How to write good OKRs?
Everything you need to know when setting objectives and key results.
INTRODUCTION
Objectives & Key Results
Objectives and key results are a form of goal setting for teams and businesses that want to set ambitious goals and meticulously track them with metrics. From nonprofits to software startups, teams everywhere are turning to OKR’s to help them meet their goals and grow their organization.
For many teams, the OKR meaning might seem too simplistic. But the simplicity of this system is what gives it the flexibility to adapt to many different types of teams and organizations.
Modern workplaces are usually complicated and a lack of employee engagement, disconnected strategies and unsynchronized teams are just some of the difficulties they face. This is why mission & vision clarity is key to the success of an organization.
This guide will help you pick the right objectives and make sure they set up your company for success. You don’t have to be a Rocket Scientist to accomplish this, but it’s important if you’re looking to implement them successfully
Components of OKR
Objective
Characteristics
- Should be Inspirational.
- Should be Directional.
- Should be Time-Bound.
- Should not have High-Impact.
- Should be Understandable.
- Should not be technical.
Examples
- Set up a colony on Mars.
- Increase ARR from Asia.
- Optimize the sales process by Q4 2019
- Achieve 100k checkouts
- Improve internal employee engagement.
- Launch a new SaaS product.
Key Result
A Key Result is a measurable accomplishment required for the Objective to be achieved. It contains a metric with start and target value you want to achieve.
Key Results measure the progress towards achieving that objective.
Characteristics
- Should be measurable.
- Objective should have at least 1 Key Result.
- Objective can have a maximum of 5 Key Results.
Examples
- Close 10 deals worth 4M
- Post 25 articles in the Employee Engagement category.
- Decrease churn rate by 5% yearly.
Initiative
An Initiative is about what you’ll do to achieve your Key Results. It’s like how you’d describe the journey from point A to point B. For example, if one of your Key Results is increasing revenue, a good Initiative might be improving the company’s blog content and social media presence.
Characteristics
- Should be Specific.
- Should be Time-Bound.
- Should be independent of external factors.
Examples
- Hire a Sales Manager by Q3 2021.
- Setup and Send out 100k cold emails.
- Publish 30 articles in the next month.Cha
Outputs vs Outcome
Output and Outcomes are two foundational aspects of thinking in terms of OKRs.
An output is something you do, an outcome is something that happens as a consequence of what you do. Outputs are efforts that are in your control, whereas Outcomes are the results as a consequence of your Outputs. Some examples
Objectives
Picking the right Objectives
Setting Objectives appropriately is one of the hardest things to do right. Setting objectives at the wrong time could lead you down a path that you’re going to end up wasting your time and resources.
Objectives fundamentally help in communicating and executing the company’s strategy and goals. They should be specific and clearly stated so that it’s obvious what actions are needed to achieve the objective. Great objectives have the following qualities
1. Ambitious and Inspiring
Great companies invariably have aspirational goals and that’s what attracts the workforce. They have the most passionate visions of what they want to accomplish, and they make it happen. Compensating employees with lucrative salaries can only motivate them to an extent, but ambitious challenges serve as motivation drivers and can drive teams to peak performance.
2. Measurable
With OKRs in place, companies are able to measure progress against specific goals. This is useful when you’re assessing whether your company achieved its objective, or if you need to reassess your approach.
3. Provide Transparency&Clarity
OKRs are meant to drive peak team performance.All goals are open, and progress can be viewed by any member of the company. Making sure employees have a stake in the company’s objectives and progress, they see that they are all striving towards the same goal.
4. Achievable
If a goal is not achievable, it will only lead to disappointment. The best way to ensure success is to create goals that are challenging yet achievable. The idea is to encourage audacious goal setting and follow it up with a real dose of its viability.
Its easy for Humans and Teams to underestimate their potential. The OKR approach provides a simple and yet effective antidote to dream big and execute methodically.
Check out the following OKR
Let’s see how it fares in terms of its qualities
Ambitious and Inspiring
For a company that is not a market leader, this is an aspirational goal worth going after.
Measurable
Here the key results measure whether the objective has been reached.
Provide Transparency&Clarity
By providing clear metrics that matter, the message is clearly sent out. These goals in turn provide the starting points for sub goals to be defined. For example, the West Coast territory could sign up for a 5 million Revenue goal.
Achievable
One can only comment if a goal is achievable if she knows the goal. By clearly writing the OKRs, the goals are effectively communicated so that constructive feedback can be accumulated on the goal’s viability.
Tips to help you pick the right objectives
Educate first
Objectives should be put at the heart of any strategic plan. They should guide all other strategy and activities and provide a sense of direction for success. It’s important to create aims that are empowering & driven by the collective will of your team. With the right context, everyone knows what they should focus on and how their goals align with the objectives of the organization.
It is important to visualize how everyone’s work fits into the context of your company. Doing this will help you and others understand how what you do relates to other parts of the business.
Timing is Key
Objectives serve as the destination for your company or organization and should be inspirational for those who are working towards them. Ideally, your team agrees that these are the right goals to pursue at this moment.
For example, imagine a company that strives to get the first 100 users during the fourth quarter of the year. The goal would be to run a campaign with early adopter offer, such as Linkedin. However, it’s difficult to believe in this goal if the MVP of the product is not ready. The best thing to do right now would be to fix the stability issue you’re having with the MVP. An objective for Q4 could be “Fixing the Stable MVP Problem” or, alternatively, an ambitious key result could be “Do an Internal Validation”. As soon as that problem is fixed, you can focus on getting the first100 users.
Important criteria for Objectives
To make it easier to prioritize, we recommend aggregating the criteria for defining goals into two categories: must-haves and nice-to-haves. A goal will qualify as an Objective only if it meets all must-have criteria.
It’s really up to you on what you do with those, and not everyone will need the same kind of things. They can be nice, but if you’re new to OKR, it could help to keep things simple and not worry too much about them for now.
Must Haves
- Directional
Objectives should be set so that they make you understand the direction of your project. It is also important to have a clear Objective in order to focus on it without any distractions
Directional objectives are always aiming to get a company into a better place. As an example, don’t mention ‘business as usual’ in your OKRs. For example, you might state ‘achieve revenue growth of 200%+’.
- Aligned
Once you have a clear objective, it is important to align it. This will allow you to know which direction you are going in and makes certain that the company’s objectives will provide any value for the business
Motivation is contagious and Alignment doesn’t only promote teamwork between employees, it also helps those outside of the Objective understand their significance in our organisation’s success.
- Impact
When you know what you’re trying to achieve and are focused on it, that’s a good sign that you’re making progress. Make sure each step has a tangible effect; if not, think about why. It’s generally better to set objectives of three or four because they can have an impactful effect on your progress.
- Time-bound
Every Objective should be limited in time and have a clear deadline. If you’re set them on a cadence of quarterly, the end of the quarter is usually when deadlines are enforced. It’s possible to leave deadlines open indefinitely, but there needs to be a plan for meeting them at some point.
- No metrics
An Objective cannot be quantitative. Leave the metrics for the Key Results.
Nice to Haves
- Inspirational
Some people at your company might need a little more inspiration. Make sure you spell out the Objective and save the Key Results for anything that’s quantifiable.
Some of our customers use internal rules that state Objectives must be so inspiring that everyone working on it wants to put it on their resume. One easy way to make Objectives more inspiring is by including adjectives and adverbs such as stunning, beautiful or amazing.
- Understandable
Your objectives should be front and center in every decision you make. Make sure your objectives are simple and written in plain language that everyone can understand. Try to avoid unnecessary jargon and keep the description concise without sacrificing the quality of the Objective. This will help get your objective on others’ radars.
Ann Wylie, a writing guru, found that less than 14 words are needed for 90% comprehension in readers. This falls to 10% if the number of words is around 40. Other studies show that 11-word sentences are usually easy-going and comfortable to read.
- Not too many
It is possible to achieve a lot in the course of a year, but selecting 3 or 4 so-called Objectives will be the most effective way to make sure you are focussing on the right priorities. Picking too many Objectives usually means that something important won’t get done. Or it could mean that an Objective might not be as important as another. Goals need to be specific, well-defined and have a big impact in order to provide focus. It’s more effective to set few, important goals rather than countless small ones with little consequence.
Key Results
Setting Key Results
In order to achieve your goals, you need to be clear about what Key Results are needed. This means agreeing with everyone who has a stake in achieving the objective on what will have to be done.
Key Results are feedback mechanisms telling you if you’re moving closer to your Objective or not. This includes the outcome of an event or experiment, which is a piece of data that simply tells us where the result will end. If a Key Result is a real result (ie, outcome), you can keep going until you see the needle move for your Key Result. Initiatives—for example, projects or tasks—cause results to happen. If your initiatives are strategic Key Results, it severely limits your ability to pivot. Let’s say you’ve designed a program and have built in the KPIs that you want to drive with it. When you hit those KPIs and progress stalls or falls, you can’t change course without enormous financial and time commitments.
Keep your Objective as general as possible. Words like successful & awesome can cause multiple interpretations, leading to confusion for the prospective employer.
This is an important point. Key Results can remove any ambiguity around what needs to be done to achieve the Objective. If your Objective is ‘achieve ridiculously steep growth’ but you aren’t sure of what that could possibly mean, then it might be worth seeing some Key Results examples. Given how the Key Result was 50% over the last quarter, it’s not hard to see that the objective was quite ambitious. If you want to be more thoughtful about it, reviewing the key result or another element is crucial.
Key Result should measure what matters
The role of Key Results
The most essential role of Key Results is to specify what exactly the Objective will mean. If you have an Objective to learn Italian, then the meaning will differ for different people. However, Key Results define this meaning in more detail and make it clear what you need to do by creating concrete goals.
The Key Results define what needs to happen in order to successfully achieve the Objective. That means they help you figure out what really matters.
“What matters” is never an end in itself.
When you set yourself the objective of learning Spanish, most people think of things they could or should do to learn that language. They might listen to a Spanish podcast every day, watch a Spanish TV series, or complete a Spanish language course. One of the first things people think of when used to measure their performance is how many Key Results they’re able to achieve. These are also the metrics that most people include in their presentations and when presenting Key results.
These tasks are not related to the objective, but they seem good because they are easy to link with it. You can easily see how listening to a podcast and watching a Spanish TV series would help you learn Spanish. For most people, while these tasks may not be enjoyable, they’re a time-saving means of achieving a goal.
It’s possible that you wouldn’t be able to order pizza in Barcelona. Nevertheless, simply completing a course would make you more likely to have a basic understanding and be able to speak the language on a general level.
The results you really want to achieve are never a way to an end. So you have to design each Key Result so it’s its own reward.
‘What matters’ is subjective
I set myself a goal to learn Spanish a little while ago. What that means is simple: be able to hold a 10 minute conversation with my friend whose is a native Spanish speaker.
I won’t consider myself to have learned Spanish until I can do that. I don’t care about taking a course, watching TV series or listening to podcasts, it’s just for the end result.
This could be different for you. What matters to you may not be what matters to me. If you would also like to learn Spanish, and don’t mind your success being based on listening to 30 podcasts, then I’m not going to say that’s too much. I would leave you wondering why your goal is to “learn Spanish” instead of spending countless hours listening to Spanish podcasts, but that’s fine.
This could be different for you. It’s not for me to tell you the things that matter in your life. For example, if after listening to 30 podcasts, you believe you’ve learned enough Spanish and want to call yourself successful with this achievement. Ultimately it’s up to you! However, I would want to ask you one question – Is “Learning Spanish” your objective or “Spend time in watching spanish podcasts”?
The point is, “what matters” varies from person to person. That being said, I consider “Key Result K” (as I call it) a good Key Result if it’s not just a means to an end.
The benefit of measuring outcomes
Imagine a team A working on the before OKR and team B working on the after OKR.
Team A will just be driven by their activity, without insight into how their new website is performing. For all they know, it could actually worsen customer conversion rates by being live.
The way Team B will work is that they’ll be driven by results. They can monitor their success with the new website, and tweak it until they get where they need to be. The OKR would allow them to tweak their goal until they achieve their desired outcome.
Building successful businesses might not seem like such a big task in the beginning, but it can get very difficult when you are trying to grow and scale your business. Team B has this complicated process outlined which takes time and dedication from everyone involved. It doesn’t just happen overnight, so keep that in mind.
Components of a Key Result
Metric
The key result is measured by a certain metric. The most popular metrics for SaaS companies are Monthly Recurring Revenue (MRR), Annual Recurring Revenue(ARR) and Churn Rate, the rate at which a subscription-based company is losing customers. In contrast, factories and producers use a lot of operational metrics.
Keeping track of your Key Results can be difficult and it might take some time to figure out what works for you – we have a resource to help with that. Some teams find themselves struggling because they are lacking in inspiration or because you don’t yet know how to measure the metrics that matter most in your business. Don’t worry, we have guides to help!
No matter what Key Result you want to track, it’s essential that you are confident in the metric beforehand. If not, then there will be a risk of putting too much pressure on your time and effort – meaning that you won’t be able to measure how well your strategy is progressing.
Start and Target Values
The start and target values are straightforward. This is the value of your metric at the start of the quarter or year and the desired end value for that time period, respectively.
It’s challenging to decide a target value without pre-existing information. If you only have a few weeks to capture data for benchmarking, those two first weeks are perfect. Of course this means your data might not be significant, but it shouldn’t stop you from setting a target.
Title
You may think that by looking at the metric and start & target values, you have all the info you need. However, in order to reap any of the benefits of a OKRs, they need to be clear & unambiguous. The title is the next step after designing your Key Result. It communicates what you hope to gain from it.
The title will show you what your KPIs are and help you see how they tie together. For example: if you were aiming for doubling your MRR, the key result would be MRR, the beginning value would be 2000 and the target would be 400.
Important criteria for Key Results
Same as Objectives, we can divide these up into must-haves and nice-to-haves. A Key Result should meet the must-have criteria for it to qualify as a Key Result
The niceties like we see them, are often expressed as mandates by others but we believe they’re contingent on the situation. Particularly when it’s new to OKR or you don’t have a well-established process, it’s good to keep things simple and not be too strict about those.
Must Haves
- Make the Objective achievable
The point of Key Results is to focus on specific, measurable outcomes that will move you one step closer to the end goal. Objectives tell you where you want to go, but a well-crafted Key Result will show you how close/far you are from the Objective.
- Measurable
Nice to Haves
- Ambitious
Aim high, but make sure your key results are realistic. You want things that will both challenge and encourage you – they should be ambitious to some extent, but not too close to your limit. If a KRI doesn’t get you excited, it’s not ambitious enough. You need to set achievable targets before the Objective is due so you can reach at least 80% of it. That way, you’ll be confident that your target is attainable.
INITIATIVES
Creating Initiatives/Tasks
Your Objective (i.e. goal) tells you where to go, the Initiatives are your projects and tasks and Key Results are the desired outcomes you need to achieve to have a successful outcome. Your Vision is what motivates you in your business, and it inspires you as well as guides you
Initiatives are things you do to achieve your OKRs. They can be very successful. But even if they achieve what you were going for, not achieving your OKRs means they won’t have helped much, so you need to reflect on what went wrong in order to improve the situation.
In the case where your Initiatives are not delivering the desired results, you should change them. If you don’t have any idea as to what initiatives could achieve the goals of your business, do something small first and see if it has an effect. This is still applicable in a changing environment where trying new things can be more beneficial than sticking to one thing.
Important criteria for Key Results
Same as Objectives, we can divide these up into must-haves and nice-to-haves. A Key Result should meet the must-have criteria for it to qualify as a Key Result
The niceties like we see them, are often expressed as mandates by others but we believe they’re contingent on the situation. Particularly when it’s new to OKR or you don’t have a well-established process, it’s good to keep things simple and not be too strict about those.
Specific
A good Initiative should have a clear scope and one person or team in charge of executing it. It’s important that an Initiative uses verbs that are specific and clear. Objectives, in contrast, can use more generic verbs such as “improve,” “increase,” and so on.
Within control
When you have control over your initiatives, it’s up to nobody but you to complete them. This means there are no dependencies on something or someone else. Reward is incentivized for achieving their OKRs
FAQs
OKR FAQ
OKRs have been used successfully in both individual and team settings. One of the most popular scenarios for using OKRs is to set company-wide goals, such as revenue, employee retention rates, and customer satisfaction. The OKR system is most effective when it’s the organization’s top management defining the goals.
Key Performance Indicators (KPIs) are measurements that can help monitor the progress of a business or an organization. They are useful for measuring how well a company is performing in relation to how it should be performing.
For more information, please this article.
Every thing can be measured. Make sure to choose key results that will show whether or not your objectives are being met. There should be both output-based and outcome-based measures of the objective, with the outcome measure being more important.
The SMART goals and OKRs are two different forms of goal setting and objectives. The SMART goals is a measurable, attainable, relevant, time-bound goal. The OKRs is an objective with key results.
- We should go for the SMART goals if we want to set smaller-scale goals as it gives us more control over our work and enables us to keep track of our progress.
- The OKRs should be used when we have a larger project with multiple deliverables or specific objectives that need to be met at the same time.
This depends on whether your company has stretch goals or not. 70% progress is the sweet spot for companies with stretch goals, and 100% progress is excellent if these are OKRs that can be reached consistently.
We don’t recommend tying bonuses to OKRs. Not achieving them shouldn’t be taboo; instead, we should see this as an opportunity to discuss a change in direction and how you can help our employees succeed.