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What is OKR and why everyone talks about it

Introduction

Anton Cherkasov

Anton Cherkasov

Anton is a founder of Focus, which is a team management platform. He is also a writer in HackerNoon, The Startup, Good Audience, and other media. Previously Anton has worked in Wildberries (#1 eCommerce store in Russia). He is falling in love with growth hacking, product management, and football.


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OKR

What is OKR and why everyone talks about it

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Focus OKR

This is a story about how we increased team performance and the quality of work by using OKR. Here are the topics of the article:

  • What is OKR?
  • Weaknesses of OKRs
  • Benefits of OKRs
  • Top 3 mistakes in OKRs
  • How to use OKRs

It was several years ago when we began using OKRs in the company Kepler Leads, which is a conversion rate optimization software. Being a CEO at Kepler Leads, I struggled with crucial problems in management, which were losing focus and decreasing team motivation. 

The team didn’t see the main picture and didn’t understand why they did what they were doing at that time. There were many side projects in the development because we didn’t have a clear focus. Employee engagement was very low. It was a classic team management problem.

Then, we began to use OKRs and we have come a long way from the “it doesn’t work for us” stage to the “wow, it works and it’s amazing” stage. At that time, my friends from other companies, which saw our results, asked me to help them to implement OKRs too. This was the moment when Focus was born. 

In this article, I will share the main mistakes companies usually make trying to implement OKRs and how to set them in real life, not just in theory.  

It’s crucial to say, however, that OKRs don’t fit everyone. It’s not a magic stick that empowers your organization and makes a dream team. OKR is a framework, which has strengths and weaknesses.

Before speaking about strengths and how to set OKRs, I want to mention the main OKRs strengths and weaknesses.

OKR weaknesses

  • It’s hard to implement. There are two reasons why it isn’t easy to set in the company. First, making inspirational and ambitious objectives is not as simple as it may seem. Second, not everyone likes to use new things in life or work. At the same time, it’s crucial for OKRs implementation that people in the team want to set ambitious objectives for themselves. People can hesitate about trying something new and end up going away because it’s easy to keep everything as usual. 
  • Implementation and setting OKRs take up a lot of time. Discussing objectives, team meetings, attaining the consensus, choosing the right key results, and defining really inspirational objectives, destructuring companies objectives to the teams… All of that needs time and you cannot set objectives top-down because OKRs don’t work like that. Otherwise, it will not be OKRs.
  • The Psychological barrier when the person doesn’t complete the goal. An OKR that was accomplished at 70% is a great indicator. However, not everyone likes it. For some people, it’s crucial to complete the goal at 100% or they will think that they didn’t work well or hard enough.

OKR benefits

  • In our expertise, a team increases its engagement. The managers begin to see the fire in employees’ eyes because of interesting goals, which they set for themselves.
  • OKRs increases transparency in the teams. Everyone begins to understand how his or her job impacts the total result. Also, it helps employees see what their colleagues do and why it matters for a company. 
  • It gives clear focus. We stopped doing different side projects, which grabbed our attention and focused on the main things for the company. It’s hard to achieve ideal focus (probably, impossible) because you always have operations like customers’ requests or bug fixing, which take your attention. However, we see that using OKRs helps teams to understand the main focus and make decisions based on core things. 

 If these benefits are important for you, then you should take a look at OKRs.

What is OKR?

Few words about what OKR means.

OKRs (Objectives and Key Results) is the methodology for setting the goals, which is used in companies like Google, LinkedIn, Uber, etc. It aligns the teams with transparent goals and metrics. Using OKRs, a team sets goals bottom-up and it helps increase employee’s engagement because people feel more responsibility when they create their own goals

An objective is a big and very ambitious goal, which should motivate the team. It’s not a SMART goal. It’s more about vision and inspiration for everyone.

An ambitious goal means that it’s really hard to achieve 100% of it. For instance, 60%-70% achievement is the best result for an objective in Google. 100% OKR achievement shows that that objective was too simple. 40% or less tells you that you either didn’t plan it well or you didn’t achieve a solid execution.

And yeah, ambitious goals mean that you should not calculate employees’ bonuses based on achieving OKRs. If you connect bonuses with OKRs, then employees will not set ambitious goals for themselves to be sure of completing objectives.

An objective doesn’t have metrics and it’s hard to understand how well it is achieved. At this moment, Key Results are coming to help us, which are the other letters in the OKR acronym.

Key Results make an objective countable. They are the metrics that display traction and how much is left.

A team might choose either one key result or several. It’s crucial to set fewer key results. The ideal amount of key results is three, with five results the maximum. The less is better. It allows the team to focus on what matters. 

OKRs examples

Objective: Achieve record acquiring new customers

Key Results

  • 25,000 signups
  • Keep CAC on the same level $20
  • Increase Visitor-to-Trial conversion rate from 5% to 10%

Objective: Close maximum deals

Key Results: 

  • 100 new companies
  • Increase market share from 10% to 15%
  • Hit quarterly revenue of $500,000 

Objective: Make clients love our service

Key Results: 

  • Reduce average response time from 20 to 5 minutes
  • Reduce average closing tickets time from 40 to 12 hours
  • Increase NPS to 80%

Top 3 mistakes in OKRs

Mistake #1: too simple or too complex OKRs

We did it twice in the beginning. At the first iteration, we had the second worst OKR:

Objective: Triple sales

Key Results: 

  • Get new 1000 leads in Q1
  • Increase trial-to-customer conversion from 10% to 30%
  • Hit $100,000

What’s wrong: There are 2 crucial mistakes. Objectives shouldn’t be measurable and must be more realistic. In this period of time with the resources we had, there was no real way to achieve triple sales in a quarter even for 50% achievements.  

How it should be: 

Objective: Achieve the sales record

Key Results: 

  • Increase the number of monthly leads from 100 to 200
  • Increase trial-to-customer conversion from 10% to 30%
  • Hit $20,000

Setting the right OKRs is the most difficult part of implementing this framework. Also, I saw a lot of times when a team chose very low goals and finished at 100%. Here is an example of this case:

Objective: Launch eCommerce shop

Key Results: 

  • Make a store design
  • Create a website 
  • Sign contracts with 5 suppliers 

What’s wrong: This objective doesn’t inspire a lot and doesn’t link to the more important key results. 

How it should be: 

Objective: Get first sales in the new store

Key Results: 

  • Launch eCommerce store in Q1
  • Sign contracts with 5 suppliers 
  • Get 50 sales in Q2 

The right goal setting is always a balance between identifying ambitious, but possible goals.  

Mistake #2: Too many key results

We prefer to choose 3 key results for an objective. A team might lose focus with four or more key results. It’s better to keep the focus on a few metrics in a month/quarter for achieving better outcomes. However, it depends on the team size. 

Here are some examples of bad OKRs:

Objective: Achieve the sales record

Key results: 

  • Attract 1000 new leads from Google ads
  • Increase trial-to-customer conversion rate from 10% to 30%
  • Reduce CAC from $30 to $15
  • Attend 10 conferences 
  • Increase LTV up to 50%
  • Start sales in 3 countries

What’s wrong: Each of these key results requires a pretty solid time for testing many hypotheses. As a result, we didn’t execute it well because of the loss of focus.

How it should be: 

Objective: Achieve the sales record

Key Results: 

  • Attract 1000 new leads from Google ads
  • Increase trial-to-customer conversion rate from 10% to 30%
  • Maintain CAC below $30 

Mistake #3: dependencies from other teams

We don’t recommend setting goals that have direct dependencies from another team. For instance, we had several cases when 2 teams set one OKR, together. Afterward, one of the teams stopped working on it during the cycle because of some internal issues and priorities. It became hard for the second team to achieve because it couldn’t complete the whole objective alone. 

Not good key result: Increase NPS from 50 to 60

Much better key result: Increase monthly retention from 30% to 40%

We learned that it’s better to not track NPS in OKR because NPS is a very slow metric. It takes a decent amount of time to correctly measure it. The team usually doesn’t have the time to change NPS and measure it in quarters. In that case, it’s better to track monthly retention than NPS. 

How to implement OKRs

The first rule is to understand why your team needs OKR. Setting OKRs takes time and team alignment. Often, it’s not easy to do the first time. You should remember why you want to do it while you are setting OKRs. 

Bad reasons to set up OKRs:

  • “Let’s try it because everyone uses it”
  • “We need OKRs because Google uses it”

Good reasons to set up OKRs:

  • “We want to increase the team’s alignment in each level”
  • “We want to improve employee engagement”
  • “We want to focus everyone on strategic goals”

5 steps to set up OKRs

  1. Executives identify yearly and quarterly company’s OKRs.
  2. Teams identify its OKRs on a quarterly basis with the company’s OKRs. Team leads discuss with their people how they can contribute to the company’s objectives.
  3. Teams set the monthly goals depending on their quarter OKRs.
  4. A team updates the status of OKRs weekly or bi-weekly.
  5. 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.

OKRs lead the game

It’s time for our conclusion. OKRs are not a magic tablet that gets jobs done. It’s a continuous process of searching for balance with ambition and reality while setting objectives. 

It’s also crucial to remember that a team should work with OKRs at least once every 2 weeks. I will share details on how to work with OKRs in future articles.

There are two types of companies with OKRs – the ones that tried to set OKRs and gave up and others that were successful in setting them up. In our case, OKRs increased focus and engagement inside the organization. It’s hard to imagine working without OKRs now. We’re using some modifications in goals, however, not pure OKRs. I’ll share that later.

Finally, we created Focus, a tool that keeps teams on top of their priorities every day. Try Focus for free to start working smarter.

Anton Cherkasov

Anton Cherkasov

https://usefocus.co/

Anton is a founder of Focus, which is a team management platform. He is also a writer in HackerNoon, The Startup, Good Audience, and other media. Previously Anton has worked in Wildberries (#1 eCommerce store in Russia). He is falling in love with growth hacking, product management, and football.

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