OKRs

Beginner's guide to OKR: Everything you need to know

Larry Page, the former CEO of Alphabet  and co-founder of Google, publicly claimed in John Doerr’s book “Measure What Matters” that — 

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.

To learn how to use OKRs for 10x growth in your company too, keep reading!

Table of contents

  1. What is an OKR?
  2. Components of OKRs
  3. OKR examples
  4. 8 Key principles of setting OKRs
  5. Benefits of OKRs
  6. How to get started with OKRs
  7. 5 common OKR pitfalls to avoid
  8. OKR FAQs
  9. Conclusion

What is an OKR?

For the sake of simplicity, we will focus on a short definition of what is OKR. OKR stands for Objectives and Key Results (OKR), a popular leadership tool for setting, distributing, and monitoring short and long term goals and results that align organizational purpose with individual targets across all levels. OKRs are frequently set, regularly tracked, and modified periodically.

Components of OKRs

John Doerr, one of the most prominent venture capitalists, who introduced Google to OKRs, uses a simple formula for setting OKRs — 

I will _______ as measured by _______.

i.e.

I will (objective) as measured by (key results).

Typically, an OKR framework must have 3 parts to be effective — an objective, 3-4 key results, and a time period for achieving the results.

1. Objectives (where do I want to go?)

These constitute the qualitative goals to be achieved on organizational, team, and/or individual levels. Objectives must be aspirational, time-bound, easily understood, actionable, and qualitative.

2. Key Results (how to ensure I am getting there?)

For each key objective there should be 3-4 clearly defined measurable results that are difficult but achievable and quantifiable. Key results determine whether an objective has been achieved or not.

Former Yahoo CEO Merissa Mayer defines key results by their quantifiability —  

“It’s not a Key Result unless it has a number.”

It’s useful to use a metric in key results instead of a binary quantifier. Key results can also be characterized by their levels of difficulty, thus acting as a milestone.

For example, 

  1. Key result 1: Quantifiable target that can be achieved with 90% certainty.
  2. Key result 2: Quantifiable target that can be achieved with 50% certainty.
  3. Key result 3: Quantifiable target that can be achieved with 25% certainty.

Key Results are often accompanied by a set of initiatives (what will I need to do to get there?) i.e. specific action steps that determine how to achieve Key Results. 

3. Time Period

Setting a time limit to Key Results and initiatives helps teams keep track of progress on an ongoing basis. Team/departental OKRs are usually set and re-evaluated quarterly to keep it aligned with annual business goals. Whereas, individual OKRs are usually re-evaluated weekly.

OKR examples

Here are some OKR examples for different departments that meet specific business needs.

Having predetermined key results in place gives clarity about how exactly a goal will be achieved, leaving little to no room for confusion. Thus, guiding everyone involved on to a clear course of action.

Here’s what typical OKRs look like for product management, customer success and finance teams.

8 Key principles of setting OKRs

Setting OKRs can be a quick process, but it requires deliberate planning. Here’s a consolidated list about the characteristics of effective OKRs for any team — 

1. OKRs should be agile

The reason why more and more organizations are moving toward an OKR-based framework is the flexibility of OKR systems. OKRs use shorter goal cycles. It breaks down yearly company goals into quarterly, monthly, or weekly measurable goals. It enables team members to work on projects that make the most impact to the business in that week and pivot at a moment’s notice without additional loss of resources. Thus giving organizations the opportunity to quickly respond to internal and external changes and adapt their processes faster. 

Intel contributes their microprocessor win against Motorola to the OKR based model of strategy execution.

2. OKRs should be simple

The purpose of setting OKRs is to simplify organizational visions into understandable action steps. OKRs thus reduce the time spent on setting goals and utilizing the time and effort toward achieving that goal. 

OKRs should be simple, not easy. They should be a stretch to an individual or a team’s ability, but they should not be too complicated to understand. (See the OKR examples above to check how simple OKRs can look like for any department) 

3. OKRs should be transparent and collaborative

OKRs are for creating alignment on an organization level. For most companies, everyone’s OKRs are accessible to everyone else’s. Thus, making the achievement of goals a clear, transparent, collaborative process. 

It is useful to brainstorm with team members before setting team OKRs. This instigates a sense of ownership in employees which in turn inspires them later to perform at a higher level to make sure the OKRs are achieved on time. So, give your team members the autonomy to find the right level of difficulty that challenges them and pushes the team for higher productivity.

4. Nested cadence

The OKR framework is so compelling to organizations because it carefully combines all levels of business needs. It addresses long-term top level strategic business goals with short-term quarterly team / departmental goals. Which then can be further combined with more immediate individual weekly OKRs. Thus, OKRs ensure that at any point in time, all organizational effort and resources are aligned toward a specific vision.

5. OKRs are bi-directional

OKRs are bi-directional. It requires top-down and bottom-up collaboration. The broader company-wide vision is set by top leadership. However, the team-wide goals are set by individual team members thus making this process a market-based approach toward setting goals. Thus, the OKR framework also utilizes 360° feedback. Typically, around 60% of OKRs are set in unison with managers in a bottom-up approach.

6. OKRs are aspirational

Ambitious goals are building blocks of continuous growth and expansion of an organization. OKRs are designed to stretch individual abilities to an extent where higher than expected performance is the norm while keeping in mind that overly aggressive goals might lead to frustration and fear of failure.

Moonshot OKRs are great for the goals you believe you can’t reach (yet). Thus, making sure your team is always leaving their comfort zone while ensuring realistic expectations from each member.

Google describes moonshot stretch goals to be a fundamental work philosophy in their 10th point of Ten things we know to be true — 

“We set ourselves goals that we know we can’t reach yet, because we know that by stretching to meet them we can get further than we expected.”

7. OKRs should only be reserved for high value goals

Every OKR should directly add value to business results. Wasting resources on low-value projects especially under tight budgets can be highly consequential. Therefore, choose OKRs that provide real tangible value to the business.

Also, be mindful of underutilized resources. As OKRs are ambitious by nature, if a team can achieve 100% of their assigned OKRs without using the entire team’s bandwidth fully, make sure to raise the bar.

8. Separate OKRs from compensation

As OKRs are aspirational, it is important to use OKRs as a management tool and not as an employee evaluation tool. 

For stretch-goals, usually a 70-80% achievement is enough to ensure rapid business growth. In such a scenario, if compensation is dependent on 100% goal achievement, it would only result in decreased morale and increased stress in employees. Instead of financial rewards driving performance, let the aspiration and autonomy behind OKRs drive intrinsic motivation that pushes employees to take risks and reach for high performance.

Benefits of OKRs

The benefits of setting clear, specific OKRs is manifold. Right OKRs can supercharge the performance of an organization within a short period of time by optimizing operational inputs.

1. OKRs create accountability

OKRs are always verifiable. It is a transparent way of announcing what everyone in a department or organization is working on. Objectives and Key Results are indicators of progress. It creates clear personal and public accountability for the achievement of an objective thus pushing employees to higher levels of performance and reduced wasted efforts. 

2. OKRs help overcome communication barriers

OKRs aid in clear communication by making the goal setting process more focused and disciplined. Objectives and Key Results let employees know what is expected of them in a given period of time. OKRs also communicate what’s not important. Thus enabling managers to allocate resources for the right things. 

3. OKRs align goals with purpose 

OKRs connect individual efforts with departmental and team goals which is further connected to organizational vision by another set of OKRs. It makes strategy accessible to everyone within the organization in the form of daily tasks.

4. OKRs accelerate growth 

When employees have clarity about their roles, assignment, and purpose, and are willing to take risks, set audacious goals, and perform at a higher level, the business thrives.

5. OKRs influence culture

Unlike any other goal setting model, OKRs transform output-based culture into outcome-based culture. Which in turn creates a culture of accountability, focus, and continuous feedback and builds a highly engaged workforce.

How to get started with OKRs

Getting started with Objectives and Key Results is easier when there’s a system. Many organizations prefer an unified platform for this purpose to make setting OKRs a seamless process. However, even if you choose to do it yourself, here’s a few things that will help you set the right OKRs for your business.

1. How to plan for OKRs

Objectives and Key Results help organizations convey strategy in such a way that everyone throughout the organization knows what they need to do to make it happen on time. Setting OKRs requires a permanent mindset shift on all levels — from executives to employees — on how they see, distribute, execute, and measure their work.

  • Plan for accountability- Usually, organizations have one person responsible for implementing and managing OKRs. They are assigned the job of making sure that everyone understands the OKRs, is properly trained on how to work on OKRs, and knows how to optimize performance for maximum outcome. This person, often called the Ambassador or Chief of Staff, is responsible for the distribution of the right resources.
  • Schedule regular check-ins- Decide on how productivity will be measured on an ongoing basis for each Key Results. Weekly check-ins with managers help in pivoting tactics as early as possible. Instead of just asking for a quantitative progress report, try to understand their attitude and confidence toward the goal. 
  • Plan for revision- To make your Objectives and Key Results agile, you need to have a system (preferably a software or tool) in place that helps you shift your OKRs as and when needed. OKR revision is generally done mid-quater. Having one unified platform for all OKRs also helps in revising retrospective OKRs, recognizing patterns, and optimizing for the future.
  • Plan for the right cadence- Company-wide goals usually take an annual approach, while team / departmental goals require quarterly cadence to remain effective in an agile environment. Spotify is known for setting 6 month cadence for strategic OKRs and 6 week cadence for tactical OKRs.

2. How to set company OKRs

Next step is to find an overarching company-wide goal for your organization. It’s the ultimate goal that would decide every successive Objective and Key Result and activities within the organization. Once the company-wide vision is clear, it’s time to break company strategy down to company OKRs i.e. 3-4 specific targets your company must achieve within the next year.

It is important to have representatives from all levels while setting company OKRs. This ensures that company OKRs are feasible, strength-based, and realistic. It also helps the management to understand what resources and support they need to provide their employees to achieve those OKRs on time. 

3. How to set team OKRs

Team OKRs are how each team ensures that the company reaches its business targets for the year. This is where strategic goals are aligned with individual tasks. Team OKRs are set quarterly by team managers with direct inputs from team members and other teams’ leaders. Team OKRs are usually evaluated bi-weekly. Not every company OKR needs to be reflected in every team’s OKRs. It’s possible and natural that one department caters to one specific company OKR.

The primary purpose of Team Objective and Key Results is to help all employees stay focused on their goals despite the distraction of urgent, impromptu work needs. 

4. How to set individual OKRs

Individual OKRs are usually the initiatives that each individual team member must complete on a weekly or bi-weekly basis to keep efforts in alignment with company OKRs. It is important to remember that OKRs are not checklists. Weekly, individual OKRs are only for high priority tasks and should not exceed 3. Having clear weekly targets help employees say no to unimportant tasks whenever they need to.

5. When and how to follow up on OKRs

Weekly check-ins are effective tools to continuously track progress on each Key Results and pivoting, adjusting wherever necessary. However, make sure not to make these check-ins as performance evaluation meetings. Scoring progress weekly does nothing for value-based OKRs other than stressing out employees. Focus on measuring progress, removing operational roadblocks and improving results during these check-ins.

5 common OKR pitfalls to avoid

Setting and tracking OKRs is a strategic exercise that ensures all tactical and operational Objectives and Key Results point in the direction that individuals and teams must take to achieve organizational mission. Setting OKRs is simple, but not easy. 

While rolling out OKRs make sure to avoid these common OKR mistakes for maximum results:

1. Don’t cascade OKRs

Individual employees are the ones who directly execute business strategies. They know what is actually ambitious yet sustainable based on their own and team’s strengths and weaknesses. Setting bi-directional OKRs help businesses merge executive visions with bottomline operations.

When employees are allowed to set their own OKRs, they are encouraged to think creatively and take calculated risks. Cascading OKRs carry a risk of putting everyone inside an agenda in a highly agile business environment leaving no room for feedback and/or innovation. Thus, limiting opportunities for growth and transformation within the organization. 

2. Don’t set too many OKRs

Don’t use OKRs as a simple task management tool — a never ending to-do list that never gets completed. It is important to measure and allocate resources to what matters most.  Each objective in an OKR should only include no more than 2-5 high priority key results. Any more than that and you would end up diluting your resources for minimal results. A general rule of thumb is to ensure that every team member knows their OKRs by heart at all moments.

3. Don’t have insufficient key results for each objective

Key Results must be well thought out. If there’s insufficient Key Results for each Objective, it could lead to unforeseen miss on that OKR. Thus, causing unnecessary delay. Having carefully planned Key Results also helps to understand resource requirements and to correctly estimate how long it might take to complete the project.

4. Never set OKRs in isolation

The purpose of OKRs is to find strategic, tactical, and operational alignment of efforts. This is why OKRs must be transparent to and aligned with every team, department across all managerial levels. Having company and team Objectives and Key Results in public is a great way to let everyone know how and where their contributions fit into the bigger picture.

5. Don’t set too easy or too difficult OKRs

OKRs should be a stretch to organizational capabilities. If it is too easy, you will end up forgoing opportunities to grow and underutilizing resources. And if it is too difficult, you will end up stressing or demotivating your employees.

OKR FAQs

What is the difference between SMART goals and OKRs?

SMART goals are defined as Specific, Measurable, Achievable, Relevant, and Time-bound goals. 

The primary difference between SMART goals and OKRs is that the principles of SMART goals only allow to craft the chief objective. They provide the answer to “what should we aim for?”. Whereas, OKRs, on the other hand, give clear and specific directions on where and how to allocate resources to make sure the primary objective gets done on time. OKRs provide the answer to “what should we aim for and how do we get there?”.

Secondly, SMART goals are best for setting individual or the primary organizational goal. While working on day-to-day tasks, employees often lose sight of the bigger picture to understand how their work connects to the bigger purpose. Objective and Key Results framework prevent this by strategically connecting individual and the overarching organizational goal with team and departmental goals. Thus, OKRs help employees to work together in alignment with business strategy at all moments.

Third, SMART goals do not provide a roadmap for continuously tracking progress or the lack of it. OKRs are more insightful to measure performance and build accountability.

Pro-tip: Instead of choosing one or the other, always set OKRs and make them SMART. 

What is the difference between OKRs and KPIs?

Many people confuse OKRs with KPIs. However, OKRs are forward-moving, fast-changing milestones that an organization seeks to achieve in order to excel. Whereas KPIs are generally standard benchmarks for gauging performance over time. 

Pro-tip: To learn more about how KPIs and OKRs differ from each other and how you can use them together, read this

Conclusion

Objectives and Key Results are critical for organizations to clearly distinguish between strategy, tactics, and operations. It also helps everyone in the organization to clearly understand what they want (objectives), what they need to do to have that (initiatives), and how to measure progress (key results).

OKRs help organizations to stay grounded in reality while shooting for the moon, to plan for the future while staying focused on immediate goals. Setting OKRs requires careful planning but it takes far less time to do so than traditional goal-setting methods.

Don’t treat OKRs like new year resolutions that you set once and then forget. You must follow it up with all team members at regular intervals and make sure that resources are being used for the right things at the right time.

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