OKRs for Startups

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What are OKRs: everything you need to know in 2024

What are OKRs: everything you need to know in 2024

Sten Pittet - CEO
STen Pittet
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A brief explanation of OKR

This post will cover the essential knowledge that you need to understand what the OKR framework is about and how it works.

If you need to go further just look at the other posts in the sidebar for more in depth look at specific aspects of this methodology.

Let’s dive in!

Where do OKRs come from?

The OKR acronym stands for Objectives and Key Results. The origin of this goal-setting methodology can be traced back to when Andy Grove introduced the OKR approach at Intel in the 70s. But, it took another ~30 years before the popularity of the framework took off when John Doerr brought it to Google in 1999. Fast forward another 20 years, and OKRs are no longer a process reserved to Enterprise teams. Today we’re seeing numerous startups and scale-ups taking advantage of OKRs to set ambitious goals, align their teams, and accelerate their path to success.

The role of OKRs: aligning vectors in an organisation

Before we get started, it is important to clarify one thing: OKRs are not a performance management tool. It might feel weird to some to not be able to attach bonuses to the key results, but it’s proven time and time again that OKRs don’t work well with compensation goals. You’ll still talk about stretch goals, metrics, and measurements. But if you're rolling out OKRs to get more control over your team, you'll get an unpleasant surprise.

So, what are OKRs for then?

The main purpose of the OKR framework is to be a compass for your org.

Teams can be seen as vectors that are pointing their effort in certain directions:

  • A Marketing team can choose to explore content marketing opportunities, or it can focus on conference sponsorships – those would be 2 different directions.
  • Your Sales team can go after the SMB or the Enterprise market – again, those are 2 different directions.
  • Your Product team that can decide to build Enterprise features, or tackle application performance…

Every team in an organisation wil face daily challenges that might influence their direction. Drift away too much, and what seemed to be an innocuous distraction is now a costly waste of effort.

The challenge for most organisations isn't to get teams to work on things. No, the biggest challenge is to make sure that all team vectors are constantly pointing in a similar direction.

Without OKRs, teams point in different direction

This is where OKRs come in. The #1 job of the OKR framework isn't to put pressure on your teams. It is to act as a North Star for all teams. Beyond the stretch goals, OKR cycle, check-ins, etc.. OKRs offer a single language for focus, as well as a clear structure to align team goals to company objectives.

Without OKRs you might have 5 teams using 7 different approaches to talk about their strategy. With OKRs, it becomes effortless to go from one strategy to the next one as they’re all using the same terms and rules.

The result: you get a clearer picture of alignment. Or, more accurately, you get a clearer picture of all the misalignments. Only then can you start to work on re-aligning the teams.

OKRs act as a North Star for the teams

Understanding (and explaining) the true purpose of OKRs will make it 10x easier to roll out the framework. It will help teams avoid wasting time with endless debates around the key results, and instead focus more of their attention on whether or not their quarterly goals align with their peers.

OKRs vs strategic initiatives (aka your projects)

A common mistake when introducing OKRs is not spending enough time on the definitions before getting your team to use the framework.

Why? The words “objectives” and “key results” are not new, and your team will infer certain definitions from their own experience. If you ask around your company what people think an objective is, or what the term key result represents, then there's a significant chance that they'll tie this back to the projects they're working on:

  • “My objective is to build the new onboarding workflow”
  • “My key result? Update all the marketing copy”

It should be expected to see people gravitating to an activity-centric meaning of OKRs – projects is what we do most of the day. But, those are deliverables and don't really match the definition of measurable goals. It's important to clarify what an OKR is in the specific context of the framework.

So what's the difference?

Here's a simple way to understand how the roles of Objectives, Key Results and initiatives (or projects) differ:

  • Objectives: where do we want to be at the end of the quarter? (direction)
  • Key Result: how will we measure progress? (traction)
  • Strategic initiatives: what are our best bets to get there? (action)
OKR meaning: the difference between objectives, key results and initiatives

A good Objective should help people understand how they can best contribute to the success of the business or their team. A good Key Result should help everyone understand if they're making meaningful strides toward the corresponding Objective. And a good initiative should produce positive results on the related Key Result(s).

I hope that this framing will make it easier to understand how each element works with the other ones.

Another key difference lies in how stable each item will be during the OKR cycle:

  • Objectives should be solid: your Objectives should anchor the focus of your teams during the quarter. And as such, they must stay stable during the OKRs cycle.
  • Key Results may change: predictions are hard, and it's not uncommon to realise that we made a mistake in our targets (or even that we're using the wrong measures of success). This often happens as you learn more from your customers and the market.
  • Projects are bets: finally, the big difference between output-focused and outcome-driven teams is that the latter are comfortable discarding projects. They just treat them as bets to achieve specific outcomes.
Relationship between OKRs and projects/initiatives during the quarter.

Examples of good OKRs vs bad OKRs

We’ve covered a lot of theory so far, so why not look at some proper examples.

Here are some characteristics of good OKRs:

  • They can be understood by members of different departments.
  • They avoid insider language and unknown acronyms.
  • They're measurable and easy to track during the quarter.
  • They focus on outcomes and impact, rather than deliverables and deadlines.
  • They're not tied to compensation.
  • They increase employee engagement.
  • There are few of them!

Here are some characteristics of bad OKRs:

  • ❌ They only seem relevant to a small part of the org.
  • ❌ The language is ambiguous or hard to understand.
  • ❌ The Key Results are binary or progress is hard to assess.
  • ❌ They look like a different representation of the roadmap.
  • ❌ They're used to manage performance rather than align the teams.
  • ❌ They sap the team morale.
  • ❌ There are too many of them!

You'll find a couple of examples below to illustrate the difference.

Example 1: bad OKR focused on an initiative👇

A Product team has been running their beta for the past 6 months. Their users are happy, the product has reached maturity, and the product team has decided that they can start billing their customers. They identified Stripe as the best solution to handle the subscriptions.

They start the draft of their OKRs plan, but they're struggling a bit to finish it. The team has listed the Stripe integration as their Objective, but they can't find the corresponding key results and projects.

  • Objective: Build a Stripe integration to start billing our customers
  • Key Results:?
  • Projects:?
Bad OKR: an output is used as the objective

The issue here is that building a Stripe integration is more of an output than an outcome. It's one of the tasks to complete if you want to get paid customers, but having a billing system doesn't guarantee conversions—it just makes it possible for people to subscribe to your service if they want to.

But, we can get to the  Objective by asking why  we’re working on an output:

  • Q: Why do we want to integrate with Stripe?
  • A: So that users can subscribe online.
  • Q: Why do we want users to subscribe online?
  • A: To have paying customers!

Having paying customers sounds much more like the outcome that we're after. Now, we can rewrite our OKR like in the example 2 below.

Example 2: good OKR focused on impact👇

  • Objective: Have happy paying customers
  • Key Results: revenue, trials, retention, number of customers
  • Projects: build a Stripe integration, launch a marketing campaign, build a referral program, etc.
Good OKR example: we clearly have the direction, traction, and action

There are notable differences with our new OKRs plan:

  • It's not engineering-centric anymore. Having happy paying customers is something that many teams can contribute to. Marketing, Sales, and Support can also start thinking about ways to help the business be successful.
  • Stripe is just a bet now. Imagine if, for some reason, Stripe is not the right tool for the job. In our first example, our team would have been unable to think about alternatives because we set Stripe as the Objective. But in this example, what matters is to convert users to paid, and we could simply email them an invoice.

The simple formula to write great OKRs

John Doerr came up with a simple formula to write your OKRs.

I will ___________ as measured by _____________."

The first blank represents the Objective, and the second blank is about the corresponding Key Results. This is a great way to separate the qualitative aspect of an Objective from the quantitative function of the Key Results.

Tips for writing good Objectives

A good Objective should read as a clear statement that describes the future that you want – it is your desired outcome. Ideally is should feel relatable by multiple teams. Some recommendations:

Make it a sentence

Don't write "Retention" as a company Objective. It's not inspiring, and could lead to bad tactics such as removing the ability to cancel in-app. Instead you should write "Deliver an amazing experience to newly converted customers". This statement is about retention, but it clarifies which segment you need to focus on and how we want to achieve greater retention.

Avoid metrics if possible

Save metrics for your Key Results. Adding metrics to our Objectives often reduces their meaning for other teams and we might also set a wrong target at the beginning of the quarter.

Rather than writing "Sell 50 large contracts" (appeals to Sales), we could write "Make a dent in Fortune 500 companies" (relatable by many teams). We can then list the number of closed deals in the key results, but also have other goals around Enterprise-readiness for the Product team.

Be specific

Don't write short objectives that are too broad. Something like "Grow the business" is hard to interpret as every business wants to grow. Your team will have a hard time converging their efforts toward the same focal point. Instead you could write "Build an effective low-touch growth engine" which is much more prescriptive.

Tips for writing good Key Results

Good Key Results will help you measure progress toward your company or team objectives. A simple way to write good Key Results is to embrace the SMART framework for your goals. This methodology will help you make sure that you cover all required aspects of a good Key Result, including making it attainable and time-bound.

Some other tips that can help:

  • Key Results should have an owner. Their job is to track progress and share feedback with the org.
  • Key Results should not be binary. It will be difficult to get a sense of progress if you can measure progress over time.
  • Use leading indicators of success for long term projects. Don't wait for a project to be released to start building your confidence in the results.

How to explain the benefits of OKRs

While you might be sold on OKRs, it might take some convincing to get your team on board. Here are 5 different talking points that can help.

OKR benefit #1: Better visibility of progress across teams

Most teams have goals in one form or another. They may be expressed in the form of KPIs, themes, priorities, etc but there's certainly a document somewhere that shapes the direction for the next few months.

But, it's hard for teams to understand each other when they're using different terms for similar concepts. As a leader, you may have to switch your mental model every time you speak with a different group. This will obfuscate problems, and make it harder to execute strategies across the org.

Poor execution will lead to missed targets. Missed targets will sap morale.

Rolling out OKRs is a simple way to solve that problem. It enforces the use of shared terms and simplifies discussions. You can go from one team to another, and ask the same questions before and during the OKR cycle:

  • What are your Objectives?
  • What are your Key Results?
  • Is your project tied to an existing Key Result?
  • Are you OKRs on track?

It's not uncommon to feel like your teams aren't in sync, but don't forget that seeing misaligned OKRs can be a sign of progress.

A tool like the Strategy Map in Tability can display all your org's OKRs in a single view.

Align OKRs with the Strategy Map in Tability

OKR benefit #2: Simpler alignment

OKRs do not cascade" – Felipe Castro

Once you have visibility across your teams, you can work on improving alignment.

It is important though to not fall into the cascading trap. In a dream world, we would be able to set great goals at the beginning of the quarter, and then trickle down our strategy all the way to our sub-team OKRs.

In the real world, strategy needs to be adjusted real-time. It may be due to a disaster like COVID-19, or a change in technology, or disruptions in your team. The point is that you'll need flexibility to make OKRs work.

With the right approach, OKRs will help you significantly improve alignment and help everyone make better decision in their day-to-day activities.

And even if you're not trickling down your OKRs, you can still visualise dependencies between Key Results with a Cascading Map.

Cascading OKR map in Tability

OKR benefit #3: Improved focus – always keep in mind what matters

OKRs improve focus by limiting the set of competing priorities. Here in this guide we recommend to start with a 3x3 matrix:

  • 3 Objectives
  • 3 Key Results per Objective

This means that you'll need to identify the most important things to change each quarter, but also what should be put on the sideline.

The other way that the OKR process can improve focus is by acting as a periodic reminder of what is important. When you couple the goal setting framework with weekly goal tracking, then it becomes really easy for team members to keep in mid their top priorities.

Every project discussion happens with the right context in mind.

OKR benefit #4: Increased accountability

OKRs, coupled with weekly check-ins, will increase the sense of urgency and accountability within teams. Looking a progress trends during the OKR cycle will help you see when things are getting off-track, and push people to take action before it's too late like in the example below 👇

Weekly OKR check-ins in Tability
OKR check-ins in Tability

Accountability is not about monitoring people. It's about committing to our goals, and being honest about our ability to achieve them.

OKR Benefit #5: Create real empowered teams

We want to ensure that every member of the team has joined the team because they sincerely believe in our larger purpose." – Marty Cagan in Empowered Product Teams

We can't empower people if they're unclear about what their purpose should be. Without OKRs it is hard for leaders to give the reigns to the team as the vision and the goals aren't defined. The default behavior is to focus on the roadmap and to spend hours discussing the what and how, instead of talking about the why. As a result, we're limiting the creative output of our teams because we're already talking about the implementation details.

Having OKRs allows us to elevate the debate and discuss outcomes rather than outputs. We can then define a clear North Star for the team, and empower them to figure out the best way to get there.

How to score OKRs – and why you shouldn't copy Google

Google came up with a grading system that recommends aiming for a 60-70% completion of your OKRs at the end of the quarter. The idea is to push your team to set ambitious goals, which means that it should be hard for them to achieve 100% of their target. This sounds great in theory, but it hardly works in practice because most organisations expect goals to fall in the 80-100% range.

Say that your Marketing team reports mid-quarter that they have reached 35% of their leads target. Google would consider that to be great, but many people would have a hard time casting the same judgement. We'd expect the team to be closer to 50%.

Don't score OKRs like Google

Tips to grade your OKRs:

  • Stick to the same grading scale that you use for other KPIs. If you celebrate achievements around 80-100%, then apply the same expectations to your OKRs.
  • Keep track of progress every week. Grading your OKRs weekly will help you identify issues early on.
  • Apply a confidence level to your OKRs. Scoring OKRs is about more than reporting your current metric. You should indicate your confidence level, and add any notes that can help others understand what's going on.

If you want to go further, you can read our complete OKR scoring guide.

Comparing OKRs with other goal-setting frameworks

In this section we will look at some classic alternatives to OKRs. At Tability we recommend OKRs as the first option, but there are many different options available if you feel like OKRs are not for you. You might be looking for a more complete framework like Scaling Up, or a different approach like NCTs.

OKRs vs. KPIs

A KPI is an acronym that stands for Key Performance Indicator. It is a metric that helps evaluate the success of an org, team, or project for a particular activity. You can absolutely use OKRs and KPIs together as they have different roles. Your KPIs should be used to monitor the ongoing stability of your business, and trigger alerts whenever you see an unexpected dip in performance.

Key differences between the OKR framework and KPIs:

  • KPIs are a simple set of metrics, OKRs have both a descriptive and measurable aspect.
  • KPIs are mainly a reporting activity, OKRs include feedback and conversations around goals.
  • KPIs can stay the same for years, OKRs change every quarter.
  • KPIs monitor the performance of existing activities, OKRs drive efforts to set new performance baselines for existing activities.
  • OKRs have a continuous impact on the roadmap, KPIs will alter roadmap efforts only if there's a drop in performance.

Learn more about the difference between KPIs vs OKRs.

OKRs vs. MBOs

Management by objectives (MBO) was popularized by Peter Drucker in 1954. It's a process where managers and employees agree on specific performance goals and design a plan to reach them. A big part of MBO is the ongoing measurement and monitoring of employee's performance against the objectives.

Key differences between OKRs and MBOs:

  • OKRs aren't tied to compensations, it is actually advised to avoid using OKRs to determine bonuses.
  • OKRs focus on teams whereas MBOs put more emphasis on individual performance.
  • OKRs split goals into 2 parts: a qualitative statement (Objective) and a quantitative or observable statement (Key Results). MBOs focus on the Objectives.

OKRs vs. NCTs

Narrative, Commitments, and Tasks (NCTs) is another goal-setting framework created by Reforge. Narratives are a more fleshed-out version of the Objectives. It's a qualitative description of what the team wants to achieve, and can be often written as a couple of sentences. Commitments are the equivalent of the Key Results – they're objectively measurable goals that relate to a specific Narrative. Tasks help you lay out the work that needs to be done to achieve the Commitments.

Here are the key differences between the OKR methodology and NCTs:

  • OKRs focus mainly on outcomes, whereas NCTs include both outcomes and outputs.
  • NCTs tend to be more verbose due to the nature of the Narratives.

OKRs vs. Scaling Up

Scaling Up is a framework that was introduced in 2002  by Verne Harnish. It's built on top of the Rockefeller Habits and presents itself as a complete set of processes and activities to turn a strategy into actionable items. The Scaling Up method incorporates many elements from existing practices and can be seen more as a way to govern a company than a pure goal-setting framework for teams.

Key differences between OKRs and Scaling Up:

  • Goal-setting is just a part of the Scaling Up framework, whereas OKRs focus mainly on setting and tracking goals with a team.
  • Scaling Up is mainly introduced top-down as it starts at the top of companies. OKRs can often be introduced by a team, and expanded to the rest of the org.
  • Scaling Up has a lot more processes and activities than OKRs.

OKRs vs. BHAG

The BHAG is a concept developed by Jim Collins in his book Built to Last. A Big Hairy Audacious Goal (BHAG) is a clear and compelling statement that sets an ambitious goal for a team. The best example of it is NASA's mission to land a man on the moon and return him safely to Earth. BHAGs generally think about the long-term vision, but they also manage to infuse a great sense of urgency.

Key differences between the OKR framework and BHAGs:

  • BHAG are often multi-year goals, whereas OKRs are set annually for the org, and quarterly for the teams.
  • A BHAG is a single ambitious statement. OKRs go deeper to provide measurable ways to track progress.
  • There's only one BHAG for a company, while there can be multiple layers of OKRs that are specific to different teams.

OKRs vs. SMART Goals

SMART is an acronym that stands for Specific, Measurable, Achievable, Relevant, and Time-Bound. It's more a set of recommendations to write your professional goals rather than a goal-setting framework in itself. We actually recommend using the SMART goals method to write your Key Results, as it makes it easier to ensure that you express key results as measurable outcomes.

Key differences between the OKR methodology and SMART goals:

  • OKRs are a complete goal-setting framework, whereas SMART goals are about a specific way to express desired outcomes.
  • Objectives do not need to be SMART, but it's recommended to write your Key Results using the SMART approach.

Do you need to use an OKR software? No, then yes.

We’ve covered most of the things that you need to know to get started with OKRs. There’s just one last question to answer before we go: should you use a dedicated platform or not?

At Tability we’re making a unique goal-tracking platform that is a perfect fit for OKRs, but we’ll be the first to say that you might want to start with a spreadsheet.

If your team has never worked with goals before, it might be too much to ask them to both understand a new approach to planning and also get familiar with a new tool. It will be easier to focus your efforts on explaining the principles and rules of OKRs while using a tool that is familiar to them.

A simple spreadsheet will be enough for the first quarter.

But after that? A dedicated tool will easily double or triple the benefits.

For OKRs to be effective you need a few things:

  • Progress should be tracked weekly
  • It should be easy for people to find their key results
  • You need a quick way to find out what’s getting off track

Spreadsheets are very flexible tools, but they won’t have the automation, reports, and notifications that you need to have a smooth system in place. Instead, you will probably see people being reluctant to do their updates due to the friction experienced.

A platform like Tability can reduce by 80% the time spent on reporting activities while offering automated dashboards and multiple ways to connect your goals back to your existing tools.

Tools like Github, Canva, Jira have made collaborating on code, designs, and projects much easier and productive. Same will apply to Tability and goals.

Wrapping up: 10 common mistakes to avoid

Ok, here’s one more thing! OKRs are hard, but there’s a real payoff at the end. With that being said, you don’t have to repeat mistakes that other people have gone through.

Here's a list of common pitfalls to avoid as you go on your OKRs journey:

  1. Having too many OKRs: start simple with 3 Objectives, and 3 Key Results per Objective.
  2. Turning the roadmap into OKRs: don't try to capture everything that you do as a Key Result.
  3. Not having owners for the Key Results: OKRs won't work unless someone is accountable for them.
  4. Having only one owner for all the Key Results: spread ownership of the key results across the teams. No one should have more than 7 items to update every week.
  5. Not keeping track of progress: OKRs without goal-tracking is just reporting. OKRs should help you make better decisions every week.
  6. Tracking business-as-usual with OKRs: business-as-usual still needs to happen! No need to create OKRs for it, you can simply divide your efforts between 70% OKRs, and 30% BAU.
  7. Using a complex spreadsheet: the harder it is to find and update the OKRs, the more reticent the team will be. Use the right tool to make OKRs check-ins a breeze.
  8. Being too reactive: don't panic if your OKRs are suddenly in the red. Wait a couple of weeks to see if it was a blip or a trend.
  9. Being too ambitious: team morale will be low if all the goals are so hard that no one can achieve them. Help people get early victory to build momentum.
  10. Not empowering your teams: OKRs can only work if people are empowered to take action. Make sure that you have the right culture to support the framework.

What's next

Read our OKR best practices and tips to make goals easier to manage.

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