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Objectives and Key Results
as a method of management and development of your product.
Our last article on the product-management theme but the one which is helpful from the very start of your project is about strategic planning of your product development based on the OKR method.
Objectives and Key Results (OKR) is a goal-setting system based on the point that for each given goal, there should be a number of measurable results (metrics) that would show how well the goal is achieved. It is an uncomplicated approach to get employees engaged and to build an organization around measurable yet ambitious goals.
The OKR concept was originally proposed by Intel, but soon became widespread among other Silicon Valley companies. Google, Spotify, Twitter, Airbnb and LinkedIn, use OKR in their work.
John Doerr was behind the introduction of OKR at Google and suggested the following formula for objectives setting.
The OKR concept was originally proposed by Intel, but soon became widespread among other Silicon Valley companies. Google, Spotify, Twitter, Airbnb and LinkedIn, use OKR in their work.
John Doerr was behind the introduction of OKR at Google and suggested the following formula for objectives setting.
Doerr's Objective/Goal Formula:
I will achieve ___________, which can be measured with ___________.
The right goal should describe not only what you want to achieve, but also how you are going to measure it. The key phrase here is "which can be measured with" because it is the measurement that forms an objective. Without it, you don't have a goal, just a desire.
The OKR method consists of two parts: Objectives and Key Results.
An objective is a memorable qualitative description of what you want to accomplish. Objectives should be short, inspiring and engaging. They should motivate and challenge the team.
Key Results are a set of metrics whose values change as you move toward the Objective. For each Goal, you need to have from 2 to 5 Key Results. If you have more than that, no one will remember them.
All Key Results should be quantitative and measurable.
OKR is a management tool, not a personnel evaluation one. OKRs have no influence on the evaluation of the employee or on the size of bonuses and other incentives. It is believed that OKRs can only be used if the company consciously cultivates trust in its employees.
The result of OKR implementation is that all employees understand the goals of their work and what the company expects from them. The methodology makes business goals transparent and understandable for everyone, which ultimately increases the motivation and efficiency of teams.
An objective is a memorable qualitative description of what you want to accomplish. Objectives should be short, inspiring and engaging. They should motivate and challenge the team.
Key Results are a set of metrics whose values change as you move toward the Objective. For each Goal, you need to have from 2 to 5 Key Results. If you have more than that, no one will remember them.
All Key Results should be quantitative and measurable.
OKR is a management tool, not a personnel evaluation one. OKRs have no influence on the evaluation of the employee or on the size of bonuses and other incentives. It is believed that OKRs can only be used if the company consciously cultivates trust in its employees.
The result of OKR implementation is that all employees understand the goals of their work and what the company expects from them. The methodology makes business goals transparent and understandable for everyone, which ultimately increases the motivation and efficiency of teams.
Benefits of implementing of OKR:
- More consistent decision-making at all levels. Before setting a new task, employees will think about how it relates to the overall goals of the company and the department.
- Objective evaluation of results. Measurable key indicators allow you to objectively assess whether the goal is achieved.
- Clear metrics for measuring progress. Because metrics are already built into goal setting, you will always rely on objective rather than subjective criteria.
- Development of creative potential. Executors have the freedom to choose how to achieve results
- More transparent communication between teams when planning and executing projects.
- Getting rid of micromanagement. The executive can concentrate on the big and important goals.
- Synchronization of team efforts towards a common goal set using the OKR method.
- Increased team responsibility and engagement. Because the teams set the goals themselves, they take responsibility for achieving them.
Unlike traditional planning methods, OKRs are set, monitored and reviewed regularly, most often once a quarter. It is a simple rhythmic process that expands each team's vision and unlocks its creative potential.
Principles of OKR were formulated by Andy Grove, the inventor of the methodology:
Principles of OKR were formulated by Andy Grove, the inventor of the methodology:
- Objectives are formulated from the bottom up. At least half of the goals should be set by the teams themselves, ideally up to two-thirds.
- A limited number of goals. The number of OKR goals for each cycle is limited to 3 to 5
- Integrity. Company objectives and key results are available to everyone.
- Flexibility. If the environment changes, the goals are necessarily adjusted.
- No imposition. Management and employees agree on priorities and methods of evaluation.
- Patience. Don't be afraid of failure; the trial and error phase is a must. If you fail it will be the test of hypotheses and you will understand what you shouldn’t do again.
- OKR is a tool. The methodology should help employees in their work, it is not a document for certification.
- Exaggerated and ambitious goals. If everyone strives for a high level of achievement, the result will be better.
OKR Structure
The company sets 3 to 5 goals for the year and each quarter.
Each team/department sets 3-5 goals that are aligned with company goals.
Employees work with managers to set 3-5 goals that are synchronized with higher goals.
The criterias of setting the objectives:
The examples of the objectives:
Selection of key results:
The examples of the key results:
- The company's objectives are quite ambitious, but achievable.
- The deadline for achieving the goals has been set - at least a quarter.
- The objective must define the end state and be clearly articulated.
- No more than 3-5 goals per quarter.
- Teams should be involved in developing and setting goals.
- Goals are divided into ambitious and operational goals.
- 60-70% of goals are set bottom-up.
The examples of the objectives:
- Switch from licenses to a subscription-based monetization model
- Launch a product for market segment Z
- Successfully launch a new version of the main product
- Achieve $2 million/year in product sales
Selection of key results:
- Key results are measurable.
- The achievement of the result should lead directly to the achievement of the objectives.
- 3-5 key results for each objective.
- The result should not be substituted for the way it is achieved.
- It should be possible to confirm the achievement of the result.
- Progress should be checked at least once every two weeks, preferably once a week.
The examples of the key results:
- Get 10,000 new registrations
- Achieve a ratio of the paid version to the trial version of over 50%
- Record sales of $25,000 in the first month of new product sales
- Decrease the load time of the main page from 5.1 to 2.2 seconds
Difference between OKR, KPI and SMART
Since key results must be measurable, they may be taken from KPIs. But the OKR method also contains Objectives, which are different from KPIs.
The difference is that KPIs are designed for well-ordered systems, while OKRs are designed for confused systems where it is impossible to define targets precisely enough to "sew" them into a formula. KPIs set targets closer to reality, and OKRs can be set an order of magnitude (10 times) higher, then achieving 70% would be a tremendous progress. KPIs are suitable for regular activities where there has already been experience, while OKRs are for change and growth.
SMART (Specific, Measurable, Achievable, Relevant, and Time-Bound) goals is a different tool. For example, the big difference is in the letter "A" - Achievable in SMART and criteria “Ambitious” in OKR are very different things. SMART is designed to formalize and achieve realistic goals. Specifically, to improve performance.
OKR is designed to create a vector toward achieving ambitious goals by increasing motivation.
Objectives are different, emphases are also different, and therefore the results will also differ significantly. OKR should define the direction, and SMART should help to effectively follow it.
SMART (Specific, Measurable, Achievable, Relevant, and Time-Bound) goals is a different tool. For example, the big difference is in the letter "A" - Achievable in SMART and criteria “Ambitious” in OKR are very different things. SMART is designed to formalize and achieve realistic goals. Specifically, to improve performance.
OKR is designed to create a vector toward achieving ambitious goals by increasing motivation.
Objectives are different, emphases are also different, and therefore the results will also differ significantly. OKR should define the direction, and SMART should help to effectively follow it.
Implementation of the OKR method
The methodology works best for teams that create a product. It allows you to improve work between departments and turn teams into cross-functional groups that are united around the creation of a certain value and work towards common goals.
If you are planning OKR implementation you should realise that it will require a serious transformation of your corporate culture: work on the emotional maturity of employees, their autonomy, the ability to take responsibility, cooperation with colleagues and the ability to give feedback.
The implementation process itself is recommended to start with one team, a mature and well-played team, capable of achieving goals completely independently. Once the main difficulties have been worked out, you can transfer experience to neighboring departments, and then make a vertical linkage of goals within the company and set global business goals.
The methodology works best for teams that create a product. It allows you to improve work between departments and turn teams into cross-functional groups that are united around the creation of a certain value and work towards common goals.
If you are planning OKR implementation you should realise that it will require a serious transformation of your corporate culture: work on the emotional maturity of employees, their autonomy, the ability to take responsibility, cooperation with colleagues and the ability to give feedback.
The implementation process itself is recommended to start with one team, a mature and well-played team, capable of achieving goals completely independently. Once the main difficulties have been worked out, you can transfer experience to neighboring departments, and then make a vertical linkage of goals within the company and set global business goals.
We are pretty sure that implementing OKR in your company will drastically improve the achievements of your team and help to build trust and better communication between employees which will lead your company to awesome results.
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