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April 28, 2022

Defining OKRs - Five Examples to Consider

Andrés Dancausa

As VCs seek new ways to optimize their investment and accelerate dealflow, the implementation of OKRs - Objectives and Key Results - has seen a huge surge in interest in the past few years, thanks in part to investor John Doerr’s highly popular 2017 management manual “Measure What Matters.” 

OKRs are based on the mangement principles established by Andy Grove that allowed Intel to become the most powerful market force in chip manufacturing. They are separate from a company’s compensation structure, but apply a numerical scale (usually a percentage or dollar amount) against measurable results to immediately display what’s been achieved by each department, team, or individual in order to measure how closely an organization has adhered to it’s overarching strategic objectives.

In his book, Doer, who began his career as a salesman for Intel under Grove’s management structure, provides a succinct definition for what OKRs are meant to accomplish: “at the end you can look, and without any arguments: Did I do that or did I not do it? Yes? No? Simple. No judgments in it.”

But like all tools, OKRs can be used incorrectly. So with that in mind, I thought now’s the time to share a few “Do’s and Don’ts of OKR Implementation” across the 5 principles of correctly establishing key results for team members.

  1. Key results must be a number. 

To further specify this, I’ve seen it stated that each objective should ideally start with a verb and should always have a time limit.

Good Example ✅

  • Maintain a client retention rate of 70%, quarter-on-quarter.
    Because the numerical value is unchanging, this is an achievable goal that the entire team can take responsibilities for across all levels of the organization by allowing team members to feedback to managers, and managers to strategize with the executive team to see what works and what doesn't until the right results are achieved.

Bad Example ❌

  • Create the #1 social media presence in the industry.

How is this going to be measured? By followers? Shares? Likes? Through sentiment analysis in the comments section? Number of pieces of viral content created? And when does this have to be achieved by?

  1. It must be quickly measurable.

    Good Example ✅
  • Sell 8,000 units per quarter.

Organizational target-setting like this breaks down organizational siloes by promoting different business units to work together (sales and marketing for instance) to achieve a common goal. And it’s easy to measure: Did you sell 8,000 units? Yes or no?

Bad Example ❌

  • Acquire 30% more active users, quarter-on-quarter.

The logic here is ambitious exponential growth, which certainly isn’t unusual considering the success of services like TikTok and Spotify - but what if in Q2 you had 1,000 users, and Q3 the amount of active users suddenly dropped to 867? This would mean that your Q2 goal for Q3 would have been 1,333 so now you’re -35.95% below target, and based on your current amount of active users, your Q4 target is still lower than what you were originally shooting for in Q3 at 1,127 active users. To get the number of active users you were aiming for in Q2 for Q3 you now have to adjust the OKR. So even if you get up to 1,163 active users in Q4, did you really succeed based on the key result of your original objective? Yes and no - once consider you’re still nearly 13% shy of your Q2 target. So this is either a success or failure depending on how you measure it.

  1. It must be a challenge.

Good Example ✅

  • Enable sales team members to increase commission amount 1.5x by the end of their first year, after their trial period has ended.

This OKR aligns the long-term departmental objective of increasing sales with the individual objective of improving performance 150% through training.

Bad Example ❌

  • Increase sales fivefold in the next two years.
    Every salesperson knows that sometimes the fish bite and sometimes you sit in the boat. With the pressure on to do five-times the amount of work, what will happen to salespeople if this goal isn’t achieved? Or sales manager who hired them? Or Head of Sales who worked with managers to set individual targets? Or marketing outreach? Or is this on operations for not providing enough funding to train new salespeople to begin with? Or does the fault lie with the executive leadership team for setting too ambitious a goal? Also, are we talking number of units? A dollar amount? Does this apply to sales territories that are overly saturated as well as new ground that’s being broken by business development? If the goal is too vast, and falls on the shoulders of too many, it will not be achieved.

  1. It must be understandable to the entire organization.

Good Example ✅

  • Acquire two new enterprise-level (+$50m) clients per year in each of the following European territories: Baltics, Scandinavia, Benelux, UK&I, Spain & Portugal, Italy, France.

This multinational objective can be easily broken down into various tasks across individual teams, with everyone working towards the same goal. 

Bad Example ❌

  • Provide enterprise clients a 10% average increase in ROI from their previous provider.

This is vague and arbitrary to most team members, and requires clients to be transparent about their previous business dealings in a way that is ultimately difficult to take responsibility for. 

  1. Don't have too many Key Results.
    Your team must be able to memorize them so that in their day-to-day work they can ask themselves if what they are going to do impacts the Key Result or not.

Good Example ✅

  • Teammates can tell you their 1 to 3 OKRs when asked.

Bad Example ❌

  • Teammates refer you to a list they were sent in a company-wide email, or simply respond: “What’s an OKR?”

As a final thought, OKRs should help clarify the day-to-day of your team across all levels of the organization. They should act as a rudder and like a compass, so teammates know what to prioritize and where to adjust course and prioritize when need be. Implementing this sort of structure means that, from the bottom up, the accountability of each team member can be increased and, as a direct result, their ability to execute and act autonomously within the collective of the organization is strategically amplified. 

By clearly defining each objective in a way that can be assessed with a simple: “Did I do that?” that can only be answered with either a yes or no, investors and executive teams can work together to align the entire organization so that everyone is rowing to the same tempo, in the same direction.

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