Hot Take Alert #10: OKRs

Why do we use them. Where do people go wrong. How to do them right, including a template!

Hi there, it’s Adam. I started this newsletter to provide a no-bullshit, guided approach to solving some of the hardest problems for people and companies. That includes Growth, Product, company building and parenting while working. Subscribe and never miss an issue. If you’re a parent or parenting-curious I’ve got a podcast on fatherhood and company-building - check out Startup Dad. Questions you’d like to see me answer? Ask them here.

Welcome to another 🔥 Hot Take Alert 🔥 where I opine on something that I feel very strongly about and occasionally try to make it a little bit better. I only do this once every few months so you won’t see another one of these for a while.

Past 🔥 Hot Take Alerts 🔥 have included:

🔥 Hot Take Alert #1: PRDs are the worst way to drive product progress

🔥 Hot Take Alert #5: No you shouldn’t do a Spotify Wrapped campaign

🔥 Hot Take Alert #6: JIRA

🔥 Hot Take Alert #7: Motion vs. Progress

🔥Hot Take Alert #9: No You Shouldn’t Do a Black Friday Promotion

---

It’s goal-setting season! And if you’ve just finished Annual Planning you’re probably neck deep in Objectives and Key Results (or OKRs for short). Every company I’ve ever worked for, except for maybe one, has used OKRs. It’s one of those things in the tech world where companies either die or live long enough to implement OKRs (or JIRA).

If you’ve ever wondered why your company bothers with OKRs you’re not alone. Dear reader, today’s newsletter is for you.

In this article I’m going to dive into:

1. The OKR origin story

2. Why companies use OKRs

3. Where companies go wrong with OKRs

4. How to do OKRs correctly

5. An OKR example: creating OKRs to win the Super Bowl

I don’t want to bury the lede, so if you’re just here to grab a template and don’t want to learn how to implement it, check out this link.

The OKR Origin Story

In 1968 a brilliant Ph.D. joined a little company called Intel as their 3rd employee. He started as an engineering director, became President, COO and eventually their 3rd CEO. That man was Andy Grove. Along his journey, in 1983, he wrote a book called High Output Management and inspired a generation of other leaders with his management theory and the initial concept for OKRs.

One person he inspired was John Doerr, who worked with Grove at Intel in the 1970’s then later joined the venture firm Kleiner Perkins where he went on to fund many of the most iconic tech companies of the last 30-40 years, including Google.  In 2017 he published a book dedicated to OKRs called Measure What Matters. He is credited with introducing the Google founders to the concept of OKRs after investing in 1999.

Slightly earlier, in 2016, a brilliant woman named Christina Wodtke published a book called Radical Focus which helped make OKRs even more mainstream because it was written as a fable.

Why do I tell you this abbreviated story?

Because there comes a moment in every startup’s life where someone says to the founder / CEO, “you should implement OKRs; look at what they did for Google or [insert company].”

And while having measurable objectives is very important, and aligning teams around those objectives is also very important, it is possible that OKRs may be the greatest example of cargo culting in the startup world.

By this I mean that having aligned, measurable company and team goals is fantastic but OKRs are not a guarantee of that. And they certainly aren’t a guarantee given the myriad of ways in which they’re implemented (often poorly) today.

Why Do Companies Use OKRs?

I want to believe that most companies who are looking to implement OKRs are approaching it from the right place. 

OKRs can highlight the most important company goals

As companies grow and add more teams it’s common for a gap in understanding to emerge between the leaders of the company (those setting direction and strategy) and the doers of the company (those executing the strategy). One day those leaders wake up, look around, and say “What the hell is everyone working on?!?!” And so begins the introduction of OKRs to tell people what the most important work is (the company objectives) and how you’ll know if you’re on track to achieving those objectives (the company key results).

OKRs help teams connect their work to what matters for the company

This addresses the “what the hell is everyone working on” problem. OKRs are designed to be nested and cascading. This means, if done correctly, a front-line engineer, customer support agent, or account manager sees their work represented in the OKRs. They can draw a straight line from “the things I’m doing every day” to “the 3-5 objectives of the company.”   

OKRs raise the bar on ambition

By definition, OKRs are supposed to be 70% attainable. While I’ve never been a fan of giving it a percentage metric (what does 70% attainable mean, after all?) I do think that each key result can be scrutinized for the level of ambitiousness in the time period. And this scrutinizing behavior forces teams to either 1) articulate why this is an ambitious target using data or 2) admit that it isn’t that ambitious and change it. There are limits to this, however, which I’ll cover in the next section.  

OKRs can identify cross-functional dependencies

This is a very important role that OKRs play. First, reviewing and reconciling OKRs across functional teams puts sunlight on what is believed to be the most important work at the company. And if you, the marketing team, have some “most important work” that requires the support of you, the product team, and that is reflected on one team’s OKRs and not the other, then there is a very small chance that work is getting accomplished.

Second, the act of shared goal-setting and ownership, which can be accomplished by OKRs, helps both identify dependencies and force collaboration. It’s no longer “my goal” or “your goal,” it’s now “our goal.”

As I mentioned in Reforge’s article on NCTs (an alternative to OKRs):

Siloed goals are one of the biggest challenges inside companies. Usually the product team has goals that get them to 95% capacity. The Marketing team has goals that get them to 95% capacity. Neither team shares goals at all, but in order to achieve them, they actually have tons of dependencies on each other. Instead, they often should be collectively owning a single goal and given the space and resources to do the variety of cross-functional things required to achieve it.

OKRs help you avoid motion over progress

Readers of this newsletter will know that I’m a huge fan of outcomes-oriented product development. It’s one of the key features of Growth work that is so enjoyable to me. If OKRs are used effectively then the key results identify the input metrics and timetables you should work towards to achieve your overarching objective. When you’re considering solutions you can ask yourself, “if we nailed this execution, would we be closer to achieving our objective? If the answer is “no” or you really have to squint to see it then it might be worth reconsidering the work.

Where do companies go wrong with OKRs?

If those are five primary reasons that companies attempt OKRs, let’s explore the myriad ways they do it incorrectly. It’s these reasons, I believe, that make them something very few people enjoy doing or find helpful.

They introduce them too early

This is where the cargo culting aspect appears first. If you’re introducing OKRs it should be to avoid confusion on the most important work, help people see why their work matters, raise the bar on ambition, identify cross-functional dependencies or avoid people working on projects that don’t matter to the company (but sure feel good to ship!). 

Like all frameworks, OKRs are a tool that you can leverage to address a set of problems that you’re experiencing or about to experience in your  organization. The reality is that if you don’t have these problems and you don’t see them on the horizon, then maybe you don’t need OKRs yet (or ever!). And introducing them actually injects unnecessary work into the organization. More motion, less progress.

They make them exclusively top-down

OKRs are a circular exercise of objective setting at the company level (by your leadership team), cascading down to teams who build out their objectives in support of the company OKRs, and then review and iteration with the functional leader and eventually the company leadership team. I have seen OKR processes where the objectives and results, down to specific metrics are handed to teams and individuals. Not only is this disempowering it also has a 100% chance of being wrong. The team members doing the work are those best suited to identify how that work can be measured. That doesn’t mean that the leadership team accepts whatever is handed back to them, but it does mean that you’ve got to give your teams some slack let them propose their nested OKRs. 

They have too many

Three to five objectives and three to five results. That’s it. No more than that or it quickly becomes an unwieldy task list. In using the OKR framework, your key results are not a list of tasks, they’re a set of metrics and inputs that guide your decision making. The reason that OKRs should not be used as a task list is that you may not fully understand or know all of the tasks necessary to achieve the objective. What if you list out 7 things and then 4 of them no longer make sense one month into your quarter? Are you now stuck at 57% attainment of your objective? You’ve already lost!   

They have each team work on theirs in a vacuum

As mentioned above, the worst thing you can do is have two separate, but dependent teams work on OKRs and then mash them together. They’ll each end up over- or under-committing. Or worse, they’ll miss a critical dependency. If two teams know they need help from each other they should discuss that while drafting their respective OKRs. Ideally, this is not the first time that these two teams are having a conversation. If you’re a product manager, for example, an ongoing dialogue with your stakeholders helps keep their priorities top of mind at all points in the year. 

They make them overly ambitious

There is nothing more demoralizing for a team than when they see insurmountable objectives that they know are insurmountable. A little stretch is fine; you should strive to operate 20-30% outside of your comfort zone (that’s probably where the 70% attainment comes in). But I’ve seen companies where everyone collectively looks at each other and rolls their eyes when the initial goals are announced because they’re clearly not in the realm of possibility. This is a quick way to undermine the confidence in the OKR process across teams. You’ll start hearing, “Well, they’re impossible anyway so what does it matter.” Or worse, people will start with artificially low goals because they know they’ll get ratcheted up over time.

They tie them to performance evaluations

I worked for one CEO once who I asked, “How ambitious should we make our OKRs?” And he replied, “Make them realistic, I expect everyone to hit them.” If you expect everyone to hit those goals 100% of the time then you can expect that those goals will be set very low. Worse, I’ve seen places tie compensation and performance rating to OKRs. Recall that in the above section I listed out five reasons that companies should look to implement OKRs. Not a single one of those reasons is to improve individual performance. Not one. Don’t use OKRs for this. Improving individual performance is what you do in one-on-one and coaching conversations, not OKRs.

They set them then forget them

If a tree falls in the forest, does it make a sound? So too goes an OKR that is never revisited or reviewed. Worse is the other end of the spectrum, an OKR review that is performative rather than reflective. A good cadence for OKR share out is ~every 6 weeks asynchronously and for synchronous review every ~12 weeks (more below). And even if you can’t adhere to these timelines you need to make sure that you’re keeping company and team OKRs top of mind or else why do the exercise at all? 

How to do OKRs correctly

There are four important phases to the stages of grief, er… OKR process:

1. Ensure company-wide understanding and alignment.

2. Build company and team OKRs.

3. Execute, review and retrospect.

4. Adjust.

Phase 1: Ensure company-wide understanding and alignment for OKRs

In this first phase you have to make sure everyone knows what they are and why you’re implementing them. See primary reasons for implementing from above: alignment on most important work, see how your work matters, raise the bar on ambition, identify dependencies, and avoid motion over progress. If you’re not using OKRs to address one of those issues, or you’re not explaining that you’re doing so, then it will feel like a box-checking exercise to the rest of the team.

How do you drive that understanding?

• Make sure the leadership team is aligned on the need for OKRs. Nothing undermines a rollout like that one, rogue executive who thinks it’s not the right time. 

• Introduce the concept at a company all-hands and have your leaders introduce it in their individual team meetings. Be clear about the reasons you’re introducing it, how much time you want people to spend on it, and provide some examples (see my example at the end).

• Answer questions! Even the hard ones. There’s going to be at least a handful of people on the team who don’t understand or think it’s a waste of time. Find them and talk to them. Remember, you’re introducing this because there is a real reason at the company. Remember?!?!?

One critically important aspect of introducing OKRs is that it takes time for a company to get good at this. I think it’s common for it to take about 12-18 months depending on the size of the company (longer for bigger companies – it’s much easier to change the plumbing on a house that hasn’t been built than one that is 5 stories tall).

Phase 2: Build company and team OKRs

In this second phase the executive team builds the company objectives first.

• You’re identifying the most important work so remember no more than 3-5 objectives and 3-5 key results per objective.

• Tie them to your financial plan. Assuming you’ve done some form of annual financial planning ahead of this process you can start with objectives related to the outputs of that financial plan – reaching more new customers, increasing customer value, etc.

• At the company level, avoid having any objectives appear that don’t impact a majority of team members unless you are signaling the importance of a large initiative that only a small, focused team will work on. Even then, I don’t recommend it.

Once you’ve got company objectives and results figured out—which you get to through iteration with the executive team—introduce them to the company in another, synchronous session. This can be a follow-up all-hands meeting or maybe it’s combined with the first one and you’ve done the company OKRs ahead of time.

Introducing them to the company will also invite more questions. Team members will want to know how it reflects the most important work, why you picked X over Y, and they may jump immediately to ask about how their work is reflected in those company objectives. All good questions!

After establishing a good, shared understanding of company objectives you want to cascade and nest those objectives to the rest of the organization via the leaders of the various departments. Each leader should be able to translate one or more key results into a departmental objective in order to build their team-based OKRs.

As a hypothetical example, if you have a company objective:

“Become the market leader in widget designing software by the end of the year.”

One of the key results that supports this could be:

“Release Version 2.0 of Widgets-R-Us design software by June 2024.”

The product development team would then have:

“Release Version 2.0 of Widgets-R-Us design software” as a primary objective with their own, supporting key results.

As part of this process the product development team will want to stay in lockstep with the marketing and sales team (for example) because it’s likely all three teams will need measurable OKRs related to the go-to-market motion for driving adoption or migration to Version 2.0. 

Once collaborating teams have taken their pass at OKRs it should go back to team leaders for review, feedback and iteration. 

Things leaders should look for:

• Are there unaccounted-for dependencies that exist in one team’s OKRs that were not reconciled with another?

• Do we have the right level of ambition?

• Is there clear nesting and cascading to create alignment and a straight line to the company objective?

• Do we have too many on a per-team basis? (Note: the answer is almost always ‘yes’ at this first pass).

• Are key results binary (you can say ‘yes’ we got there or ‘no’ we didn’t), measurable, and time-bound?

I don’t think you should have more than 1-2 cycles of review and feedback. Remember, you’re not striving for metrics perfection here – your goal is to achieve alignment, connect work up and down the organization, raise the bar on ambition, reconcile dependencies and be clear on what success looks like. You can achieve this without identifying whether the metric to hit is 12.79% or 13.06%.

Once you’ve done the review, feedback, iteration process you’re locked in. Make sure they’re published in a visible place (pinned to Slack, loaded into an OKR-tracking tool or a spreadsheet, etc.) so you can start reinforcing!

Phase 3: Execute, review and retrospect.

As mentioned above, an OKR that you don’t check on might as well not exist.

How do I check we check in without creating unnecessary overhead?

A lot of companies get this wrong. They build check-in processes that are cumbersome, too frequent and performative but don’t actually help with a major goal of OKRs: to identify and focus on the most important work.

The check-in should be focused on:

1. How are we progressing on this most important work?

2. Is there anything getting in the way of it?

3. Do we have any signals that this is in fact the most important work or are we learning something different?

If you have quarterly updates to OKRs then I recommend a 6-week asynchronous check-in and a quarterly, synchronous check-in. This could be part of a Quarterly Business Review.

Does this mean that you’re not holding people accountable to weekly goals? Of course not! Managers should be reviewing OKR performance in a smaller, one-on-one setting with team members regularly. 

It just means that you’re zooming out and opening up the sharing to more people in the company on a 6-week or 12-week cadence. This could be a new dependency you’ve identified. It could be that you’ve learned hitting a specific key result doesn’t lead to the objective you thought it would. It could be that a specific result turned out to be much more difficult (or easier) than you thought and you need to focus more (or less) energy there. 

One thing it can also surface is that people aren’t spending time on the most important work—because something got in their way. 

All of these are very healthy observations because they relate to: alignment, connecting work, raising ambition, reconciling dependencies, and clarifying what success looks like.

I’ll share a template at the end for how you can do this both synchronously and asynchronously.

Phase 4: Adjust

At the end of each quarter you want to make sure that the next round of OKR setting is better than the last. This means:

• Make sure that new employees get the full treatment (from “why we do this” all the way down).

• Celebrate the success. Hitting a goal is fun. Make sure someone gets a pat on the back. Note that this does not mean that we will penalize the teams who didn’t get there because you should…

• Check in on what we learned – too many? Not enough? Too easy? Too ambitious? Not the right goals? Any number of things can go right or wrong with the OKR process.

• As a leadership team, re-evaluate budgeting and strategic planning. Are we able to achieve these goals with the people we’ve got? Were we way off on what strategies we thought would drive the company objectives?

• Not quarterly, but likely yearly make sure you’re evaluating whether OKRs are having the desired impact—are we getting better at: the most important work, connecting employees to that work, raising ambition, identifying dependencies, minimizing wasted effort. If the answer is “no” then you’re probably still not there yet with your OKR process.

Now that we’ve talked about phasing in OKRs to get them right, let’s look at a hypothetical example of how the Detroit Lions might use OKRs to focus on the right work to win the Super Bowl.*

*I typically don't like sports analogies, but a lot of people know what the Super Bowl is and this is the first time in my 40+ years of existence that my hometown franchise has actually been pretty good.

Creating OKRs to win the Super Bowl

Imagine the Detroit Lions are getting ready for the pre-season and they say, “Our overall company objective this year is to win the Super Bowl.”

Here are what a snapshot of their OKRs might look like:

Head Coach (CEO)

• Objective: Win the Super Bowl this season.

  • Key Result: Achieve a win-loss record in the regular season of at least 12-5.

  • Key Result: Have a top 3 offense and defense.

Offensive Coordinator (Hired by Head Coach)

• Objective: Develop the best offense in the league.

  • Key Result: Score at least 32 points per game in the regular season.

  • Key Result: Achieve a turnover ratio of less than 1 per game.

  • Key Result: Average 425 yards of offense per game.

Defensive Coordinator (Hired by Head Coach)

• Objective: Develop the best defense in the league.

  • Key Result: Allow fewer than 20 points per game.

  • Key Result: Achieve 3 turnovers per game.

  • Key Result: Hold opponents to fewer than 300 yards per game.

Offensive Line Coach

• Objective: Develop the best offensive line in the league.

  • Key Result: Achieve a below 20% QB pressure rate.

  • Key Result: Reduce the quarterback sack percentage by 20% YoY.

  • Key Result: Reduce offensive line penalties by 30% from prior season.

So in this example the nested objectives look like this:

• O1: Win Super Bowl

  • O1: Develop Best Offense in League

    • O1: Develop Best Offensive Line in League

  • O1: Develop Best Defense in League

    • Etc.

Looking at the Detroit Lions as a company, maybe the overarching “company” goal is to maximize revenue and hit their financial targets.

In that case the coaching staff could have “Win Super Bowl” but then you could have a Marketing department who has a ticket sales target (season tickets, individual tickets, etc.) and a Finance team whose job it is to keep the team’s spending in line with the salary cap. All the way down to a Maintenance team whose job it is to ensure a flawless fan experience.

Final Thoughts

I’ve said this throughout this newsletter, but it’s worth repeating. If you are implementing OKRs at your company, it should be because you’re trying to solve a specific problem related to alignment, connecting people to the work, raising ambition, identifying dependencies or avoiding wasted effort.

If you’re not solving for one of these then you either don’t need OKRs or you’re not ready for them yet. A simple company-wide email confirming what the most important priorities are for the company might suffice.

But if you are ready for OKRs then:

• Engage your team in participating – don’t make them top-down exclusively.

• Keep them simple: 3 to 5 objectives; 3 to 5 key results for the company and departments.

• Work on dependencies collectively while setting the OKRs; it’ll help you avoid a huge reconciliation later.

• Set them with the right level of ambition.

• Keep them out of performance reviews. That’s not the job of OKRs.

If you want to download a straightforward template in Google Sheets you can follow this link.