Employees won’t be effective if they’re unclear about the organization’s objectives and ongoing activities. It’s essential to ensure that the strategic, company, and team ambitions are transparent to all staff members.
One of the most efficient methodologies for goal setting and achievement is OKR, which stands for Objectives and Key Results. It is a structured and goal-oriented approach that delivers results through setting clear objectives, defining measurable key results, and helping build an adaptable and collaborative culture.
In this article I am going to give you tips on how to implement OKR in your organisation and make it a powerful tool in your product management arsenal. Before we delve into details, let's figure out what OKR stands for and what lies in its root.
What is OKR?
The methodology for setting ambitious goals known as OKR was born in 1971 at Intel thanks to the company's head Andy Grove, and back then it was known as Intel MBO. However, it gained popularity at Google in 1999 when John Dorr proposed OKR to management.
OKR's goal-setting system led to effective outcomes and, as a result, Amazon, Twitter, Netflix, and others adopted OKR, and it helped them accelerate growth, achieve high performance and become dominant on the market.
OKR methodology consists of two main parts: objectives and key results. Let’s take a closer look at each of them.
- Objectives
An objective is a big and ambitious goal that drives you and the team, and sets the direction of your work. It should be well-motivated and high-reaching: it’s okay if it is almost impossible to achieve 100% of the goal.
For example, at Google, 60%-70% goal fulfillment is the best result. If you have reached 100% of your objective, then you've set a goal that is too easy. Less than 40% means that the estimation of your efforts was incorrect or you don't have a clear understanding how to achieve your goals.
One important thing to remember is that you can't reward employees for meeting or not meeting OKRs. If employees realise that their bonuses are dependent on OKRs, then they will simply underestimate their goals.
The objective itself is hard to measure because it isn't tied to any metrics. That’s why it's hard to know how much was fulfilled in the end. And this is where Key Results, the remaining letters in the OKR acronym, come in to help.
- Key Results
The key results are the outcomes that show how well you have achieved the goal. A team can choose either one key result or multiple to track the goal, but choosing too many is not recommended. The idea is to stay within 5 metrics—it helps the team to keep the focus, and focus is one of the major principles of the OKR methodology. In the real world, 2 or 3 key results work best.
Advantages of the OKR methodology
What are the benefits of OKR compared to other product management methodologies? In brief, it combines adopting clear and measurable metrics for results while keeping the “bigger picture” in sight at all times.
OKR helps focus on what is really important and relevant to your business. OKRs are also set at all levels of the company, which makes departments, teams and employees work together more effectively. Everyone has their own OKRs for which they are responsible.
This methodology fosters working in sync and transparency. OKRs are aligned with each other and transparent, this allows everyone to keep moving in the same direction.
OKR requires constant monitoring of metrics in order to measure progress toward goals. This helps you determine which goals and results are not being met, identify causes, and develop solutions. Monitoring can also be used to revise the OKR achievement plan or adjust indicators.
How to set your OKRs
OKRs are pivotal in addressing challenges, refining operations, and fostering innovation, yet implementing efficient OKRs takes a lot of time. It requires gathering a team, discussing, developing a common direction, cascading to departments, coordinating the company plan with OKRs of departments. Thorough and consistent approach to OKRs is a serious time investment, but this is the only way, as pulling objectives and key results off the top of our head will not lead to any positive outcome.
Collective monitoring of OKRs helps maintain a comprehensive view of the product, showing all the essential components your team really needs to execute the strategic plan. It’s important to normalize the procedures for setting, concluding, updating, and evaluating your OKRs. It will ensure everyone is aligned and moving forward in sync with the established goals.
Here are some best practices to apply when setting your OKRs:
- Avoid arbitrary choices when selecting metrics
Choosing the right metrics is crucial to achieving business objectives.The focus should be on metrics that have demonstrated a connection to key lagging indicators, which are significant from a broader business standpoint. It is also important to establish customer journey metrics. This approach allows product teams to base their decisions on solid evidence. By selecting relevant metrics, businesses can ensure that the measures taken are not only appropriate but also beneficial to the overall goals.
- Identify leading and lagging indicators
When analyzing the performance of marketing materials, it is important to distinguish between leading and lagging indicators. Leading indicators attempt to predict future outcomes, whereas lagging indicators look at the past and observe if the outcomes are genuine. Therefore, creating a clear distinction between these indicators is essential for formulating OKRs for product teams.
Leading indicators are predictive measures that can indicate future success, while lagging indicators are definitive measures that reflect past outcomes. The category of leading indicators includes both input and output. For instance, the input refers to the time spent designing banners, while the output indicates the number of banners created to promote integrations. In contrast, lagging indicators focus on the impact, such as the total revenue generated from subscriptions.
Identifying indicators can be difficult because the interpretation of metrics can vary greatly depending on the context. To accurately define which metrics qualify as leading or lagging, it is crucial for measuring and predicting the success of marketing initiatives.
- Ask probing questions
This will help you pinpoint your leading indicators. This requires expanding your viewpoint beyond just user impact to also include stakeholder and team member conduct. It is important to identify primary outcomes that are predictive rather than reflective, and this may require an additional layer of analysis.
- Keep your key results on track
Moving from outputs to outcomes requires questioning motives. Ask 'why' to understand the purpose of the initiative. Asking this question regularly will help you identify metrics that go beyond mere description and capture the essence of success in a more meaningful way.
- Encourage agility in product development cycles
OKRs are inherently agile, therefore they are a good fit for the fast-changing product management landscape which is largely dictated by market trends, customer needs, and technological advancements.
OKRs are typically set on a quarterly basis, which allows teams to adapt their strategies rapidly in response to feedback or market shifts without losing sight of their annual or long-term goals. Regular check-ins on progress towards key results enable teams to pivot when necessary while maintaining momentum towards their overarching objectives.
- Empower team autonomy
To transition from lagging to leading key results, it is essential to identify the necessary actions users must take before any significant change in the lagging metrics can be observed. This approach involves working in reverse to identify more actionable key results that can drive progress.
Conclusion
Despite its many benefits, implementing OKRs is not without challenges. It is important to remember that the process of setting the right OKR takes at least several iterations. It's rare that anyone manages to do it perfectly the first time.
Setting OKRs and benefiting from them requires careful planning and consistent follow-through. Common pitfalls include setting vague or unachievable objectives or failing to fully commit to the regular review process required to drive progress.
To succeed, you must stick to the "Why" throughout the whole journey. If the motivation is unclear, it will be easy for the team to get discouraged.
If implemented thoughtfully, OKRs can be a tool that will revolutionise your product management. This methodology helps align teams with a unified vision, while providing enough flexibility for operations. OKRs help make data-driven decisions, encourage ownership and foster collaboration across different functions.
They can truly inspire and help your team focus on what truly matters, driving innovation taking the product towards the ultimate goal with every completed cycle.