A Playbook for Creating Effective OKRs
A Playbook for Creating Effective OKRs
Setting goals is a critical component of achieving success for any organization. It helps teams focus their efforts, track their progress, and work towards a common objective. Goals provide a clear direction, allowing individuals and teams to prioritize tasks and stay on track. With well-defined goals, organizations can motivate their employees, improve productivity, and enhance overall performance.
Many top tech leaders have emphasized the importance of setting goals for their companies. Elon Musk, CEO of Tesla, has said, “If you don’t have a clear and concise set of goals, you’ll be forever in the reactive mode, responding to fires and neglecting opportunities.” Similarly, Satya Nadella, CEO of Microsoft, said, “If you don’t set a goal, you’re not going to get there.” Simply put, setting goals and constraints help companies succeed and achieve their potential.
Goal Setting Frameworks
There are many different goal setting frameworks, but perhaps the three most common in the business world are: OKRs, SMART goals, and BHAGs. Different frameworks resonate with different teams and companies, but overall OKRs seem to have become the most popular. People tend to gravitate toward OKRs due to their broad application, effective results, and simple setup. We’ll briefly outline the basics of each framework below and then go into deeper detail on our recommender framework, OKRs.
OKRs (Objectives and Key Results) is a popular goal setting framework that was developed by Andy Grove, the former CEO of Intel, and then popularized at Google. The framework consists of setting objectives, which are specific and measurable goals that align with an organization’s mission and vision. Key results are then established to measure progress towards achieving those objectives. The OKR framework is designed to drive focus, alignment, and accountability throughout an organization. It is best used for companies with clear, concise, and measurable objectives, and when teams require transparency and alignment across multiple departments.
SMART goals, on the other hand, are a more traditional goal setting framework that is widely used across various industries. SMART stands for Specific, Measurable, Achievable, Relevant, and Time-bound. SMART goals are best used when setting individual performance goals, such as employee objectives.
BHAGs (Big Hairy Audacious Goals) is a goal setting framework developed by Jim Collins and Jerry Porras in their book, “Built to Last: Successful Habits of Visionary Companies.” This framework is designed to set long-term goals that are ambitious, inspiring, and compelling. BHAGs are meant to provide a clear vision and direction for an organization over a long period of time, sometimes spanning decades. BHAGs are best used for organizations that require a significant change or transformation, such as entering a new market, launching a new product, or undergoing a major cultural shift.
When is the right time to set OKRs?
OKRs are most effective when they are based on and derived from a clear company vision and mission statement. Before you get too deep into OKRs, we’d recommend you first establish clear vision and mission statements, and then set OKRs. Getting clarity of the purpose and vision of the company is hard work, but it will pay dividends and further enable your OKRs to be effective. If you set OKRs before you have a clear company direction, you may send the team off in the wrong direction.
That said, it is generally recommended that early-stage companies set OKRs as soon as they have a clear understanding of their business objectives and strategy. Setting OKRs early can help to establish a culture of goal setting and accountability from the beginning. Additionally, setting OKRs can help to prioritize critical activities and finite resources, and can provide a clear roadmap for achieving business objectives.
It’s also important to keep in mind that OKRs should be adaptable and flexible, particularly for early-stage companies. As a company grows and evolves, its goals and priorities may shift, and its OKRs should evolve with these changes. Therefore, it may be necessary to refine and adjust OKRs over time as the company matures and its strategy evolves. Setting OKRs early on can provide a framework for success, but it’s important to remain agile and adaptable in the face of change.
The OKR Basics
Objectives are qualitative, inspiring goals that define what you want to achieve. They should be short and memorable.
Key Results are quantitative, measurable outcomes that demonstrate progress towards objectives. They should be concise and measurable.
As an example:
Accelerate customer acquisition and drive revenue growth
1. Increase monthly recurring revenue (MRR) by 20% by the end of the quarter.
2. Acquire 100 new customers per month for the next three months
- Avoid lengthy and ambiguous wording. Also, keep the total number of OKRs small: perhaps 2-4 Objectives with 1-3 OKRs per Objective. A proliferation of goals will spread you too thin.
Tips for writing Great OKRs
- Engage the team in the OKR process. Involving your team in crafting your OKRs is essential to their success. The team will ultimately be responsible for executing the objectives and key results, so their input and buy-in are critical to achieving the desired outcomes. By involving your team in the process, you give them a voice and help them feel a sense of ownership in the goals that they will be working towards. When employees feel like their ideas and contributions are valued, they are more likely to be engaged, motivated, and committed to achieving the goals of the organization.In addition to promoting employee buy-in, involving your team in the OKR process can lead to better outcomes. We are firm believers that the best ideas are scattered among the team members. Your team has unique insights and perspectives that can help you develop better, more effective objectives and key results. By listening to their input, you can identify potential issues, roadblocks, and opportunities that may have otherwise gone unnoticed. Including your team in the OKR process also allows you to tap into their expertise and experience, which can help you identify realistic targets and strategies that are more likely to be successful. Ultimately, involving your team in crafting your OKRs can lead to better alignment, improved performance, and a greater sense of ownership and commitment to the goals of the organization.
- Aligning the Organization with OKRs. Aligning OKRs across the company is crucial to achieving overall organizational success. When objectives and key results are not aligned, it can lead to teams pulling in different directions, duplication of efforts, exhaustion of employees, and confusion among teams. By aligning OKRs, all teams and individuals are working towards the same overarching and common goals and can prioritize their work to achieve those goals. This helps to create a more cohesive and efficient organization, where everyone is working together towards the same vision.OKRs can also help bring alignment across the company by promoting transparency and communication. When OKRs are transparent and visible to all employees, it helps to create a shared understanding of what the organization is trying to achieve and how each team and individual is contributing to those goals. This transparency can also promote accountability, as individuals are more likely to take ownership of their contributions when they understand how they fit into the larger picture. Additionally, the process of developing OKRs can foster communication and collaboration between teams and individuals. When different teams and individuals are involved in the process of setting OKRs, it encourages cross-functional communication and collaboration, leading to a more cohesive and aligned organization.
- Talk about OKRs often. OKRs are most effective when they are focal points of conversation. Talk about them often. Establish clear deadlines for setting, reviewing, and updating OKRs to maintain focus and momentum. Don’t set OKRs, work as normal for a quarter, and then hope the OKRs are all complete 90-days later. Review them regularly and openly discuss progress and challenges. As you discuss and review progress regularly, it will also set an example and tone for the rest of the team and company to follow.
- Assign owners to each OKR. Assigning an owner to each OKR is important. We recommend having one owner for each overall Objective. Though if the OKR is big and complex, feel free to assign an owner to each KR as well. Assigning owners will promote success and accountability and ensure that someone is responsible for driving progress towards the objective. By assigning an owner, team members are more likely to take ownership of their responsibilities and work towards achieving their goals. Assigning an owner can also help clarify roles and responsibilities within a team and help prevent confusion or overlap in responsibilities.
- Make sure you are set up to measure your OKRs. Effective OKRs are measurable. If you cannot measure it, don’t put it as your goal. We often see companies and teams get excited about metrics, but then they can’t track those metrics. This dilutes the effectiveness of these goals and makes it impossible to measure actual progress. Whatever metrics and measures you set, make sure you can measure them.
- Leave the “how” of achieving the OKRs up to the OKR owners. Goals are typically most effective when they are matched with plans to achieve the goals. As a leader, you should focus on “what” the OKRs should be, while empowering the teams to figure out “how” they will achieve these goals. The “how” may be the list of initiatives or tactics the team will take to realize the OKRs. You didn’t hire smart people to only execute your ideas. Trust your team to identify the right ways to achieve these OKRs and have regular check-ins with them to ensure they are on the right path.
- Add prescriptive tactics where it makes sense. Sometimes you already know which initiatives you need to complete to complete a specific OKR. In that case, it can be helpful to add those to the OKRs. While you want to empower teams to set their own plans to achieve their OKRs, if you already know the solution, don’t be afraid to list it. As an example, if you know that “Improving Bounce rate by 33%” will require a new Homepage, then add “New Homepage” as a tactic to that OKR. That level of detail can help others across the organization understand how you plan to achieve your OKRs.
- Keep focused and don’t be afraid to iterate. You’ll quickly notice how hard it can be to focus on only a few items and once. Don’t give in to the inevitable distractions and obstacles that will try to pull you in other directions. Keep pushing to move the metrics that matter most. However, don’t be afraid to iterate on your goals if you learn new information that changes your outlook. If you uncover a better or more relevant goal, talk to the team about it, and consider changing paths. The best ideas and goals don’t surface only in quarterly planning – be nimble to adapt as necessary.
This blog is also a great source of 60+ examples of what good OKRs could look like.
By following this OKR startup playbook, you will cultivate a culture of accountability and collaboration that propels your team towards achieving ambitious goals and fulfilling your startup’s vision and mission.