Setting the right goals is a vital part of product management for both the development teams and the stakeholders. Product managers should know how to collaborate with the product team and define the objectives and key results, called OKRs, that define the product’s success in the form of measurable and realistic outcomes.
In this guide, we explore OKRs, their importance, why they’re used, and some examples of effective ones.
OKRs are used by organizations to define their objectives and set measurable goals for a product. However, you shouldn’t confuse OKRs with Key Performance Indicators (KPIs). KPIs are indicators that help a team track its performance. Meanwhile, OKRs are the framework — they’re what you’re aiming for.
Although there are no hard and fast rules, it’s good practice to have a maximum of ten objectives for each quarter. Every objective can have one or multiple key results, depending on its complexity and the team working on it.
OKRs help you keep track of the big picture. You should set reasonable goals that can be accomplished in the given timeframe, such as a quarter or a year.
Every company or product team manages its OKRs differently, depending on the product roadmap. However, the following principles are standard and can make the OKRs more effective.
Your objective is what you want to achieve. It’s an ambitious goal that, preferably, is inspirational and must be action-oriented. With a clear objective, the product team can keep ineffective execution and confused thinking at bay. Meanwhile, the key results are your monitoring system to make sure that the team will achieve the objective. They should be time-bound and realistic. More importantly, they should be measurable so that the team can determine if they met the objective or not.
Let’s look at an example:
In this example, the product team will get feedback from customers, identifying their unmet needs and opportunities for expansion using a tool like Parlor. They will then get scores on the UX mockups and attain insights from internal stakeholders, like the sales teams. Using this information, they can work to come up with a vision for the new product.
OKRs help teams create alignment, encourage engagement, and track progress. Besides the overall product OKRs, individuals and groups can also create OKRs for personal goals that will eventually assist them in meeting the original objectives.
Product managers use OKRs because they align a team. Objectives in OKRs are like short-term mission statements that the team has to accomplish. Instead of having an overall organizational objective, it’s better to have individual objectives that inspire every person in a product team. Meanwhile, key results quantify the inspirational language of an objective and keep everybody on track.
Without OKRs, individual employees can feel disconnected from the organization. How is their work benefitting the organization? In the absence of OKRs, it’s hard to make people feel like they’ve achieved anything concrete. OKRs let everybody know how they’re contributing to the success of the organization as a whole.
Companies like Microsoft and Google use OKRs because of their inherent benefits. OKRs help product managers:
To make the most out of OKRs, product managers need to ensure that they are:
To start building your OKRs, here are 5 examples.
Objective: Make our new product launch a success
The key results are directly linked to the objective and clearly indicate what every team needs to do. The web developers work on the website while the sales and marketing teams work on getting a product pre-launch in order.
Suppose you want to increase the learning potential and opportunity for the product team. You can set an OKRs around these lines.
Objective: Increase learning opportunities for the product team
Likewise, if you want to deliver new product features quickly, you can set OKRs for that too. Here’s an example.
Objective: Speed up the delivery of new product features
OKRs are meant to give you simple yes or no results. There’s no in-between. You succeeded, or you didn’t.
For instance, you may aim to increase your conversion rate this quarter.
Objective: Convert more visitors
As you can see, these key results are directly linked to the objective.
Once your product is out for release, you may want to make the activation experience a breeze for your customers. The OKRs for it could look like this.
Objective: Offer a smooth activation or user onboarding experience
If you want to make the last key result even more specific, you can identify the steps to reduce the churn rate. For instance, you can say that you want to reduce the churn rate in step 2 to step 3 of your activation funnel.
These examples would have made it clear that the key results ultimately help you get closer to the objective since they’re associated with its accomplishment.
You can create a format for grading the OKR based on your organization. For instance, a partner at Google Ventures, Rick Klau, recommends giving your Key Results a score between 0.0 and 1. In the third OKR example above, the first key result states that you should increase the velocity of the sprint team to 38 points. If you manage to do it, you give the key result a score of 1. If you only manage to raise the velocity to 34 points, the OKR gets a score of 0.5.
Alternatively, you can grade your key results from A to F or score them 0% to 100%. In most cases, high scores for the key results translate to the accomplishment of the objective, but not always. It’s possible that even though your key results score high, you still didn’t achieve your objective. In that case, your key results weren’t actually helpful for the objective, so you need to rework them.
The correct use of OKRs can be highly beneficial for a product team and an organization as a whole. Here are some good practices for using OKRs:
Every objective should have three to five key results. Make sure these key results are measurable and relatively “aggressive.” Google and some other companies use ” stretch goals” to create a challenge. For instance, if they want to reduce the product delivery time by seven weeks, they set the stretch goal to five weeks, but they still consider the objective met at seven weeks.
The ambitious goal you set for the product team should align with the company’s overall goals. It’s good to set the company OKRs first and then set individual or department OKRs.
The product manager should keep an eye on the progress of OKRs, and they should share it to make sure that everybody’s on the same page.
Product managers might face the following challenges and pitfalls in setting OKRS:
When you’re defining and using OKRs, avoid putting too many OKRs in the queue for one quarter. Instead, use OKRs for the prioritization of objectives.
Start by listing the objectives for the year. What does the organization need to achieve this year? Now, you can prioritize which objectives need to be met first. Divide your yearly objectives into four quarters based on their level of priority.
Moreover, focus on the outcome rather than the tasks. Many companies habitually plan around deliverables. Although this is imperative for strategy execution, you can’t use this approach for OKRs. OKRs are outcome-driven.
Whether your organization has a customer-centric or product-centric approach, OKRs can be very effective at spelling out the objectives for everyone, from product managers to development teams. The OKR framework requires you to set a realistic and ambitious objective. Then, you have to specify three to five key results that will eventually help you meet the objective.
A good OKR is meaningful, inspiring, measurable, and audacious. If it has these characteristics, your team will get it done, and your goals will be met.