Mastering OKRs: Your Guide to Success

OKRs are Objectives and Key Results. Every OKR has two parts:

Objective: A simple statement describing WHAT you want to accomplish?

Key Results: A set of three to five measures that describe HOW you’ll reach that Objective — and how you’ll know when you’ve done so.?

OKRs help teams achieve audacious goals in five ways:

Focus: They highlight your top priorities.

Align and Commit: They transparently share both teams’ plans with the whole organization.

Tracking and Stretching: They make it easy to measure progress and track momentum.

Well-written OKRs share three traits:?

They capture the CHANGE you are trying to make.

They push you to stretch beyond what you’ve done before.

They connect to an organization’s mission and purpose.

Strong OKRs are NOT:

A list of activities.

A description of what you already do each day (business as usual).

All of your Key Performance Indicators, a dashboard of all the metrics a team tracks in its operation. OKRs spotlight the few items where the needle most needs to be moved. We use OKRs to lead and KPIs to manage.

Well-written Objectives are:

Significant, concrete, action-oriented, and inspirational.

Specific and concise, typically short enough to fit on one line.

Everyone on the team sees how to contribute to its success.

Well-written Key Results are:

Timebound, aggressive yet realistic, and measurable and verifiable.

Interconnected — they work as a set. If one KR falls short, the Objective will be at risk.

Indicative of progress and achievement, rather than simple activities.

Leading Indicators that signal when an Objective might be off track.

The three types of OKRs are:

Committed: The team must fully attain the goal by the end of the cycle.

Aspirational: They push the team to think bigger and work in new ways. An aspirational goal spurs the team to accomplish more than with a committed goal, even when they fall short.?

REDEFINING OKRS:

OKRs are a communication tool that describe what success looks like. To reach your Objective, what do you need to accomplish? And how far do you need to stretch your efforts this cycle to get there?

For a high-ranking team in the National Football League, winning the Super Bowl is a good stretch goal. For a team that finished last in its division the previous season, a Super Bowl championship might not be a reasonable — or useful — goal. But setting an ambition to make the playoffs might energize and inspire the team.?

That’s why we recommend categorizing your OKRs as one of three types: committed, aspirational, or learning.

Committed OKR

Though still a stretch, we must achieve 100% in the next cycle.

Aspirational OKR

A significant stretch in the next cycle; typically only 70% of these KRs will be met.

Learning OKR

What you want to learn in the next cycle.

?Define Success Upfront

As you draft your OKRs, you can set the tone for the cycle by designating them as either committed or aspirational upfront. Springing that information on a team mid-cycle–or, even worse, at cycle’s end of a cycle is unfair and will create turmoil. Your team needs to know how to gauge and focus their efforts before they get started.

If a committed OKR is perceived as aspirational, it sets the team up for failure. People may assume that underperformance is expected. They’ll lack a sense of urgency in getting a failing KR back on track.

If an aspirational OKR is perceived as committed, it can breed frustration and resentment. When a team finds itself unable to hit a highly aggressive benchmark, they may worry that they’re underperforming and act as if their jobs are at risk. This significantly changes team dynamics, and in our experience, not for the long-term good. They might even shift their energies from a higher-priority, committed OKR to try to achieve the aspirational OKR — and wind up failing on both.

The solution is simple. Mark your OKRs as committed or aspirational from the start. It’s as simple as placing an “A” or “C” next to each one to avoid any confusion over expectations.

Committed OKRs

In a committed OKR, the Objective is expected to be fully achieved by the end of the cycle. All metrics in the Key Results must be met in full and on time. Committed OKRs are essential to any organization’s health and success.?

A committed OKR could be effective for a nonprofit organization that needs to secure a certain amount of donor funding:

O: Secure our future through increased donor engagement. KR1: Grow new donations by 17%. KR2: Host two major donor events. KR3: Donation renewals are at 40%.?

One common mistake in a committed OKR is to sandbag with a low-value Objective for the sake of “hitting the numbers.” All OKRs — even committed OKRSs — should contain a degree of stretch; success should not be a given. Remember, good Key Results are aggressive while also realistic.

Aspirational OKRs?

An aspirational OKR is a goal that sets the bar for success further out and, by design, will exceed a team’s ability to execute in a given quarter.

When a team sets such a high bar as to be seemingly impossible, they are called 10x goals or “moonshots.” Even though most aspirational OKRs fail to be fully achieved, they exist to push a team to think bigger than a committed OKR. These aspirational OKRs should remain on a team’s OKR list until they are completed.

As long as meaningful progress is achievable, falling short on an aspirational OKR is okay, even expected. As Google’s co-founder Larry Page says, “When you aim for the stars you may come up short, but still reach the moon.”

The expectations for aspirational OKRs are different than a committed OKR. A committed OKR is expected to be successfully and fully completed by the end of the cycle. With aspirational OKRs, many organizations, including Google, only expect to succeed 70% of the time.

Here’s a real-world example from DEED Developments, whose mission is “to empower the growth of the Minnesota economy, for everyone.” They published this aspirational OKR:

O: Reduce the disparities faced by populations with barriers to employment. KR1: Increase the average starting wage for people of color who DEED helps place in jobs by $2/hour. KR2: Create a unique “Equity goal” for every single program across DEED, focused on reducing disparities based on either 1) race, 2) ability level, or 3) geography.

In this OKR, the Objective is ambitious and the success of its Key Results is not a given. Say the organization? was able to increase the average starting wage for people of color they placed in jobs by 50 cents an hour. That’s well short of the goal, but it is undeniable progress.?

By setting their sights so aggressively, DEED discovered how to leverage their efforts most effectively, with some inevitable trial-and-error. They can keep working toward the $2-an-hour KR in the next cycle.

Let’s imagine that DEED achieved their equity goals and fulfilled KR2. Now they can let that KR go and draft a new, even more ambitious KR to support the O of “reducing disparity.”

Committed vs. Aspirational Goals Reflect Different Attitudes

Designating OKRs as committed or aspirational will help direct a team’s actions. We’ve noted how phrasing and point of view have significant impact on how OKRs are perceived and executed.

As you draft your OKRs, consider how categorizing them as committed or aspirational will affect your team’s attitudes and actions. Do you want them to focus on achieving an essential goal? Or would you like them to rally around stretching to achieve something great?

Which type of OKRs is better? There’s no one-size-fits-all answer. It’s like choosing between a hammer and a drill; it all depends on the job you’re trying to do. Most organizations limit their use of committed OKRs. To unlock the protocol’s full potential, they lean more heavily toward aspirational OKRs to achieve more than they normally would.

Imagine a chef who wants to use OKRs to manage her new restaurant in New York City’s West Village. She hopes to motivate her staff with Objectives like, “Be a second home for the people in our neighborhood.” But at the same time, she knows that opening a restaurant in New York is a risky business. She began leaning toward more basic committed OKRs to “keep the lights on.”

Again, context is everything. For more established companies, making ends meet would be business as usual, not the stuff of great OKRs. But for a young and growing business, it’s perfectly fine for an initial OKR to focus on benchmarks that ensure survival. An early-stage committed OKR might look like this:

O: Our restaurant runs like a well-established and successful operation. KR1: $X in monthly sales (with Y% from takeout orders). KR2: Labor costs kept below $Z weekly. KR3: Pass all health and safety inspections. KR4: Obtain sidewalk cafe license for outdoor seating before opening.

This OKR focuses the staff on critical items to get the business up and running. They can rally around establishing superb business as usual. Once the system is locked into place and the restaurant is running like a well-oiled machine, they can shift their focus to growth opportunities.

A next-level, aspirational OKR might look like this: O: Be a second home for the people in our neighborhood. KR1: 30% of guests are return customers. KR2: Sell out a holiday event with sentimental value (e.g. Valentine’s Day or New Year’s Eve). KR3: Hand out 100 neighborhood discount coupons per week. KR4: Keep four "neighborhood favorite" items on the menu in each season.

Learning OKRs

As we spent time with startups and teams focused on research and development, we came upon a third type of OKR. Perhaps your team might proceed in more than one direction, but you don’t have? enough data to be sure of the right path. More than anything, you're seeking a proof of concept. This is where a learning OKR comes into play.

As Sweat Equity Ventures partner George Babu observed, “When you’re a startup founder you constantly have to answer the question, ‘Does your startup make sense?’” Babu has co-founded startups like the AI-enhanced robotics maker Kindred, which aims to enable robots to solve valuable real-world problems, and Rypple, a performance management app later acquired by Salesforce. “When you don’t have a lot of data,” he says, “OKRs are one way to talk about the value you’re going to deliver and what ‘good’ looks like.”

Learning OKRs are best geared for goal-setting when the outcome is uncertain or undefined. After a series of unsuccessful experiments with audio narratives, Duolingo’s product manager, Conor Walsh, used a learning OKR to turn a product around that was facing a steep decline in users.

Based on the data, Duolingo’s Stories might have been shut down. But Walsh believed there was more his team needed to know before they pulled the plug. He decided to shift their focus from boosting traffic to learning more about their users. He set a learning OKR to determine where users were getting discouraged.?

By interviewing users, Conor and his team identified their highest-impact pain points. One was that users found it challenging to use Stories on their phones, a realization that eventually led Duolingo to redesign and enhance the product’s mobile experience. As a result, growth among Stories users skyrocketed — from fewer than 20,000 in mid-2018, when Conor joined the company, to more than 80,000 just over a year later.?

When drafting a learning OKR, it’s important to keep the following in mind:

• Focus on what you want to know, but don’t yet have sufficient data. The point of a hypothesis is to find the answer to a question. So don’t be afraid to ask big questions, such as: “What is our product model?” Or: “What is our business model?”

• Stay open-minded toward unexpected outcomes. You may discover that something works, or partially works, or doesn’t work at all. Learning OKRs are all about the journey.? Since experimental Objectives may have unexpected outcomes, it’s especially important to track and periodically analyze and communicate results.?

Let’s say you’re the product team for a direct-to-consumer appliance that’s just gone to market. Customers are giving positive feedback, but delays in refill orders have made the appliance unprofitable to date. The product requires significant capital to scale, and it’s a priority for the company’s growth goals this year.?

Instead of setting a committed or aspirational goal to ship more units or expand the customer base by X%, the team’s priority is to determine the appliance’s most profitable market — is it small businesses, or medium-sized ones?? A learning Objective is designed to answer the question, with a set of Key Results that will generate the needed data to set strategy.?

Learning OKRs help teams to experiment more effectively. They enable you to fail faster and more constructively. When a learning OKR falls short, you’ll know you need to revise it before proceeding. When a learning OKR succeeds, you’ll be on firmer ground to create an appropriate committed or aspirational OKR.?