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How to set OKRs: A practical guide to setting Objectives and Key Results

What is an OKR?

Before we get into how to set OKRs, it's important to understand what they are. Because they require a mindset shift.

The acronym OKR stands for Objectives and Key Results. It’s a goal management framework that helps break down company strategy into manageable chucks. It’s a simple approach to create alignment and employee engagement around measurable but ambitious goals. They're used by highly agile and innovative companies looking to maximise performance, engagement, and transparency.

The big difference from traditional planning methods and OKRs is that they're set quarterly and tracked monthly or weekly.

5 benefits of using OKRs

OKRs helps companies bridge the gap between strategy and execution and move from an output-based to an outcome-based approach to work. The benefits of the framework include a better focus on results that matter, increased transparency, and stronger company alignment. OKRs achieve this by organising employees and the work they do around achieving common objectives.

1. Strategic alignment

OKRs help managers and employees align their efforts with everyone else in a company. This ensures that everyone is moving in the same direction. It also helps staff understand the purpose behind their tasks. Purpose is one of three key motivators so it’s critical in getting the best from your people. Increased alignment also helps improve collaborative working between teams. It also encourages role autonomy and ownership because your people know what their priorities are.

2. Cultural transparency

The biggest direct impact of OKRs is a shift to transparent goals across the business. With OKR, everyone can see everyone else’s goals, from the bottom of the company to the very top. This helps encourage a more open and honest culture. If you’re not quite ready to move to complete transparency, OKRs can be made private or set to team-only visibility.

3. Engaged employees

OKRs give more oversight and alignment which in turn, grows employee engagement. With engagement linked to a host of business benefits including increased productivity and reduced staff turnover, this is a huge benefit.

4. Focussed execution

OKRs help people focus on what’s important. Employees know which parts of their role contribute to the bigger picture and help to prioritise the work that has real business impact.

5. Business impacts

Research shows that employees with OKRs are more effective that those who use other frameworks. This results in increased performance, increased sales, and even better customer satisfaction scores.

The anatomy of a great OKR

A great OKR describes what you aspire to do and how you’re going to measure it. OKR is critical to your performance management strategy and are structed like this: I will (Objective) as measured by (Key Results).

An Objective tells you where you’re heading

An Objective should motivate and challenge the team. They need to be memorable, qualitative descriptions of what you want to achieve. They should be short, inspirational, and engaging.

Key Results are how you define success

Key Results are a set of metrics that measure your progress towards the Objective. Each Objective should have between 2 and 5 Key Results. All Key Results must be quantitative.

If it doesn’t have a number, it’s not a Key Result

Marissa Mayer | ex. Google, Yahoo

How to set OKRs that work: a worked example

Let's say our Objective is to Create an awesome customer experience. This sounds great, but how would you know if the experience is awesome? And what defines awesome? Remember, without measurement you don’t have a clear goal.

That’s why we need Key Results. Key Results are crucial. They define what we mean by “Create an awesome customer experience.”

How do we measure if we’re providing an awesome customer experience? Net Promoter Score (NPS) and Repurchase Rate would be two good options. Do our customers feel so good about dealing with us that they would recommend us and buy again?

But measuring NPS and repeat purchases alone can send the wrong message. It might encourage us to make the customer happy at any cost. Therefore, we can include a counter-measure such as Customer Acquisition Cost. We want to make the right type of customers happy.

Avoid Key Results that focus on effort or input over outcomes. Here are some bad examples of Key Results:

  1. Collect 5 customer surveys per day
  2. Make 25 outbound calls a month
  3. Speak to 12 customers every month

Here's what our final OKR looks like

Objective: Create an Awesome Customer Experience

Key Results

  1. Improve Net Promoter Score from 45 to 70.
  2. Increase Repurchase Rate from 67% to 83%.
  3. Maintain Customer Acquisition cost under £850.
how to write OKRs

Multiple teams can feed into one OKR

A second team could feed into the same Objective but with different Key Results. For example, the product development team could have KRs around product stickiness and usability. That’s how we use OKRs to align purpose across the company.

How to set a great OKR

So, you understand the theory. You’re down with the structure, all you need now is the actual help on building a great OKR, right? Here goes:

Understand the brief

Before you start using OKRs it’s important to have a clear understanding of the challenge you want it to solve. And the benefits you expect it to bring. For most, OKRs offer a transparent and clear way translate company objectives into bite-size chucks.  in a way that’s clear to all employees, and is transparent and measurable.

Make someone responsible

OKR is a framework. But it’s also a steep learning process. It often involves a fundamental shift in how people think about and measure the work they do, moving away from a focus on input and effort to a focus on outcomes. That’s why it’s important for OKRs to have an owner. Their role is to ensure that everyone using OKRs is properly trained, engaged, and has ongoing help and guidance when they need it.

Align, don’t cascade

Set top down and bottom up OKRs. Encourage employees to set and own their own OKRs so that they feel motivated to achieve them. They can be mapped to team, department, or company Objectives. And should deliver strategic value and not business as usual activities or outputs.

Find the right cadence

OKRs are usually created on 2 cadences

  1. A strategic cadence with high-level, longer term OKRs for the company (usually annual).
  2. A tactical cadence with shorter term OKRs for departments and teams (usually quarterly).

Company Objectives are typically set annually whereas individuals and teams set their OKRs quarterly. This nested approach takes account of the fact that while strategic objectives rarely change quickly, tactical objectives can shift frequently.

However, companies are free to customise the cadence so that it best suits their own needs. For example, Spotify uses a cycle of 6 months for company objectives while its teams set OKRs every six weeks. It’s all about finding the cadence for you.

How to set OKR

10 tips for writing great OKRs

How to set OKR Objectives

  1. Objectives need to be aspirational and memorable
  2. Use jargon-free language everyone understands
  3. Create Objectives that fit your company culture
  4. 5 Objectives maximum, or you’ll lose focus
  5. Follow the annual OKR cycle process

How to set OKR Key Results

  1. Set between 2 and 5 KRs per Objective
  2. Focus on metrics and results (outcomes) not tasks and effort (inputs)
  3. Set quantitative metrics for each Key Result
  4. Key Results are stretch targets. 70% completion is typical and encourages higher performance
  5. Review KRs often so your people aren’t working on outdated priorities.

And finally, use an OKR software tool that connects your employee performance and engagement for a holistic and much more effective process.