“I have no idea of the company’s strategy for this year,” “I understand the overall strategy, but my goals are either too vague or completely unachievable”: If only I had a dollar for every time I’ve heard these sentences among product teams!
Such malfunctions are a major concern for product leaders, as they very often lead to:
- a lack of team engagement, as they don’t feel part of the construction of the company’s strategy or the design and definition of their own methods of achieving said strategy
- a lack of meaning attributed to the work being executed, making it feel unambitious, mechanical and repetitive
- problems of coherence and coordination between the teams, which result in lower quality products and inefficient utilisation of resources
- failure to value and recognise the work done and good performance of the the team, impacting on the collective morale
- an inconsistent Product as it is the result of conflicting decisions and lack of alignment, transparency and constructive collaboration
- a product that does not help the company (as a whole) to achieve its objectives (the Product is sometimes only one lever among others to achieve these objectives)
Here is a guide on the OKR method that works very well for the product teams I support at Thiga.
This article is based on the second chapter of our book Product Oriented Organizations.
OKR = Objectives & Key Results
The OKR method was designed at Intel, and implemented by Google in 1999. Since then, Google have systemised this approach, with many other companies following suit.
The OKR method is based on two pillars:
- Ambitious and aspirational goals
- Key results (key results) that are time-bound and quantified indicators that make it possible to assess the level of achievement against an objective.
Objectives paint the picture of where you want to be:
In the OKR method, the Objectives (O) are typically qualitative in nature and postulate an ambitious future state. The idea here is to set an objective which seeks to solve a key problem area of the product which affects a strategic objective of the business, i.e. something that will have an IMPACT. An objective should be broad enough to inspire critical thinking and creativity, but specific enough to make the desired outcome clear and obvious. To use Ken Norton’s example: “John F. Kennedy challenged Americans to land on the moon before the sixties had ended. He didn’t say “let’s launch 20 rockets, 25 as a stretch goal.” He emphasised impact – walking on the moon.”
Key Results (KR’s) define the quantitative measures of success. KR’s help to:
- Specify areas of impact to measure progress against the objective. “Launch a successful MVP” can, for example, break down into several dimensions and indicators of success, e.g. retention rate, user satisfaction level, press or media visibility etc.
- Set a level of quantified ambition for each dimension to help the team assess and prioritise ideas by considering reach, impact, confidence and effort.
KR’s are best kept ambitious and limited to maximise focus. 2 – 5 KR’s per objective is a good range. It’s important not to spread focus across too many indicators, while equally important to avoid leaving out important dimensions (e.g. measuring acquisition, but not retention).
Starting from the big picture
OKRs exist at multiple levels: a strategic level, and a more operational level, determined by each team.
Starting from the company level, top management must define what will be considered as a success over the coming year, i.e. the strategic OKRs of the company. In most organisations, periodically, the CEO calls on the management team to set the common objectives of the company. In our opinion this is best prepared in advance by each member of the management team separately, in collaboration with their teams, to identify the ambitions and success criteria of each entity of the organisation. Involving the team in the creation of strategy gives them clarity, ownership and accountability up-front.
Example model for org-level OKR’s:
From the overarching business strategy and OKR’s, product teams/squads can then break down these strategic business OKR’s into specific Product OKR’s.
Key Results – the key to the problem
Product OKR’s are defined by each Product Team/squad, usually quarterly, and are discussed proposed to management. A good way to start is by listing all the KRs that seem relevant to the objective without quantifying them, and then prioritising them in relation to each other. The second step is to select the KR’s which give the strongest indication of positive impact on the objective.
You can formulate KR’s in the following way: “realise X new registrations during the period”, “reach Y active users per day” while waiting for the real figures.
A confidence index should also be associated with each KR. The art of good KR’s is making them very ambitious and difficult to achieve, without being ridiculous and impossible. They should be equal parts exciting and intimidating, the critical ingredients of any good challenge. The confidence index reflects the aspirational side of the OKR: a good KR should have a confidence index (chance of reaching the goal) of about 50-75%, as determined by the team.
The idea here is to inspire ambition and innovation. As a team, we assume the risk and likelihood that the goal may not be achieved entirely, but we’re still shooting for it. Why? Because if we get it, it’ll be a big deal and even if we don’t, we’ve still made a significant impact we can be proud of.
Critically, it’s important to celebrate accordingly with OKR’s, because constantly ‘failing’ can feel pretty crap for the team. If we know that achieving 50-70% of the goal still represents a significant step forward and we get there, that’s a win for the team. If we get to 100%, we’ve absolutely killed it (and possibly underestimated ourselves)!! If we fall well short of that 50-75%, we figure out why and re-calculate our path to success.
At the end of the fixed period, each team meets to take stock and estimate the percentage of achievement of the various Key Results, according to the indicators set upstream. It’s important results against previous OKR’s are referenced and reflected upon in order to determine and explain the bases for new OKR’s (i.e. did what we tried last quarter work? to what degree? We propose x going forward as a result (e.g. x being: continue, add to it/iterate, try something new).
Most goal logic in companies considers failure to achieve goals as a failure. This is not the case in the OKR method. A key aspect of OKR’s is not simply to achieve the goals, but also to bring transparency, align teams, push organisations and individuals to excel, and learn what they are really capable of.
With this in mind, it’s also recommended to disassociate the achievement of OKRs with bonus pay systems; if you really want to link OKR and remuneration, make sure that a bonus can be granted even if their team hasn’t reached 100% of their OKR’s, a threshold (or entirely alternative measure, for that matter) could be determined instead (e.g. 50-70%).
Initiatives: 3rd pillar of the OKR method
With the Objectives and KR’s set, initiatives are the third and last pillar of the OKR method: an initiative is a planned action aimed at positively impacting one or more KRs. Initiatives can be thought of as problems which, if solved, will have an impact on the OKR’s. Just like the Objectives and KR’s, initiatives must be transparent and monitored over time, in the form of a kanban/scrum or other visual board. Inititatives can then be broken down into more deliverable chunks (epics/features and user stories).
Initiatives can be proposed based on findings from research and data analysis, and/or brainstormed by the team by simply asking ‘how might we achieve our set KR’s’ and then prioritising the outputs to form a roadmap.
So we’re now looking something like this:
To ensure goals factor into the organisation of daily work and give a rhythm to the team, we recommend the product team use Scrum to manage delivery. Scrum sprints helps determine the action plan for time-boxed periods (usually two weeks), with specific goals and deliverables towards the OKR’s and initiatives the team has committed to.
This allows the team and the wider company to have visibility on the following for the next 14 days (for example):
- What initiative(s) the team intends to tackle during the sprint to advance one or more KRs?
- What will ship and must be anticipated?
Not everyone will be able to participate in all these events; Organise them by team (if possible multi-disciplinary), but don’t forget to communicate the results through the organisation (visual management, newsletter, fast synchro points , dedicated channel Slack/Teams …). You can take inspiration from this very simple newsletter format to share progress on OKR’s:
- List of Objectives and KR’s and recall of the level of confidence for each (highlighting those that have been revised upwards or downwards)
- Reminder of initiatives and shipped features for the week or the previous two weeks.
- Proposed initiatives for the following period.
In a nutshell: a falsely simple method
The OKR method seems very simple, but its implementation is quite demanding. Clarity, communication and collaboration are key. Make sure the team are involved, they understand why it is like it is, and they get a chance to provide frequent input and feedback on the process.
If you want to drive OKR’s effectively in your product team, here are a few things to keep in mind:
- Do not set OKR in a top-down way – people HATE being told what to do, but love chasing dreams: let your team define their own goals, always related to the organisation’s strategic goals and OKR’s, and negotiate trade-offs as necessary.
- Don’t forget to communicate widely on the objectives: each team must have a clear idea of the objectives of the company but also of each team at all times. Set up a simple tool so that everyone can view and follow their own OKR’s and those of other teams (a highly visible wall and some system cards stuck to it is perfectly fine for localised teams).
- Keep it tight! For a first implementation of OKR’s, we advise you to focus on one or two objectives with 2-5 KR’s each, then increase over time as needed. It’s also perfectly OK to adjust or commit to new OKR’s mid-quarter if you happen to undershoot the ambition and smash your first ones too easily.
- Vary the types of KR: do not focus on one or two key KPIs, but think carefully about all critical dimensions of success.
- Adopt a level of ambition according to the maturity and the risk appetite of your team in order to avoid demoralising them. OKR’s are designed to be aspirational, but not impossible. Don’t be afraid to push the team to aim higher if they’re being overly conservative.
- OKR’s will feel a little uncomfortable initially and people tend to get uneasy committing to ‘unrealistic’ targets. Make sure you re-iterate that they won’t be judged on 100% achievement. A target is just something to aim for, the more aspirational they are, the deeper it makes us think, the more it helps us achieve.
- Avoid defining Objectives or Key Results as “outputs”: “continue the project”, “deliver the new version”. OKRs are only effective when they determine “outcomes”, which measure the actual performance of the teams. They should be aspirational states, not specific deliverables!
Resources – to go further
OKR Examples : This site gives many examples of OKR, sorted by type of activity. Very interesting to give concrete examples to your employees of what their objectives might look like. Here’s a great reference article on Product Planning with OKR’s.
- Of course, our book Product Oriented Organisations includes a chapter on the OKR method!
- Measure What Matters by John Doerr – John Doerr was one of Google’s early investors and Board Directors. and is considered one of the ‘Godfathers’ of OKR’s. He learned about them from Andy Grove while at Intel and years later introduced them to Google. This book is his seminal piece on the methodology, it’s a NYT bestseller and recommended by none other than the tech world’s most admired bookworm, Bill Gates, as well as several other high profile business people and writers.
- Radical Focus: Achieving Your Most Important Goals with Objectives and Key Results. In this reference book published in 2016, Christina Wodke explains in detail all the steps to implement OKR’s, as well as scenarios encountered with clients she advises in the USA.
- re: Work – Set Goals With OKR This online reference guide published by Google outlines all their best practices, which you can explore by category. We encourage you to also take a look at the complete Google Ventures presentation: How Google sets OKR’s.
- Tools to set up and follow OKR’s: Perdoo, Weekdone, 7Geese, Javelo …