Objective and Key Results: 101
#61: How to set up meaningful goals and track relevant metrics
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Objective and Key Results: 101
When I think of my first encounter with the OKR framework, I have a vivid memory of a company where I worked in the early stages of my career, which had no understanding of setting these objectives in a meaningful way. As you may suspect, I have hated OKRs for a very long time. I switched sides a couple of years ago when I witnessed how they can be established in a way that they mean something, they are bonded with metrics that are worth tracking, and at the end of the day, they are quite helpful in telling if you and your product team are doing good work and heading in the right direction.
In this article, I’m providing a brief overview of the OKRs theory, but I’m primarily focusing on examples of how OKRs can be implemented in a meaningful way in your organization and your projects.
What are OKRs, and why do they sometimes fail
OKRs (Objectives and Key Results) is a popular goal-setting framework used by individuals, teams, and organizations to define objectives and track their progress and outcomes. According to Wikipedia, the framework was popularized by Andrew Grove of Intel in the 1970s, who later documented this method in his 1983 book, “High Output Management.”
How does an OKR really look? It’s a two-part statement. There’s an overarching objective that should be ambitious and feel uncomfortable. Key results should be measurable and drive the completion of the objective. An example of an OKR could look like this one below:
Objective:
Improve the self-serve onboarding in our product.
Key Results:
Increase activation rate by 10%.
30% of our users sign up and activate through the mobile app.
The flow in activation is shorter, from 12 to 9 steps.
Objective Key Results is a relatively old framework. However, many organizations still struggle to put it to the right use. There are a myriad of reasons why OKRs fail, but the most popular and quite easy to address are:
Lack of clarity and alignment. This happens when the team’s and individual contributors’ goals are not aligned with the overarching organization’s goals, e.g., the product team is focused on building features, driving improvements in the user experience of the admin area of the product, while other teams target customer growth, aligning with the overarching financial OKR of the entire organization.
Setting vague or unrealistic objectives. Goals that are either not clearly defined or too ambitious (they should be ambitious and reachable in at least 60-70%, though) can cause confusion and demotivation. Just imagine setting a moonshot financial OKR to quadruple last year’s revenue in an unstable economic period – organizations doubling their YOY revenue are performing incredibly well.
Overemphasis on metrics and depraved incentives. When organizations are too focused on vanity metrics, teams and individuals may go to the dark side and try to game the system. In 2016, Wells Fargo, an American bank, caused a nationwide scandal by creating millions of fraudulent savings and checking accounts on behalf of their customers without their knowledge, in an attempt to hit aggressive sales goals set by management.
The first two were definitely the case for the aforementioned organization that I worked for some time ago, and which turned off OKRs for me for a very long time. Let’s now explore the ingredients for inspirational OKRs that product teams and ICs want to achieve.
A recipe for meaningful and inspirational OKRs
OKRs that are inspirational and which product teams and ICs enjoy achieving share a few non-negotiable ingredients:
Strategic alignment. Make sure your team’s objectives are aligned with the overarching goals of the organization, as well as their vision and mission.
Limited scope. A rule of thumb is to focus on 3-5 objectives, each having around three key results.
Aspirational and actionable objective. Write objectives as short, inspirational statements that give purpose and direction. Use clear and action-oriented language that conveys endpoints, e.g., “ship feature X”, “improve product’s reputation”, “increase the use of the product.”
Measurable key results. Craft key results as specific, quantitative outcomes that, when achieved, will directly advance the objective. KRs should describe outcomes, not activities. If you are planning an activity that will influence the objective, describe the impact the activity will have.
Put in a time frame. Make OKRs time-bound, usually quarterly or annually. This will help focus efforts and allow for regular reviews.
Alright, enough of theory. Let’s now focus on how you and your team can implement OKRs in your organization and make good use of them.
OKRs in practice
Let’s use a fictional organization as a background story for our OKRs:
Acme Inc. works for a relatively small volume of B2B customers. The main product of this young startup based in Europe is monitoring how brands are positioned in popular LLMs.
The management team sets an annual financial goal that the entire organization contributes to. Growing revenue to a certain value helps the company continuously improve its products and services. The company has set its mission and follows a specific list of values. As any serious CEO would do, the big boss sat down with the board of directors once, and they designed a five-year vision for the entire organization.
Acme Inc. has a few small product teams onboard responsible for various parts of the system. The entire company does quarterly planning for all product teams four times a year.
The goal of this exercise is to align the objectives with the strategic annual goals and the long-term vision. A couple of other factors, such as the voice of the customers and UX metrics, influence what the team will be focusing on in the next three months.
Let’s take one of the teams as an example and give it a more detailed look:
This is the Data Visualization Team, whose main job is to ensure customers can easily access and consume the insights they need.
As the second quarter of the year comes to a close and Q3 planning approaches, the team is preparing a list of key problems to tackle over the next three months. While doing that, the team’s Product Trio is considering both long-term vision and the customer feedback they have collected in the past few weeks. Two main themes emerge from the long list of problems:
Our customers face challenges in navigating complex data to uncover key insights about their positioning in LLMs.
Our customers get too many notifications from the system.
After discussing the short list of problems with the board of directors, the Product Trio is certain that this is the set of the right things to lean on in the next quarter. The next step is to ideate how the team might want to tackle these two problems, but they already know how to do it from this article.
Before the Q3 starts, the team has a quite clear idea of what they are after. What’s left to be done before jumping into actual design and development is to set Objectives and Key Results, which will help the team follow the right path and measure if it was actually good. Also, the team will report their OKRs to management a couple of times during the quarter to reassure them that the operation is (hopefully) going smoothly.
Since the team will focus on two initiatives to address two problems, they require only two OKRs. Here’s what the team came up with:
Objective 1:
Improve the way our customers find the key insights in our product.
Key Results:
Time to insight improved by 25%.
Error rate for finding insights on the dashboard reduced by 20%.
25% of the customers use new AI-based search functionality.
The team is about to build an AI-based search functionality that, as the team supposes, will unlock new ways of interacting with large data sets and enable quicker time to insight, which is a specific metric tracked by the organization. Additionally, the team plans to run a usability study while developing the new functionality to determine if the error rate metric drops after making a few changes to the dashboard.
Objective 2:
Customers receive relevant notifications.
Key Results:
20% of our customers adopt notification settings.
Customer satisfaction increases by 10%.
100% of our customers receive smart notifications.
To tackle the second problem, the team will build a set of two functionalities: smart notifications and notification settings. Up to this day, customers have been unhappy with the number and relevance of notifications they receive from the system regarding their positioning in LLMs. That’s why the team decided to develop a piece of software that will determine if a notification was seen in the system and send an email with a delay to avoid knocking on the customer’s door twice. The second part of the solution would be the notification settings module that will let the customers customize which types of notifications and how frequently they want to receive.
What’s the main takeaway from this example?
The OKRs must align with what the team is about to build within a given time frame. Everything has to happen in a very specific order, where writing down OKRs is usually the last step of the planning process. Otherwise, the objectives may become disconnected from the product team's actual work, lose their meaning, and be challenging to hit.
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Episode 62 will be released on August 14.
Best,
Arek and Mateusz