In this article, we’ll tell you what the OKR concept implies and how to start adhering to it.
Many companies face the same problem, and the OKR framework helps tackle the issue, namely sync people up and help them move in the same direction while meeting their objectives. We’ve got some experience to tell you how you can implement OKR and why no one can do this right the first time (which is completely normal).
To make this article more insightful, we’ve talked to Ilya, a product & strategy thinking mentor, and discovered his experience in implementing OKR in different companies.
Grab your pen and some paper and make notes on the OKR implementation as you read this article.
What is the OKR?
OKR (objectives and key results) is a goal-setting framework helping you determine the direction of your company’s growth, sync teams up, and engage all employees in the process of setting objectives and defining key results.
The objectives are set at these levels:
- particular employees.
Objectives are then decomposed into measurable results the company wants to achieve. The objective is marked as achieved if a certain result is met.
OKRs first appeared in Intel and then moved to Google. Now many high profile companies like Spotify, Twitter, Airbnb, and Miro use them. It doesn’t mean OKRs can only be applied in the IT universe. You can use them anywhere! Even when planning your own life. I mean it.
For example, my objective for the next 2 years is to learn French. My key results are to pass DALF for C1 and have 10 Tinder matches with native speakers.
The major thing about OKR is that both top management and the whole company are involved in defining objectives and key results. That’s why OKRs help you sync up with your team, move in the same direction, and increase the involvement of each team member as everyone knows how they can influence the achievement of a common objective.
What makes OKRs so great?
Transparency: to make sure OKRs work for good, the company should be 100% transparent for its employees. That’s the only way you can encourage the team to perform great. Every employee should have access to OKRs.
Simplicity: OKRs are easy to use and understand. Any person opening the OKR spreadsheet can easily get what it’s saying.
Flexibility: OKRs can be set for any term from a month to several years. This helps you set the pace of the company’s development and adjust to the environment quickly.
Two-way goal-setting: OKRs are not set for teams by the top management. They can draw up the OKRs, but then they should pass them on to teams so that they can edit and adjust the OKRs. And there can be several iterations.
Inspiring goals: within the OKR concept, objectives should be ambitious and catchy. Inspiring objectives encourage the team to achieve better results. However, the OKR assumes that you can’t achieve 100% of your objectives and that’s completely okay.
An OKR isn’t a KPI: The OKR concept doesn’t have an incentive system for achieving objectives. Non-monetary motivation establishes a welcoming environment. So, employees are willing to generate ambitious ideas and have no fear of not meeting the targets.
Objectives, key results, and initiatives
How do we define Objectives and Key Results (KR)? John Doerr’s formula helps you get the difference between these two. John Doerr is the person who invented OKR and shared his knowledge with Google. Here’s his formula:
Within the concept, the objective setting is based on its definition and our perception of an achieved objective. The objective should describe the target, and the key results are the parameters we will use to know if we have met the objective. Let’s look closer at the formula:
Key results are an equally important part of the formula. They are decisive in whether an objective has been met or not.
Another way to understand KRs is to ask the question: “If our goal is X, what will success look like?”
What should be the objectives?
Objectives are catchy qualitative descriptions of what we want to achieve. Objectives should be concise, ambitious, inspiring, and engaging. They must encourage and challenge the team. In this case, the whole company will have a better chance of achieving greater success.
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What are the “key results”?
Key results are a set of parameters that we use to assess how close we have gotten to our objective. Each objective usually involves between 3 to 5 KRs. If you pick more, the teams will find it hard to stay focused. Key results must be quantitative and measurable.
There are 2 kinds of key results:
- Key action-driven result. Success is measured in completed/not completed projects.
- Key value-driven result. Success is measured in the value that the company or customers obtain.
Here are some results of key action-driven results:
- the chatbot launch
- an online course launching
- the OKR book release
Below are some key value-driven results:
- increasing the MRR from X to Y;
- decreasing the Churn rate from X to Y;
- increasing the ER from X to Y;
- maintaining the CAC at around X.
Take a look at the table of key action-driven results and their value equivalents:
Key action-driven results are highly likely to fail in leading you to an objective. The release of a new feature is not a success guarantee. That’s why OKRs have to be value-driven. Only then can they be as effective as possible.
Key results should reflect the value to the company or its customers. Teams will be focused on achieving greater success and there’ll be more room for creativity. The employees won’t be stuck on a particular activity but will look for different ways to achieve the objective.
But if you’re implementing the concept for the first time, it makes more sense to choose actions as key results. They will help you to switch to OKR:
Many companies try to add metrics to KRs immediately and fail this stage. If there was no meaningful movement in the company at the beginning, you’ll find it hard to track the metrics.
How we did it at Dashly
Last year, the goal for OKR in Dashly was to double the number of active users. It’s a catchy and quite ambitious goal, isn’t it?
How do we know if we’ve achieved it or not? We’ve chosen key metric-based results and we’ve put all our effort to reach them and evaluate our success using them.
If objectives are about ambitions, key results must be clear and precise.
The key results for the “doubling” target could be the following:
- Increasing the MRR to X: this is our monthly revenue. If we want to grow, we should grow our revenue, too.
- Decreasing the Churn rate to Y. The fewer users leave us, the easier it is for us to grow.
- The CAC must not exceed: this is the Customer Acquisition Cost. If we want to be efficient, we can’t spend more than a certain amount on user acquisition.
- Increasing the number of organic visitors to X. The more website visitors we have, the more purchases we generate.
Objectives and key results should be value-oriented. So, you must learn not to mix them up with activities and tasks that need to be done to achieve the OKR. Initiatives will help in this.
Initiatives are the very activities, tasks, and projects that you need to accomplish to achieve the OKR.
Let’s get back to our goal of doubling up. We’ve chosen several key results we’ll use to evaluate our success in the future. The KRs are to increase the MRR to X and decrease the Churn rate to Y. And these are the initiatives:
- launching the chatbot: a huge and awesome feature will help decrease the customer churn;
- online course release will help generate new target leads;
- the OKR book release will help increase the number of product signups.