A Guide to Defining & Measuring OKRs

Introduction to OKRs

OKR stands for Objectives and Key Results. It is a goal management framework invented by Andy Grove during his time at Intel and later introduced to Google by John Doerr. An OKR framework helps companies implement and execute strategies. The framework focuses on measuring results that matter, encourages transparency, and improves strategic alignment. The OKR framework organizes employees and teams to achieve the top objectives to allow the company to realize its strategic objectives.

What are Objectives and Key Results?

An OKR consists of an Objective, which acts as a Northstar, and several Key Results that indicate the objective is being achieved. The framework prescribes several guidelines that will help stakeholders and teams prioritize, pivot, and measure the outcome of their efforts.

OKRs help companies put the strategy into execution and move from an output to an outcome-based approach.

What is an Objective?

An Objective is a brief description of what the organization or team wants to achieve. It is directional. Objectives do not contain any specific methods, technical information, or metrics.

• An Objective states the “What” (what you want to achieve).
• An Objective is a qualitative headline, an overarching statement of what you want to accomplish.
• Objectives should be set quarterly and evaluated by the team periodically to evaluate progress and take corrective action.
• Google suggestions for setting objectives: “use expressions that convey endpoints, e.g., ‘climb the mountain,’ ‘eat five pies,’ or ‘ship feature Y.’”

What is a Key Result?

A Key Result (KR) is a finite, measurable outcome required to achieve the Objective. It typically contains a metric with a start and a target value. An organization should measure the KRs to indicate the progress toward the Objective.

• A KR is the “How” (how you will achieve the Objective)
• KRs reflect a quantifiable and measurable outcome of the Objective’s accomplishment; it is not a task
• KRs measure the progress made toward an Objective
• An Objective should have one to five Key Results
• A KR includes in it a KPI (Key Performance Indicator) and is written in such a way that its very outcome or result can be a measurable milestone (and sometimes, if possible, quantified as a metric)
• It can be a milestone – thus qualitative but measurable by Complete, Incomplete, or by % progress
• Or it can be a metric – quantified by a number ($ or any monetary value, # of units, etc.)
• Google suggestions on creating Key Results: “Key Results should describe outcomes, not activities.”

An objective states the ‘What’ and a KR is the ‘How’ or, what you want to achieve and how you will achieve it

How do OKRs differ from the KPIs?

KPI stands for Key Performance Indicator. They are a way for teams to track performance within the initiatives. OKRs are a framework for setting and achieving goals. The relationship between Objectives and Key Results makes it a better goal management framework. However, your team can still use KPIs. Some KPIs make great Key Results.

Here’s how KPIs and Key Results differ:

Key Results are the metrics by which you will measure the progress of the OKRs. Key Results can be quantitative (e.g., increase the conversion rate from 2.8% to 4.2% in 12 months) or qualitative (e.g., research user’s current experience and friction points). In the last example, an organization can assess in many ways: polls, surveys, NPS, direct feedback, et al.

KPIs are the quantifiable ways to measure your initiatives against target results. If you have a well-defined quantitative Key Result, you can use a KPI framework to support that initiative as long the initiative is connected to the organizational objectives.

Committed vs. Aspirational OKRs

Committed OKRs are goal-setting commitments. Resources and schedules need to be adjusted to meet these. These types of OKRs can be linked to Service Level Agreements (SLAs) or can be SLAs. An example of a committed OKR has zero critical defects in a release. A discussion or corrective action needs to occur when this objective is not met.

Aspirational OKRs are broader and define how we want the world to look.

For example, our objective is to delight the client. With aspirational OKRs, there is no clear path to get there and no actual knowledge of the resources it will take. These must be looked at annually and broken down into measurable objectives for the year. The goal is to set bold enough OKRs that are not attainable but inspirational and forward-thinking enough that not attaining them still drastically shifts the organization.

Cultural Obstacles

When implementing OKRs, there are several potential cultural obstacles that teams may need to overcome. Some of the most frequent challenges that we see across organizations are:

1. Command and control leadership – you can miss the big picture when goals are only dictated from the top. Leaders need to remember that they hired smart people, so make sure to harness the intelligence of the entire organization and let ideas trickle up from every level.

2. Overload (OKRs for everything) – people commonly come up with OKRs for everything, which can cause teams to lack focus and spread themselves too thin, ultimately not achieving any of their goals.

3. Set it and forget it – often, organizations will spend time coming up with a great plan around goals, and then they won’t discuss those goals until it’s too late. It’s important to regularly discuss goals and manage conversations throughout the OKR cycle.

4. Slippage culture – organizations can lack the discipline in making and managing commitments. It’s important to honor those commitments and hold people accountable for what they agree to do.

5. Lacking conversation and feedback skills – OKRs require frequent discussions and feedback, so having honest and healthy discussions and check-ins will enable your teams to succeed.

6. Everchanging OKRs – OKRs should be reviewed frequently and refined as the organization learns and adapts, but OKRs should not be continuously rewritten. This might indicate a poor understanding of how to set OKRs and that OKR training is needed.

Authoring OKRs

OKRs should be written in an iterative manner to familiarize the stakeholders with the process and give them enough time to develop good OKRs.

1. Determine the OKR area of focus to best identify your OKR initiatives.
2. Determine OKR stakeholders such as the capability owner, initiative owner, and program manager.
3. Set the OKR kickoff to better understand what an OKR is, it’s development process, and your initiatives.
4. Develop Objectives. This process includes brainstorming objectives individually and then consolidating them as a group. The result is a completed draft of your objectives.
5. Develop Key Results. Similar to the above, this process includes brainstorming key results individually and then consolidating them as a group. The result is a completed draft of your key results.
6. Review OKRs and update them depending on any feedback. The final step is to come to an alignment on entering them into Jira.

It is essential to align OKRs across the organization. Initiative OKRs should tie into the company goals and strategy. The quarterly plans and team backlog should deliver work toward the OKRs.

Let’s take a look at an example case. Our banking client has the object of increasing the overall market share of their digital banking product. They’ve set the following as their key results.

• App score rating of 4.0 or above for both iOS and Android
• Digitally active customers 5% YoY in 2021
• Decrease call-center volume related to digital banking by 10% for Q4

Alignment & Delivery of OKRs in the organization

Annual Review

Develop a Line-of-Business strategy to define a mission, direction, and a series of initiatives.

Quarterly Review

Build our initiative-level OKRs to define quarterly goals. Example: Reduce account inquiry call volume by 90%

Create a capability-level plan and epics and determine how they are measured. Example: Reduce ATM deposit call verification by 90%

Bi-Weekly Review

Prioritized list of tasks that the team will work on to deliver OKRS. Example: As a digital banking user, I want to receive automated confirmations of ATM deposits

Recording and Tracking OKRs

OKRs ensure the company moves in the same direction and with clear priorities. It is not a top-down approach; it’s both top-down and bottom-up and ensures alignment.

Purpose of OKRs

• Make company, team, and individual goals and priorities more transparent
• Prioritize work across the team, project, program, and all levels of the company
• Focus on and invest in the right things
• Ensure the work being done aligns with the pre-defined business objectives
• Clearly articulate the business outcomes and value that will be delivered
• Measure success towards achieving the objective (delivered value) using metrics
• Identify and address cross-team dependencies

OKR Concepts

• Meant to be bold, “stretch” goals; it’s who / what we aspire to be
• Align, not cascade; teams are provided the creative opportunity to determine how they contribute to / enable the higher-level strategic objectives
• Aren’t milestones; task progress ≠ business value
• Aren’t, and shouldn’t be, tied to performance evaluation and compensation

Reporting and Tracking

It can be overwhelming to determine the best tool to track OKRs. When starting with OKRs, it is best not to try and implement a complicated tracking solution since that will distract from the effort and focus of implementing OKRs.

Here is a suggested progression of tools that can be used as OKR adoption and use matures:

• Use a shared document, slides, or spreadsheet. It can be easy to create a simple tracking sheet that gives everyone visibility to OKRs
• Leverage an existing tool that is already deployed, like Jira
• Evaluate and purchase an OKR tool
• Build an OKR tool that meets your specific implementation needs

Measuring OKRs

To make OKRs measurable, there are five common mistakes to avoid while writing OKRs:

1. An Objective is an action, not an impact
2. An Objective is broad-based and vague, not focused
3. The Key Result is a solution, not evidence
4. The Key Result is a percentage of something, not a measure
5. The Key Result is related but is not direct evidence of success

Measuring and grading OKRs

OKRs inherently contain a hypothesis: For example, if the organization achieves the following Key Results, they should see the Objective move up by X points. If we were to run an experiment successfully, we need to measure the Key Results and the Objective.

People, teams, departments, or the company responsible for OKRs will directly work on the Key Results. The Key Result must be measurable with the target before the OKR is shared; for example – The sales team will generate 1000 leads by the end of Q2. Once the target of the Key Result is established, then its progress can be monitored and graded during reviews.

Best practice recommends scoring Key Results between 0.0 to 1.0. However, companies score them on percentages or A to F also.

A score is obtained by dividing the target value by the actual result. So, if the sales team generated only 300 leads and the target was 1000, they would get a score of .3, or 30%. Once we score, we can grade them.

SCOREGRADE

• 0.8 to 1.0 Excellent
• 0.6 to 0.8 Good
• 0.4 to 0.6 Fair
• 0.0 to 0.4 Review

It is recommended that while setting a target for a Key Result, a stretch should be 0.6 – 0.7, and if the team can achieve it, they are probably doing an excellent job.

There will be a few Key Results that are excellent (0.8+) and a few that might be poorer than expected (<0.3). Unless the Key Result is supposed to be binary (e.g., launch the software by x date), getting a 1.0 score is suspicious and should be reviewed.

There are other areas to pay attention to, such as lower targets so that the teams can comfortably meet them. Also, if Key Results are being used for individual performance assessments, organizations should not weaponize OKRs, and teams and individuals should be encouraged to be brave, experiment, and fail fast. An individual may be conscientious with a high work ethic, but the group may still fail to achieve their OKRs.

Reviewing OKRs

When the Key results scores are very low, discuss with your team and ask:

1. What went wrong?
2. What were some of the blockers or issues beyond our control?
3. How else could we have done better?
4. Is there anything we can do differently?
5. What support and guidance is required to achieve the Key Results?

OKRs should be treated as experiments, and failures should be seen as learning opportunities. To foster healthy reviews, collaboratively review the OKRs, typically at the end of each quarter. Get all stakeholders aligned and let the initiative owners or team leads explain their grades and any adjustments or pivots they need to make for the next quarter.

These reviews can be in a retrospective style, i.e., ask these questions:

• What score or grade did we get?
• Why we got those grades?
• What are we doing differently in the next quarter and why?
• What did we learn from the experience? (document learning)

Determining the success of OKRs

One way to assess the success of an OKR is to average the Key Results score. However, it only tells us how well we completed the key results for an Objective. The pitfall of using the averaging method is that it is possible to knock off all the OKRs but still fail to move the Objective in a positive direction. Much goes into the design of Key Results to avoid a situation of this kind.

It is recommended that we focus on achieving each Key Result as they impact different areas of success but aim to achieve a single Objective.

References

Doerr, J. (2018). Measure what matters. Portfolio Penguin.
Niven, P.R., Lamorte, B., (2016). Objectives and Key Results: driving focus, alignment, and engagement with OKRs. John Wiley & Sons.
Klau, R (2013). How Google sets goals: OKRs/ Startup Lap Workshop; https://youtu.be/mJB83EZtAjc