A complete introduction to the Objectives and Key Results framework.
What does the OKR acronym mean?
The Objectives and Key Results (OKRs) framework is a goal-setting methodology that has been around for quite some time. Andy Grove promoted it at Intel in the 70s, then John Doerr took it to Google in 1999. Fast forward another 20 years, and OKRs are no longer a process for Enterprise organisations. It is now a methodology adopted by large and small teams to help them build a culture that puts outcomes over outputs.
This guide will give you a simple and modern approach to OKRs, designed to reduce friction for remote/hybrid teams, and encourage fast feedback loops.
Table of content:
- OKRs definition
- What are the benefits of OKRs?
- OKRs vs other goal-setting frameworks
- How to start with OKRs
- How to write good OKRs
- How to grade OKRs
- OKRs software
- What are common OKRs mistakes?
Objectives, Key Results, and projects
An easy way to explain the role of Objectives and Key Results is to keep projects as part of the picture. That’s because the term “Key Result” already has a meaning outside of OKRs. Projects that are the highest priorities could easily be seen as candidate for “key results” — aren’t they critical after all?
So what's the difference?
Here's a simple way to understand how the roles of Objectives, Key Results and projects differ:
- Objectives: where do we want to be at the end of the quarter? (direction)
- Key Result: how will we measure progress? (traction)
- Projects: what are our best bets to get there? (action)
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 project should produce positive results on the related Key Result(s).
This is a bit abstract so let's look at an example.
Example 1 👇
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 KRs and projects.
- Objective: Build a Stripe integration to start billing our customers
- Key Results:?
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 👇
- 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.
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.
So more differences:
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.
Most teams have goals once they're past stage 1. 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 to compare teams that each use a different language for focus. As a leader, you may be switching your mental model every time you speak with a different team. This will obfuscate disparities, and make it harder to identify problems in your org.
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:
- What are your Objectives?
- What are your Key Results?
You may not always like the answer, but don't forget that seeing misaligned OKRs can be a sign of progress.
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.
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.
OKRs, coupled with weekly check-ins, will increase the sense of urgency and accountability within teams. A good OKRs tracking tool will help you see when things are getting off-track, and push people to take action before it's too late.
Accountability is not about monitoring people. It's about committing to our goals, and being honest about our ability to achieve them.
#5 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.
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 OKRs 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 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 OKRs 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 OKRs 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 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 KRs as measurable outcomes.
Key differences between OKRs 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.
The rules of OKRs are simple, but you can't change your culture overnight to switch from a focus on outputs to using an outcome-driven framework like OKRs. Fortunately, there's a clear path for teams that are getting started.
Stage 1: no shared goals
This is where most teams start. You're still trying to understand the market and your customers, and you're mostly working on a roadmap set by leadership.
What are signs that you're in stage 1?
- There are no goals beyond revenue and customer growth targets.
- There are no monthly and quarterly reviews of progress and impact.
- The roadmap is reactive, and new projects are picked only after the current work is done.
- Micro-management is needed to make progress. The team doesn't have enough understanding of the path forward to make their own decisions.
- The team feels disengaged from the product, and people are waiting on leadership to know what to do.
Stage 2: we need goals
Teams often move to stage 2 once they grow past a certain size. Leadership can't keep track of all the work in progress, and there are too many open questions about the future. It's time to find a more sustainable way to set the direction, and it often starts with writing a vision statement and introducing a core set of KPIs. Most of the efforts in stage 2 will go into changing the culture to build more trust and become more data-driven.
What are signs that you are in stage 2?
- You have some metrics beyond your sales and customer targets (but still defined by leadership).
- You're tracking KPIs like monthly active users (MAUs), conversion rates, and customer acquisition costs (CAC). Still, you do not have goals driving improvements in specific aspects of your products.
- Tracking KPIs is a passive activity. You keep an eye on their growth but might not have targets, and they don't really impact the roadmap.
- Progress is reviewed on a monthly basis.
- The team has a shared understanding of the vitals of the business, but not everyone feels like they can have an impact.
Stage 3: we set goals
Stage 3 is when things get exciting. There's a clear vision that helps everyone understand what success looks like. Teams are able to run workshops to define their goals, and it's often when OKRs are introduced.
There are still some hiccups around goal-tracking, but people can now work autonomously and report on outcomes to leadership.
5 signs you're at stage 3:
- You have a few people championing the concepts of SMART goals and OKRs.
- Leadership creates the vision, but teams can define their own goals.
- There are clear Key Results, but targets are hard to hit (too ambitious).
- Goals are set before each quarter and written down in spreadsheets.
- But, the OKRs check-ins process is seen as a helpful activity, but not necessarily required.
Stage 4: we track goals
A stage 4 company is fully outcome-driven. Every team knows how to best contribute to the business, and they can make hard calls on projects that won't deliver the impact expected. OKRs are actively used to drive efforts instead of just being a reporting tool.
Stage 4 is when your company can produce unexpected results as people develop innovative solutions to achieve a particular outcome. Teams are also more engaged as they become accountable for their own decisions.
5 signs that you're at stage 4:
- Everyone is familiar with the concepts of KPIs, SMART goals and OKRs.
- Teams can establish goals to significantly improve a particular theme or aspect of their product (expand customers, know our users, ecosystem integrations).
- Leadership can focus on longer-term goals (where they want to be in 2-3 years) and let teams define the right outcomes for each quarter.
- Progress on OKRs is tracked every week, and directly impacts the roadmap.
- Teams have ditched spreadsheets in favor or more robust tools to track their goals.
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 and ideally cover the work of multiple teams. Some recommendations:
Make it a sentence
Don't write "Retention". 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 KRs, but also have other goals around Enterprise-readiness for the Product team.
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
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.
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%.
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.
There are many options out there to track your OKRs. We'll look here at a few examples with their pros and cons.
Spreadsheets: great way to start, but hard to scale
If you're just getting started with OKRs, the easiest is probably to start with a spreadsheet (Google Sheets, Airtable). It's a familiar tool, very flexible, and you should be able to find a template to start.
On the flip side, spreadsheets will quickly show their limitations:
- Hard to see trends on the Key Results
- No workflows
- Hard to scale with multiple teams
Use a spreadsheet to start, but look for a more robust solution on your second or third quarter.
OKRs-tracking platforms: great for teams getting serious
Teams will often need a more scalable solution to manage the OKRs process once they commit to the framework. A specialised OKRs-tracking platforms will simplify the check-ins process while offering great visibility on the goals.
Teams looking for a nimble and affordable solution that can be adopted rapidly by many can look at Tability.
Teams with large budgets that are looking for custom development, centralised control can look at GTMHub as a solution.
Docs: simple, but lacking workflows
The issue is that, compared to spreadsheets, you lose the ability to use formulas and that's going to make reporting harder. You also have the same issues around workflows and scale:
- You often can't filter OKRs by owners.
- There's no concept of reminders or check-ins.
Project management tools: too much focus on short-lived outputs
Project management tools (Trello, Jira, Clickup) are extremely powerful when it comes down to workflows. The concepts of ownership is embedded in the product, and you can easily add comments and updates on tasks.
But the issue is that project management tools are designed to transition tasks from "in progress" to "done" as quickly as possible.
A task lives for days/weeks. A Key Result should last a quarter.
You'll need a different UX to be able to see progress on long-term outcomes.
Here's a list of common pitfalls to avoid as you go on your OKRs journey:
- Having too many OKRs: start simple with 3 Objectives, and 3 Key Results per Objective.
- Turning the roadmap into OKRs: don't try to capture everything that you do as a Key Result.
- Not having owners for the Key Results: OKRs won't work unless someone is accountable for them.
- Having only one owner for all the Key Results: spread ownership of the KRs across the teams. No one should have more than 7 items to update every week.
- Not keeping track of progress: OKRs without goal-tracking is just reporting. OKRs should help you make better decisions every week.
- 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.
- 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.
- 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.
- 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.
- 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.
And when you feel ready, you can look at a simple way to create your first OKRs plan.
Stop doing pointless tasks, start making decisions with purpose