Jon Ayre
Jon Ayre Strategic Advisory Practice Lead

Our Thinking Tue 25th October, 2022

How to do OKRs right

Most people have experienced OKRs in at least one organisation, and many claim they don’t work. In reality that thing they experienced wasn’t really OKRs. Here’s how to do it right.

Horses with stripes

“If you claim to dislike horses because they’re too stripey, it’s probably not horses that you hate” – Jon Ayre

Most people have experienced OKRs (Objectives and Key Results) in at least one organisation, and many claim they don’t work. On looking at what these people don’t like about OKRs, I’ve found a very common pattern. In reality that thing they experienced wasn’t really OKRs. It may have been called OKRs but more often than not, it was one of two existing things that serve very different purposes. 

The first imposter is the KPI process (Key Performance Indicators), which although useful and valuable, isn’t OKRs. I’ll explain why in the next section. The second imposter is traditional performance management. Other than sharing the term “objectives”, this is a very different beast with very different aims. So, what I was witnessing was a dislike of other processes, and not of OKRs. In fact, I’ve encountered very few people who’ve used OKRs in the way I recommend they should be used.

This blog post lays out how OKRs should be done if you want to get the real benefits of the approach.

OKRs – an alternative to KPIs

Organisations emerging from the industrial revolution have traditionally been organised into hierarchies, made efficient through the separation of concerns. These organisations often measure their effectiveness using well recognised KPIs (key performance indicators), such as cost and time. This approach proved useful for companies operating in stable business sectors that had reached a high level of maturity.

The internet, however, has created significant market disruption. The rate of change across many businesses is still rapid, and promises to remain so for the foreseeable future. To respond to this ever-changing environment, a new way of setting targets and prioritising work has emerged that removes the need to micromanage every task and function. Made popular by Google, this technique is generally referred to as OKRs (Objectives and Key Results). Unlike the more static KPI approach, it adopts a rapid review cycle and a focus on group responsibility.

OKRs are about delivering change, not on maintaining the status quo, and should be used accordingly. They provide a non-hierarchical way to drive successful outcomes.

Essentially, the OKR approach aims to achieve three outcomes:

  1. Align task execution directly to company strategy
    When the tasks being performed by a team or individual are far removed from the strategy that gave rise to those tasks, the reason is lost. All too often, teams successfully complete these tasks but somehow manage to completely miss the strategic point. By linking tasks directly to core company goals, OKRs help to ensure that the “doers” understand the purpose and value of their efforts.
  2. Create transparency
    Where teams and departments operate in isolation from one another, and when their work is hidden from the rest of the organisation, duplication of effort proliferates and waste is high. The OKR approach endeavours to create transparency so that unintended duplication can be avoided.
  3. Encourage collaboration
    There is little incentive to collaborate when overall goals are divided and cascaded down to teams, and then divided further to individuals. By creating objectives at the team level, rather than measuring the success of each individual, collaboration can be encouraged rather than discouraged.

Goals – setting the strategic direction

The starting point for the OKR approach is the set of core goals for the organisation. These goals typically manifest as a handful of statements that embody the overall purpose and intent of the organisation; they are high level, direction setting, and likely to create an element of conflict when taken as a set.

For example, a company might have as two of its goals, ‘be profitable’ and ‘be ethical’. There are many ways to be unprofitably ethical and many ways to be unethically profitable. Taken together, however, the number of options available to the company is reduced. Thus, through a small number of well-defined goals, a company can create a clear strategic direction.

Constraints may, at first glance, seem to limit innovation and progress; in practice, they help to focus attention on the changes that best align with the strategic direction of the company, thus facilitating faster and more effective decision making.

Goals are long-lasting (at least a year, and generally longer), and they form the first layer in the OKR hierarchy; there is only one more layer.

Objectives – a call to action

The real driving force behind the OKR approach is the objectives themselves. Objectives are the things you’re going to achieve; they are time-based (typically to be concluded within one or two quarters), qualitative in nature (not quantitative) and aspirational (but achievable). 

Thus, an objective should clearly state an outcome, rather than an action or deliverable. “Build an application” is not an objective, but “Ensure our customers are engaging more regularly with our service” might be. This may seem like a small distinction, but it has a big effect; by focusing on outcomes you empower teams to use their skill and judgement to deliver success, rather than just complete tasks.

Each objective must link back to one of your goals, whilst conflicting with none of the others. If an objective seems to link to more than one goal, it is likely that you have combined more than one outcome into a single objective. This is not advisable as there will be a conflict of focus when attempting to deliver the objective.

Objectives form the second and final layer in the OKR hierarchy. Objectives should not have sub-objectives, nor should they be cascaded to sub-teams to create further related objectives. It should, therefore, be clear that objectives need to be assigned to multidisciplinary, empowered teams and not distributed to individuals. Anyone who is needed to make the objective successful should consider themselves part of that team.

Key results – measuring success

If the intent is to deliver successful outcomes, then there needs to be a way of measuring that success. All too often, progress is measured in terms of tasks completed or widgets delivered; this is not the purpose of key results. Each objective should have at least one key result by which its success is measured.

A well defined key result is numerical in nature, defines a specific target (either relative to a current baseline or absolute), and measures an outcome rather than the tasks undertaken to achieve that outcome. Additionally, care should be taken to select key results for which you can “move the needle” within the timescale of the objective. If you’re not going to see any movement in the measurement over the next quarter or two, then it is not going to be an effective way of guiding your actions and refining your approach.

Examples of key results might include “50% of new users return within 2 weeks” or “Churn rate < 2% this quarter”. An example of a poorly defined key result might be “20% more prospects contacted” as it measures the level of activity and not its success.

Putting it into practice

It is easy to overcomplicate the OKR approach and so the following sections put the theory into practice in the simplest possible way. This ensures that any embellishment or refinement required to suit a particular organisation still results in a straightforward and repeatable approach that can easily be understood and remembered by everyone involved.  

Agreeing on the goals

If you don’t already have a well-defined set of organisational goals, the simplest way to set goals is to bring together the organisation’s key decision makers and work through the following process with them:

  1. Ask each participant to describe on sticky notes the purpose of the organisation (they can suggest more than one). Participants should not confer with one another – it is important that each expresses their own independent views.
  2. As you post all the suggestions onto the wall, sort them into common themes. Usually, you will find a high degree of commonality – if not, you will need to spend some time working with the group to bring them to a common understanding of their purpose.
  3. Each of these groups forms one of your goals. Don’t wordsmith the goals in the room; use a simple shorthand for now and allow the facilitator to do the wordsmithing based on the session as a whole.
  4. Don’t spend too long discussing these goals once you have them. Further clarity will often arise relating to the goals once the objectives have been defined. Treat the OKR approach as an iterative one.

Setting the objectives

Now that you have your goals, it’s time to start defining some objectives to achieve those goals. This activity should be performed by the key decision makers in the room to set their own objectives, and potentially those of their teams, but it is also advisable to perform this activity with various groups across the organisation and encourage a culture of objective setting based on the overall goals. One way of doing this is as follows:

  1. Based on activities already underway, and on ideas emerging from the goals, each participant should define objectives that have a personal stake in and post these under the goal to which they relate. Remember, objectives should be achievable within the next quarter or half. 
  2. Remove duplication by grouping identical or similar objectives together, and reconsider objectives that align to multiple goals to make sure they aren’t multiple objectives combined into initiatives.
  3. Eliminate objectives that conflict with any of the other goals (or reshape them to avoid conflict). This is an important step!
  4. For each objective identify who will make up the team that will deliver that objective.

Defining the key results

The team that is responsible for delivering the objective should also define the key results against which it will be measured; this ensures that they are bought into the achievability of the objective and thus motivated to complete it. The number of key results is arbitrary, but in practice there should be between one and five for manageability. For each key result make sure:

  1. It is numeric in nature.
  2. It can be measured (no matter how approximately).
  3. A baseline can be established (so that improvement can be seen).
  4. It can be affected within the timescale of the objective (typically quarterly).

Establishing a cadence

Establishing, monitoring and renewing OKRs is an iterative process, and once you have defined and assigned your objectives you need to establish a cadence for reviewing them. A typical cadence is as follows:

  1. Plan quarterly
    Review all your current objectives, remove those that are no longer relevant or that have been completed, and create new ones for the next quarter. Some of these new objectives are likely to evolve out of previous objectives allowing you to take your success to the next level, or change tack in response to unexpected results.
  2. Amend monthly
    The whole point of OKRs is to continuously improve based on your findings. It is therefore worth revisiting your objectives on a monthly basis to see if any are flawed and need to be adjusted to improve your chances of success. 
  3. Report weekly
    Measuring your key results on a weekly basis and reporting on progress improves transparency across teams, and also allows you to test-and-learn as you progress. It is easier to know which actions produced which results if you measure at a granular level, rather than only on completion of the objective.

It is then up to the assigned teams how they deliver, and the tasks they perform to achieve that delivery, but as objectives are short lived, explorative and iterative in nature, agile techniques are usually well suited to their delivery. This is because OKRs are about change and improvement – for existing processes where change is not needed or prioritised, existing techniques should still be used to measure their success and efficiency.

Over to you

OKRs are simple in nature, but any change, no matter how small, is always hard to embed in a lasting way. This is because old habits are hard to break, and so it is essential that during the early stages of introduction, you revisit the rules for objectives and key results in this document and make sure you are applying them consistently. Otherwise, it is highly likely that you will drift back towards an existing KPI based approach. Three of the common mistakes made are:

  1. Cascading objectives so that teams can create “subordinate” objectives of their own.
  2. Measuring tasks completed rather than outcomes achieved.
  3. Giving every objective to everyone, rather than assigning them to responsible and empowered teams.

These are the three cardinal sins of OKRs. Avoid these and you should be okay.