OKRs can be an extremely powerful tool when used properly. A well executed OKR process can vastly improve your people intelligence, and when used in conjunction with talent mapping or talent assessment, can help HR and senior management both understand what is happening and shape what will happen in the future. But, as is the case with most people management tools, if they’re not implemented well, they can cause a lot of problems.

The key to getting the most out of OKRs lies in understanding what role each component plays, and ensuring that each component stays in its own lane. These are the three components of an OKR:

• Objectives (Provide motivation and excitement)
• Key Results (Provide measures and guidance)
• Initiatives (Provide the specific actions required)

Objectives

Objectives are the simplest bit, but there are still a few commonly made errors. An objective is something that you want to make happen. There are pretty much no other rules for them than that. They’re the target - the tangible change in the world you want to see, however big or small.

• Become the market leader
• Make our customers love us
• Get rich!

If you’re more used to SMART objectives, I suspect these will seem woefully inadequate to you. This is because an Objective in an OKR doesn’t try to do as much of the heavy lifting as a SMART objective does. With SMART, the objective has to do everything on it’s own. It has to communicate what you’re trying to achieve, how you’ll know you’ve achieved it, and when you’ll have achieved it by. Consequently, they can be quite uninspiring: Achieve revenue of x by the end of Q4 is not as interesting as Get Rich!, even if it is much more specific.

The primary purpose of an Objective is to get people enthusiastic. When my co-founders and I first started DoThings, we had a simple objective: Get on Payroll. We were bootstrapping, so the business wouldn’t be able to pay us until it generated revenue. If we’d been using SMART, we might have set specific Objectives relating to revenue, expenditure and growth. The resulting objectives would have been far more informative, but they'd probably have failed to convey the thing we actually wanted to achieve, which was for the business to support us financially.

That term I just used - “our business to support us financially” - leads me to the next point about Objectives. They can be worded however you like, and they work best when they’re worded the same way people would think about them or talk about them. When we were working our butts off building the business, we didn’t think to ourselves: “won’t it be great when the business is able to support us financially”. No, we thought: “I really need to get paid”. Wording your Objectives the way you think them is really powerful. It makes them more human, and ultimately the more human the Objective is, the more effective it will be.

Key Results

Key Results are how you can measure the progress towards an Objective. In my experience, this is where the wheels start to fall off for a lot of people. For the sake of clarity we’ll only use one Key Result per objective in these examples, but in practice you can set anywhere up to around five.

Let’s start with the basics. Key Results must be measurable, they must be numbers, and their values can’t be subjective. If the Objective component is all about excitement and motivation, Key Results are about measuring and guiding.

John Doeer, one of the leading voices regarding OKRs, uses this pattern when setting an OKR:

Misinterpreting this pattern is one of the most common wrong turns people take with OKRs. It’s easy to think that this means a Key Result must be a way of measuring if the objective has been achieved. But this isn’t the case. A Key Result is a way to measure progress, but not necessarily success. This might seem like semantics, but it’s a really important distinction that’s crucial to understand.

Imagine you have this simple objective: Get a Dog. Now, think of Key Results simply as measures of success. What are the measures of success for if you have a dog or not? There’s only one isn’t there: number of dogs. If you were to set this as a Key Result, you would have stuck to the accepted pattern, but in practice this Key Result isn’t delivering you any value.

This problem can be fixed if you think of Key Results as measures of progress. Consider this Key Result:

Objective: Get a Dog

Key Result: Disposable income over $200 per month

This isn’t a measure of success - your disposable income is not a way for you to measure if you have a dog or not. However, it is a way to measure if you can get a dog or not. From this, I can communicate that the reason I can’t get a dog and achieve my goal is that I can’t afford it, and this in turn tells me that the thing I need to change to make it possible for me to get a dog is to increase my disposable income.

This is the power of Key Results as measured of progress, not measures of success. They can communicate the specific levers that can be pulled in order to achieve a goal, even when they aren’t direct measures of success.

None of this is to say that Key Results can’t be measures of success - for some objectives that will work perfectly well. They just don’t have to be. The important thing for a Key Result is that it shouldn’t be something that can only be measurable in retrospect. They should show you how you’re progressing towards being able to achieve your goal, even if they are not a direct way to measure whether it has been achieved or not.

Another common wrong turn with Key Results is failing to realise that they should have is that they should be precisely that: Results. They should not be actions you can take, they should be the potential results of your actions.

Take this example of an incorrectly set Key Result, taken from a popular OKR example site:

Objective: Hire a Chief Marketing Officer

Key Result: Submit a job listing to 5 major recruitment platforms

This kind of mistake is extremely common. It’s a number, it fits the pattern, so it’s an acceptable Key Result, right?

No. This Key Result isn’t the result of you doing anything, this is you doing something. And this action itself does not help you achieve your Objective. What if you submitted the job listing to 5 major recruitment platforms, but nobody applied for the role? You wouldn’t have made any progress to your objective at all, even though the Key Result was delivered.

A Key Result shouldn’t be an action, it should be the intended result of your actions. A better Key Result for this Objective would be:

Objective: Hire a Chief Marketing Office

Key Result: Receive 20 applications for the role

This communicates what kind of things need to happen in order to give you a shot at achieving your Objective, without prescribing exactly what should be done to make those things happen. To put it simply, a Key Result is exactly what it says it is - it’s a result that is key to the success of the Objective.

Initiatives

There are of course occasions when we do want to communicate specific actions that we think will help achieve a Key Result. If we’re sure that the best way to receive those 20 applications is to submit the job listing on 5 major recruitment platforms, how do we communicate that?

We do that with Initiatives.

Initiatives are specific things you’re can do to generate Key Results. If it’s an action you can take through choice, then it’s an Initiative (sometimes called Deliverables). They are specific pieces of work you can carry out that you believe will help drive your Key Results and ultimately achieve your Objectives.

With this in mind, our above example becomes:

Objective: Hire a Chief Marketing Office

Key Result: Receive 20 applications

Initiative: Submit a job listing on all major recruitment platforms

You might be wondering why “Hire a Chief Marketing Officer” isn’t an Initiative. After all, isn’t that an action you can take? This is another common wrong turn. The reason this is an Objective rather than an Initiative comes down to control. Hiring a CMO is not as simple as just doing it. It’s not Amazon where you can just pick one off the shelf. Other things need to happen to allow you to take that action.

You can’t just decide to hire a great CMO. You would first need to create a role profile, find candidates, create an interview process, carry out interviews etc etc. Hiring a CMO is going to be the end result of a lot of different actions and external factors, rather than something you can simply carry out the moment you want to do it.

Imagine you were setting OKRs relating to getting better at a sport. What category do these two things fall into?

• Win a tournament
• Practise at least 5 times a week

You can simply choose to practise 5 times a week, so that’s an Initiative. It’s entirely within your control if that happens or not. However, winning a tournament isn’t a choice you can simply make. It’s a thing you want to happen, but it’s not entirely within your control. If you’re ever unsure if something should be an Objective or an Initiative, just ask yourself if you can simply choose to do the thing in question. If it’s directly in your control whether it happens or not, it’s an Initiative.

You don’t need to decide what your Initiatives are when you’re planning your OKRs. In fact, where possible you should empower people to make those decisions themselves. But you should keep Initiatives in mind when you’re planning in order to make sure you aren’t setting Key Results or Objectives that should actually be Initiatives.

Common Questions

How Ambitious should Objectives be?

There’s a very simple trick we use at DoThings to determine if an Objective is suitably ambitious. We ask whoever understands the objective best if they think it will be achieved, and if the answer is something along the lines of “Err….maybe?”, then we’ve nailed it. The standard guidance for your OKRs is that you should probably be achieving around 60-70% of them. Any more than that and you’re not being ambitious enough, any less and you might want to dial it down a notch. We don’t necessarily disagree with that guidance, we just think it’s over-complicating it a bit. If you set an Objective and you’re not sure if you can achieve it or not, but think you have a good shot, you’re probably in the right area.

Objectives should be possible, but far from guaranteed. If you think you’ll definitely achieve it, you should aim higher. If you don’t think it’s possible to achieve it, you should aim lower. If you’re completely convinced you can become one of the market leaders, then maybe you should aim to be the market leader. Conversely, if you really don’t believe it’s possible to become the market leader, maybe you should aim to just become one of the market leaders. Everything should come down to how confident you are at the time.

How often should OKRs be set?

This is another area where they’re often over-complicated. There are various guidelines relating to operational or strategic cadences, and talk of quarterly or annual OKR periods. Our advice is to ignore all of this. What’s important is what you are trying to achieve, in most cases the timeframes are meaningless. You don’t need to arbitrarily fit your objectives into set periods. There’s no need to have quarterly or annual objectives, just have objectives, and set sensible time frames for them on a case by case basis. This is where having good people intelligence tools like DoThings really becomes helpful.

The time-frames should fit your Objectives, not the other way around. When one Objective is achieved, you can move on to the next one.

Should OKRs be linked to reward?

This one is more complicated. Coupling bonuses or reward to the success or failure of any OKR is a bad idea. However, this is not the same as coupling reward to results.

Although those two things might sound very similar, they produce very different outcomes. To illustrate this, imagine you want to set this extremely ambitious OKR:

Objective: Make our product the market leader

Key Results:

• NPS Score over x
• Customer Churn below y
• Total Customer number over z

Now, consider these two ways of approaching reward in relation to this objective.

Bad Approach: Reward Linked to Success or Failure

With this approach, you decide to motivate everyone by linking a proportion of the bonus pool to success or failure of the Objective; if they achieve the goal, everyone will be rewarded more. Seems like a good way to motivate everyone to get it achieved, right?

The first problem you’re going to face will be immediate. You’re going to get pushback on the Objective itself. People will say that it’s too ambitious, because they know there’s a good chance they’ll fail and that will cost them money. They will want a more achievable Objective, because they don’t get paid unless it is achieved. The chances are you’ll end up having to accept a less ambitious goal just to keep everyone engaged.

The second problem you won’t see until later. Imagine there are a couple of months left of the year, and you find yourself in a situation where the Objective obviously can’t be achieved. Everyone knows they are going to fail no matter what they do. Or maybe it’s the opposite, maybe the Objective has been achieved with a few months to spare. In both scenarios, the likelihood is that people will disengage. Either the goal can’t be reached; so that’s the point, or the goal has already been reached, the reward is secured, and everyone can relax.

By linking reward to success or failure, you incentivise people to set less ambitious goals that are less likely to be achieved or surpassed.

In short, it’s not a good idea.

Good Approach: Reward Linked to Metrics

This time, let’s link reward to the Total Customer Number metric. If we make it so the more paying customers we have, the greater the bonus pool will be, we create a very different set of incentives:

• Nobody is motivated to set a less ambitious goal
• There’s no reason to give up if it becomes obvious the goal can’t be achieved
• There’s no reason to stop pushing once the goal has been achieved
• There is still a financial incentive to get the goal achieved

Connecting reward to results in this way avoids the problems that connecting to success or failure creates, but still allows you to provide shared economic incentives. The key word there is shared. If the economic incentive for the business is the same as it is for the employees, that’s only going to help you. If the way all the staff can make more money is to make the business more money, that’s usually going to workout well for everyone.

Should OKRs be Used to Evaluate Performance?

Short answer; No. Performance should be measured entirely on behaviour. When evaluating performance you can look at the OKRs an individual contributed to, but their success or failure is irrelevant. OKRs are not a performance measurement tool, and if you use them that way you’ll fall into the same trap as linking them to success or failure for reward. People will push for less ambitious Objectives.

Your OKRs are a tool for getting everyone aligned. That’s it. You should evaluate performance based on job skill, behaviour, and the impact they have on others. If you link success or failure of OKRs to individual performance measurement, you’re going to create a culture where people value “their” Objectives more than the company’s success. That’s counter-productive.

Who should OKRs be Assigned to?

The golden rule here is that you should never assign an OKR to anyone who doesn’t decide what Initiatives are carried out to achieve it. Let’s say you have a team of 5 people, and the team leader decides what that team works on. The 4 people who don’t get a say in what they do should not have OKRs. If you want to drive how they behave and help get that work done, that’s a performance management issue, but if they can’t choose Initiatives themselves, they shouldn’t be given OKRs. Instead, include them in Team OKRs that their work contributes to.

Who should be able to see OKRs?

It’s universally agreed that OKRs should be ‘transparent”, meaning that they shouldn’t be hidden from anyone. But I’ve noticed the way people often try to achieve this is quite lazy.

The most common solution is usually a variant of “make them all available on the intranet”. If that works for you, great, you must have one of those intranets that people actually use that I’ve heard so much about. But for the rest of us, we probably need to do something else.

If you just make everyone’s OKRs “available” to everyone else, the chances are they aren’t ever going to look at them, and even if they do they’re probably going to immediately forget them. It’s a lazy action that probably won’t really deliver the outcome you want.

The better solution to this is what I call contextual transparency. Instead of exposing every single OKR and expecting people to remember them all, we can instead make sure that people know the relevant OKR for every initiative they’re part of. When someone starts working on an Initiative, whoever is running that Initiative should make sure that everyone knows precisely which Key Results that Initiative is intended to influence, and which Objectives the Key Results help to achieve.

Summary

Truly understanding OKRs is the most important factor when it comes to your success in implementing them. When you understand them and you set them right, OKRs will give motivation, clarity and guidance, without stifling agility or creative solutions.