company. If the company has dozens of departments and each of them has dozens of OKRs, it will be pretty hard to create transparent communication. You will spend your time trying to understand what’s going on in each team.
Goals should lead to new achievements. It doesn’t make sense to set goals for routine operations that you are doing every day: answering customers’ questions, doing operational processes, etc. They should be done without reminders. OKRs are not intended for maintaining the status quo.
Objectives should be concrete. We should understand where we want to be, what we should achieve. Vague wording like ‘simplify’, ‘facilitate’ doesn’t explain the finished result. Specific goals allow us to focus on achievements and create a roadmap for it.
- Launch the new product for target market X
- Achieve $2M ARR this year
- Deliver X product to the end of Q3
A usual mistake in OKRs is setting a strategic, but vague goal.
OKRs should be transparent. Make them public. Everyone in the company should see and understand the objectives and key results. Obscure and ambiguous wording leads to misunderstanding and conflicts.
How to set Key Results
Key results should be measurable. If we can’t measure it then we can’t know how to track the progress at the end of the quarter. Here are several examples:
- Achieve 10,000 signups by the end of Q3
- Increase the visitor to customer conversion rate from 3% to 10%
- Reduce site speed from 3.1 to 1.2 seconds
- Launch the authorization through Facebook feature until August 1st
- Reduce time to deliver the order from 12 to 6 minutes
Each objective should have 3 to 5 key results. Too many key results lead to losing focus. On the other hand, only one key result replaces the objective in fact.
Key results should have a clear impact on the objective. Working on the key results, which don’t directly influence the objective, will take time and resources and don’t help to achieve the goal.
A key result is about the outcome, but not the way on how to achieve it. The freedom with choosing the way to achieve a key result is the core of OKRs because it gives teams the opportunity to choose the most suitable option and change it if it’s necessary over time.
Key results should be easily affirmed. If you don’t know how to achieve the key result, then you should not choose it.
- OKRs should be short. There is no space for long OKRs for the whole page.
- OKRs are not a to-do list. If your OKRs look like a task list then you should change it.
- The team has at least one OKR that is connected with the company’s goals. Otherwise, it isn’t clear how the team impacts the company’s outcomes.
- The most important team’s OKRs should be based on the main company’s goals. The core company’s goal should not have a weak priority for the team.
- Common OKRs should be aligned between teams. For example, if the product team is going to launch a new product at the beginning of the quarter, then the marketing team probably might not have enough time for promotion.
- OKRs require the attention of the whole team. OKRs are the top priorities of your organization. It’s your North Star Metrics. Everyone in the team should understand what matters the most right now for the company and how he or she contributes to it.
- OKRs give solid value to the business. It doesn’t make sense if achieving OKRs will bring small or low-value outcomes for the company. It’s your top priority.
- Key results are only metrics that you need for achieving an objective. If key results are not enough for accomplishing the objective, then it’s a bad sign. It leads to delays in work due to search for other resources needed for this OKR.
5 steps to set up OKRs
- Executives identify yearly and quarterly company’s OKRs.
- Teams identify its OKRs to the quarter based on the company’s OKRs. Team leads discuss with their people how they can contribute to the company’s objectives.
- Teams set the monthly goals depending on their quarter OKRs.
- A team updates the status of OKRs weekly or bi-weekly.
- At the end of the quarter, a team runs the retrospective meeting where members analyze the traction and set new OKRs for the next quarter.
Last, but not least, is about OKRs results. OKRs should be ambitious, which means that it shouldn’t be too easy to achieve. In Google, 60-70% of OKRs is an indicator of success. If you achieve 100% OKRs progress, then the objective is too simple. In this case, you should increase the level of OKRs in the next strategy session. At the same time, the result with 50% OKRs progress or lower is considered as a fail cycle. If you have 50% of progress or lower, then analyze the reasons for these results and make better decisions in the next quarter.
Finally, I believe that identifying top priorities and consistent focus on it day-to-day is the best way for building high-performing teams. That’s why we created Focus, a tool that keeps teams on top priorities every day. Start working smarter with Focus.