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OKRs (Objectives and Key Results)

Get up and running with OKRs.

Developed by Andy Grove at Intel, this goal-setting strategy was popularized by John Doerr who famously implemented it in Google. It's now one of the most popular goal-setting frameworks in organizations across the world, especially those in tech. In this article, we'll cover everything you need to know about OKRs to get you up and running.

What are OKRs?

OKRs stand for Objectives and Key Results. It is a goal-setting framework that encourages organizations to set challenging objectives along with measurable key results.

Objectives

Objectives are qualitative goals that define what you want to achieve. They are broad, long-term, and inspiring.

Key Results

Key Results are quantitative and measurable outcomes that indicate progress toward achieving the Objective. They help answer the question, "How will we know we are progressing toward our objective?".

History of OKRs

1. Andy Grove and Intel

The OKR framework can be traced back to Intel, the American multinational corporation best known for its microprocessors. Andy Grove, one of Intel's co-founders and its former CEO, is credited with the conceptual development of OKRs in the late 1960s and early 1970s. During his tenure at Intel, Grove recognized the need for a structured approach to setting and tracking objectives. The OKR framework provided a way to align the company's efforts and measure results against those objectives.

2. John Doerr and Kleiner Perkins

John Doerr, a young salesperson at Intel, learned the OKR framework directly from Andy Grove. Doerr would later become a venture capitalist at Kleiner Perkins, one of Silicon Valley's most renowned venture capital firms. Armed with the knowledge of OKRs, Doerr introduced the framework to many of the startups that Kleiner Perkins invested in. One of the most notable beneficiaries was Google.

3. Google and Silicon Valley

In 1999, a fledgling Google invited Doerr to teach them about this management tool that had proven successful at Intel. The rest, as they say, is history. Google adopted OKRs wholeheartedly, integrating it into their organizational DNA. Today, OKRs are considered one of the critical factors that contributed to Google's meteoric rise, offering a structured yet flexible framework that accommodated rapid growth and change.

4. Beyond Silicon Valley: Widespread Adoption

Once Google found success with OKRs, it wasn't long before other organizations took notice. LinkedIn, Twitter, Uber, and many other tech giants adopted OKRs, each tailoring the framework to their specific organizational needs. But the influence of OKRs didn't stop at the tech industry's doors. Companies in healthcare, finance, retail, and manufacturing started adopting the framework, too.

5. The Rise of OKR Literature and Consultancy

The growing interest in OKRs led to a surge in literature and consultancy services around the topic. John Doerr's book "Measure What Matters" became a bestseller, providing a detailed guide on how to implement OKRs effectively. Other prominent books on OKRs include "Radical Focus" by Christina Wodtke and "Objectives and Key Results" by Paul R. Niven and Ben Lamorte.

6. Present Day: A Global Phenomenon

Today, OKRs are not just an American or Silicon Valley phenomenon. Companies around the world have integrated OKRs into their strategic planning processes. Furthermore, the framework is also being adapted for public sector organizations, non-profits, and even individual goal-setting.

Leading and Lagging Metrics

It's important to understand the concepts of leading and lagging indicators in any goal-setting framework, but especially when it comes to OKRs. For key results, it might be better to consider leading indicators as your metrics as they are usually more actionable. If you would like to have a metric for your objective, then it might be better to consider a lagging metric, since they is the end result that you're aiming for.

Leading Metrics

They are actionable metrics you can influence directly, providing real-time or near-real-time data that can guide your decision-making processes. In essence, they serve as early warning signs that help you anticipate what's coming and adjust your strategies proactively.

  • Predictive: Leading metrics are indicators that foretell the outcome of an objective.
  • Actionable: These metrics can be influenced through direct action.
  • Immediate: Typically represent real-time or near-real-time data.

Some examples of leading metrics:

  • New Leads Acquired (Sales): The number of new leads acquired can predict future sales and revenue.
  • Response Time (Customer Service): Faster response times often lead to higher customer satisfaction.
  • Patient Wait Time (Healthcare): Shorter wait times can predict higher patient satisfaction.
  • Quality Checks Passed (Manufacturing): Higher numbers of successful quality checks can indicate better end products.

Lagging Metrics

Unlike leading metrics that serve as early indicators of future performance, lagging metrics provide a historical view, showing you what has already happened. These metrics are generally easier to measure but harder to influence or improve directly since they represent the result of several past actions.

  • Outcome-Oriented: Lagging metrics represent the result, usually a direct outcome of several actions or strategies.
  • Historical: These metrics look at past performance.
  • Hard to Influence: Usually can't be directly acted upon.

Some examples of lagging metrics:

  • Revenue (Sales): The most straightforward indicator of business success, reflecting the sum total of your efforts.
  • Customer Lifetime Value (CLV) (Product and Marketing): Represents the total value a customer brings to your business over their entire lifecycle.
  • Net Promoter Score (NPS) (Product and Customer Service): Measures customer loyalty based on their willingness to recommend your service or product.
  • Mortality Rates (Healthcare): Indicate the effectiveness of a healthcare system in treating life-threatening conditions.

Why Both Types of Metrics Are Important in OKRs

In the context of OKRs, leading and lagging metrics serve to balance each other. While lagging metrics tell you whether or not you’ve achieved your objectives, leading metrics can signal whether you’re on the right path to achieve them.

  • Tracking Progress: Leading metrics serve as early indicators, helping teams understand if they are on the right trajectory towards achieving the OKRs.
  • Verification: Lagging metrics provide the ultimate validation of whether or not an Objective was achieved, serving as a sort of "final report card."
  • Strategic Adjustment: The combination of both metrics allows organizations to make timely adjustments to strategies and actions.
  • Focus and Accountability: Leading metrics help in keeping the teams focused and accountable as they offer more immediate feedback.
  • Comprehensive Understanding: Using both types of metrics gives you a 360-degree view of performance.

Examples in the Context of OKRs

Let’s consider some examples to understand how leading and lagging metrics can co-exist within OKRs.

Sales Team OKR

  • Objective: Increase the market share by 15% in Q3
  • Lagging Metric (Key Result): Achieve $2 million in new sales revenue
  • Leading Metric: Number of new qualified leads acquired per week

Product Development OKR

  • Objective: Improve user engagement by the end of Q4
  • Lagging Metric (Key Result): Increase the average time spent in the app by 25%
  • Leading Metric: Number of new features deployed that focus on user engagement

Customer Service OKR

  • Objective: Improve customer satisfaction by 20% in 6 months
  • Lagging Metric (Key Result): Achieve a Net Promoter Score (NPS) of 75 or higher
  • Leading Metric: Average response time to customer queries

Best Practices for Using Leading and Lagging Metrics in OKRs

  • Clear Alignment: Make sure both leading and lagging metrics align well with the set OKRs.
  • Timely Review: While lagging metrics may be reviewed quarterly or yearly, leading metrics often require more frequent check-ins.
  • Data-Driven: Ensure that both types of metrics are supported by reliable data sources for accurate tracking.
  • Balance: Don't lean too heavily on either type; a balance is essential for a more holistic view.
  • Adaptability: Be willing to revise and adapt metrics as the business environment and strategic priorities change.

OKR Examples

Example 1: Sales Department

Objective: Become the market leader in Q4

  • Key Result 1: Increase quarterly sales by 20%
  • Key Result 2: Onboard 5 new high-value clients
  • Key Result 3: Achieve a customer retention rate of 95%

Example 2: Product Team

Objective: Launch a game-changing product that solves X problem

  • Key Result 1: Complete product development by end of Q2
  • Key Result 2: Achieve at least a 4.5-star rating within the first month of launch
  • Key Result 3: Secure 10 partnerships for co-marketing campaigns within 3 months

OKRs vs KPIs: What's the Difference?

While KPIs (Key Performance Indicators) and OKRs may seem similar, they serve different purposes.

KPIs

  • Descriptive: They describe the current situation.
  • Continuous: Usually don't have a set timeframe.
  • Individual Metrics: Often not tied to larger company objectives.

OKRs

  • Prescriptive: They set a path for future action.
  • Time-bound: Typically set for a specific time period, such as a quarter or year.
  • Holistic Approach: Align individual, team, and organizational objectives.

In essence, KPIs help you measure performance, while OKRs allow you to set a strategic direction. They can work in harmony, where KPIs can serve as Key Results in your OKR framework.

Good OKR Practices

Good OKR practices at organizations often share most, if not all of the following characteristics.

1. Specificity

It's clear what is to be achieved (for e.g, improving a metric from X to Y).

2. Focus

Try to aim for a maximum of 3 key results. Too many metrics can lead to a loss of focus.

3. Relevance to Strategic Aims

The objective makes it clear how it will positively contribute to the company's strategy.

4. Accountability

It's often a good idea to have one person (often called a Driver or DRI - Direct Responsible Individual) who co-ordinates and follows up with all stakeholders and reports it to the rest of the org. They are the one accountable for the OKR.

5. Ambitious but not impractical

Good OKRs are ambitious but not so much that it saps morale out of the people working on it. Also, the focus on metrics should not cover over other qualitative aspects which might be difficult to measure (for example, having a great UI or not helping any colleagues which don't contribute to your OKR).

Making it work for you

Always keep in mind that OKRs are supposed to work for you, not the other way around. People at orgs often spend an inordinate amount of time crafting the perfect OKR, whereas that time might be better spend actually following through and getting the work done.

There are some people who become a bit dogmatic when it comes to the format of the OKRs. Our recommendation is to not be overly tied to any specific format. Ultimately OKRs are a tool to think about important goals and how to achieve them. Nothing more and nothing less. If you are finding out that you're spending a lot of time bikeshedding the perfect language, then it's time to look for simpler language, different metrics or just think about whether OKRs are even right for you or not (see the next section).

If you're implementing OKRs for the first time in your org, you will almost certainly get it at least slightly wrong. It's important to learn from it and make better ones the next time.

Another important thing to remember is that follow-through of the OKR is often more important than the definition of the OKR itself. Making sure everyone is aligned and understands the OKR correctly. Co-ordinating efforts, regular and accurate reporting of progress and more are the key to having a successful OKR practice. For some places it may mean regular review meetings where people go through the OKR and discuss progress and blockers. For others, it may just be regular updates on a dashboard or timely emails etc.

When not to use OKRS

OKRs are not a one-size-fits-all solution. There are certain situations where applying OKRs may not be appropriate or effective. Understanding these scenarios can help you decide if and when OKRs are right for your organization.

1. When Goals are Short-Term and Tactical

OKRs are designed to facilitate strategic planning over a medium to long timeframe. They are less suited for short-term, tactical goals that require immediate action. For instance, if your objective is to "resolve a critical product bug within the week," using OKRs might be overkill and slow down the necessary quick action.

2. When Flexibility is Needed

OKRs create a structured environment that focuses the team's efforts on a few key objectives. However, this can be limiting in scenarios where flexibility and adaptability are more important. If your organization is in a rapid prototyping phase or a highly volatile market, the rigidity of OKRs could hinder your ability to adapt quickly.

3. During Crisis Situations

In times of crisis, the primary focus often shifts from growth and development to damage control and immediate survival. Since OKRs are designed to align an organization’s various departments toward common, longer-term objectives, they may not be the best tool for managing immediate, unpredictable situations that require rapid decisions and actions.

4. When Goals are Unclear or Undefined

There is a school of thought that even if the metric is unclear, we should go ahead and commit to an OKR. It will serve as a forcing function to figure out the right metric in time. We strongly advise against that.

OKRs require clearly defined objectives and measurable key results. If your organization is in a phase where the goals are still unclear or are being developed, jumping straight into OKRs could be counterproductive. It’s crucial to have a well-defined vision and objectives before translating them into OKRs.

This is especially true in the 0-to-1 phase of product development, where things are often unclear and you are just about discovering which things are working and which things are not. In this phase especially, it may make better sense to see whether OKRs are truly providing clarity and direction, or whether some other just a milestone might be better to aim for.

5. When a Different Framework is Already Effective

If your organization is already using a different goal-setting framework successfully, like Balanced Scorecards or SMART goals, and there's no clear need for change, switching to OKRs might not add enough value to justify the cost and effort of transition.

6. For Individual Performance Evaluations

OKRs are meant to encourage team collaboration towards achieving collective organizational goals. They are not designed to serve as performance evaluation tools for individuals. Using OKRs for individual assessments may discourage risk-taking and innovation, as employees may prefer to stick to easily achievable key results to ensure positive evaluations.

We strongly advise against holding individuals accountable for team OKRs. Doing so often prevents ambitious thinking as people would prefer to play it safe in order to achieve their goals.

7. When Resources are Limited

Good leadership and management is needed to decide right way to track and achieve goals. Implementing OKRs effectively requires a certain level of resource investment for training, monitoring, and adjustments. If your organization is resource-strapped, it might not be the best time to implement a new strategic framework.

Books to Level Up Your OKR Game

To fully grasp the value and implementation of OKRs, these books are indispensable:

  • Measure What Matters by John Doerr: Considered the OKR bible, this book offers a comprehensive guide, enriched with real-world examples from companies like Google and Adobe.
  • Radical Focus by Christina Wodtke: This book gives a more narrative approach to OKRs, making the methodology easily understandable for everyone in your team.
  • Objectives and Key Results by Paul R. Niven & Ben Lamorte: Ideal for those looking to delve into OKRs' analytical and strategic aspects, offering in-depth templates and case studies.