If you work at a tech company, there is a good chance you’ve come across OKRs - or Objective and Key Results. Many companies turn to OKRs with an almost feverish belief that they will transform everything. That just by talking about OKRs they will have more focus, deeper alignment, and more success!
What could go wrong?
All you need to do is define an Objective and set some Key Results and watch the magic happen. Unfortunately, while OKRs are quite simple to understand, they are incredibly hard to use well.
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The Basics of OKRs
Measure What Matters, THE book on OKRs for most people states:
“An Objective is simply what is to be achieved, no more and no less.”
“Key Results benchmark and monitor how we get to the Objective.”
Here is even an example provided on their website:
Why OKRs are Helpful
While simple, OKRs are helpful because they are a straightforward framework that allows teams to have a clear focus to achieve (the Objective) with clear and agreed-upon metrics for measuring progress and success.
This helps teams have more alignment with the rest of the organization, know how they are being evaluated, and put their efforts towards what was decided matters most (the Objective).
Where They Go So Wrong
This all sounds amazing! But in my experience, OKRs often become an organizational burden with little of the potential benefits and many people end up thinking they are mostly a waste of time.
Why does this happen? Here are a few ways I’ve seen OKRs go wrong:
Lack of alignment on the stated Objective. One of the purposes of the Objective statement is to align the team and the company on what really matters and then focus efforts toward that goal. It is very common for companies to not actually be aligned on the objective. Usually because getting alignment is hard and takes time. So in practice, the team doesn’t get to focus much of its efforts on the stated Objective and is essentially set up for failure from the start.
The Objective statement is way too broad. This is one of the funniest when you stop to think about it, but it is an easy trap to fall into. The company thinks, well what we really want is more sales. So Team A, your Objective is “Increase the company sales” and your KR is “more sales.” What could go wrong? You stated an Objective and have a measurable KR. While this could be appropriate for a long-term OKR that spans a year or more, the problem is that often this type of broad OKR can get assigned to a team. This is an issue because you have not created an Objective that puts in an appropriate amount of focus and constraints. Almost any amount of work for a company could potentially lead to more sales, so the team will likely not have much focus and struggle to be aligned.
The Key Results Are Output Metrics. An output metric is a metric that lags behind the effort, is usually more high level, and is hard for a team to directly impact. Revenue is a good example. The amount of revenue a company generates is an important metric, but it is an output metric. Input metrics are the leading metrics that impact your output metrics. For example, the number of items you have in stock is likely an input metric to how much revenue you generate. Team-level KRs should almost always be input metrics. When teams are assigned output metrics such as revenue, they actually have little ability to impact their metrics and lack focus. A team could try all sorts of things to increase revenue and likely fall short. But if assigned a metric like “increase the number of items in stock”, there is a much clearer level of focus and control of their destiny.
What Should You Do?
I personally think OKRs are a useful framework for companies. If you are interested in trying OKRs are making your OKR process better, I’d suggest the following:
Keep It Simple. Don’t roll out a process that creates more organizational burden than the value it creates. Pick a few teams, assign them clear and specific Objective statements with input metrics as KRs for a quarter, and see what you learn. Then scale from there.
Constraints are Powerful for Innovation. Leaders need to use their understanding of the business and the key strategic levers to assign appropriately focused Objectives to teams. Don’t expect teams, in a quarter, to make significant changes to high-level output metrics. Focus their effort on the important Objectives you need to achieve to move your input metrics. For example, instead of “Decrease the churn rate” use something more like “Customers better understand the value they are giving up when they want to offboard from our product.”
Alignment is Critical. If other teams or departments could have asks of a team, it is critical that those groups are aligned on what the team’s Objective is and that the Objective will be the focus. Otherwise, the focus required to succeed will be lost.
Don’t Forget Strategy! Before committing to an OKR, you need to have a high-level understanding of how you think you can accomplish the OKR in the time required. If you have a quarterly OKR and really have no idea how you will succeed, its pretty likely you won’t. The risk tolerance is also important in this step. If your appetite for failure is really low then you need to have a very clear and known plan to succeed. If you are less risk-averse for an Objective, then the plan can have more unknowns.
I hope this has been a helpful discussion of OKRs and can help you use them more effectively!
If you have seen other challenges with OKRs, drop a comment and I am happy to provide some thoughts to see if I can help.
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“Team-level KRs should almost always be input metrics. When teams are assigned output metrics such as revenue, they actually have little ability to impact their metrics and lack focus. “ - this continues to be the crux of the challenge for many people using OKRs, and I think it comes down to level in the org.
Senior Leadership are internally-focused and measured on yearly performance against lagging output metrics like Revenue and Profit.
But there’s that “missing middle” of connecting shorter-term, client-centric success input metrics at the Product level, tied together with a Strategy laying out how they lead to lagging output metrics.