OKRs: The New Black or Just a Fad in Product Development?

More and more companies are implementing OKRs, and as OKRs become more common, curiosity about the concept is increasing.

But are OKRs the new black, and what are they really? And when and in what context do they make sense?

Here is an introduction to OKRs and why it makes sense for you to consider using them—whether you are a business owner, employee working on projects or in roles within product and technology development.

What is this ‘OKR thing’?

In this article, I will provide you with an answer to this question, but if you want a quick introduction to the topic, you can start by watching this short explainer video that briefly explains what OKRs are and what they are for (only in Danish):

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OKRs are a method for setting objectives —nothing more, nothing less... and yet there is a little more to it 😊

‘OKR’ stands for Objectives and Key Results. 'Objective' is the goal you strive to achieve, and 'Key Results' are the specific results and, in some cases, targets you want to achieve. It is a concretization of the objectives.

For example (and now, dear reader, you are invited on a small journey back in time to when I was young): I went to high school and as I started school, my focus was to pass my exam. This was my goal (Objective).

At the same time, I was aware that I also needed to pass with reasonably good grades. I did not know what I wanted to do after high school, but I figured that if I had an average grade of about 9 (I am an old Danish fellow, so I go by old Danish grading scales), it would be a ticket to any school I could imagine if I wanted to go down the academic university route. To pass with an average grade of 9 kept future doors open.

A 'Key Result' therefore was to finish school with an average grade of 9. At the same time, I was into windsurfing and almost lived on the beach, studied the weather forecast more than anything else, and windsurfed whenever the weather gods allowed, and I participated in competitions across the country on weekends. I wanted to have time to pursue my interest in windsurfing during my high school years, so not everything would ‘revolve around school and homework'. Therefore, this became another 'Key Result': Being able to pursue my interest in windsurfing while attending school.

Both results expressed what I considered 'my success' in achieving my goal of 'passing the exam'. To summarize, my Objective was to pass the exam, and the two Key Results were 1) achieving an average grade of 9 and 2) having time to pursue my interest in windsurfing.

Of course, I knew nothing about OKRs back then, which is also irrelevant. The point is that we all—both you and I— set goals for ourselves throughout most of our lives in all kinds of situations, both in our private lives and work lives (and yes, I know we only have one life, but that is for another article;)

So, OKRs are nothing more than a method or framework for setting goals.

A conversation tool for creating alignment

In my view, one of the main intentions with setting OKRs is how it becomes a conversation tool that facilitates a dialogue about what we want to achieve. It may sound a bit hippie-ish to talk about a 'conversation tool' in the serious context of managing and setting goals for a company, which normally is something that happens in the boardroom and is done by men/women in sharply pressed clothes. Nevertheless, the critical point is that OKRs are an excellent conversation tool.

The problem is that the language and concepts we use to set goals become ambiguous for those who must act on them. Often also for those who create them. We inadvertently throw around 'board room bullshit' about creating 'delightful customer experiences', 'customer-centric solutions', 'increasing revenue share', and all sorts of other things that give rise to interpretations and 'translations' in all kinds of directions. We make different interpretations depending on who does the interpretation.

Let us take an example. A company has an app as part of its value proposition. The marketing department is good at driving traffic to the app, but the company does not get the turnover out of the app they hoped. It turns out that users are not 'activated' in the app. They land in the app, but they never engage with it. The functionality and magic of the app depend on the users integrating their calendars, which means the users have to provide personal information (we are pretending for the sake of the example).

The company decides it is essential to focus on creating a better onboarding experience in the app. Typically, management is inventive and already has the solution to the problem (do you know the feeling?..;)

Management decides that:

1. To speed up the sign-up process, Google-login is enabled, and

2. To make a tutorial video that will play when the app is opened.

All fine suggestions... These are what we call 'opportunities' and belong to an 'Opportunity backlog'. More on that later!

If we only formulate an high-level goal such as 'Improve app onboarding experience' the risk is that the statement will be interpreted in many different ways—especially if several teams are working on achieving the same goal: Maybe it means that we have to build a particular thing - e.g., Google login; maybe should ensure that customers are met by various experience-enhancing initiatives such as beautiful pictures, guided tours, etc. Who does what, and what should we build, do, and achieve? Well, management will decide! - Yes, maybe – but if they do, there is no reason to create OKRs, but more on that later. Just play along a little longer.

We need to be more specific about when the team and the company are a successful in reaching the goals (Objectives). This is where Key Results come in and can be used to articulate and match the level of ambition.

Thus, 'Improve app onboarding experience' can be interpreted in many directions. If we use Key Results to specify the success of this effort, one Key Result could be that we want to go from 10% to 70% of customers who integrate their calendar into the app (as a stepping stone to give customers the necessary functionality and 'product magic'). An alternative could be that X% of customers reach a certain 'activation point' in the app— it could be a service or functionality that they find helpful (but which they do not get to today as they drop out before they reach this point).

Another goal could be to ensure that customers experience the onboarding as 'pleasant', in contrast to today where the process of providing personal information such as integrating with their calendar etc. is a somewhat painful affair.

The Results help us become specific about what is considered a success when it comes to 'Improving app onboarding experience'. Objectives and Key Results can be set up as below:

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As the example shows, good Key Results require that you have good insight into the performance of your product. If you do not already have that, you will have to do a bit of digging to get it and be able to set specific, measurable goals.

If you are not able to obtain specific data you will have to make the results measurable as the context allows. You can replace a quantitative measure such as 'Increase customer satisfaction with X %' with a qualitative measure by interviewing several new users about their experience or whatever is possible.

With Key Results we can articulate what we are actually aiming for, what the specific level of ambition is, and therefore achieve agreement on it in the team, with stakeholders, etc.

We can discuss 'how far' we expect to get when it comes to fulfilling the specific goals—and align the expectations of management and the team. Is it, for instance, overly ambitious to aim for reaching 70%? What do we imagine it will take to manage that? Did the team expect to reach 20%, while management expected 80% to drive a profitable business and reach the budgets? In that case, it is beneficial to align and make sure we do not 'waste' development effort on reaching e.g., 20%, if it will not provide the necessary effect on turnover. Or conversely - if one team does not believe it can deliver more than a 20% increase on the given Key Result, management must consider adding more resources to assist the Objective they deem vital to the company's success.

KRs articulate the level of ambition which ensures transparency between management and the team as well as internal clarity for the team about what it looks like when the goal is reached. KRs become a conversation tool, creating transparency around the team's success and expectations for the team.

The anatomy of OKRs

The example before illustrates how an OKR consists of an Objective and Key Result(s). The Objective is the goal, while Key Result(s) express the more precise definition of what reaching the goal looks like.

The Objective can be fluffier than KRs but no less important as it sets the direction. It typically ties into a 'why' or motivation—what we want to achieve as part of a larger goal/purpose for the company. In the above example, the Objective of 'Improving app onboarding experience' links into the company's overall ambition to run a healthier business, get more out of a given product, etc.

Key Results (KRs), on the other hand, are quite specific and measurable. We must be able to express whether we reach the goal or not - or to what extent we reach the goal.

If you think about good old goals from the 'SMART model', then KRs 'just' have to follow the same guidelines and be specific, measurable, realistic, time-bound, etc.

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OKRs are inherently time-bound. They are normally set for one year or quarter, and you can typically do both - that is, set OKRs for the year and then break down these goals for the year into OKRs for the upcoming quarter. If we have a goal for the year, what should we achieve in the first, second, and third quarters to fulfil our annual goal, etc.? Both yearly and quarterly OKRs follow the same template. Typically, you have 1-3 Objectives, each is broken down into 1-3 Key Results.

A good practice is to have as few as possible—it is COMPLETELY OK to have just one Objective and one associated Key Result. It is definitely a strength if you can boil it all down to just one!

Avoid having more than 2-3 Objectives, and likewise underlying KRs. The more, the worse! If there are more than a couple, you typically chase too many things at the same time, which is poison in terms of focus and efficiency—whether we are talking about the company in general or for the individual small team. Focus is king!

Boost execution by working on as narrow a focus as possible and as few goals and results at a time as possible.

Why are OKRs such a good fit for product development?

Setting clear goals is an important part of managing our companies, projects, etc. We want to be able to navigate and ensure progress, and to achieve this, we use different ways of setting goals at different levels in the organization. You are probably familiar with company goals, budget goals, sprint goals, project goals, etc. All these helps create alignment and a shared understanding of what we are to achieve and in which direction to run. Alignment is important for teams to function, collaborate, and be productive. Goals create alignment, as everyone understands what is to be achieved, when it must be achieved, and what to do to achieve it. It creates alignment in the team, between teams, and across the company.. Clarity about what is the focus in different parts of the organization.

At the same time, we also want employees to be able to contribute with their unique knowledge and ideas for solutions. We do not merely want to set a direction for ‘what to do’ but also allow for competencies to come into play across disciplines and experiences. We do the latter to strengthen innovation and ensure that employees are able to contribute.

As the leader in my children's kindergarten said about leading the employees in the institution: "We should not march to the same beat, but we must move in the same direction".

We want to set the direction and at the same time release the creative forces and recognize that there may be several ways to reach a goal. In today's modern organizations, the leader/leaders do not have all the answers. As Steve Jobs beautifully expressed it at Apple: "It doesn't make sense to hire smart people and tell them what to do, we hire smart people so they can tell us what to do."

OKRs is a clever way to ensure a good balance between on the one hand, 1) moving in the same direction and, at the same time, 2) creating room for autonomy in the organization and not deciding what should be done but allowing different ways to the goal and thereby releasing the competencies and potential of the employees —both in individuals but especially in groups working across professional domains - e.g., in the complicated intersection between technology, business development, design, user experience, and marketing.

Henrik Kniberg, who is one of the people behind Spotify's way of working, made an ingenious video to illustrate this:

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When working with OKRs, you establish both a language and a dialogue about what we are to achieve, and thus you create the framework for teams and employees to think for themselves and come up with the best solutions to the goal they are chasing.

OKR across the hierarchy

One of the advantages of OKRs is that the method can facilitate the creation of shared goals as well as link goals across different parts of an organization and across hierarchies in organizations. You can achieve a positive 'cascade effect', linking the goals of the boardroom to development teams and the other way around.

It is not necessary to do so, however. It is perfectly all right to implement OKRs without striving for coherence and traceability - and many companies choose to implement it that way. If you want traceability and coherence, it requires more from you with regards to sharing data and providing high quality goal definitions. When you succeed, though, you may experience the positive benefit of strengthened transparency and coherence throughout the entire organization. On the other hand, you might die trying to get it all to align and momentum can be lost due to high expectations. Most companies will get far if they start working goal- and outcome-oriented, so start there!

From 'top to bottom', OKRs can be created at the executive level - i.e., top management defines the most important goals for the company - same format as presented earlier. These goals (Objectives) are typically at the 'corporate level', and can be in the style of 'Increase sales by X currency', 'Establish ourselves in a new market', 'Grow a given part of the company', etc.

These are then expressed by OKRs, where an example of the Objective could be 'Establish ourselves in the Swedish market', and KRs could be 'Establish a physical presence in Sweden'; 'Reach a turnover in the Swedish market of 1 mDKK'.

The company's business units can then break down corporate goals. The different units, e.g. the Department for Private Customers and the Department for Business Customers, will each create OKRs for how they will support the company's overall goals.

There may be a strategy around establishing the company in the Swedish market by targeting private customers first, and therefore the Department for Private Customers will provide a pitch supporting this specific goal, while the Department for Business Customers has a different focus.

The sub-departments or development teams in the Department for Private Customers can then establish individual goals that support the corporate goal, and thus traceability can be created from the development team to executives, where the goals are shared. Management therefore gets direct and immediate insight into how the company is moving towards the goal.

A development team in the Department for Private Customers may be working on opening up for payments in Sweden, another on attracting Swedish users, and a third on converting Swedish users to paying customers. Each team reports on their goals, and management and the teams themselves can follow their joint progress towards their goals.

Thus, management gets an overview of the progress on their business goals and is able to make forecasts rather than 'just' knowing when something is delivered without knowing the real effect of the initiative.

OKR, Team, and Opportunity Backlog

Let us get back to management's 'inventiveness' in relation to goal setting and what OKRs can do to facilitate a frame. As mentioned in the example with the app that did not manage to convert the user to paying customers during onboarding, management is typically quick to resort to various solutions on what to do. Often in very specific terms and solutions that management wants to implement, however, typically without evidence that those solutions will affect or alleviate the actual problem - in this case, enrollment and activation of the users.

It is often the case that we draw incorrect conclusions about problems and opportunities when developing digital products. It is very difficult to predict the effect of the measures and solutions we conjure up. Often, one or more false assumptions about our solutions make the solution less effective than hoped, and/or significantly more expensive to implement than we imagined from the start - and therefore, the benefits may be balanced out by increased costs.

Product guru Marty Cagan talks about two uncomfortable truths in digital product development:

1. Most of our ideas fail.

2. The ideas that become successful have gone through several iterations.

This is where OKRs become the framework for what we want to achieve by decoupling the solution from the problem and leaving the solution for the problem or goal open for the team to figure out.

This naturally requires the team to come up with the right solutions and not least work in a data- and hypothesis-driven way, in order for them to build evidence for the solutions they work through testing and validation, verifying the potential to deliver the desired value.

The team establishes an 'Opportunity backlog'. This consists of all the opportunities and solutions that the team sees. These can very well include ideas from others than the team itself - e.g., management, the janitor, or the CEO's creative nephew.

The team assesses the ideas/opportunities continuously, and will implement the ones deemed most fit for the goal that is being chased - considering both risk, effort/cost, time, etc.

This method is called data- and hypothesis-driven development or 'Product Discovery', where the team assesses the initiatives using the best available indicators to ensure that nothing is built and implemented/delivered that does not provide real value.

Top-down vs. Bottom-up Goal Setting

When OKRs are rolled out and implemented as a method across the organization, it can be done in many ways, and there are many aspects to consider such as communication, annual rhythm, reporting, etc.

One aspect is whether the approach to setting goals should be done 'top-down' or 'bottom-up'.

A starting point is for management to set an overall direction for the company in the form of OKRs at the company level and typically for a year (top-down). The middle managers then take their cue from these and engage in dialogue with their teams to set lower-level goals for the year and the upcoming quarter. Typically, it will be a mix of 'top-down' and 'bottom-up' where management sets some of the goals (top-down), while the organization contributes with how they can fulfil the goals (bottom-up).

When transitioning to become OKR-driven and especially in the early stages of this process, more managerial support to create goals in teams is typically needed, as it can be quite difficult for teams to relate to the concept of OKRs in itself but also as they are often not used to the general process of setting business goals. Leaving the process of setting goals too much to the organization and teams can be a misplaced act of kindness, as many teams find it challenging to take the task upon themselves. Instead, it can be beneficial for management to help teams formulate concrete OKRs in an open and honest dialogue.

I have often experienced and advised that in the beginning management should set goals for teams and then gradually, in subsequent quarters, allow teams to come up with drafts for goals. In this way, top-down meets bottom-up, which becomes a beneficial process for both management and teams/employees.

Misguided Culture Can Swallow OKRs in One Bite

As is probably evident, OKRs play a part in many different aspects of a company. If you want to get the full benefit of OKRs, you need to identify the value you want to create through OKRs. At the same time, you must have the courage to let teams work towards goals rather than on specifications and feature lists.

Setting goals is just a minor part of working with OKRs. It is all the 'stuff around it' that's hard. Here, I am thinking about culture in terms of ensuring that we dare let teams take responsibility and come up with the solutions instead of having management specify the solutions. Likewise, employees and teams must commit to work data-driven, measure their progress in relation to the defined goals, build evidence, and involve the entire team's competencies, etc. It requires that you, as a leader, dare bring people together across different professions and domains and create cross-disciplinary teams to be able to get cross-disciplinary commitment and cross-disciplinary contributions to solve the goals.

It requires a company culture that recognizes a minimum of 'growth mindset', and that employees have the answers if they are given the right conditions. It also requires you to show leadership by setting a clear direction, establishing suitable structures and organization of the employees, etc.

OKR as Unnecessary Pseudo-Work

Is OKR the new black, and should everyone just get started? No! Suppose you are situated in an organization where you are primarily a subcontractor, and where the culture is that 'others order' and 'you deliver'. In that case, OKRs may be completely off the mark. It can be the tool to change the dialogue and help create 'partnership' rather than 'customer/supplier relationship', but if circumstances or culture ensures that others decide what work is to be done, then OKRs typically fall flat. One of the pitfalls is to merely convert your existing delivery plan or delivery roadmap into OKRs: 'Build it', ‘ship this, ship that'. In that case, we have achieved nothing other than writing a roadmap in a different way - now using the new black: OKRs - and then you better just leave it. It becomes unnecessary pseudo-work.

If you, on the other hand, are situated in a mature organization where you can talk about which business results you want to create, and if you simultaneously believe that employees are the key to achieving these results, then OKRs are a perfect tool that can make your organization flourish: Create better results and at the same time provide happier employees.

Too good to be true? No. I have seen it happen several times!

OKRs for Your Team?

If you are the leader of a team, or you are leading in a team, e.g., as a manager or product owner, then try out the process of setting goals for what the team is to achieve and use OKR as a framework/method for it.

Getting started can be a straightforward, low-practical exercise. The roll-out of OKRs does not need to start in the boardroom or transformation office. You can easily start small - and in fact, I predict the highest chance of success if you think in terms of 'downscaling' and of how the individual team can start working in a different way, rather than thinking that the entire organization needs to change - because that kind of thing can be an exhausting uphill marathon (in bare feet).

Start with one single team and start setting business goals for what you are to achieve - that is, which 'outcome' or change you will cause.

Then, prepare how you will measure progress towards the goal - and how you can do that as early as possible to ensure that you are informed of difficulties before it is too late to change direction. Measure before, during, and after implementation.

That is the recipe for turning focus to the value of what we are to deliver, rather than solely on 'just' delivering (lots of gadgets..).

OKRs are simple to get started on. The difficulties emerge when teams, as well as management, must start working in a new way, be able to manage according to, measure on, and lead in relation to goal fulfilment rather than just 'shipping features'.

It does not come by itself, so take the exercise quite seriously ;-) xx

Want to Know More About OKRs?

If you will lend us an hour of your life, there is a webinar titled 'OKR – what is the hype and how do you get started?' available for you (in Danish only):

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We have assisted many organizations in tying strategy and execution together when it comes to OKRs - you are welcome to contact us if you would like a chat about the opportunities of implementing OKRs in your organization.

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