What are OKRs (Objective Key Results)? Definition, Examples, and Benefits

We all strive for something, whether personal or professional. At the heart of that desire lies a preferred outcome. This fundamental human concept can be expressed simply:

“I will ________ as measured by ____________.”

In his book Measure What Matters, John Doerr used this clear framework to explain Objectives and Key Results (OKRs). The business world, however, is far from simple. It’s a dynamic environment with many interconnected elements. Yet, by focusing on core principles, OKRs can help your organization achieve remarkable results.

Imagine your organization sets a bold goal to improve customer satisfaction by decreasing wait times. While the intention is clear, you may lack an effective system for reaching this target. This is where OKRs offer a powerful framework to guide your journey from ambition to success.

What are OKRs?

Objectives and Key Results (OKRs) provide a structured approach for defining, aligning, and achieving goals within any organization. Introduced at Intel in the 1970s, OKRs quickly spread throughout the tech industry. They offer a collaborative way for employees to understand and contribute to company-wide objectives.

Research demonstrates that when team members grasp the significance of their work, they’re more engaged and productive. OKRs refine the traditional Management by Objectives (MBO) approach by encouraging bottom-up participation. They empower teams to identify how their work directly supports high-level company goals. This mindset shift transforms the focus from simply completing tasks to making meaningful progress that propels the entire organization forward.

The OKR framework consists of two components: Objectives, which are specific and clearly defined goals, and Key Results, which are how the goal’s progress is measured or monitored.

Defining OKRs

OKRs (Objectives and Key Results) consist of two essential parts: the objective you want to achieve and the key results that measure progress toward the objective.

• Objectives should be short, memorable, and inspirational descriptions of your goals. They should motivate and challenge the team.
• Key results are a set of metrics that measure progress toward the objective. You should have two to five key results for each purpose. Any more than that, and the team may struggle to remember them.

There are two critical points to consider when defining OKRs. First, objectives should be concise and engaging so the team can easily remember them. Second, there should be a small number of metrics to track critical results. These metrics should be measurable on a timely basis. Reviewing progress quarterly is impossible if results can only be seen after two years.

Examples of Objectives

As Steven Covey famously wrote in his book, “The Seven Habits of Highly Successful People,” it’s important to “begin with the end in mind.” This idea is particularly relevant when identifying the objectives you want to achieve.

Some examples of high-level objectives could include:

• Improving customer satisfaction
• Increasing recurring revenue
• Scaling system performance
• Growing the number of customers served
• Reducing the number of data errors in the system

Each business must identify objectives relevant to its context, such as market demands, customer needs, competition, and regulatory requirements. These objectives should guide the activities of every team within the organization.

While having a broad objective to “be profitable” is acceptable for most companies, it isn’t particularly helpful in guiding teams in achieving that goal. Instead, framing objectives in terms of “what can we achieve in the next quarter to help us reach our long-term goals” allows teams to focus on smaller, achievable steps that can be regularly reviewed and adjusted to ensure they align with the organization’s objectives.

Examples of Key Results

Understanding that “key results” are the desired outcomes we want to achieve after taking a set of actions is crucial. One of the common mistakes that people make with OKRs is to clarify desired outcomes with actions that are required to reach objectives. This mistake can lead to a lack of clarity. It may make it difficult to determine if the actions taken have been practical.

Let’s aim to reduce the number of data errors in the system. However, specifying the critical result as installing a new vendor package release would be a mistake. This is because there’s no mention of tracked data errors or future goals, and it would be hard to determine if installing the latest release made things better, worse, or had no effect. 

To avoid this mistake, it is essential to identify measurable results that are key to achieving the desired objective. This means we need to specify the results we want to see after taking a set of actions. By doing so, we can determine whether the actions we take are making a positive impact on the objective or not.

In the example below, we show how to keep the same objective and specify key results that track if improvements are achieved. Many different activities may be done in concert to achieve the desired objective. 

Objective: Reduce the number of data errors in the system

Key results:

• Number of data quality errors reported to the support desk: This is a critical result that would help us measure the effectiveness of our actions. By tracking the number of data quality errors reported to the support desk, we can determine whether or not the actions taken have been practical.
• Number of orders that can’t be filled automatically: This is another critical result that would help us measure the effectiveness of our actions. By tracking the number of orders that can’t be filled automatically, we can determine whether or not the actions taken have been practical.
• Order errors reported by customers: This is yet another critical result that would help us measure the effectiveness of our actions. By tracking the order errors reported by customers, we can determine whether the actions taken have been effective.

By measuring these results, we can determine whether the actions we take are making a positive impact on the objective or not. It is important to remember that the actions taken to achieve an objective are not the critical result but the measurable outcome we achieve after those actions.

Matching Objectives and Key Results

When designing OKRs, it’s crucial to select key results that act as leading indicators towards your objective, rather than lagging indicators.

• Leading Indicators: These metrics offer early signals of progress, allowing you to track your trajectory and make adjustments as needed. They are measurable frequently, giving you actionable insights.
• Lagging Indicators: These metrics reflect outcomes that may take a longer time to manifest. While important, they don’t provide the same real-time guidance for course correction as leading indicators.

Here’s a table illustrating how leading indicators can be matched to common objectives:

Explanation:

• Customer Satisfaction: Metrics like Net Promoter Score (NPS) and survey results give you an early read on customer sentiment. Decreasing customer churn rates also signal positive trends.
• Market Position: Tracking market share against competitors and conversion rates helps you gauge the effectiveness of your sales and marketing strategies as your product or service gains traction.
• Revenue Streams: Recurring revenue models offer stability and predictability, making them a vital leading indicator of financial health.
• System Performance: Monitoring the number of simultaneous users your system can handle, along with the volume of customers served successfully, indicates scalability. Decreasing performance complaints reinforces positive customer experience.

By focusing on leading indicators, you create an OKR framework that supports agility, allowing for proactive adjustments to ensure your initiatives stay aligned with your overall objectives.

Tracking success with OKRs: It’s Not Just About Perfection

OKRs use a simple scoring system to gauge progress toward your Key Results (KRs). The scale ranges from 0 to 1:

• .3 = You missed the mark by quite a lot: This signals the need to revisit your strategy and identify obstacles to progress.
• .7 = You didn’t hit your target but made significant progress: Celebrate this success! It indicates that you’re on the right track, and adjustments might be needed to reach your full target.
• 1 = You hit your stretch target (awwwww yeah…) Excellent work! This demonstrates that your goals were ambitious and achievable.

The Beauty of Stretch Goals

In the OKR system, scoring 0.7 is considered a success. This is because OKRs are designed to be stretch goals – ambitious targets that push teams outside their comfort zone and drive growth. Don’t be afraid to dream big! If you consistently achieve perfect scores, it’s time to make your Key Results even more challenging.

Key Takeaways:

• OKRs track the journey, not just the destination. Focus on progress and learning from both successes and setbacks.
• Embrace iteration. OKRs encourage regular assessment and adjustment to ensure continued alignment with your objectives.
• Celebrate wins! Acknowledging achievements, even those that fall short of perfection, boosts motivation and reinforces a culture of continuous improvement.

OKRs and Agile Development: A Perfect Pairing

OKRs and agile development are a natural fit. Agile’s core principle of “embracing change” aligns perfectly with the iterative nature of OKRs. Here’s why they work so well together:

• Adaptability: Agile processes emphasize flexibility, allowing teams to respond to shifts in market conditions, customer needs, or internal challenges. OKRs, with their focus on regular progress reviews, provide the necessary checkpoints to reevaluate goals and realign as needed.
• Transparency: Both OKRs and agile development promote openness. Communicating objectives and key results ensures everyone understands the bigger picture, facilitating collaboration and better decision-making.
• Focus on Outcomes: Agile methodologies prioritize delivering working solutions over rigid adherence to a predefined plan. Quarterly OKR reviews shift the focus from simply completing tasks to asking, “Did we achieve our desired outcomes?” This outcome-driven mindset empowers teams to stay focused on driving value.

The combination of OKRs and agile development creates a powerful framework for adapting quickly to changing circumstances while maintaining alignment with strategic goals.

Aligning OKRs to Business Strategy: The Importance of the Big Picture

To maximize the impact of OKRs, they must be rooted in your organization’s core purpose. Start by aligning your top-level OKRs with your company’s mission, vision, and values—these act as your “North Star,” guiding your overall strategy.

• Mission: Defines your company’s fundamental reason for existing.
•  Vision: Describe your desired future state.
•  Values: Reflect on the guiding principles that shape your company culture.

The Cascading Effect

Think of your mission, vision, and values as the foundation of a pyramid. From there, a clear hierarchy emerges:

• Long-term Goals: Set ambitious targets for the next several years.
•  Annual Goals: Break down long-term goals into achievable steps for the current year.
•  Quarterly OKRs: Define specific objectives and measurable results to propel you towards your yearly goals.

This alignment ensures that daily actions and decisions across all levels of the organization contribute to its strategic success. OKRs translate your “why” into clear “whats” and “hows,” providing focus and direction.

Summary and Conclusion

OKRs are an influential tool organizations use to set strategic objectives, track progress, and measure success. When implemented correctly, OKRs can motivate teams, keep them focused, and contribute to the company’s overall success.

The key benefits of OKRs include:

• Focus: OKRs help teams focus their attention on the most important goals.
•  Alignment: OKRs align all levels of the organization around a common goal.
•  Transparency: OKRs make progress and success transparent to everyone.
•  Motivation: OKRs provide teams with tangible goals and measurable success.
•  Agility: OKRs can be adapted to changing circumstances.

Before you start implementing OKRs, make sure to:

• Clearly define your objectives.
•  Set measurable key results.
•  Create a plan to achieve your goals.
•  Regularly track progress.
•  Feel free to make adjustments as needed.

OKRs can be a beneficial tool for organizations of all sizes. When used correctly, OKRs can help your company achieve success.

If you have any questions or need more information, please get in touch with us.