OKRs and the Rule of 3
Many companies (and individuals) in Silicon Valley leverage OKRs as an effective way to set goals for their companies and themselves. After being properly trained (or brainwashed) in the ways of OKRs at Google, I continue to use them in my work at Upstart and in my personal life.
For anyone unfamiliar, OKRs stands for Objectives and Key Results. It is a way of setting goals for an individual or organization. While the basic approach to OKRs is pretty straight-forward, as with many things the devil is in the details. Here’s a quick run down of how I like to use OKRs.
Objectives
Objectives are the starting point for OKRs. Objectives should be qualitative statements about what you want to achieve. I like these to be simple statements that describe success and they don’t need to be quantified — indeed I find it easier if they are not (that’s the job of the KRs).
I also like to limit myself and my teams to 3 objectives (5 if you must…). I think OKRs at their best are be about focus. What are the most important things we need to achieve? And if you have too many priorities, well then you really don’t have any. So, I try hard to keep to the limit.
The Objectives also need to be broad enough to encompass the KRs, so there is usually some interplay between the two as we define them — some Objectives that maybe should be Key Results with a broader objective — or vice versa.
Key Results
Key Results are the ways you measure the achievement of your objectives. When done right, they will answer the question “How do we know if we’ve achieved the Objective?” These are what get graded. KRs should be very clearly quantified — including what the baseline is, how you’re measuring, etc. If the goal is to improve a metric, make sure you know the baseline and whether zero improvement is really a 0 or a .2 or something else. Be very clear on the measurement — you don’t want to be figuring that out at grading time.
These should be stretch, but not crazy goals. For most organizations, the objective is to be at an average of .7 or 70% achievement. More than that and you’re not being aggressive enough. Less than that, and you aren’t being realistic.
I wrote a piece earlier on two different kinds of ORKS — Input and Output. One measures the work you want to get done and the other measures the results you want to achieve. While I generally prefer Output KRs, when they are sufficiently aggressive the Input KRs can give you a chance to get some credit for hard work that didn’t achieve the expected results. Again, determining the right KRs is a real art and takes some practice.
Process
The OKR process typically runs quarterly, though you could make it longer (semi-annual or annually). I think any shorter and the process really won’t work and will take too much time. When done well, that means that before the end of a quarter you get together with key people and set your OKRs for the next quarter. More often, it means you do this in the first 1–2 weeks of a quarter.
My preferred cadence is to check in on your OKR achievement level monthly. I also review my OKRs each week as I’m planning out my tasks and calendar to make sure I’m focused on making progress on all fo them. For the company, I typically like a team or company-wide status update monthly.
At the end of each quarter, you need to grade the OKRs. Each KR should get a grade from 0–1 (no, you’re not allowed to grade over a 1.0) representing the percentage of achievement. This is where it is critical that there is agreement on the grading scale up front. Many OKR grading sessions end up with surprising debates about how to grade a numerical KR — make sure to lock that down upfront. Each Objective should be graded as the average grade of its KRs. You can also add an overall grade which is the average of all the Objectives grades.
OKR are not a perfect science. While you are aiming for objectives where 0.7 represents solid success, you will have 1s and you will have 0s — I’ve explained my fair share of 0s over time. That doesn’t mean the process failed, or that the team did badly. Maybe things changed, maybe priorities shifted — it happens.
It is critical that you not tie compensation or promotions directly to OKRs grades — it will cause sand-bagging, grade inflation, etc. OKRs are best when they are a process that forces you to really focus on your key priorities. Removing things from the initial list is a valuable part of the process. As is setting aggressive targets based on your best estimates of what is possible but hard to achieve. Tying promotions and pay to this will make the process overly political.
Finally, I like keeping OKRs in a running Google Doc where you can look back on last quarters to see what your goals were and how you did. I always like to have not only the grades, but a description of the results (deals signed, actual revenue growth, products launched, etc). Looking back on old OKRs can be a fun walk down memory lane and great institutional memory!
Wrap Up
I hope this guide on my perspective on OKRs was helpful. After using them for more than a decade both personally and professionally, I find OKRs to be a very valuable tool for forcing a conversion about what the biggest priorities are and how to measure your success against those priorities. And perhaps more than anything else, their value is in forcing conversation (and alignment) around those things. After all, alignment of objectives is one of the most valuable things an organization can have.
Originally published at https://jeffkeltner.com on September 22, 2020.
