How to write great OKRs

[fs-toc-h2]Introduction

[fs-toc-omit]Objectives and Key Results

OKR has become one of the most effective and most popular goal management methodologies. The beauty of OKR lies in its simplicity; it’s a set of best practices from over 75 years, bundled together and radically simplified.

The modern workplace is complex, often resulting in low employee engagement, strategies disconnected from execution and organizations struggling to unify teams behind bold missions & visions. Problems that stifle innovation, harm growth and prevent people from living meaningful lives.

OKR is well-equipped to fix these problems. This guide will help you pick the right OKRs and set them up in a way that will lead to success.

‍

[fs-toc-omit]What is OKR, and what’s it for?

The acronym OKR stands for Objectives and Key Results, a popular goal management framework that helps companies implement and execute strategy.

If implemented well, the benefits of the framework include a better focus on results that matter, increased transparency, and better (strategic) alignment. OKR achieves this by organizing employees and the work they do around achieving common Objectives.

An OKR consists of an Objective, which tells you where to go, and several Key Results, which are the results you need to achieve to get to your Objective. Initiatives are all the projects and tasks that will help you achieve your Key Results.

‍

[fs-toc-omit]The difference between OKRs and KPIs

KPIs and OKRs are different types of goals.

Imagine your organization is a car, and you’re driving your car toward a destination. That destination is your organization’s ultimate goal (the mission & vision), and your OKRs build your roadmap toward it. But, as you’re driving your car toward your destination, you also need to keep an eye on your car’s dashboard to make sure, for example, that the engine is functioning well and that you’re not running out of gas.

The things you’ll find on your car’s dashboard are the things that you always need to watch — regardless where you are on your roadmap. Hence, the things that you’ll find on your car’s dashboard translate to business as usual for your business. Business as usual is best measured through KPIs: simple indicators that immediately tell you if something is performing well or not — just like the indicators on a car’s dashboard.

‍

[fs-toc-omit]When implementing OKR, get your KPIs in place first

There are 3 reasons why you should get your KPIs in place before implementing OKR.

• You can’t drive without a dashboard

The analogy above also helps us explain why you need to get your KPIs in place first, before implementing OKR.

Would you feel comfortable driving a car without a dashboard? You wouldn’t be able to see the oil pressure and risk breaking your engine. You wouldn’t be able to see the fuel level and risk running out of gas.

Your KPIs help you keep the engine running. Without having them in place first, you’ll almost certainly get stranded somewhere on your journey toward your ultimate goal.

• KPIs provide important input when setting OKRs

Once you have your KPIs in place, and once you have set the desired target values for your KPIs, you can then see which KPIs are healthy and which aren’t. This is important input when setting OKRs. When a KPI is unhealthy, you should make it a priority to fix it: you should create an OKR to fix your KPI.

• It helps everyone understand what OKRs are for

Lots of teams that are new to OKR struggle to understand what OKRs are for. We’ve developed a simple model to address this: build, improve, or innovate. In short, that model explains that OKRs are designed to help you break out of the status quo and realize your ambitions.

Yet teams that are new to OKR are often working on OKRs that reflect their business as usual. You’ll quickly notice that is the case when your OKRs are pretty much the same each quarter. When your OKRs are reflecting your business as usual, your OKRs won’t help you see what deserves priority right now, and they won’t help you understand how particular problems are being addressed.

When introducing KPIs and OKRs at the same time, you tackle this problem from the start. As you identify what’s most important to work on, you can naturally designate whether the goal is best represented as a KPI or as an OKR. Ask yourself, are we doing anything differently (OKR), or is this already an established process (KPI)? Are we building, improving or innovating (OKR), or will we continue to do what we already do (KPI)?

‍

[fs-toc-omit]What are Objectives, Key Results, and Initiatives?

Before we dive into how to write great OKRs, let’s first have a quick look at the different components (Objectives, Key Results, and Initiatives), what they mean, and how they work together.  

Objectives, Key Results, and Initiatives answer three straightforward questions:

Where do you need to go?

The answer is the Objective. It should set a clear direction, like a destination does, such as New York.

Examples:

• Beat last quarter's revenue growth
• Provide an awesome customer experience

‍

How will you know you're getting there?

The answer are Key Results. See them as a GPS device. They tell you if you're getting closer to your Objective.

Examples:

• Close €1 million in new bookings
• NPS at 80

‍

What will you do to get there?

The answer is Initiatives, the projects and tasks that you'll work on to achieve your Key Results.

Examples:

• Host 2 webinars on OKR
• Implement in-app live chat

‍

[fs-toc-omit]A Metaphor

To get a better understanding, consider this metaphor:

Imagine you’re in London (UK). You need to go to New York (USA).

• “New York” is your Objective (question 1).

To reach your Objective, you’ve decided to buy a yacht and sail west for 8 days. That is likely to get you closer to your Objective.

• “Buy a yacht” and “Sail west for 8 days” are your Initiatives (question 3).

Without a navigation system, like GPS, it will be impossible for you to know whether you are getting closer to your destination.

• Your Key Results are your GPS device, which tells you if you’re heading in the right direction (question 2).

Buying a yacht and starting to sail west isn’t the smartest thing to do if you don’t have a destination (Objective) yet. A famous quote from Lewis Carroll (Alice in Wonderland) reads: “If you don’t know where you’re going, any road will take you there”. It’s, therefore, best to always start with an Objective.

Key Results can be difficult to create, but they are necessary to get feedback on whether your Initiatives have the desired effect.

‍

[fs-toc-omit]Outcomes vs. outputs

A big benefit of OKR is that it helps you differentiate between outcomes and outputs.

An output is something you do, an outcome is something that happens as a consequence of what you do. “I’ve had a demo with a prospect” is an output, “I’ve closed a customer” is an outcome. Most people naturally focus on outputs. It’s relatively easy to come up with a list for what you need to do today, this week and this month. However, as Stephen Covey explains in his book The 7 habits of highly effective people, outputs always come last. In order to be successful, you should start with the end in mind.

At Perdoo, we’ve developed a simple process that you can follow which ensures that you always start with the end in mind:

1. Where do I want to go?
2. What are the results that I need to achieve in order to get there?
3. What do I need to do to achieve those results?

In OKR terms:

1. Objective
2. Key Results
3. Initiatives (an Initiative can be any output from a task or todo to a project or deliverable)

Starting with outputs (i.e. Initiatives) is impossible unless you don’t care what these outputs should accomplish. When Alice asked the Cheshire Cat in Alice in Wonderland: “Which way do I ought to go from here?”, the Cat replies “That depends on where you want to get to”. Alice then says “I don’t much care”, upon which the Cat concludes that it then doesn’t matter which way you go.

‍

Objectives

Picking the right Objectives

Picking the right Objectives is harder than you might think. Setting the right Objective at the right time is even more difficult.

Types of Objectives

Although it sounds like a no-brainer, it’s not always clear to teams brainstorming their Objectives what an Objective can be used for.

To get more clarity on this, you should first understand that an Objective is always designed to get you out of your status quo. That means that if you’re completely satisfied with how things are going at the moment, you may not have the need for an Objective.

When you’d like to move forward and get out of your status quo, there are 3 different types of Objectives you can use:

Typically, these 3 types of Objectives are used in the order they are displayed above. For example, you can’t improve something that hasn’t been built yet.

Let’s have a closer look at these 3 different types of Objectives.

Build

A build Objective creates things that didn’t exist before. When we started investing in customer success at Perdoo, we found it important to first focus on the onboarding experience for new customers, which is the first 3 months of a customer’s journey with us.

Our Coaching Team, therefore, created the following OKR for Q3 2020:

Improve

Everything that you do to make something better that already exists, falls into the category of an Improve Objective. You can improve for different reasons, such as to improve the quality or performance of something or to deliver the same quality or performance at a lower cost.

Back to our example at Perdoo: once we had a well-performing onboarding experience in place, we focused on the post-onboarding process in the following quarter. Once that was covered as well, we decided to revisit our new customer onboarding and further improve it. We primarily needed to make sure that our onboarding program, which was still functioning well, became more time-efficient.

For Q2 2021, our Coaching Team created the OKR:

Innovate

Sometimes improvement isn’t enough, and something more drastic is required: innovation. You can innovate your product, parts of your product, and even your organization’s management (e.g. by introducing OKRs).

If our Coaching Team had learned that our customers’ needs had changed, or if it was a priority to automate our new customer onboarding to make it more scalable, we could have created an Objective to Reinvent our onboarding program to make it more scalable.

Putting it all together: a metaphor

To explain the 3 different categories, I’ve used a real-world example from our own Coaching Team at Perdoo. To make it easier for you to apply this logic to your own team or company, let’s use a metaphor.

When you’re building a car from the ground up, most of your work will fall into the build category. It’s impossible to improve the engine if you haven’t even built the engine yet. Neither is it possible to innovate the driving experience if you don’t have a chassis.

Once you have your basic car, you might want to improve different parts of it. You could improve the engine for higher performance. You could also improve the manufacturing process so that you can build an engine with similar quality at a lower cost.

Sometimes you have to reinvent yourself, and if you don’t, others will. If you see that your customers don’t want to drive a car themselves anymore, you’ll have to innovate to make autonomous driving possible.

‍

[fs-toc-omit]Tips to help you pick the right Objectives

Orientate first

Typically, Objectives drive the organization forward. Directly or indirectly, they should get you closer to your organization’s ultimate goal. Therefore, the most important thing to do when crafting Objectives is to orientate. With the proper context, everyone understands where they can best focus their efforts, and they can make sure that their OKRs support the high-level goals and strategy of the organization.

Visualizing that context is crucial, so everyone can see how their work fits into the bigger picture. That’s why Perdoo lets you map out your Strategic Pillars to join the dots between your organization’s strategy and the goals that’ll deliver it. You can then quickly build out and re-align your OKRs while viewing that full alignment.

Timing

Objectives are like destinations that you set out for your organization or team. They should inspire everyone working on them, and your teams and employees ideally buy into them. In the ideal scenario, you all agree that these are indeed the right things to focus on at this moment. I made at this moment italic, because timing is key.

Imagine, for instance, a company with an Objective for Q4 to become a great place to work. A Key Result could be to get certified by greatplacetowork.com. Even though it would be a great Objective, it’s probably hard to buy into for employees if employee turnover is skyrocketing. A better idea would be to fix the turnover problem first: create an Objective for Q4 to Fix the employee turnover problem (an ambitious key result would be to reduce it by 50%). Once that problem is fixed, you can focus on becoming a great place to work.

Look at your KPIs

Your KPIs tell you how key areas of your business are performing. Are your KPIs revealing certain problems that need to be solved? If so, what could you do to positively influence those KPIs? If you’re using Perdoo, you can create an OKR to get an unhealthy KPI back on track.

At the end of the day, OKRs really only tell half the story of what each area of your business is working toward. Take your Marketing team, they likely have KPIs as well as OKRs – two different types of goals, with different purposes. If you’re serious about transparency, you’ll need to track these goals alongside each other to get a complete view of Marketing’s priorities. And Perdoo let’s your team see all those priorities in seconds on your Marketing page.

Close and review OKRs from previous timeframe

Always review your OKRs when the timeframe is about to end. This exercise will tell you whether you need to port over any OKRs to the following timeframe, significantly impacting your available bandwidth for the future.

To get the most out of closing OKRs, check out this article.

Check the purpose of your team

Why have you been hired? What’s the purpose of your team and your position? Are you living up to these expectations? The Objectives that you’ve set for yourself, are they in-line with what is expected of you?

Crowdsource the knowledge of your people

In the Industrial Age, the manager was often seen as the person who knew everything and was best equipped to make decisions. Those days are over. It’s the people closer to the ball who have unique insights into what’s going on, either within the business or in the market. Use this knowledge!

With modern tools, it’s easy to collect input. Ask your team to suggest 1 or 2 Objectives for the upcoming period. Discuss the most popular suggestions with management and try to make at least one of them a company or team-level Objective.

‍

[fs-toc-omit]Important criteria for Objectives

To make working with OKR more practical, we split up the criteria for Objectives by must-haves and nice-to-haves. An Objective should meet the must-have criteria for it to qualify as an Objective.

The nice-to-haves are often communicated as mandatory by other people or organizations, but we believe they’re optional. Especially when new to OKR, it could help to keep things simple and not be too strict on those.

Must-haves:

• Directional

Objectives tell you where to go, so make sure the Objective sets a clear direction. Having a direction also helps you to focus your efforts. Things that fall outside of the scope of the Objectives, should be said no to. Directional can result in the Objective being a bit vague, that’s ok. Remember: the Key Results will specify it.

Being directional, also means that the Objective should help move the company out of the status quo. Consequently, there is no need to reflect business as usual in your OKRs. As an example, Achieve an incredible revenue growth is directional, Sell our product to customers isn’t.

• Aligned

Once your Objective sets a clear direction, it is important to align it. This ensures you are moving in the right direction. It’s a great and easy way to ensure your Objective provides business value. You have four main options:

• Directly support the company’s strategy.In Perdoo you’ll align your Objective to one of the company’s Strategic Pillars. This is ideal for long-term, company OKRs.
• Improve a KPI.
  If the conversion rate on your website has dropped, your Marketing team could create a quarterly OKR to fix this unhealthy KPI.
• Support another OKR.With annual company OKRs defined, the different teams or departments in your organization can decide how to best support these long-term Objectives, often through quarterly OKRs.
• Don’t align the OKR.
  This could be a red flag that your OKR isn’t going to provide business value. Personal development goals formulated as OKRs could fit in this category.

Alignment kills two birds with one stone as it will also boost employee engagement, letting everyone working on the Objective see how their work fits into the bigger picture.

• Impact

Once your Objective is directional and strategically aligned, you can be sure you are moving in the right direction with that Objective. You should now make sure it will be a substantial step in that direction. As you should only have 3 or 4 Objectives, each one of them must have a real impact. Fast forward to the end date of the Objective. Imagine you’ve accomplished it, would it have made a difference?

• Within circle of influence

The Objective ideally is inside the circle of influence for the owner. That means that the owner is actually able to influence the area of the Objective. Making an engineer the owner of an Objective that’s about bringing on board new customers makes no sense since it’s outside their circle of influence.

• Time-bound

Every Objective should be limited in time and therefore needs a horizon. If you set OKRs on a quarterly cadence, the deadline is usually the end of a quarter. Objectives can, however, be due before or after the end of the quarter.

• No metrics

An Objective cannot contain any metrics. Leave the metrics for the Key Results.

Nice-to-haves:

• Inspirational

Some people in your company are motivated by numbers. Others need a more inspiring goal. Use inspiring language for your Objective and leave the numbers for the Key Results. Some of our customers use internal rules that state an Objective should be so inspiring that everyone working on it should want to put it on their resume. An easy way to make Objectives more inspiring is to include adverbs and adjectives such as successful, awesome, best, strongest, steepest, etc.

• Understandable

Objectives drive your day-to-day work and should be present every time you make a decision. Simple information is easier to remember, so Objectives should be written down in the language of the organization. Try to avoid jargon specific to your position or team and keep descriptions as short as possible, without diminishing the quality of the Objective. Simple, short language allows for others to connect with it and keep it top of mind.
Writing guru Ann Wylie found that when a sentence length is max. 14 words, readers understand 90% of what they’re reading. This drops to 10% if the number of words is around 40. Other studies show that sentences with 11 words are considered easy to read, and those with 21+ words difficult.

• Not too many

There is so much you can do in a year or quarter, OKR forces you to pick the 3 or 4 Objectives that matter the most. Setting too many Objectives usually reveals an inability to focus on what’s most important, but it could also mean the impact of each Objective is too small. Many Objectives with small impacts don’t provide a clear focus and are probably not inspiring. Less is more.

‍

Key Results

Setting Key Results

Now that your Objectives are set, it is important to agree—with your manager, team and everyone working on each Objective—what the appropriate Key Results would be.

Key Results are feedback mechanisms telling you whether you’re getting closer to your Objective or not. A result—as you probably know—is an outcome of something. If a Key Result is a real result (ie, outcome), you can iterate your Initiatives until the needle moves for your Key Result. Initiatives — eg, projects or tasks — drive results. When you have Initiatives as Key Results, you’re finding yourself locked into achieving them, even if you later find out it’s the wrong approach to drive certain metrics.

The Objective is directional and often contains adverbs and adjectives, which can be vague or ambiguous. If you have, for instance, words like successful or awesome in your Objective, then different people will have different interpretations of those. At Perdoo, we’ve seen this first-hand with some of our customers. One of our customers had a company-level Objective to Become the no. 1 startup in the UK. When others started to create their own OKRs based on this, it became clear that HR and the leadership team (who created the Objective) had completely different interpretations of this: leadership was thinking about becoming the fastest-growing startup, HR about becoming the best place to work.

Key Results take away such ambiguity. Only by looking at the Key Results can someone know exactly what is meant with the Objective. If your Objective is about achieving ridiculously steep growth, then that could still mean many different things. If the Key Result indicates a quarter-over-quarter growth of 50%, you could easily conclude that is quite ambitious. Only by looking at the Key Result(s) you can see just how ambitious the Objective was intended to be.

‍

[fs-toc-omit]Key Result should measure what matters

In Why OKRs outclass regular goals, I explained why OKRs are such a powerful way to structure your goals: they help you identify what really matters. In Outcomes vs. Outputs, I emphasized the importance of having Key Results that measure outcomes, because outcomes—not outputs—are usually the things that really matter.

These articles have sparked much debate, but the importance of outcomes seems to be widely embraced nowadays. Nonetheless, many people still struggle to understand what good Key Results are, and why measuring outcomes is so important. I’ll try to answer this question once and for all.

First things first: the role of Key Results

The most important role of Key Results is that they force you to specify what you mean by a particular Objective. If you have an Objective to learn Italian, then ‘learning Italian’ will mean different things to different people. Key Results enable you to specify what it means to you. They answer the question: what needs to happen in order to successfully achieve the Objective?

In other words: Key Results help you identify what really matters.

‘What matters’ is never a means to an end

When you set yourself the Objective of learning Italian, most people start thinking about all the things they could or should do to learn that language. You could listen to an Italian podcast every day, watch a TV show in Italian, or complete an Italian language course. Because these are the first things that come to mind, it’s very tempting to add those as your Key Results—which is also what most people would do.

It’s tempting to think these are good Key Results because there seems to be a clear relationship between these tasks and your Objective. You can easily see how listening to a podcast and completing an Italian language course would help you realize your Objective of learning Italian. However, for most people, all these tasks are actually a means to an end (“something that is not valued or important in itself but is useful in achieving an aim”).

Imagine you’ve listened to an Italian podcast for 30 days in a row and you’ve completed an Italian language course, but when on holiday in Italy you still cannot order a pizza in Italian. Would you consider yourself successful? Would you say that you speak Italian now? Probably not.

That what really matters to you is almost never a means to an end. What you really care about is the end itself. So you have to make sure that each Key Result is never a means to an end, but an end itself.

‘What matters’ is subjective

I set myself the Objective to learn Italian a little while ago. What that means to me is simple: be able to have a 10 minute conversation with my Italian family.

Only when I’m able to do that, will I say that I’ve successfully learned the Italian language. I don’t care about listening to an Italian podcast, it’s just a means to an end for me.

This could be different for you. What matters to you may not be what matters to me. If you would also like to learn Italian, and you’d consider yourself successful once you’ve listened to 30 Italian podcasts, then who am I to say that that is not a good Key Result? You would leave me wondering why your Objective is to “learn Italian” and not “spend countless hours listening to an Italian podcast”, but that’s fine.

The point is, ‘what matters’ is highly subjective, so only you can say if something is a good Key Result or not. (Just make sure they’re not a means to an end.)

What matters depends on your (true) Objective

To successfully identify what matters, you need to start with your Objective. The challenge here is that your true Objective may not always be clear at the beginning.

Example: Launch a new website
I was consulting a compa