Objectives and Key Results (OKRs) are the most common planning framework for technology companies. In OKRs Part I we discussed the many benefits they bring to improve communication and focus.
In Part II we’ll explore HOW to write effective OKRs and fit them into your operating cadence.
Throughout the article we will be creating OKRs for a fictitious Seed Stage Crypto Payroll company named PayOut.
Before we dive in, let’s start with a poll: is the below OKR good or bad for our company PayOut?
O: Become the best crypto payroll solution
KR1: Add 3+ blockchains
KR2: 10% of qualified leads complete onboarding
KR3: Achieve customer satisfaction of onboarded customers to 4.0+
By the end of the piece you’ll understand how to assess and draft great OKRs.
Writing OKRs
1/ Identify Your Planning Cadence
Before drafting OKRs it’s important to determine how frequently you want to set OKRs and grade performance.
Generally, I recommend a quarterly OKR planning process. This means setting OKRs each quarter and grading progress at the quarter’s conclusion, and then setting new OKRs for the following quarter.
Especially in startups, the quarterly cadence enables meaningful, measurable progress towards objectives but also enables the business to update OKRs at a reasonable frequency. For example, if teams use biweekly sprints to organize work, they’ll have six sprints to achieve their Objectives (or least make measurable progress towards the Key Results). If founders use a more frequent planning cadence, or run purely Agile with no formal planning process, their roadmaps will likely become more task-oriented instead of impact oriented, and they will constantly feel pressured with short-term needs and potential feature requests. Conversely, if startups use a much longer biannual or annual planning process they are unlikely to adapt their business to the rapidly evolving market and problem space.
One note. If, during the quarter, a dramatic change in the market or user-base occurs, teams can and should update OKRs mid-quarter. Pivots are normal, but they should not be common.
2/ Setting the Objectives
Let’s look at our example Objective for our fictitious payroll company, PayOut:
O: Become the best crypto payroll solution
This objective has numerous issues with it. First, the goal doesn’t provide any strategic priorities or direction. Anyone reading this would ask questions like, amongst which customer groups? In which geographies? Across which product lines? This statement lacks precision and is closer to a Vision statement than an Objective. Anyone - employee, investor, customers, etc - should be able to read your Objectives and immediately understand what’s important.
In addition, given this is a Seed stage company with few users, it’s too lofty an objective. The team may not reach this objective for years if they are fortunate.
In general, here’s a few considerations for writing Objectives:
I think it’s most helpful to think of Objectives as desired end states. As such, they should be achievable in 3-12 months, which makes them feel achievable and ensures teams regularly reconsider what are the highest priorities.
Objectives should use qualifiers to make them more precise. This helps provide strategic clarity on what is important and what is not. However, they should not sacrifice clarity.
Objectives DO NOT need to be measurable. That’s what Key Results are for. Although they can include measures (e.g. 20k DAU), it’s more important to communicate the strategic outcome they aim to achieve.
Objectives should cover the most important outcomes for the next 3-12 months. Nearly every work-stream should roll-up to a specific OKR. If there are many ‘critical’ employee efforts that do not roll up to the company’s Objectives, then the Objectives likely need to be adjusted. In addition, the Objectives should NOT be MECE. If they are, it likely means they are not creating focus for the business.
Using this feedback, I would update the Objective to the below.
O: Grow the employee payroll product to 7 APAC businesses by targeting small/medium crypto companies completing international payments to remote employees
The above Objective does a few things:
Focuses on a particular Geo - it’s clear the company should prioritize APAC companies
Focuses on which features are important - it’s most important to nail payment flows to international employees. If customers start asking engineers to build employee token staking features, then the team can tee up a valuable prioritization conversation. However, without predefined Objectives, teams are more likely to incorporate customer requests on a whim that may not create long-term platform value.
Focuses on which customer segments are important - small/medium business that have faster buying cycles - reaffirms BD/Sales team should not spend cycles on larger, enterprise deals.
The goal is achievable in a quarter, even if a stretch (though not all Objectives need to be completed in 1 quarter)
Not every objective needs to be this specific with this many qualifiers (and this is borderline too verbose), but it helps to hammer home the value of specificity.
3/ Setting the Key Results
Now that we’ve updated the Objective, below are the initial KRs:
O: Grow the employee payroll product to 7 APAC businesses by targeting small/medium crypto companies completing international payments to remote employees
KR1: Add 3+ blockchains
KR2: 10% of qualified leads complete onboarding
KR3: Achieve customer satisfaction of onboarded customers to 4.0+
My assessment is that only of these is well worded.
KR1 measures WHAT the team does but not the impact it should produce. Why add blockchains? If the real goal is to increase the number of viable customers, a stronger KR would be “increase viable customer base by XX% through integration of additional blockchains” or “unblock [x] customers through addition of new blockchains”. KRs that measure Impact empower teams and ensure that every PR produces VALUE to the business.
KR2 is good. It’s clear that there must be a process to qualify leads, and an onboarding process they complete. The goal is to drive 10% of those customers through to the end of onboarding. In conjunction with the 7 customers stated in the objective, the 10% number also defines a baseline number of required qualified leads for Sales/BD.
KR3 is worded fine, but it’s a waste of time. Especially for early stage customers, measuring ‘customer satisfaction’ is useless and has zero impact on your cash flow. Instead, a better measure of customer satisfaction is customer churn. Money talks, and continued usage is a better proxy of your product solving their problems than a quiz. I think a better KR is something like, “At least 40% of new customers remain WAUs three months after onboarding”.
In summary, below are our revised KRs:
O: Grow the employee payroll product to 7 APAC businesses by targeting small/medium crypto companies completing international payments to remote employees
KR1: Unblock [x] customers through addition of new blockchains
KR2: 10% of qualified leads complete onboarding
KR3: At least 40% of new customers remain WAUs three months after onboarding
There are ways we could continue to tweak the above OKRs, and often the OKR definition process is iterative. But these provide a very clear picture of what’s important - again, any investor or employee that reads this can immediately tell what’s important.
Distilling some of the important aspects of writing helpful KRs:
They should be impact oriented, NOT effort oriented
For example, ‘Launch [x] Feature’ is a bad OKR in 99% of cases
They must be quantifiably measurable
Ideally, they should not align to one team / department (eg Engineering, Marketing, etc). The above OKRs require multiple teams to complete - there is no “my department” mentality - the team wins or loses by working together
4/ Putting it all Together
The goal with OKRs is to create focus and accountability for teams. Typically 3-5 Objectives with 3-5 supporting KRs each is right, but ultimately use what’s best for your organization.
Regarding achievability, many teams have adopted the Google mindset of planning to achieve 70-80% as success. I personally find this completion rate is hard to assess during planning, so often I scope as, “if everything goes perfect we’ll achieve 100%.” This enables OKRs to be achievable, but also recognizes that things happen (eg product delays, customer cancellations, etc), and most teams will likely complete 70-80% of their OKRs.
Once the team sets the OKRs, how do you ensure they are helpful?
First, visit them on a regular basis. They should become ingrained in every team member and be referenced in meetings. At 6th Man Ventures, we use a biweekly Sprint cadence to develop and assign work, and we ensure every goal is tied to a particular OKR. This means that every two weeks we need to visit our OKRs and ensure all Sprint Goals tie to them. For us, the OKR process has been an invaluable way to align ourselves and communicate priorities to the partnership.
Second, if they are updated mid-quarter due to changing customer needs or new insights, make sure the old OKR, new OKR and the update rationale are communicated throughout the team (and investors if applicable). In most cases, OKR updates shouldn’t be viewed as failures, but rather as signs that the team is rapidly learning from customers.
Lastly, teams should consider quarterly postmortems to grade accomplishment of the OKRs. These meetings should be ‘blameless’ to ensure teams search for the truth and are used to understand which OKRs were met, and which ones were not hit, and why. I find Green, Yellow, Red is a useful rubric to measure progress, with Green meaning the OKR was accomplished, Yellow meaning progress was made, and RED meaning that the team was blocked or no material progress was made.
Example OKRs for PayOut
Below are a full set of hypothetical OKRs for PayOut. Note that objectives span core elements of the company - growing an existing product line, creating new product lines, and positioning the company for future growth. My hope is this may be a valuable template for founders looking to introduce OKRs to their companies.
O1: Grow the employee payroll product to 7 APAC businesses by targeting small/medium crypto companies completing international payments to remote employees
KR1: Unblock [x] customers through addition of new blockchains
KR2: 10% of qualified leads complete onboarding
KR3: At least 40% of new customers remain WAUs three months after onboarding
O2: Increase our Brand Equity
KR1: Publish [n] articles that drive [n] impressions and [n] inbound qualified leads
KR2: Drive [n] impressions through thought leadership forums such as podcasts and conference panels
KR3: Generate [n] qualified leads through hosting networking happy hours
O3: Expand our Product line into Accounts Receivables / Payables
Finalize LOIs with [n] design partners
Complete MVP and onboard [n] customers
O4: Prepare Organization for 10x Growth
Hire Head of Growth
[n] engineers earn code ownership role
Onboard [n] customer service representatives and [n] engineers
Please drop any comments or questions in the Comments Section!