This article covers:
- What Is OKR?
- What Is the OKR Methodology?
- What Are the Different Types of OKR Examples?
- What Are Some OKR Examples for Growth?
- What Are Some OKR Examples for Operations?
- How Is OKR Tracking Performed?
- Are There Any OKR Metrics?
- What Is OKR Scoring?
- What Are Some OKR Best Practices?
- How to Write an OKR?
- OKR Product Management
What Is OKR?
OKR is an acronym for Objectives and Key Results. Pioneered by John Doeer, this framework is instrumental in facilitating goal-setting behaviors.
It is a management methodology that enables all employees in an organization – from the chief executives to the interns – to focus their attention and efforts on specific goals.
This collaborative tool holds immense power in driving engagement and ensuring that all team members are on the same page.
What’s more? This simple tool has widespread applications and numerous benefits in shaping the present and future of any organization. Whether an NGO, a corporate firm, a school, or even an advertising agency, OKR can be transformative for any organization that applies it.
OKRs define your corporate strategy, individual and collective progress, and parameters for good and bad performance, among other uses.
But how can one apply OKRs to their organization? What factors do you need to consider before creating OKRs? Are there any elements that you should stray away from when implementing OKRs?
Join us ahead as we decode the answers to all these questions and more!
What Is the OKR Methodology?
First things first, let us understand the structure of the OKR methodology. That’s right, there is, after all, the secret formula for OKRs.
Let us begin by understanding the two primary elements that constitute OKRs –
The first component is ‘objectives.’ As the word suggests, objectives are the goals that any organization wishes to achieve. An objective clarifies ‘What goals do we want to achieve?’
These objectives are concise, action-oriented, and easy to understand. Remember, complicated or ambiguous objectives will not help drive employee efforts.
The second component of this methodology is ‘key results.’ Key results define the output of the objectives mentioned above.
Key results outline the performance parameters individuals must meet to fulfill the set objectives. Essentially, key results answer the question – ‘how do we get to achieving these goals?’
As such, key results cannot stand to be vague.
Always apply the SMART method when defining key results. Your key results must be Specific, Measurable, Attainable, Relevant, and Time-bound. This method facilitates clarity in the objectives and ensures proper resource flow towards meeting these goals.
These two components combine to form the OKR formula.
OKRs typically contain a statement defining the objective, with 3 to 5 key results measuring how we can meet the above objective. However, you can also articulate OKRs in the form of a singular statement.
Now, let us understand how different organizations apply this OKR structure.
What Are the Different Types of OKR Examples?
Let us start with the example of a mattress firm that wishes to increase its customer retention rate. What would their OKR look like? Let’s find below –
Objective: Increase customer retention rate
Key Result 1: Reach out to 30 previous customers for feedback
Key Result 2: Attain a Net Promoter Score of 8
Key Result 3: Offer 30% discounts to repeat customers
How about another example?
Let’s peek into how OKRs work on a departmental scale. For instance, how would a publishing firm’s social media marketing department note down OKRs to increase user interest?
Objective: Increase user interest in the latest book.
Key Result 1: Publish three posts every week with excerpts from the book.
Key Result 2: Organize weekly contests and send free copies to the winners.
Key Result 3: Publish two videos of the author discussing the book.
Finally, let us understand how the OKR structure breaks down on the individual level. How will a teacher organize her OKRs to meet the school’s goal of increasing student grades?
Objective: Increase student grades.
Key Result 1: Organize extra classes every weekend for students with grades below B.
Key Result 2: Reward 40% or higher increase in performance.
Key Result 3: Conduct weekly tests.
Isn’t it so simple yet so effective?
Join us to discuss how you can make OKRs more powerful through tracking!
What Are Some OKR Examples for Growth?
OKRs designed for growth typically aim to increase revenue, customer engagement, brand value, and so on. Let us look at what an OKR aimed at growth would look like –
For example, a purse company wishes to increase its brand’s customer base through social media. What would their OKR look like?
Objective: Grow customer base through social media platforms
Key result 2: Increase Instagram user engagement (likes, comments, shares, saves, retweets)
Key result 3: Organize monthly contests and gift products to winners
Now, let’s look at how the OKR would be for a phone company that wants to increase its global sales.
Objective: Increase global sales
Key Result 1: Achieve 80 million dollars in sales
Key Result 2: Reduce churn rate by 7%
Key Result 3: Achieve 30% sales growth in South Asia
What Are Some OKR Examples for Operations?
OKRs that aim for operations revolve around increasing efficiency, productivity, and improving the organization’s culture. As such, operational OKRs typically revolve around administrative purposes. Let us understand how OKRs are used for operations –
How would a company that wishes to increase employee productivity structure its OKR? Let’s find out!
Objective: Increase employee productivity
Key result 1: Ensure employees finish all tasks within the working week.
Key result 2: Set a deadline for each task to streamline workflow.
Key result 3: Ensure employees attend meetings on time.
Similarly, let’s say a library wishes to increase the rate of return of the borrowed books.
Objective: Increase the rate of return of the book.
Key result 1: Maintain records of individuals who borrowed books, including contact details.
Key result 2: Charge a deposit fee that individuals have to pay when borrowing book that will be reimbursed post return
Key result 3: Penalize late returns.
Key result 4: Disallow individuals from borrowing books after three instances of delay.
How Is OKR Tracking Performed?
Simply setting your OKRs is not sufficient to ensure success. You must also track progress and adapt your OKRs to ongoing progress to reach organizational goals. But how does this tracking work?
Tracking OKRs begins with how you define them. Since OKRs are set in a top-to-the-bottom manner and concern the entire organization, they need to be determined collectively. OKRs begin with organizational goals, bifurcate into departmental OKRs, and finally, individual ones.
Secondly, you must have a transparent approach when working towards the OKRs. Employees must share OKRs with peers so that each individual is aware of their goal and monitor progress towards the same.
This way, each department can evaluate three essential factors critical to OKR tracking –
i) how much time would be required to meet a goal.
ii) what would be the parameters for good and bad performance for the goal.
iii) where they are headed in terms of meeting the goal.
You can use applications such as Trello, Koan, Timely, Perdoo, and Engagedly for OKR tracking.
Are There Any OKR Metrics?
There are no predefined metrics to measure success in achieving OKRs. These metrics vary based on organizational motivations, structures, and target behaviors. For instance, in the earlier example concerning the teacher, higher grades would be a metric reflective of success.
Similarly, in the OKR concerning increasing customer retention rate, the Net Promoter Score (NPS) metric correlates with success in retaining customers. NPS is a metric that measures customer loyalty and satisfaction.
Therefore, a higher NPS would ideally result in a high customer retention rate.
Regardless of your metrics, what you should know at the end of the day is – how did you fare?
Come along ahead as we discuss OKR scoring!
What Is OKR Scoring?
Scoring or grading OKRs involves determining where your efforts lie to reach success. A critical component of scoring is detailing how much of a key result you have completed.
Now, let’s get to the main question – How does scoring work?
Join us ahead as we discuss three methods for OKR scoring –
1. Google’s OKR Scoring Method
In Google’s OKR scoring method, they implement a zero to one grading scale. On this scale, a score of 1.0 constitutes completion, whereas 0 means incomplete. They mark the key results in increments of 0.1 based on where they lie between these two scores.
Additionally, all key results for a particular objective are averaged to receive an overall score of how the team performed in meeting the objective. Let’s understand with an example –
For instance, an ice cream store wants to increase the sales of its newest flavors of mango, vanilla, and chocolate. Based on Google’s scoring scale, their grades are as follows –
KR1: Mango – 0.6
KR2: Vanilla – 0.4
KR3: Chocolate – 0.5
From this measure, we can see that the sales of the Mango ice cream increased considerably, with vanilla selling the least of the three. However, when we average these figures, the OKR score comes out to be 0.5, i.e., the store accomplished only 50% of its objective.
However, in Google’s rulebook, an objective is only deemed to be completed if the average score is 7 – 7.5.
2. Binary OKR Scoring Method
The binary method of scoring OKRs comes from Intel’s founder, Andy Grove. As we can see from the title itself, the binary method scores OKR progress on a two-point scale – yes, or no.
Yes, you heard it right! According to this method, an all-or-nothing approach works best when determining OKR success.
So, for instance, in the earlier example, the performance on OKR would be rated as ‘no,’ as it didn’t achieve the target of increasing sales fully.
This radical approach can have several positive and negative consequences. On the one hand, this method can motivate team members and ensure that they work harder and innovate more to reach the objectives.
On the other hand, when implemented repeatedly, this scale can demoralize members as it completely invalidates their labor. Furthermore, it may also sow discontent amongst employees towards management.
3. Scoring Based on the Type of Key Result
While most organizations welcome uniform scoring methods due to the ease of use, they might not always work for all key results you wish to achieve. For instance, if a key result for an organization is ‘Attain sponsorship from X company by the end of the quarter.’
Irrespective of where the organization is in terms of communicating with the company, if they fail to achieve the sponsorship, the key result score would not matter. In such instances, the binary approach works best.
Therefore, organizations may choose to score some key results on a binary scale and others on a grading scale.
What Are Some OKR Best Practices?
Now that we have understood OKRs, their components, metrics, and their scoring methods, let’s get to decoding the best practices in setting OKRs. While understanding the technique of OKR setting is crucial, it is the best practices that determine your ability to achieve success.
1. Collaborate and Create
Never implement OKRs without discussing them with all individuals affected by their use. Whether department or organization-wide, all individuals must be aware of the OKRs, why you implement them, and how their success can fuel company growth. Without these discussions, organizations may not be able to gain willful participation and efforts from employees.
2. Ensure Your OKRs Are Time-bound
While aspirational OKRs are always welcome, ensure that most of your OKRs are time-bound. If there is no set duration for achieving OKRs, employees may not be satisfied. Organizations often utilize annual OKRs for this purpose.
3. Give Employees Autonomy in Setting OKRs
Employees must set their OKRs in alignment with the organizational objectives. Without this autonomy, employees may not have the same motivation for working towards the goals. Moreover, employees will have more significant insights about the resources and restraints at their position and hence will be able to allocate efforts accordingly.
4. Be Transparent When Deciding OKRs
Transparency is vital when you develop OKRs. This transparency enables employees to share individual work updates within the team and across groups. Furthermore, this transparent approach will also allow different departments to work in cohesion based on whatever progress each of them has achieved.
Now that we have understood best practices, we can look at how you can orient OKRs for different purposes.
How to Write an OKR?
Writing an OKR can often feel intimidating and challenging. In such situations, it is advisable to refer to the company’s vision statement to clarify the direction in which you must expend your efforts and resources.
Furthermore, it is crucial to be mindful of the resources and personnel that the company has at its disposal. It ensures that you set realistic and time-bound key results.
OKR Product Management
The product management team is one of the departments/teams that have most successfully adopted OKRs. Indeed, product management teams at LinkedIn and Intel have utilized OKRs to gain excellent results.
OKRs can facilitate greater communication, streamline efforts, ensure group cohesion, and result in high output management. If incorporated along with product management tools or product roadmap softwares, they can create a huge difference in your functions.
What Are Some Product Management OKR Examples?
Now that we have understood how practical the OKR methodology can be for product management let us look at how OKR can be used at different stages of product management to achieve success.
Objective: Launch productive successfully
Key result 1: Offer free trials to consumers
Key result 2: Convert 20% of free trials to paid version users
Key result 3: Offer discounts on referring products to others
Key result 4: Gain 30% revenue from referrals
Objective: Ensure that product is user tested
Key result 1: Test product with 15 customers
Key result 2: Incorporate user testing in the initial developmental phases
Objective: Increase customer satisfaction
Key result 1: Conduct customer feedback surveys
Key result 2: Integrate customer feedback and make product changes
Key result 3: Decrease customer churn rate from 20% to 5%
Key result 4: Achieve App Store rating of 4.5
Key result 5: Gain a net promoter score of 8
Objective: Streamline product release procedure
Key result 1: Reduce bugs in the product by 20%
Key result 2: Increase app store rating from 4.5 to 5
Key result 3: Reduce churn rate by 15%
Key result 4: Improve NPS score
Isn’t it wonderful how such a simple methodology can streamline work processes at every stage of development?
Well, that’s the beauty of the OKR methodology.
As you may know by now, OKRs are revolutionary yet straightforward tools that can drastically improve the functioning of any organization.
Objectives and key results can work tremendously in facilitating a feeling of unity and ensuring consistent individual and company progress.
Whether you may work in a corporation, a non-profit, or a restaurant, whether you’re successful or just starting, irrespective of what stage and type of organization you are in, OKRs are the way to go!