The Objectives and Key Results (OKRs) framework is a goal-setting methodology that can be a powerful tool to drive focus at scale. There are only 2 components which should make it a simple system to master, but many teams have a hard time setting good OKRs when they adopt the framework.
Why is that?
Well, 90% of our working time is spent thinking about outputs. These are the projects, specs, code, designs, etc, that we've been hired to produce. On the other hand, OKRs are about outcomes. These are the improvements we expect to see from the work we've done: more engaged users, higher conversions, increased revenue, etc.
So the challenge for teams is to shift their focus when they get into planning mode. You should no longer think about deliverables and deadlines. Instead, you must concentrate on why you planned those deliverables and clearly outline the corresponding goals. This guide will give you a simple 3-step process to achieve just that!
Let's define what we mean by good OKRs before we discuss the best way to figure them out.
A good Objective is a concise statement that sets the direction for the team. It should focus on the desired impact at the end of the quarter and avoid mentioning implementation details.
ex: "We're a leader in the APAC market", "Our user onboarding is world class", "We're recognised as a thought leader in our industry".
Good Objectives should target a specific aspect of the business (avoid general statements like "Be great"), and it should also speak to as many functions as possible. The more teams can relate to an OKR, the easier it will be to align everyone and create synergies between teams.
ex: Don't write "Rock our Apdex score" as non-engineers might not be familiar with Adpex. Instead, you can simply write "Achieve great application performance".
On the other side, good Key Results can be domain-specific. This is how your engineering team can indicate how they'll measure success (Apdex, page speed, throughput, etc...)
Great Key Results should be SMART. That means they should be specific, measurable, attainable, relevant and time-bound. In practice, it means picking a relevant metric and detailing its expected progression (ex: "Improve day-2 retention from 40% to 55% [by the end of the quarter]").
Objectives set the direction, and Key Results will help you measure traction. Good Key Results should help you understand how far you are from reaching your Objective during the quarter. They're critical to success as they will help you adjust your effort and identify efforts that are not yielding the expected results.
Now that we've established the criteria for good OKRs, we can look at a simple way to write effective OKRs in a single session.
We first need to decide on a couple of themes that will later become our Objectives. One way to do so is to use a customer journey framework like the AARRR funnel (also known as Pirate Metrics), and then decide on which parts of the funnel you want to focus on.
If you're not familiar with the AARRR funnel, it's a framework that divides your customer journey into 5 stages: Acquisition, Activation, Retention, Referral, and Revenue. You can then track each step, identify where people drop, and prioritise work in the areas that need improvements.
I like to use that framework as it makes it easy to visualise where we want to be the most impactful. For instance, an early-stage startup will probably want to focus on Activation and Retention (in fact, startups should tackle Pirate Metrics in the RARRA order). In contrast, late-stage companies will put more emphasis on Revenue.
So, all you need to do then is to decide which parts of the funnel you want to focus on, and these segments will become your themes for the quarter.
If the AARRR funnel isn't a match for your team, you can use other frameworks as a starting point.
Pick the framework that is the most relevant for you, then isolate 1 or 2 components that should be your top priority for the next 3 months.
Once you have your themes you can start looking at the corresponding KPIs. OKRs are different from KPIs, but your Key Results will often re-use metrics that are present in your KPIs. So here, we can simplify our writing process by starting with the metrics to figure out what our KRs should be.
The other advantage of this method is that it's a sure way to avoid listing projects as Key Results – which is one of the common mistakes made by teams when they're getting started with OKRs. Using metrics will help you write effective OKRs that can be measured and tracked during the quarter.
Let's assume here that we've picked Activation as a theme. Here's a list of corresponding Activation KPIs that cover the journey from the signup page to having an active user:
I'd recommend listing 8-15 metrics that matter. You may already have a clear idea of what you want to track, but listing all the important KPIs will help you create a better picture of what could be tackled, and what you're choosing to ignore. It's also a great way to identify metrics that can be paired to avoid bad side effects (ex: you start spending too much on attracting low quality leads. Signups go up, but conversions go down and so does your budget).
From there, you can pick the KPIs that you want to improve.
In our Activation example, we care more about the post-signup experience than the signup conversions. So, our theme/metrics combo will look like this:
We're almost there!
The last step is the easiest. All we need to do is to turn our theme and metrics into proper sentences.
"Activation" becomes "Boost activation by improving the post-signup experience". We use dynamic language to convey the importance of this effort, and we also specify which part of Activation we want to improve. By adding "post-signup experience" we make it clear that we're not looking for improvements in signup conversions.
We have our Objective, now we just need to turn the metrics into Key Results using this formula:
Improve <metric> from <current value> to <improved value>.
Reduce <metric> from <current value> to <improved value>.
Put it all together and your theme/metric combo becomes a simple OKR:
That's it! From here you can start identifying the action items that will help you move the needle and list them under the corresponding Key Results.
Your OKRs will only be as good as your ability to remember them (and see progress) – especially if you're a remote team!
Got a question? Find me on Twitter @stenpittet