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Please note, Demystifying OKRs has been divided over 5 parts, & you are currently on one of the elemental parts (Part 2 of 5). Across these 5 elements, we demystify Objectives – Key results, from theory (Part 1), it’s application (Part 2), the best practices (Part 3), to it’s deployment (Part 4) & the common mistakes (Part 5). Also see, The Brew’s success stories in aligning human capital to business strategy here.
The power of OKRs, as Doerr describes, is in having a “North Star” every quarter by which you can set your priorities. As well as being able to see how it fits in with everyone else’s goals and priorities:“It was incredibly powerful for me to see Andy’s OKRs, my manager’s OKRs, and the OKRs for my peers. I was quickly able to tie my work directly to the company’s goals. I kept my Objectives – Key Results pinned up in my office and I wrote a new one every quarter, and the system has stayed with me ever since.”
Instead of simply being another task on your list, an Objective – Key Results is an ambitious goal that’s supported by concrete actions that you need to take to hit. As Google explains on their re:Work blog, Key Results should be numerically based and easy to grade with a number (they use a scale of 0–1) with the “Sweet spot” for success being somewhere around 60–70%.
If someone consistently fully attains their objectives, their OKRs aren’t ambitious enough and they need to think bigger.
When used this way, OKRs enable teams to focus on the big ideas and accomplish more than they thought was possible. All without the usual fear of the repercussions of “missing” a goal.It might seem strange to purposefully set goals you don’t think you’ll hit. But when aiming high, even failed goals result in substantial progress. This is where the nuances and skills behind writing a good OKR becomes apparent.
So, what is an example of a good OKR?
So what does this all look like in practice? Let’s run through an OKR example to solidify our understanding of their fundamentals before moving on.Let’s say your business, like many others, relies on giving a better customer experience than your competitors.So, your quarterly objective might be something along the lines of “create an awesome customer experience”.
But how do you know if you’re succeeding in doing this? You need some form of measurement to make this an OKR you can actually work towards. But what shows you’re creating an “awesome” customer experience?For one, you could look at your NPS, or Net Promoter Score (a tool that can measure what people think of your brand) as well as your customer churn rate (how many customers you’re losing a month).
A great experience would mean people both say nice things about you and stick around.Sounds good? But it’s not the full story.
Before we get going, let’s think about these Key Results for a second. By saying we want to improve our NPS score and lower churn, it sounds like we’re willing to do whatever it takes to make our customers happy. But to run a sustainable business, we need to keep costs under control. Which is why we should add a third Key Result around cost as a countermeasure.
So, that OKR would look like:
Objective: Create an awesome customer experience
1) Improve Net Promoter Score from X to Y
2) Reduce Monthly Churn Rate to X%
3) Maintain Customer Acquisition Cost of under $X
While designing OKRs for one of the high growth fin-tech startup (see the case study), we had gone for the objective—“have the largest merchant base across the country” But the key result tied to that—“increase the number of new merchant sign-ups by (X number)”—led to signing up of huge merchant base using growth hacks like social media ads, only to find that few ever completed their transaction on the digital platform.
The lesson learnt was that teams closest to business or customer often are best equipped to identify an OKR issue and fix it. In addition to requiring second order thinking before going full horse, some management oversight is required to ensure that OKRs create real business value for the enterprise.
Post realizing the above, we changed the key result to “increase number of new merchants that complete their first transaction by (X number),” pivoting from social media growth hack to to merchant to merchant referrals. Progress on the re-designed key result advanced the team toward the strategic goal of market-share & higher revenue.
Now we have an ambitious objective aligned with our company’s strategic goals and a small number of measurable key results that will tell us if we’re doing the right things to get there. At the end of the work period (typically a quarter), your OKRs provide a reference of how well you did, where you succeeded, and where you need to focus more attention in the future.
Stay with The Brew on Demystifying OKRs for the rest of the parts. Divided over 5 parts, we demystify OKRs, from theory, its application, to it’s deployment, the best practices & the common mistakes.