April 06, 2023
#BackToBasics
In today’s fast-paced business world, setting goals is critical to driving business growth. Without clear objectives, it can be challenging for tech businesses to stay on track and ensure they are making progress towards their vision. However, traditional goal-setting methods can be time-consuming and ineffective.
Enter Objectives and Key Results (OKRs) – a powerful way to align your team and drive business growth popular among tech founders and entrepreneurs. But what exactly are OKRs, and how can they help you as a tech founder to grow your business?
What are OKRs?
OKRs are a goal-setting framework used widely in the tech industry. OKRs consist of two parts: Objectives and Key Results. Objectives describe what you want to achieve, while Key Results are measurable indicators that help you track your progress towards achieving your objective.
For example, if your objective is to increase user engagement on your website, your key results may include the following:
- Increase daily active users by 10% within the next three months.
- Increase the number of pages visited per session by 15% within the next three months.
- Increase the average time spent on the website by 20% within the next three months.
The objective is the outcome you want to achieve, while the key results help you track your progress towards achieving that outcome. By setting objectives and key results, you can create a clear roadmap for your team, align your team around a shared goal, and track your progress towards achieving that goal.
The history of OKRs.
OKRs were first introduced by Andy Grove, co-founder and CEO of Intel, in the late 1970s. Grove wanted to create a system that would align the company’s objectives and strategies with the goals and actions of individual employees. He worked with John Doerr, a venture capitalist at Kleiner Perkins, to refine the system and make it more accessible to other companies.
Doerr later introduced the system to Google in 1999, and it quickly became a cornerstone of the company’s culture. OKRs were credited with helping Google scale rapidly and achieve its ambitious goals.
Since then, OKRs have become increasingly popular in the tech industry and beyond. Companies like LinkedIn, Twitter, and Airbnb have all adopted OKRs to set and achieve goals, increase transparency and accountability, and foster a culture of continuous improvement.
Today, OKRs are used by companies of all sizes and industries, from tech startups to Fortune 500 companies. The system continues to evolve and adapt to meet the needs of modern businesses, but its core principles remain the same: setting clear and measurable objectives and key results to achieve long-term success.
OKRs Vs Other Goal Setting Methodologies.
Here’s how OKRs differ from other business goal-setting methods.
How OKRs differ from traditional goal-setting methods.
Traditional goal-setting often involves setting SMART goals (Specific, Measurable, Attainable, Relevant, and Time-bound). While SMART goals can be helpful, they often lack the ambition and inspiration to drive real progress. OKRs, on the other hand, focus on setting ambitious and measurable objectives that inspire action and innovation.
One of the key differences between OKRs and traditional goal-setting methods is the emphasis on ambition. OKRs are designed to be ambitious, inspiring teams to push beyond their comfort zones and drive innovation. Traditional goal-setting methods, on the other hand, often focus on attainable goals, leading to incremental progress but limited innovation.
Another difference is the focus on measurement. OKRs require specific, measurable key results that define success for the objective. This emphasis on measurement ensures that progress towards the objective is visible and can be tracked, allowing for adjustments to be made as needed. Traditional goal-setting methods often lack this focus on measurement, leading to ambiguity and lack of accountability.
How OKRs differ from KPIs.
KPIs, or Key Performance Indicators, are a metric used to measure progress towards a specific goal. While KPIs can be useful for measuring progress, they do not necessarily inspire action or innovation. OKRs, on the other hand, are designed to inspire action and drive innovation by setting ambitious, measurable objectives.
One of the key differences between OKRs and KPIs is the emphasis on alignment. OKRs are designed to align everyone in the organisation towards a common goal, ensuring that everyone is working towards the same objectives. KPIs, on the other hand, are often focused on individual performance, leading to a lack of alignment and coordination.
Another difference is the emphasis on flexibility. OKRs are designed to be flexible, allowing teams to adjust their goals and priorities as needed to respond to changes in the business environment. KPIs, on the other hand, are often more rigid, leading to a lack of adaptability and agility.
The benefits of using OKRs to grow your tech startup.
“If you set a crazy, ambitious goal and miss it, you’ll still achieve something remarkable.”
(John Doerr | Measure What Matters).
Using OKRs can help your business grow in several ways. Here are some of the key benefits of using OKRs for business growth:
#1 Focus on what matters most:
OKRs allow you to focus on the most important things that will help your business grow. For example, Sears Holding Company achieved an 8.5% increase in hourly sales within 18-months of implementing OKRs. By setting clear objectives and key results, you can align your team around a shared goal and ensure everyone is working towards the same outcome.
#2 Increase accountability:
OKRs provide a clear framework for tracking progress towards your objectives. This helps increase accountability among team members, as everyone is responsible for achieving their assigned key results.
#3 Make more informed decisions:
With clear objectives in place, decision-making becomes more streamlined and strategic. By aligning goals and priorities across the organisation, teams can make better decisions about where to allocate resources, which projects to pursue, and which initiatives will impact business growth. This can minimise wasted effort and ensure that resources are used effectively to drive business success.
#4 Encourage innovation:
OKRs allow for flexibility and encourage innovation. By setting ambitious goals and key results, you can push your team to think outside the box and develop creative solutions to achieve your desired outcomes.
#5 Improve agility:
OKRs are designed to be dynamic and adaptable, allowing organisations to respond quickly to changing market conditions or shifting priorities. By setting ambitious but achievable goals and regularly reviewing progress, teams can adjust their approach and pivot as needed to stay on track towards their objectives. This helps keep the organisation nimble and responsive, which is critical in today’s fast-paced business environment.
#6 Create a culture of transparency:
OKRs encourage transparency and open communication within your team. By sharing your objectives and key results with your team, you can foster a culture of transparency and ensure that everyone is on the same page. Studies show employees in companies with OKRs are 23% more likely to understand company strategy than employees in companies without OKRs.
#7 Boost employee engagement:
OKRs can improve employee engagement by 32% and productivity by 21% by providing a clear sense of purpose and direction for their work. When employees understand how their work contributes to the company’s overall objectives, they are more likely to feel invested in their work and motivated to perform at a high level. This can increase productivity and collaboration, leading to a stronger sense of shared purpose among team members. This can drive business growth by enabling teams to work together more effectively towards common goals.
How to create effective OKRs for your tech startup.
“An effective goal-setting system starts with disciplined thinking at the top, with leaders who invest the time and energy to choose what counts.” (John Doerr | Measure What Matters).
Creating effective OKRs requires a structured approach. Here are 7 steps you can follow to develop effective OKRs for your business:
#1 Start with your company’s mission and vision:
Your OKRs should align with your company’s mission and vision. Review your company’s mission and vision statements to identify the most important outcomes you want to achieve.
#2 Identify your priorities:
Next, identify the priorities to help you achieve your mission and vision. These priorities should be the most important outcomes you want to accomplish in the short term (typically 3-months).
#3 Create specific objectives:
Based on your priorities, create specific, measurable objectives that align with your company’s mission and vision. Objectives should be ambitious but achievable, and they should inspire and motivate your team.
#4 Define key results:
Once you have your objectives, define specific, measurable key results to help track progress towards achieving your objectives.
#5 Set deadlines:
Set specific deadlines for achieving your key results. This will help you track progress towards achieving your objectives and ensure everyone is working to the same timeline.
#6 Review and adjust:
Regularly review progress towards achieving your objectives and adjust those you find that are not achievable. Similarly, if you achieve your objectives earlier than expected, set new objectives and key results to keep your team motivated.
#7 Evaluate and refine:
Once you have implemented OKRs in your business, it’s essential to evaluate and refine the process continuously. Solicit feedback from team members on how well the OKRs are working and what could be improved. Use this feedback to make adjustments to the process and improve its effectiveness. By continuously evaluating and refining the OKR process, you can ensure that it remains relevant and effective for your business.
Examples of effective OKRs for business growth.
Here are some examples of effective OKRs for business growth:
Objective: Increase monthly revenue.
Key Results:
- Increase new customer acquisition by 20% within the next three months.
- Increase upsells and cross-sells by 10% within the next three months.
- Reduce customer churn by 5% within the next three months.
Objective: Improve product quality.
Key Results:
- Decrease the number of bugs reported by customers by 50% within the next three months.
- Increase customer satisfaction scores by 10% within the next three months.
- Decrease product development time by 20% within the next three months.
Objective: Expand into new markets.
Key Results:
- Identify three potential new markets within the next two months
- Develop a go-to-market strategy for each new market within the next three months
- Launch in at least one new market within the next six months
Implementing OKRs in Your Tech Startup.
“OKRs are big, not incremental—we don’t expect to hit all of them. (If we do, we’re not setting them aggressively enough.)” (John Doerr | Measure What Matters).
Implementing OKRs in your business requires careful planning and execution. Here are some tips for implementing OKRs in your business:
#1 Start small:
Start by implementing OKRs in a small team or department before rolling them out company-wide. This will allow you to test the process and make adjustments as needed.
#2 Involve your team:
Involve your team in the OKR-setting process to ensure buy-in and alignment. Encourage your team members to provide feedback on the objectives and key results to ensure they are achievable and relevant.
#3 Communicate regularly:
Communicate regularly with your team about the progress towards achieving your objectives and key results. This will help keep everyone motivated and focused on the desired outcomes.
#4 Celebrate successes:
Celebrate successes along the way to keep your team motivated and engaged. Recognize team members who have contributed to achieving key results and celebrate when you reach your objective.
#5 Monitor and track progress:
It is crucial to monitor and track progress towards achieving your objectives and key results regularly. This can help you identify any issues or roadblocks early on and take corrective action.
Common mistakes to avoid when implementing OKRs.
Here are some common mistakes to avoid when implementing OKRs in your business:
#1 Setting too many objectives:
Keeping the number of objectives manageable and aligned with your mission and vision is vital. Setting too many objectives can lead to overload and a lack of focus. For tech startups, you might want to work towards a single objective, whereas established tech companies might be working towards 3-5 objectives. In terms of number of objectives, 3 appear the sweet spot.
#2 Not involving the team:
Not involving the team in the OKR-setting process can lead to a lack of buy-in and alignment. It is essential to involve the team in the process and encourage feedback to ensure objectives are achievable and relevant.
#3 Focusing too much on metrics:
Focusing too much on metrics can lead to a culture of micromanagement and a lack of innovation. Balancing metrics with qualitative feedback and encouraging experimentation and creativity is important.
#4 Not reviewing or adjusting:
Not reviewing progress towards achieving objectives and key results and adjusting as needed can lead to wasted effort and lack of progress. It is essential to regularly review progress and adapt OKRs to stay on track towards achieving your mission and vision.
#5 Not celebrating successes:
Focusing solely on the next set of objectives can lead to a culture of never being satisfied. Celebrating progress and successes is vital to maintain motivation and morale. Recognize team members who have contributed to achieving key results and acknowledge the progress made towards the company’s mission and vision. Celebrating successes can also reinforce the importance of OKRs and encourage continued buy-in and engagement from the team.
Conclusion.
In conclusion, OKRs are a powerful tool for tech co-founders to achieve their business goals. By providing a structured and collaborative approach to goal-setting and execution, OKRs can help teams to stay aligned, focused, and accountable.
One of the key benefits of OKRs is their flexibility – they can be used at any level of the organization, from individual contributors to entire departments and even the company as a whole. This makes them especially valuable for fast-moving tech startups, where priorities and goals can shift rapidly.
But implementing OKRs successfully requires a thoughtful and structured approach. It’s important to take the time to set clear and meaningful objectives, to ensure that they are aligned with the company’s overall mission and vision, and to communicate them effectively to the team. Ongoing tracking and regular check-ins are also essential for keeping the team accountable and adjusting course as needed.
Finally, it’s worth noting that OKRs are not a silver bullet – they are just one tool in the toolbox of business growth. It’s important to use them in conjunction with other strategies and tactics, such as customer feedback, market research, and product iteration, to achieve long-term success.
