Why start-ups love OKRs

One of the main aspects of professionalising a growing start-up consists in establishing a robust system of goals and accountabilities. One that focuses team members on ambitious projects and aligns them with the overall strategy. This is not a trivial task given the behavioural and culture changes involved.

This is where the OKR framework comes in. So what are OKRs, why do they matter, and how do we use them?

What are OKRs?

OKRs (Objectives and Key Results) represent a framework for goal setting. This framework creates alignment around a few Objectives, and tracks outcomes via clear Key Results. It has been used at Google, LinkedIn, and many other successful technology companies.

In 2013 GV partner Rick Lau delivered a presentation on how Google uses OKRs. His video went viral; I invite you to view it here to get a glimpse of how it’s done.

Objectives are statements of broad, qualitative and inspirational goals. They are strategic and designed to motivate people and stretch their performance. They are also time bound and clearly owned by one individual. Whereas key results help answer the question: how will I know I have reached my objective. They help measure the achievement of objectives in a quantitative manner.

Why they matter

When start-ups scale, they face a number of organisational challenges. In the early days of a start-up, most of the joiners find themselves gravitating around the founding team and they build close ties amongst each other. In this context, communication and collaboration is relatively easy because of the size of the team. It’s only later when the team scales that cracks start to appear in this model.

Here are some of the symptoms we hear teams describing:

• Many team members cannot state the company strategy and goals,
• Individual contributors cannot articulate what is expected of them, they have difficulty defining the boundaries of their roles,
• They have no visibility on what others are doing, team work becomes difficult,
• Managers cannot tell what their direct reports are focusing on,
• Teams are not aligned with each other, they duplicate efforts or start working in silos, reducing cooperating and information sharing.

OKRs provide focus, create transparency and improve communication and collaboration. As a result, teams are more aligned and work together towards a common strategy.

How to use them

The first step in implementing OKRs in an organization or a team is to make sure that everyone is aware of the reasons behind this introduction of OKRs, so as to elicit full collaboration. In a first stage, each team leader, manager and director will be invited to reflect on what they think are the top priorities they want to work on and how this aligns with the company strategy. Individual contributors will then be next to do this exercise. This way everyone in the organisation has had the chance to write up what they think their OKRs should be,  from the top to the bottom of the organisation. This exercise is followed by at least one meeting between individuals and their managers where they discuss the priorities they have come up with and agree a list. Trough iterations, individuals end up focusing on a few but ambitious objectives (typically two or three objectives and three key results for each), and they align with their team or manager goals.

The process of setting up OKRs is typically a balance between what the individual thinks he or she should be working on and the team priorities cascaded top down. In other words, OKRs are agreed, and never dictated.

An organization can typically start discussing OKRs towards the end of a quarter, and have them agreed right at the beginning of the subsequent quarter.

An essential feature of OKRs is that the are fully transparent. Anyone can see what others are working on and what the overall company goals are. As a result, the entire organisation becomes aligned from top top bottom.

OKRs are stretch objectives by definition, so they are hard to reach, and people will often fail in achieving 100% of their goals. It is quite common to find tech companies using an achievement rate of 70% to indicate that goals are set at the right stretch level. To be effective, OKRs must be set and reviewed at specific cadences, for example quarterly. Great teams learn how to set regular stretch goals and improve their attainment progressively.

Here is an example of what sales OKRs might look like for a sales manager of a SaaS business:

• Objective 1: Grow quarterly sales by 30% YoY
• Key result 1: Acquire 50 new customers with contract value of 250k$
• Key result 2: Up sell 20% of existing customers to the premium contract
• Key result 3: Reduce churn rate to less than 2%

You can browse through many more examples on this website set up by weekdone who provide OKR softwares.

Finally, the key to creating a substantial impact with OKRs is to constantly obsess on their execution. OKRs are ambitious and it’s only through disciplined execution and accountability that teams manage to overachieve.