OKR is a goal-setting methodology that has helped companies like Google, Intel, Linkedin and Zinga succeed.
In an interview, Dick Costolo, former Googler and former CEO of Twitter, was asked what he learned from Google that he applied to Twitter.
He shared the following:
“The thing that I saw at Google that I definitely have applied at Twitter are OKRs—Objectives and Key Results. Those are a great way to help everyone in the company understand what’s important and how you’re going to measure what’s important. It’s essentially a great way to communicate strategy and how you’re going to meas‐ ure strategy. And that’s how we try to use them. As you grow a company, the single hardest thing to scale is communication. It’s remarkably difficult. OKRs are a great way to make sure everyone understands how you’re going to measure success and strategy”
IMHO, OKR helps companies achieve 3 things:
- Focus – What do we do and what do we not do as a company?
- Alignment – How do we make sure the entire company focuses on what matters most?
- Acceleration – How to maximize the team potential?
What about the good old KPI’s?
At this point, you’re probably asking yourself what’s the exact relationship between OKR and KPI.
And you are totally right, there is much confusion about this.
KPI are Key Performance Indicators.
Popular KPI’s are:
- Visitor-to-Signup Conversion Rate
- Customer Lifetime Value (LTV)
- Churn rate
- Many more…
They are focused on telling us where we are.
OKR on the other hand is a goal-setting framework that creates alignment, clarity, and transparency by strategically managing the change of the KPI’s into desired values.
OKR is built from 2 parts that “balance” each other:
- O – Objectives
- KR – Key results
Please follow as I explain best practices on each of them and will also give some great examples
What is the Dream ? What do you want your company to achieve?
OKR Objective should meet 3 requirements:
- Qualitative and inspirational – The Objective should excite and motivate the team that needs to deliver it. Use simple words, even slang words like “boost”, “Kill”, “Own”, “Awesome”, “Disruptive”,…
- Time-bound – Usually a month or a quarter.
- Actionable by the team independently – There will be OKR for each level and team in the company and each team should be able to achieve the Objective without the help of anyone else in the company.
Here are some examples for great Objectives:
- Become our customer’s best friends by Q1
- Launch an awesome MVP of our product by Q1
- SMB will be madly in love with our product by Q2
- Launch a killer release to meet need X of our VIP customers by Q2
- Totally disrupt the way people share memories by Q4
OKR’s Key Results
Key Results take all that inspirational language and quantify it
How would you measure that objective if you made it? What numbers would move?
KR are a quantitative Success criteria, a common understanding that defines if we succeeded or not by the end of the time.
Successful KR should:
#1 Measurable and Quantifiable
KR’s are your way to stay in touch with the business reality
They tell you if you’re progressing in the right direction and in the right pace.
Everyone in the company knows exactly what he is expected to achieve.
#2 Balance opposing forces
like growth and performance, or revenue and quality, by making sure you have the potentially opposing forces represented.
To create a good balance make sure you set at least 3 Key Results per each Objective
#3 Be challenging but not impossible
As you set the KR, you are looking for the sweet spot where you are pushing yourself and your team to do bigger things, yet not making it impossible.
Finding that sweet spot is very important.
If you are 100% confident that you can meet the KR you’re not pushing yourself
If you think that it would take a miracle to meet the KR, you will not even try to do it
Google teams likes to set OKRs such that success means achieving 70% of the KR, while reaching beyond is considered extraordinary performance.
From Re:Work, Google’s official guide to OKRs :
“Google often sets goals that are just beyond the threshold of what seems possible, sometimes referred to as “stretch goals.” Creating unachievable goals is tricky as it could be seen as setting a team up for failure. However, more often than not, such goals can tend to attract the best people and create the most exciting work environments. Moreover, when aiming high, even failed goals tend to result in substantial advancements.”
When you set KR in this way they encourage employees to continually push their limits. You never know what you are capable of until you shoot for the moon.
It’s important to communicate to the employees that OKRs are not synonymous with performance evaluation.
Employee performance evaluation should NOT be about how well did his team meet with the planned OKR, It is more about the employee personal contributions and impact on achieving the team OKR and the larger organizational OKRs
An example for KR for the Objective : “SMB will be madly in love with our product by Q2”
- At least 15% of visitors sign up for a trial.
- At least 10% of our subscribers share at least 1 article each week
- At least 20% of the customers use feature X more than once a week
- For 80% of the customer’s, Maximum Loading time is less than 2 sec
The OKR is an on-going process.
In the above graph you can see the process in the year/quarter level.
but it is important to realize that OKR should be implemented into the daily routines.
you can’t expect to set an OKR in the beginning of the quarter and that in a magic way it will be successfully achieved at the end of the quarter.
You need to define structured weekly meetings/status updates.
This is a BIG part of successful implementation of OKR in companies
If you would like me to write more about this, please comment below or send me an email.
- Focus – You should NOT set more then 3 concurrent OKR in the company level. OKR’s are not everything the company does, it’s the most critical things at a given moment. you should expect people to keep the ship running the other 80% of activity without it.
- OKR must be transparent – anyone in the company should be able to see everyone’s else OKR’s ! not just managers. This promotes clear communication and better collaboration between teams and departments.
- OKR should be cascaded – start with the company level, then departments and finally in employee level
- Celebrate partial success – companies who utilize OKR are aiming high and it means that they “fail” a lot because they achieve on average only 70% of the KR. You MUST find ways to celebrate the partial success.
- Encourage employees to suggest company’s OKR !!! utilizing a parallel bottoms-up
This article was just a short introduction to OKR,
There are many many related challenges about OKR:
- How to successfully implment OKR
- How to avoid dangerous mistakes.
- How to choose the right OKR tool ( there are so many out there – Perdo, Betterworks, Per , 7Geese, weekdone,..)
If this subject interest you, please comment below or send me an email
I Promise that if it interests many of you, I will write follow-up articles
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