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The Power of the OKR Framework
Goal-setting - Exponential Outputs - Team Alignment - 10x not 10%
Hello, I am Nicolas Bustamante. I’m an entrepreneur and I write about building successful startups.
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OKR stands for objectives and key results. It's a goal-setting framework to define and track goals and their outcomes. Andrew Grove, Intel's co-founder, introduced the concept and documented the methodology in his excellent book High Output Management. Legendary venture capitalist John Doerr, who previously worked at Intel, introduced the idea to many successful startups and wrote a reference book called Measure What Matters. Google co-founder Larry Page recognized in the foreword that: "OKRs have helped lead us to 10× growth, many times over." I have noticed firsthand how OKR can enhance the execution quality of a company. It makes the difference between a good and a great organization.
I value the concept of OKR because it creates alignment, which is a strong driver for success. As an organization grows, there is always a percentage of teams working on the wrong challenges without knowing it. They give their best to climb the wrong mountains, and OKR solves that. I also admire how OKR pushes people to think thoughtfully about the whole business. When every stakeholder understands the business and knows the key priorities, then the team is unstoppable. If you are not yet familiar with OKR, it looks something like this:
OKR example from a software company
Objective: Reach meaningful scale by achieving 5,000 software subscriptions/month.
KR1: 100K site visitors/month via technical and non-technical SEO.
KR2: Improve funnel to achieve 5,000 subscriptions/month based on all site traffic.
KR3: Scale product and processes to support 5,000 subscriptions/month.
KR4: NPS above 90.
OKR example from a football team
Objective: Win the Super Bowl.
KR1: Passing attack amasses 300+ yards per game.
KR2: Defense allows fewer than 17 points per game.
KR3: Special-teams unit ranks in top 3 in punts return coverage.
Objectives are the "what." Objectives express goals and intents, are aggressive yet realistic, and must be unambiguous. Objectives are crucial because they communicate what the priorities are. I like using no more than three objectives per OKR to drive focus. It's often better to suppress an objective than to add one; less is more in this matter. I also like objectives that the team can quickly memorize to keep our priorities in mind. Real success comes when you can ask anyone at the coffee machine what the company’s objectives are.
Key results are the "how." Key results are measurable milestones describing a clear outcome with a number and a deadline. Key results are not tasks or activities; they described outcomes of different actions. Those key results can be committed or aspirational. Committed KR means that 100% achievement is expected. Most KR related to revenues or hiring are committed KR. Aspirational KRs are potentially unattainable because they are here to push organizations to new heights. It's about moving the organization to a new dimension. Aspirational KRs are valuable because you may come up short when you aim for the stars but still reach the moon. It can be hard to set up aspirational KR since it has the potential to discourage people who don't believe they're achievable. However, I have also noticed that challenging key results drive better performance than average KR. The reason being is that teams often limit themselves with mental barriers that block outstanding achievements.
Sitting down with teams to write down OKR creates alignment and shapes the business understanding for everyone. It's tough to write flawless OKRs, and, in this matter, done is better than perfect. An important thing to remember is that OKR can be modified during the cycle. Sometimes, an objective or a key result is no longer relevant or doesn't fully grasp what the team wants to achieve. Once corporate OKRs are written, they cascade to different departments that set up their own OKRs according to corporate ones. In an ideal world, corporate key results become objectives for the teams. It becomes a great tool when every team, say product, marketing, or legal, all work in the same direction. I also like to display on TV a live dashboard of OKR achievement.
Finally, it even becomes more powerful when teams sit down to reflect after the end of a quarter. Questions such as "Did we accomplish our objectives? What were the contributors to our success? What obstacles did we encounter? Were our OKRs well written?" are even more important than writing down good OKRs.
Writing down good OKRs can be challenging. There are many mistakes to avoid, such as confusing committed and aspirational key results, writing unambitious OKRs, choosing low-value objectives, forgetting to use numbers and deadlines for key results, adding hard-to-track metrics, or having teams' OKRs that contradict each other. It is crucial to ask leaders responsible for OKRs the right kind of questions: what OKRs do you plan to focus on to drive the most significant value? which of your OKR aligns with critical initiatives in the organization? what OKR should we eliminate?
I learned the hard way that communicating OKR to drive adoption within teams is the most formidable challenge. Winning people over OKR isn't easy. OKR may be perceived as unnecessary work by leaders who "know what they're doing" and "don't want to waste time." The transparency of OKR is also scary because it requires admitting failures publicly and being accountable for them. It is tough to get the commitment of team leaders, and can only be done by repeating the "why it's important" incessantly. Then you have to convince individual contributors that might miss the "what's in for me." It's easy for contributors to think OKR is just a tool for managers. Again, over-communication and constant repetition is the key here.
In my experience, there are four main ways to fail to implement OKR. The first way is insufficient communication from leadership regarding why the OKR framework is important and what it will bring to everyone. The second happens when the organization doesn’t know where it’s going and doesn’t already have some north star metrics. The third is badly written OKRs which create confusion instead of clarity. The last way is stopping OKR for a few quarters; if you stop, it will be harder to start again. Any successful team overcame these traps to 10x their output with the OKR framework.
OKR is a wonderful tool that drives excellence within an organization. Although challenging to get started, it is worth it to try it over until it works. I also like to use OKR in my personal life to tackle complex projects such as planning a wedding or simply keeping track of my key objectives in life. If you are currently setting up OKR and, more broadly, want to discuss the topic, feel free to send me an email!
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