Measuring What Matters Most: Objectives and Key Results

My Own Journey Defining Metrics and OKRs

Success and Mess

In 2019, our organization had enjoyed lots of prior successes; and we were rapidly growing. However, I had this nagging feeling that we weren’t having the right kinds of conversations at the leadership level. Further, as the company grew, I had a deep-seated uneasiness that I didn’t understand what was going on in our company. I didn’t have solid numbers in front of me each week to make strategic decisions around whether we were going to hit our revenue targets for the year or whether any of the new initiatives we were investing time and energy into were actually going to be completed on time – if at all.

To make things worse, our team had become very good at saying “yes” to lots of great ideas and starting new initiatives (myself being the worst offender), but it felt like even though our teams were extremely busy, and we had a lot of great projects underway, some of our internal projects weren’t getting done. We had the right team in place, and I trusted them, but I was quietly worrying and suffering as a leader.

Defining our Mission and Vision

Fortunately, we stumbled upon some great resources, one of which was John Doerr’s book on Objectives and Key Results or OKRs, and it helped us dramatically change how we measured and led our own organization. First, we sat down as a team and talked about what gets us up in the morning, our “why,” and we put pen to paper around our vision (at Beyond20, we are passionate about “Changing Work Life”).

We also talked about what kind of company we wanted to be and how our company would look when we reached our goals. We then worked our way backwards, defined what we wanted to accomplish over the next year as well as what we needed to accomplish for the next quarter and defined our “big hairy goals,” our OKRs.

Seeing Results with Quarterly OKRs

As you’ll see in this article, OKRs are meant to be defined on a short time horizon (which is particularly helpful as the world around us is rapidly changing – at times, overnight, forcing us to pivot quickly). Over the course of two days, our leadership team defined our vision, mission, annual goals, and quarterly OKRs, and within a few weeks, we had developed a great, weekly cadence of reviewing our numbers.

With that said, it still took us several quarters to get really good at defining and hitting our OKRs and get to a place where we could roll out the process to our teams. However, by the end of the year, we had made significant results as a company and aren’t turning back.

This article provides an overview of what OKRs are, the value they bring, how to know when you’ve created solid OKRs, how they fit in with your organization’s strategy, and what to do with OKRs once you’ve defined them, so you can successfully guide your organization to deliver more aligned, impactful work.

Why OKRs are So Vital

Every organization I have ever worked for or with has struggled with the lack of visibility into their organization and, yet, there is hope. OKRs help our teams not only gain visibility, but they also inject creativity, drive, and meaning into the work that we do and align everyone on a unified set of goals. OKRs, simply put, form a clear framework for defining and tracking our most important organizational objectives and their results.

OKRs are so effective that leading digital organizations like Google, LinkedIn, and Twitter (to name a few), use them to set strategic, ambitious goals, focus their organizations, and visibly track their results against these goals. The nice thing about OKRs is that they help organizations change how teams work by shifting the emphasis from outputs (reports, etc.) to outcomes (results for customers and the organization – for example, specific increases in revenue or cost savings). In my experience, organizations that have a focus on fast and dynamic growth greatly benefit from rolling out OKRs.

What are OKRs?

I like how author John Doerr defines OKRs:

Think of it like a goals management system where objectives define the “what” we’re trying to achieve; and key results monitor the “how” we know that objective is achieved. Here’s some additional detail on each part.

Good objectives:

• express goals and intent
• are aggressive but realistic
• are tangible and unambiguous
• show clear business value
• can cut across teams

Good key results:

• describe measurable outcomes (not activities) that advance an objective
• include evidence of completion
• contain a mix of qualitative and quantitative outcomes

One way to phrase OKRs is by using the phrase “as measured by”. Thus, an OKR could read, “We will achieve x as measured by the following”. You don’t need to go overboard on creating OKRs. Keep it simple. A maximum of five is plenty.

What Great OKRs Look Like

There are some good online resources that give recommendations on how to craft a great OKR. The OKRs we define should be:

• short, inspirational, engaging, and easy to remember
• specific and time-bound, showing real dates
• ambitious stretch goals that feel somewhat uncomfortable
• quantifiable and easy to craft and understand with a simple, numerical grade (for example, on a scale of 0-100)
• public so that everyone in the organization has visibility into grades
• management goals only, not tied to employee performance evaluations or compensation

Here is a great example of an OKR from Buffer:

OKRs should be clear to everyone and hard to achieve. If teams are hitting their goals every quarter, they’re not set high enough. Ideally, teams will only achieve 70% of their OKRs.

With that said, taking on OKRs is not for the faint of heart, neither for teams nor leaders. They can be relatively easy and quick to define, but they are challenging to achieve and require discipline. At a leadership level, it requires total commitment – saying “no” to a lot of things (pet projects and ideas you may feel passionately about) and constantly re-centering and aligning yourself and your teams on what’s important, so that you’re singularly focused on doing what’s needed to achieve your key goals.

Tying OKRs to the Strategic Mission and Vision

All objectives defined by the organization should tie to the organization’s mission (our “why” or reason for being) and vision (our future state), which together form our strategy. Generally, leadership teams will define three to five high-level objectives and three to five expected, key results defined for each objective (again, keep it simple). As a result, OKRs will naturally form the top priorities for the organization. This Perdoo article and diagram do a nice job of showing how OKRs bridge the gap between strategy and execution.

After leadership has developed OKRs for the organization as a whole, each team will then create their own OKRs, largely based on the organization’s broader, strategic OKRs. This is an important point worth noting: Team members must discuss and come up with their own OKRs that support the organization’s goals; and OKRs can frequently come from bottom up. Leadership can provide input, but should not dictate what the team-level OKRs need to be. That is a fast way to kill engagement and, frankly, kill some really great ideas.

How OKRs Bridge the Gap Between Strategy and Execution (Perdoo)

Comparing OKRs with CSFs and KPIs

You may be familiar with goals and metrics like Critical Success Factors (CSFs) and Key Performance Indicators (KPIs), which define what “success looks like” along with ways to measure ongoing work and the stuff that’s created from that work. However, these are different from OKRs. They serve a different purpose and, frankly, do not go far enough to align or motivate teams. In fact, when teams start by defining their metrics and use them in place of organizational strategy, bad things can happen (take Wells Fargo, for instance).

In practice, I find that CSFs and KPIs, while good for managing our “steady state” or status quo, are rarely inspiring and don’t often address trying out new things we’ve never done before.

The nice thing about OKRs is that they can be changed at any time (and, for us, they often change throughout each quarter), and they help us make progress in new, growth areas whereas CSFs and KPIs help us manage the day-to-day stuff that still needs to happen. Operations still need to be run impeccably well, and we need to keep revenue coming in the door to fund the new things we’re doing (very few of us have the luxury of being able to lose money and still survive).

Another key difference is that KPIs measure outputs from specific services, products, or processes (the number of Service Desk tickets closed within a defined SLA or the amount of code we write) whereas OKRs focus on outcomes or results (how many new customers we sign up, how much new revenue we book, etc.). Further, OKRs can quickly flow up, down, and across the organization without having to be tied to CSFs or KPIs.

Understanding Leading and Lagging Indicators

One thing that was helpful for our team to discuss as we created OKRs for the first time was to understand the difference between leading and lagging indicators.

• Lagging indicators are easy to capture, but impossible to influence. For example, if your intent is to lose weight, stepping on the scale will tell you what you currently weigh, but it does not allow you to influence what it reads. In a work environment, that might mean reviewing your monthly revenue. At that point, it’s impossible to influence.
• Leading indicators are a lot more challenging to define, particularly at first, but they are things your team can influence to produce the results you’re looking for. If we use the same example above, a leading indicator would be to walk for 20 minutes each day, eat at least 2 fruits or vegetables each day, etc. It’s these kinds of indicators we want to get good at defining.

Reviewing and Revising Your OKRs

Once your team defines its OKRs, they should be reviewed (and refined as needed) each month or quarter, and progress should be reviewed in each team on a weekly basis. This approach allows us to quickly adapt and respond to any internal or external changes. Further, grades should be analyzed to ensure they are neither too high nor too low (if you’re in the 60-70% range, that’s a good place to be). Teams with high grades should be pushed further, and low grades should be analyzed and refined to support teams that are struggling. The goal is not to have everything show as “green”, but rather to push the organization to new heights; and OKRs are a great way to help us get there.