What is an OKR?

Objectives and Key Results (OKRs) is a goal-setting methodology where an objective states what you want to achieve, and 3 to 5 key results are measurable steps to help you reach that goal. (OKR = 1 Objective and n Key Results)

  • Objectives: Describe unambiguous outcomes. The successful completion must provide clear value to the organization. Objectives should be specific, measurable, achievable, relevant, and time-bound (SMART).
  • Key Results: Describe deliverables or measurable results, not activities.

OKRs align everyone’s efforts, keep teams focused, and boost company transparency. They make it easier to track progress and adjust strategies as needed!

Highly aligned companies grow revenue at least 58% faster and are 72% more profitable than misaligned companies. (LSA Global LLC )

Overview

Jodie’s quick guidance to OKRs:

  • You require a company mission and vision statement to derive all OKRs from. Without such, any alignment is coincidental.
  • OKRs are public by default. This increases alignment and dependencies and conflicts can be quickly identified, discussed, and resolved. Decide where you want your OKRs to live for employees to see.
  • Aggressive goals are encouraged.
  • Define goals according to the goals of the company, and calibrate them with managers. (Grove)
  • OKRs should be set both top down and bottom up. Meaningful insight can be found all over an organization.
    • Sales OKRs are the easiest because they are set according to goals and budget.
    • It’s up to employees with their managers to set aligned OKRs without any formal control of the process; there should be no centralized goal-setting process across the organization. (De Mello 69)
  • OKRs should not be tied to compensation. (De Mello 38) There are caveats.
    • Front-loads pressure and tension, driving employees to politically negotiate easy goals (sandbagging) to maximize good bonuses.
    • Leads to ethical problems, opening of fake accounts, etc.
    • OKRs can be set more aggressively when not tied to compensation.
    • Employees should be rewarded for moving the company forward in great strides together to develop a culture of high performance.
    • I have been involved in successful OKRs tied to compensation bonuses. Some were linked to company EBITDA and used a tiered bonus structure. The better the company did as a whole, the larger bonuses employees took home. This encouraged and incentivized collaboration on shared goals. 💰 OKRs are collective commitments. (Struthers)
  • Percentage achieved of an OKR does not matter much — the actual results are what is important.
  • Short cycles and nested cadences: strategic cycle (3-10 years) > annual cycle > 1-6 month long OKRs.
    • Sometimes annual OKRs are sufficient, but business is so fast-paced that 6-month cycles or higher are recommended.
  • Multi-disciplinary teams should only have team-level OKRs and not individual. (De Mello 85)

OKR Implementation Strategy

So you’re set on implementing OKRs for your organization, eh?

1. Determine your overarching mission and vision statements

“Companies that enjoy enduring success have a core purpose and core values that remain fixed while their strategies and practices endlessly adapt to a changing world.” (Collis & Porras, Harvard Business Review) This requires core ideology and envisioned future.

👍 Do this:

(Telecom, paraphrasing) “We build high performing fibre networks across Alberta (including rural) [core ideology], so that Albertans are empowered and can compete in a global market [envisioned future].” ✨

👎 Not this:

(Mediocre telecom, paraphrasing) “We do not want to be the worst telecom option. [core ideology] Second worst is okay. [envisioned future]” 💩

If well-written, vision and mission statements will feel harmonious. (De Mello 51)

  • A mission is the company’s purpose.
  • The vision is how the world looks if the company fulfills its purpose.
  • A mission statement can be company or customer-centric.

2. Determine 3-year or 10-year Strategic OKRs

We will _______, and we will know if we are successful if we can ______, ______, and _____.

These can be considered the company’s dreams. Growth has to be a major objective. For example:

  • Entering or expanding geographic market
  • Achieving ARR/MRR milestones
  • Developing portfolio of products and services
  • Number of new customers
  • Organic growth and acquisitions

Strategic OKRs:

  • Are revised annually
  • Objectives are generally created by the executive team; Key Results are often created by department VPs and then further refined by the executive team
  • Quantify the path to the vision of the company (strategic decisions should be quantified by strategic OKRs)
  • Must be constantly communicated within the organization. (Main job of the CEO.) (De Mello 58)

Examples

Completely new? Review your pirate (AARRR) metrics for ideas to start:

  • Acquisition: customers finding the product
  • Activation: customers experiencing the core value of the product
  • Retention: customers coming back to use the product again
  • Referral: customers sharing the product with others
  • Revenue: monetizing customers

3. Determine Annual OKRs

Team-level and/or department-level annual OKR goals are derived from the company’s strategic OKRs.

They are generally viewed from a Balanced Scorecards lens: financial results, long-term sustainability, customer, and employee needs must be balanced. This ends up having three primary objectives:

  • Employee experience
  • Customer satisfaction
  • Financial and business results

Examples

  • Objective: Enchant our customers
    • Key Result: NPS (Net Promoter Score) of at least 50% across our products and services
    • Key Result: Reduce the number of complaints to 2 per month per customer
  • Objective: Cultivate a collaborative and inclusive environment
    • Key Result: Implement consistent DEI training with 100% of team members
    • Key Result: 100% of hiring managers trained in DEI recruiting by Q1
    • Key Result: 65% increase in women in leadership roles
    • Key Result: 40% increase in the overall diversity of the employee population
  • Objective: Become a company loved by our employees
    • Key Result: Improve employee engagement rate by 30%
    • Key Result: Reduce company turnover by 20%

4. Determine 1-6 Month OKRs

Short OKRs allow employees to quickly course-correct and respond to market and innovation.

Short cycle OKRs have three phases: planning, monitoring, and debriefing

5. Create and Maintain Feedback Loops

  1. Which OKRs are working? Collect data on key results.
  2. What obstacles are in our way?
  3. Are our OKRs reinforcing an aspect of our culture that needs to change?
  4. Are we doing the right thing? For employees, customers, stakeholders, the world?
  5. Is anyone missing from the conversation? Did everyone get a chance to voice their opinion?
  6. Have you heard from all stakeholders? Employees, customers, investors, and market?

6. Rolling Out OKRs

It’s a marathon and not a sprint! The goal is not to roll out OKRs as quickly as possible. The goal is to improve operating excellence and company alignment.

Sometimes starting with simple KPIs (Key Performance Indicators) may be the right move for your organization. Proper time and resources need to be allocated to crafting OKRs and making them visible to the company. You need to be honest with yourself and where you are as a company.

OKRs are a collective commitment, and require public commitment by leadership. You must lead by example.

Works cited

  • De Mello, Francisco Souza Homem. OKRs, from Mission to Metrics: How Objectives and Key Results Can Help Your Organization Achieve Great Things. Independently Published, 2018.
  • Grove, Andrew S. High Output Management. Vintage, 1995.
  • Hubbard, Douglas W. How to Measure Anything: Finding the Value of Intangibles in Business. Wiley, 2014.
  • Kelly, Allan. Succeeding with OKRs in Agile: How to Create & Deliver Objectives & Key Results for Teams. Amazon Digital Services LLC - KDP Print US, 2021.