Objectives and Key Results: A Guide to Defining the Key Results in OKRs
08 Feb, 2019
Have you started using OKRs yet?
If so, you're in good company - companies like Amazon, Deloitte, Google, Intel, Microsoft, and Netflix all use OKRs. If OKRs work for the best companies in the world, they're more than good enough for your company. The key is using them properly. Or, rather, setting the right key results and measuring them correctly. Luckily for you, we're covering how to set and measure key results the right way.
What Are Objectives and Key Results (OKRs)?
OKRs are a popular leadership and management technique developed by Intel. It's a process for setting goals, communicating goals, and monitoring quarterly goals and results. They hierarchically connect a company, a team, and objectives to measurable results.
OKRs consist of three parts:
- Key Results
An objective is a description of a goal to be completed in the future, setting a clear direction and providing motivation. A key result is a metric with a starting value and target value to measure progress toward the objective. An initiative is a description of the work a team does to influence the key result. Quite often you will meet a simplification whereby initiative being included in the Key Result thus OKR consisting only of point 1 and 2. That is not a great idea. You can find out why further down in the text.
Types of Key Results
With that in mind, let's take a closer look at key results.
There are many ways you can make key results, but they can generally be split into two types:
As you can guess, the main difference comes from the metric in question.
Activity-based key results measure the completion of tasks or activities in terms of project deliverables. This is a fairly straightforward type of key result and it's fairly straightforward to measure. Examples of activity-based key results include things like:
- Launching a new product page
- Developing and launching a new employee training program
- Developing a new landing page
- Creating a new lead generation campaign
- Releasing a beta version of a product
However, don't be led astray by activity-based key results. Just because they're easy to measure doesn't mean they're the right choice for you--or that they're measuring what you need.
Then, there are value-based key results, which measure the delivery of value to customers or to an organization. These results are often more qualitative than activity-based key results, but they can be more comprehensive, as they measure the outcome of successful activities. Examples of value-based key results include:
- Increasing lead conversion from A to B
- Reducing customer acquisition cost from Y to X
- Achieving a conversion rate of E% from free to paid users
As you can see, value-based key results can be a bit more finicky to measure than activity-based results, as you have to measure your relative degree of success. However, they can be highly informative, as they give you numbers to measure success (rather than just a list of tasks).
How Key Results Fit into Your Success Plan
How does Google succeed with OKRs? Simple: big objectives and measurable key results. When we say big, we mean big. Google wants their employees to reach for the stars, so they set objectives that are just this side of impossible.
One of the pioneers of OKRs, Andy Grove, said that you should set goals this way and think of 70% as the new 100%--in other words, if you're hitting 70% of your goal, it's as good as hitting 100%, and it's time to make it a little harder. The key to hitting your objectives, of course, is knowing how to measure your progress. This is where key results come in.
How to Define Key Results in OKRs
So, how do you measure your key results? Let's take a closer look.
Defining a Metric That Can Be Measured
First, you have to define your metric for your key results. The important part is finding a metric that can actually be measured.
For example, it doesn't do you any good to say that you want to increase employee engagement if you don't have any way to measure that engagement. Usually, you should set three to five key results for every set of three to five high-level objectives.
The best way to figure out whether a potential key result is measurable or not is to ask whether you can set a starting value and a target value. These are central to the whole concept of key results, and they're how you'll measure your success. If you can't set those values, you may not have a metric you can measure.
No Measurement = No Results
Let's be honest: you need a metric that you can measure.
It's not good enough to make broad statements about success. Anyone can make sweeping generalizations and then convince themselves that they're making progress. Do you want a team of hamsters (a lot of effort to go nowhere) or do you want a team that actually delivers results?
If you answered the latter, then you need measurable results. To this end, you should always aim to write and measure key results that are value-based rather than activity-based.
Planning a Scale to Measure Progress
Part of this process is creating the right scale to measure your progress toward a goal. Thankfully, key results have a scale built into them: the starting value and the target value. You should set your values on the same basis as your objectives. They should be almost impossible but still allow you to reach 70% completion if your team really pushes for it.
The starting value is easy--that's where you begin. The target value should be set with this almost-impossible standard in mind. You can also set intermediary goals on a timeline toward your larger objective so that your team has a clearer sense of what benchmarks they should hit along the way.
How NOT to Measure Key Results
If this all makes sense, great!
If you're still trying to wrap your head around the concept, it might be helpful to look at the opposite--how you shouldn't measure key results.
Fortunately (or unfortunately), companies tend to make the same mistakes when it comes to OKRs and measuring their key results. Chances are, you'll run into the same potholes as others before you. On one hand, it would be better not to make the same mistakes as everyone else. On the other hand, it's easy to do better if you can learn from the mistakes of others.
Here are a few ways you definitely shouldn't measure your key results.
Metrics are a company's best friend. They're cold, hard numbers, an easy scale by which to check your work. And yes, metrics have their uses. But your OKRs will fall short if you rely solely on metrics to measure your success. Data, especially in OKRs, is only truly useful if you can use it to measure your team's performance quality. You want a richer set of data, not just a sheet of numbers.
For example, it's more useful to you to know how many inspections an employee completed in a day than how many buildings passed inspection. One number is a dead end, while the other tells you something about employee productivity.
Metrics, Metrics, and More Metrics
Another common measuring mistake? The line of logic that says if something can be measured, it should be measured. Just because you can measure a table leg doesn't mean you should measure a table leg. If you're not getting something useful out of measuring that table leg, it's a waste of your time.
The same goes for any business metric. You should think less about the number of metrics than the quality of metrics. In other words, does this metric actually tell you something about the quality and effectiveness of the work your employees are doing? If the answer is no, you probably don't need the metric.
Good Metric Now = Good Metric Later?
Metrics are an ugly hole to fall into, and they can keep leading you astray if you're not careful. One example of this is the faulty assumption that a good metric now translates into a good metric later.
The entire point of OKRs isn't to reach a goal and rest on your laurels. The point of OKRs is to keep addressing problems and priorities as they evolve--and they will evolve. Once you reach a good metric, there's a chance it can be improved upon, so take the time to change how you measure success for that metric.
Letting the Numbers Speak for Themselves
You never thought we'd leave metrics behind, did you?
Here's the thing: metrics are a slippery slope. It's easy to grab hold of numbers with both hands and present them to your supervisor triumphantly as just that--numbers.
You shouldn't rely on numbers to tell the whole story, because that's based on a faulty assumption of what the numbers are. Numbers aren't a smoking gun that makes everything click into place, but rather a trail of breadcrumbs to the forest.
No number will tell you everything you need to know about your employee productivity and your progress toward your goals, but the right collection of numbers can help point you in the right direction.
Assigning Value Judgements to Volumes
Related to number problems is the temptation to attach value judgments to measurements of volume. For example, let's say that you want every member of your marketing team to make at least five more phone calls in an hour. When they bump up the volume, it's easy to attach a basic value statement to their performance.
However, this doesn't give you a complete picture. They may make five more calls, but that doesn't mean the quality of those phone calls is good--it might actually be worse than it was when they were making five fewer calls. The key here is context. A number without the appropriate context won't actually tell you anything--you need to have the full story in order to treat that number as valuable.
Confusing Key Results with Initiatives
Another common mistake is scrambling together key results with initiatives.
We said earlier that key results are your measurable progress toward an objective, while initiatives describe what you're doing to reach those results.
At surface value, these sound like almost the same thing. There's a key difference here: initiatives are your action plan to reach objectives, while key results measure your progress to get there. This usually comes from teams thinking that key results are tasks. Key results aren't tasks at all. Initiatives are. Key results measure your results based on your progress on your initiatives.
Turning Key Results into a Task List
This builds into our final critical mistake: turning your key results into a task list. On one hand, a task list seems like a good way to measure progress, since you can check tasks off as you go. But, again, this is based on a fundamental misunderstanding of what key results are.
Key results are not tasks. Key results measure the results of your tasks on a qualitative level. Think of it this way: you can measure key results as a task list, but it's possible to complete all your tasks without actually making progress towards your objective.
The whole point is to reorient your company to a results-based culture, not a task-based culture. Once you learn to measure key results as progress made, rather than completion of tasks, you're headed in the right direction.
Helping You Master Your OKRs
Do you think you're ready to implement your OKRs?
If you're measuring your key results the right way, then you set yourself up for success. If you're still a little foggy on how to measure your key results, no worries. We can help you figure it out.
We offer comprehensive OKR management for fast-moving companies so that your team can stay on track and on the same page.