The Value of Setting Objectives & Key Results (OKRs)

Before I get into the value of setting objectives and key results (OKRs), I should probably answer a question many readers might be asking: What are OKRs? Basically, OKRs is a method of setting goals for an organization.

Humans are avid goal setters, constantly striving to improve our performance, regardless of the field or endeavor we choose. Perhaps you have experience in setting goals in some of these domains:

• Family: Partner, children, extended relations
• Physical: Health, fitness, and wellbeing
• Work: Career, volunteering
• Spiritual: Religious or other spiritual affiliations
• Relationships: With friends or others
• Hobbies: Interests beyond work

Some of my goal-setting memories bring me a few chuckles, such as my goal of winning a “Best Screenplay” Academy Award after taking one screenwriting class. I even pictured Steven Spielberg having the honor of bestowing the Oscar on me. Hey, the more specific a goal the better, right?

Your company probably has goals related to sales, customer satisfaction, retaining the best people, and a host of other elements designed to propel you past your competition. Whether people have their companies or themselves in mind, there is little doubt that setting goals is a very healthy and positive activity, one that everyone should pursue with rigor.

Goal-setting challenges

Problems often occur in how people go about writing and constructing goals. That’s where many people, whether crafting goals for companies or themselves, get stopped in their tracks almost instantly.

It’s common, for instance, to write goals that are vague and nebulous: “Get more fit.” “Be the best company in our industry.” They sound good — and few would argue with the merits of either of those examples — but the quality that specifically marks real success is missing from both. A number of other pitfalls loom out there in the goal world as well, such as:

• Setting unrealistic goals that you have no genuine chance to achieve
• Having too many goals at one time
• Failing to account for any assistance you’ll require from others in achieving your goals

Despite the potential challenges, goal setting is one of the most powerful things you can do in your organization (and your life). You just need a better, more reliable system, and that’s where OKRs — objectives and key results— come in.

Sounds good, huh? Maybe if I’d have known about OKRs back when I was practicing that Oscar speech, I’d actually be clutching a gold statue now. The good news for me and you is that it’s never too late to succeed.

Setting goals really works

Maybe you’re already convinced and are a believer in the power of setting ambitious goals, with a lifetime of experience to back up that claim. If so, great — we have that in common. On the other hand, perhaps you do need to be convinced of goal setting’s value. Maybe you came up in the school of hard knocks and don’t believe in the woo-woo world of setting goals. Well, I’ve got news for you: Goal setting, especially with the use of OKRs, really works, and I’m going to win you over to this idea, I promise.

Back in 1968, when the Beatles song “Hey Jude” was dominating the airwaves, a little-known professor from the University of Maryland named Edwin Locke published a blockbuster article that would revolutionize the field of goal setting. “Toward a Theory of Task Motivation and Incentives,” based on Locke’s pioneering research, showed that setting goals led to higher performance in a wide range of domains.

Whether it concerned office workers toiling in smoke-infested offices (it was the 1960s, remember), loggers felling timber in northern British Columbia, or truckers rolling along the blacktop, Locke demonstrated that setting goals improved performance in a statistically significant fashion. It wasn’t uncommon, for example, to see performance gains of more than 200 percent! Forget free love and flower children; the real revolution of the 1960s was goal setting.

Locke went on to collaborate with a professor from the University of Toronto named Gary Latham. Together they conducted hundreds of studies on goal setting and reviewed hundreds more, all culminating in their 1990 magnum opus, A Theory of Goal Setting & Task Performance. Although it’s not a page turner a là Dan Brown or Agatha Christie, it’s a revelation. Locke and Latham demonstrated unequivocally that setting goals led to improved results, and as an added bonus, working toward a goal boosted motivation.

Locke and Latham made clear that certain types of goals are better than others. Specific and challenging (but not too challenging) goals were critical to improved performance. Both of these characteristics (specificity and challenge) are vital to OKRs.

The components of OKRs

The heading of this section sounds cold and clinical, but the fact of the matter is that goal setting, especially using OKRs, can be … wait for it … fun. As Locke and Latham (see the previous section) made clear, goal setting improves motivation, and who doesn’t like the feeling of being motivated to pursue something you care about?

More good news related to the question "what is an OKR?" is that the framework is light on terminology. It involves just three terms: objectives, key, and results. Actually, it’s three words and a conjunction. Yes, I looked it up; “and” is a conjunction. But really it’s just two terms: objectives and key results, more commonly referred to as OKRs. In the upcoming section, I define these terms and look at an example.

Terminology matters in any kind of change initiative, including OKRs. You may find that some people will abbreviate the acronym to OKR, omitting the s. There is no agreed-upon acronym, but in this article, I use the plural OKRs and suggest that you do the same. However, what’s most important is that whatever acronym you choose, you use it consistently throughout your organization.

At this point in the article, you might be thinking: OKR vs. KPI? (oh, the wonderful world of business acronyms). KPI stands for key performance indicator and it applies more to specific projects, programs, products, and other initiatives. OKRs are used more to outline organization and team goals.

Defining an “objective”

An objective is a statement of a broad, qualitative goal designed to propel the organization forward in a desired direction. There are a few things to unpack in that simple definition. The first is the word qualitative. This word points to the fact that objectives are aspirational statements and don’t include numbers.

The second word to put under the microscope is organization. You can, and most likely will, create OKRs at multiple levels of your organization: the company-level; business unit; department team; and so on. Thus, the word organization in the definition is meant to be generic.

Finally, the last part of the definition notes propelling the organization forward in a desired direction. This is the essence of an objective, which, to keep things nice and simple, asks, “What do we want to do?”

Writing a basic objective

Now comes one of the hardest tasks I faced in writing a book on OKRs: providing the very first example of an objective. Why was it so difficult? Because no matter what field or industry I draw on, there is a risk that some people will think, “Oh, so OKRs are for only those types of companies.” Or, “Well, that doesn’t apply to me.” Oy! Always remember that you can use OKRs anywhere and everywhere, from writing pop songs to ending malaria. So don’t read too much into the following example.

Say that your company has a mobile app that has been crashing lately, much to users’ chagrin. That’s a strategic problem, and OKRs are very well-suited to help you overcome strategic challenges. So here’s a possible objective:

Reduce mobile app crashes in order to increase user satisfaction.

Ta-da! You’ve just had your first exposure to an actual OKR-style objective. Exciting, isn’t it? (Surely it’s one of those “remember where you were moments” as you soak this in.) This example objective is a relatively simple statement, but it is composed of three parts that all effective objectives have in common:

• It starts with a verb. By its very nature, an objective is action oriented, so you always want to begin one with a verb. Your verb choice will depend on the objective you’re striving toward, but every word matters in the objective, and the verb you choose sets the stage for the rest of the statement.
• The verb is followed by a description of what you want to do. In this case, you want to reduce mobile app crashes. Now, a lot of people would stop right there. “Reduce mobile app crashes” sounds like a worthy objective. But, there is a third component to a well-written objective, and that is …

• The “in order to” or “so that.” This final part captures the business impact of the first two components of the objective. Why is it important to reduce mobile app crashes? Because you believe that it will lead to increased user satisfaction. That final component is the most important, because it makes clear the strategic relevance of the objective: why it matters.

  I’ll bet you could stop reading right now and quickly brainstorm a dozen things you’d like to get done in the next few months. Doing that is relatively easy, but when you add that third component of why the objective is strategically important now, you quickly recognize what really matters, and which objectives are the critical ones to pursue.

Share this formula for writing an objective with your team:

Verb + what you want to do + in order to / so that (business impact)

Some people bristle at formulas and a paint-by-number approach to objective creation, but goal setting is not a natural muscle for most people. They need all the help they can get in writing effective OKRs, especially in the beginning.

Providing a formula or template simply gives people a leg up on the task without inhibiting their creativity in any way. After all, the formula doesn’t dictate what verb to use, or why their objective is important. It simply provides a path for creating objectives that will be technically sound and add value.

For much more on setting OKRs and how to make them do wonders for your organization, check out my book OKRs For Dummies.

Defining a key result

Part of the OKR definition is "key result," and now you can turn your attention to that part. A key result is a quantitative statement that measures the achievement of a given objective. The key results answer the question “How will you know you’ve achieved the objective?” Of course, the most important word in the definition of “key result” is quantitative. A key result should consist of raw numbers, dollar amounts, percentages, or even dates, which you will use in the case of milestone key results.

Writing key results

In the earlier “Writing a basic objective” section, the example objective was “Reduce mobile app crashes in order to increase user satisfaction.” Now you have to decide what set of key results will demonstrate the achievement of that objective. You may want to try these:

1. Study app crashes and determine the three most common causes by May 15.
2. Develop fixes and update the app by June 1.
3. Decrease the number of mobile app crashes from five to one.
4. Increase app store rating from 4.2 to 4.8.

A question I get frequently is, “How many key results should we have for each objective?” Although there is no absolute right or wrong answer to the question, a good rule of thumb (as rules of thumb go) is three to five. But beyond the number, you should think in terms of telling a story with your key results. By that I mean that the key results should work together in a coordinated way to demonstrate the success of the objective.

Continuing with the example objective, if you’re going to reduce mobile app crashes, you first need to find out why the app is crashing by determining the common causes. That topic provides a good opening “chapter” in your story of success for this objective. This key result is a milestone, which is binary – either you achieve it or you don’t. Milestones are like hurdles that you need to get over in order to measure the ultimate business impact outlined in the objective.

A milestone key result always includes a date — how quickly you believe you can achieve the milestone without sacrificing quality.

After studying the reasons for the crashes, your next key result is devoted to developing fixes and updating the app. Think again of your story: First you study the causes, and then you develop fixes. This, too, is a milestone key result.

Now things get interesting. Your third key result measures the reduction of mobile app crashes from five to one. This is a metric key result because it has numbers. This key result also slots nicely into your story. You’ve studied the crashes, applied a fix, and your hypothesis is that by doing so, you’ll see a reduction in app crashes.

Hypothesis is a critical word in the context of OKRs, and in measurement in general. Whenever you measure anything, you’re making your best guess that it is related to your desired outcome.

The final key result, “Increase app store rating from 4.2 to 4.8,” is also a metric, again because it has numbers. It also holds the distinction of being the most important of the example’s key results because it directly measures the business impact of increasing users’ satisfaction that was identified in the objective. Therefore, it’s a great and logical ending to a strategic story.

When you're doing your OKR planning, I strongly encourage you to use the story concept as you're constructing your set of key results. Begin with the end in mind by identifying your business impact key result and then work backward, asking what drives, or leads to, that key result. Doing so will help you craft a comprehensive and cohesive set of key results.