A Guide to OKRs: Mastering Objectives and Key Results
What are OKRs?
OKR stands for Objectives and Key Results. It’s a widely utilized framework for defining, aligning around, executing, and measuring progress toward key organizational goals. Although not exclusive to Agile organizations, OKRs are frequently used in Agile organizations as a planning, execution, and measurement tool.
Defining and aligning around OKRs helps to link organizational and team goals in a hierarchical way to measurable outcomes. In simple terms, OKRs answer the questions:
- Where do we want to go?
- How will we measure our efforts to get there?
In this guide, we will define OKRs, share examples of OKRs, walk through the benefits, and help you understand how to align OKRs to your business strategy.
Objectives: Ambitious, qualitative, actionable, and time-bound
In OKRs, an Objective is simply what is to be achieved, no more and no less. Objectives are often defined at the organizational level, although they can be defined at every level of the organization.
Objectives align teams around a specific, unified vision. When properly defined, Objectives are, “…a vaccine against fuzzy thinking—and fuzzy execution
Objectives should be:
- Ambitious: Big-picture, aspirational
- Qualitative: Able to be defined verbally in concrete terms
- Actionable: Able to be implemented in current conditions
- Time-bound: A timeline should be defined in the Objective itself
Key Results: Measurable, specific, time-bound, and verifiable
Key Results in OKRs are how organizations measure their progress against their Objectives. They help to make the Objective actionable, by helping organizations clearly define how they will achieve their Objectives. If Objectives answer the question, “Where do we want to go?” Key Results answer the question, “How will we measure our efforts to get there?”
They should be:
- Measurable: Able to be quantified
- Specific: Easily understandable; clearly defined
- Time-bound: Defined by a specific, realistic timeline
- Verifiable: Able to be definitively confirmed; teams must be able to answer the question, “Did we achieve this Key Result?”
Key Results lay out specific, actionable requirements that the team (or individual) responsible for them either completes or doesn’t – giving team members a clear-cut way of knowing whether they’re making progress, and leadership a subjective way of assessing performance.
Whereas an Objective can be long-lived (rolled over for a year or longer), Key Results evolve as the work progresses. Once they are all completed, the Objective is achieved.
Examples of OKRs
It can be helpful to look at examples of OKRs from other organizations to get a better understanding of how to create OKRs that might work for your organization.
Here is an example of a portfolio-level Objective and three corresponding Key Results.
- Improve online customer experience within the next six months
- Add live chat bot to website to reduce online support calls by 15%
- Increase conversion rate of website visitors to trial by 20%
- Conduct three focus groups to better understand online customer pain points
The Objective is ambitious, qualitative, actionable, and time-bound. The Key Results take that Objective and make it actionable, with specific details and measurable expected results. Teams will be able to verify whether they reduced online support calls by 15%, increased their trial conversion rates by 20%, or conducted three focus groups during the six-month period.
Ensure that the metrics you measure for Key Results can be collected and analyzed during the time period specified for the OKR; many business metrics, such as revenue, are lagging indicators – not fast enough or accurate enough to determine the impact of one specific change.
It’s better to track progress towards OKRs using early indicators, which can come in the form of:
- app downloads or trials
- website traffic
- app usage
- specific feature usage
- in-app feedback (such as a pop-up that asks users for a Net Promoter Score)
Direct customer feedback through social media engagement, focus groups, and other channels can also help assess the progress of any given initiative.
Unlike lagging indicators like revenue (which are difficult to attribute to specific events), these early indicators can be tied directly to specific events; for example, the addition of an in-app onboarding walkthrough sequence might result in increased usage of certain features or greater trial engagement. This data can be used to make informed, timely decisions, and can help to inform the creation of future OKRs.
Types of OKRs
Not all OKRs are created equal. Many organizations distinguish OKRs in two ways:
- Aspirational vs. committed
- Strategic vs. tactical
Aspirational OKRs are created to be overly ambitious, “shoot for the moon” goals. They are reach goals, intended to inspire teams to deliver as much as possible, with the understanding that 100% goal completion will likely not be achieved. JFK’s 1961 promise to Congress that the US would put a man on the moon by the end of the decade could be thought of as aspirational OKR.
Committed OKRs, on the other hand, are created to be achieved. They include fixed targets that teams are expected to be able to complete. As you can imagine, it’s important that everyone working toward an OKR is aware of whether the OKR is aspirational or committed, so that expectations are appropriately aligned.
Another way that organizations categorize OKRs is by function: Are they strategic or tactical? Strategic OKRs are typically established at the organizational level and are bigger-picture, longer-standing types of goals. Tactical OKRs are usually established at the team level and are used to guide the execution toward more concrete, shorter-term goals.
Benefits of OKRs
Many of the best-known companies around the world use OKRs to align their teams’ efforts around ambitious, big-picture goals. OKRs guide organizations through the process of turning big-picture dreams into real, actionable plans at every level.
Unlike KPIs and other business metrics, which measure financial performance after work has been done, OKRs offer a proactive approach to setting and achieving targets.
There are many reasons why organizations choose to employ OKRs:
- Align team members to big-picture goals
- Improve productivity by focusing efforts across the organization
- Provide actionable structure for measurement, accountability, and transparency
- Boost employee engagement through goal-setting
- Increase insight and transparency for executives
- Improve resource allocation and management
- Define and streamline cross-functional dependencies between teams
John Doerr, the venture capitalist credited with introducing the OKRs framework to Google, uses and recommends a very simple formula for creating OKRs. For Objectives, the formula is:
I will _____________________ as measured by _________________________.
The “I” should be replaced with “we” when the OKRs are meant for teams or entire organizations. A manufacturer of light fixtures might establish the following Objective:
- We will improve delivery speed of our newest product, X, as measured by lead time from time of purchase to time of delivery.
Typically, each Objective will have between one and five Key Results. For this example, the Key Results for this Objective might be:
- Reduce shipping time from average of 5-7 business days to 2-3 days
- Reduce time from order confirmation to order processing from 2-3 days to under 1 day
- Eliminate 100% of delays due to lack of inventory by producing all parts in-house
Each of these Key Results is measurable, specific, time-bound, and verifiable.
Scoring (also called grading) OKRs is when organizations analyze their performance against their defined Objectives and Key Results. This typically occurs at the end of an execution cycle. Scoring OKRs is an important part of the process, because it is when teams are able to objectively measure how they did compared to what they planned to do.
There are several methods available for scoring OKRs. They range from a simple “yes / no” method of scoring to more quantified methods.
The yes / no scoring method works as it sounds. For each of your Objectives and Key Results, you would answer the question, “Did we achieve this?” with a yes or no response.
Using our “improve online customer experience” example above:
|Did we achieve this?|
|Objective||Improve online customer experience within the next 6 months||Yes – achieved all three of our Key Results to improve customer experience during this six-month period|
|Key Result 1||Add live chat bot to website to reduce online support calls by 15%||Yes – reduced online support calls by 26%|
|Key Result 2||Increase conversion rate of website visitors to trial by 20%||Yes – increased conversion rate to 22.5%|
|Key Result 3||Conduct three focus groups to better understand online customer pain points||Yes – three focus groups were conducted|
The yes / no scoring method can be helpful for Objectives that are truly either / or: Either you achieved them, or you did not. For example, if your Objective was to launch a new product line in Q1, but you were not able to do so, then this scoring method would work.
However, most organizations choose to use scoring methods that tell a more complete story of the progress made on OKRs, such as by scoring each Key Result on a scale from 0.0 to 1.0. Using this scoring method, each Key Result would be graded, and the average score of all Key Results would be used to measure the overall score of the Objective.
With this approach, a “1.0” is intended to be a stretch goal and most results should land in the range of 0.6 – 0.7. From the Google official site on using OKRs, ReWork:
“The sweet spot for OKRs is somewhere in the 60-70% range. Scoring lower may mean the organization is not achieving enough of what it could be. Scoring higher may mean the aspirational goals are not being set high enough. With Google’s 0.0 – 1.0 scale, the expectation is to get an average of 0.6 to 0.7 across all OKRs. For organizations who are new to OKRs, this tolerance for ‘failure’ to hit the uncomfortable goals is itself uncomfortable.”
While this type of scoring is incredibly helpful, it’s also important to look at objective data subjectively. While data can help to quantify progress that was made, it doesn’t consider any extenuating circumstances that might have affected progress. Failing to account for and include this subjective information whenever data is shared can make teams feel uncomfortable with OKR scoring and less likely to want to participate openly in using OKRs.
Another note on scoring OKRs: It can be helpful to look for patterns in OKR scoring to gauge whether your OKRs are sufficiently “sized” for your organization or team. Similarly, if your organization is struggling to make meaningful progress on most of its goals, then you might need to adjust the size or quantity of your OKRs moving forward to make them more achievable.
Many Lean and Agile organizations choose to use OKRs because the framework complements the structure, function, and goals of Lean and Agile transformations. Often, organizations get stuck when trying to evolve their traditional funding and planning practices to meet the needs of their new cross-functional Agile teams. OKRs provide an actionable way to create the transparency and accountability needed to fund and launch Agile teams, while arming teams with a better way of setting and tracking their progress toward goals.
OKRs can be utilized by organizations regardless of their Lean or Agile maturity. But for organizations looking to scale Agile and evolve their organizational structures around value creation, organizing into value streams is a key step. Organizations undergoing Lean / Agile transformations will get the most value out of OKRs if they utilize them within the structure of value streams.
The 2 Types of Value Streams
Learn more about Defining Objectives and Key Results in the eBook, Two Types of Value StreamsView the eBook • The 2 Types of Value Streams