The OKR method is a proven way of setting goals and achieving them. OKRs are used by top companies, such as Google, Netflix, and Uber.
This method can be used by large enterprises, small startups, or even for setting personal goals.
But why exactly have OKRs taken the business world by storm?
In this article, I’m going to share a condensed tutorial on how to set goals with the OKR method and give some examples of how I set OKRs.
What are OKRs
OKR stands for Objectives and Key Results:
Objectives describe what we want to achieve – it is the goal that we are trying to reach.
Key Results describe how we are going to achieve it. These are metrics that measure our progress towards achieving an Objective.
How to construct OKRs
Let’s imagine we run a donut shop. This quarter our marketing team has decided to set some OKRs.
Before we set specific Objectives, let’s run a quick analysis of our business.
It all starts with our company vision
In their essence, Objectives are checkpoints that lead us towards reaching our company vision.
A company vision is its long-term mission. It is the purpose of why the company exists in the first place.
For example, Nike’s company vision is “To bring inspiration and innovation to every athlete in the world.”
Google’s company vision is to “organize the world’s information and make it universally accessible and useful.”
Let’s say that the company vision for our donut shop is to “bring happiness to our community through the joy of food.”
When we know our company’s vision, we can set Objectives which will lead us towards reaching it.
Weigh different options
If we hope to achieve our company’s vision to bring happiness to our community, first, we need to increase our community’s awareness of our donut shop. After all, if people do not know about us, we will not be able to engage with our community.
Let’s say that our donut shop currently serves only 120 customers per week.
With these 120 customers, we have 30 more visitors step foot in our shop. They’re either the customers’ friends or unimpressed window shoppers.
If 120 people out of 150 visitors per week convert, this equals a conversion rate of 80%.
We can think of several ways to quickly grow our business:
- What if we got more people to visit our store?
- What if we convinced the window shoppers to grab a donut?
- What if we got our donut shoppers to grab a cup of coffee, as well?
- What about loyalty cards for frequent users?
So, just from these quick examples, we can see that we could choose a few different options:
- Attract more people to visit the store at the same conversion rate.
- Increase our conversion rate and convince all 150 weekly visitors to buy donuts.
- Cross-sell coffee to donut shoppers to increase our revenue.
- Get the same 150 visitors to come in more frequently by handing out loyalty cards.
Which is the best possible option for our business?
Our donut shop only opened recently and is still in its growth stage. Currently, the number of weekly visitors is quite low. Our business needs more exposure.
Therefore, the best option for our shop would be option #1 – attract more people to visit the store at the same conversion rate.
If we focused on cross-selling or handing out loyalty cards, we would soon reach a ceiling when we are not able to scale our business any further.
Increasing our conversion rate would be a good idea if it were below an industry benchmark. However, at this point, 80% conversion rate seems to be healthy – there will always be people who tag along with their friends into our shop with no intention of purchasing a donut themselves.
However, while Option 1 may be a step in the right direction, it is not a well-formed Objective yet.
It’s still missing the core principles of OKRs.
Objectives should inspire & challenge
The beauty of OKRs is the perfect mix between ambition and reality.
Objectives push us to test the boundaries and explore untapped solutions.
At the same time, Key Results keep us grounded by measuring our progress with data.
An Objective which states that we need to “Attract more people to visit the store” is not inspiring at all.
Also, merely attracting “more” people is not challenging.
Hey, I could easily invite all of my Instagram followers to visit the store, and next quarter we’ll have 151 visitors instead of the initial 150. Mission accomplished?
To phrase an inspiring goal, we need to go back to our vision: Bring happiness to our community through the joy of food.
Our vision is a long-term mission. It differs from an Objective because it does not have a specific point at which we could say: “that’s it; our job is done.” We want everyone to fall in love with our fresh-made donuts.
An Objective has a clear end goal. It takes us a step closer to our vision but does not mimic it.
A good Objective is specific and can be measured with Key Results.
Examples of Objectives
Let’s think of some specific Objectives that we could set for our donut shop:
- Turn “Dafty Donuts” into the best dessert diner in town.
- Turn “Dafty Donuts” into the #1 most visited new restaurant in town.
- Grow our visitor base 10 times.
These are some possible marketing Objectives we could set for our donut shop.
Yet, some of them come with slight downsides, which may put unnecessary pressure and hurt performance. Can you spot which ones?
Focus on what you can control
Option #1 is quite demanding and juxtaposes us against other dessert diners in the area.
Focusing on our competitors can always backfire. It can distract us from focusing on our own growth.
Also, the criteria for determining which restaurant is the best is not clear.
Option #2 is a bit more lenient in regards to putting too much focus on our competitors.
In a way, it’s like aiming to win the “biggest breakthrough artist” award for restaurants.
But in the end, what if you’re 2nd best? Or the criteria on which you based this ranking is not as reliable as you initially expected?
It is better to focus on your own performance and growth first.
Therefore, I would choose option #3 – “Grow our visitor base 10 times”.
It is clear, challenging, and transparent.
Clear criteria for measuring progress will keep us focused in the same direction.
An ambitious goal will encourage us to explore some untapped solutions.
If we just kept doing what we’d already been doing and only improving a little bit, we might achieve 10% growth – that is not ambitious enough.
10X growth would put us among the top restaurants in town. At the same time, it would make us focus on improving our restaurant first, and not distract us by paying too much attention to our competitors.
OKRs are always measurable
While an Objective determines our goal, Key Results measure our progress. This combination makes OKRs so effective at setting goals and achieving them.
When creating Key Results, we need to use metrics with values on a numeric scale. That way, even if we miss our original mark, we will be able to measure how close we were to achieving the Objective.
For example, if we aimed for 1,500 weekly visitors, but only reached 1,300 – that’s 87% of the total Objective.
Healthy Key Results measure our progress in reaching the Objective.
First, we measure essential quantitative metrics, such as revenue, profit, or the number of visitors. Then, we measure the quality of our work.
Therefore, it is best to choose several metrics. It will give us a better overall assessment of our performance.
Choose the right metrics
Choosing the right Objective is essential. But we can’t know what impact our work has if we cannot correctly measure it.
The most common mistake is choosing the wrong metrics for our Key Results.
Without the right metrics, it is impossible to measure the progress and quality of our Objectives.
Have clear measurement criteria
A common problem, especially in marketing, is ambiguous terms and measurement criteria.
One marketing department may have several teams that use different platforms and attribution methods to measure their results. Data will overlap, get scattered, disconnected, and lost.
- Which Analytics platform do we use?
- How do we precisely define each key metric?
- What attribution model do we use?
Once we start to unravel these questions, we may realize that our teams had been trying to sail one ship in four different directions.
Define every term
To define the right metrics, let’s take a look at our Objective, “Grow our visitor base 10 times.”
First things first, we have to decide how we define the word “visitors”.
- Is this anyone who walked into the store?
- Are we interested only in particular age groups?
- What about minors who are with their parents?
- Should we exclude those who only come in to get a bottle of water on a hot day?
- Or perhaps we should only count those who end up talking to the cashier?
These are questions that we need to answer during the planning stage. It will make our life much easier once the quarter has started.
Examples of Key Results
Using what we have talked about so far, let’s set some Key Results for the Objective “Grow our visitor base 10 times.”
Key Result to measure quantity
To achieve growth, we need a Key Result that will measure the quantity of the metric we are trying to grow.
Last quarter we had 150 weekly visitors, therefore, if we want to achieve 10x growth, this quarter we’ll need to attract 1,500 weekly visitors.
Key Result to measure quality
To grow our revenue, we need to make sure that the quality of work is high.
Therefore, our second Key Result should measure the quality of the visitors our first Key Result brings in.
Otherwise, we may start chasing the number of 1,500 weekly visitors and start sending random traffic to our store, who will not have any interest in our actual product.
Last quarter we saw that 120 out of 150 weekly visitors bought a donut. That means our conversion rate is 80%. For simplicity’s sake, we will aim to keep this conversion rate stable.
After some quick maths, we see that our second Key Result should aim for 1,200 weekly paying customers.
Key Result as a health metric
Next, we should add a third Key Result to control our advertising spend.
Attracting new visitors and trying to reach a broad audience may quickly turn our advertising campaign into a dollar-burning bonanza.
The third Key Result will keep us grounded so that we don’t have to close the doors and sell the oil from our fryers to pay our bills.
Therefore, for our third Key Result, we will maintain a 100% return on investment, which means that for every dollar spent on advertising, two dollars will be put in our tills by happy paying customers.
This health metric will help our business achieve sustainable growth.
It’s not a Key Result if it’s not on a numeric scale
Sometimes it may make sense to decide whether an Objective was reached by using binary Yes/No answers.
For example, “Launch a Christmas campaign” or “Implement a cryptocurrency payment gateway”.
These are called Initiatives, and they should only aide, not replace Key Results.
Instead of checking off a task which we planned to do, we should evaluate how this task will contribute to our Objectives and Key Results.
For example, launching a Christmas campaign would help us bring in more visitors through our doors.
It will contribute to our first Key Result “attract 1,500 weekly visitors to our shop”. Therefore, this Key Result will measure the quality of our Initiative.
OKR example summary
So, let’s summarize. So far:
- We have set our vision: “Bring happiness to our community through the joy of food”. Our vision is inspiring, based on our core values, and it is long-term.
- We have set an Objective for the next quarter, “Grow our visitor base 10 times”. Our Objective is inspiring, challenging, measurable, and it will make us explore out-of-the-box solutions.
- We have set three Key Results to measure the progress and quality of reaching our Objective:
- Attract 1,500 weekly visitors to our shop.
- Convert 1,200 weekly paying customers.
- Maintain a 100% return on investment.
These Objectives and Key Results are going to keep us ambitious yet grounded throughout the quarter. Let’s go, Dafty Donuts!
Common OKR examples
Once we get the basic principles down, we can quickly transform the OKRs from our donut shop into a set of OKRs for any other type of business.
E-commerce store OKR examples
A quarterly OKR for an e-shop selling sports gear could look something like this:
Vision: Enable anyone to be an athlete.
Objective: Triple our revenue.
- $45,000 total revenue in Q1.
- 1,000 Purchases made.
- $10,000 spent on marketing.
Notice how we can easily switch from calculating average weekly values to total values for the whole quarter. Also, instead of counting the return on investment from our marketing spend, we can use a dedicated budget.
The phrasing of the Objectives and Key Results depends on what is more clear to the members of the marketing team themselves. They will be the ones working to achieve their OKR, so they can set it the best way they seem fit.
Online Blog OKR examples
Let’s explore a set of OKRs for an online blog.
Our example blog provides cooking recipes for busy professionals. It encourages them to find time to cook healthy, delicious home-made meals on a budget:
Vision: Help hard-working individuals find time for healthy home-made meals.
Objective: Double our weekly readers.
- Engage 10,000 weekly readers.
- Generate 1,000 total newsletter subscribers.
- Write 2 high-quality articles per week.
The main Objective is to build our audience of readers. First, we should define what the term “readers” means to us.
A common tool to measure activity on websites is Google Analytics. While Google Analytics is a great tool, we want to go further than just sticking to the default metrics of Users or Sessions.
First, some of the Users that Google Analytics deems to be unique may actually be people who use different devices, i.e., desktop and mobile.
Second, we have to track how many visitors are actually useless spam traffic.
Third, our Key Results uses the term “engage”. We need to define this term, as not all visitors are engaged readers.
Someone might click a link to our article on social media, but realize that the content is not what they expected. Others might misclick on a banner ad, etc.
These Users should be excluded from our OKR Results because they are not engaged readers.
To accurately measure our Key Results, it is vital to choose the right metric.
Do not be afraid to fail
Due to the measurable nature of OKRs, we can always determine our progress with exact numbers.
How much percentage of our Objective or Key Results did we reach? Was it 100%, 120%, 75%, or 0%?
Do not be discouraged if you did not reach 100%.
Since Objectives have to be ambitious and inspiring, it is quite normal if we do not achieve 100%.
When someone reaches 60% of their Objective, that is already considered a solid result.
In fact, if someone continually achieves 100%, quarter after quarter, this may mean that their Objectives are not ambitious enough.
So, do not be afraid to experiment, test, fail and learn from your mistakes. That is the best way to move forward.
OKRs are an excellent tool for setting goals and achieving them. This method combines a healthy balance between ambition and realism.
Objectives push us to explore untapped solutions. At the same time, Key Results keep us grounded by measuring our progress with data.
I hope you have found this review of the OKR method helpful. It is by no means 100% accurate. This article is based on my personal experience of using the OKR method.
Everyone has their own goals, which they are trying to achieve.
The beauty of the OKR system is that it can be applied in any sphere: our careers, our hobbies, or even personal life.
In conclusion, I would like to give credit to the original author of the OKR method, Andy Grove. Also, John Doerr, who was the person that made this method available to the public with his book “Measure What Matters“.
I highly recommend reading John Doerr’s book. It gives a complete and thorough analysis of the OKR method.
In this article, I may have only scratched the surface.
Thank you for reading. Have fun setting goals and achieving them!