Part 1: Get Ready for OKR Success
This set of best practices is based on my experience rolling out OKRs at CloudMade, on conversations with many product leaders, and on a number of books and articles which I have put to the test.
OKRs should empower product teams to succeed, giving them autonomy and a sense of purpose. But more often than not they end up wasting time, creating stress for the founders and the product teams and becoming window dressing, rather than a powerful tool. Let’s fix that.
Before diving into some examples, I want to set out some high-level principles that guide the way I think about OKRs and goal setting in general.
Checklist for Success
I’ve found that many OKR failures could have been avoided if the items on this checklist had been addressed.
Teams feel component and empowered
In order for teams to perform their best they need to feel competence in their domain, to believe in their mission, to feel related to one another and to have autonomy. This is well documented in psychological literature, has been backed up by research at Google and is a core part of the cultural DNA at most high performing tech companies.
Results are 98-100% within the control of the team
Signing up to goals that are not within the control of the team or individual causes stress, missed expectations, and is a root cause of many products’ failure. The reasoning becomes obvious when you consider the first principle above - feelings of competence and autonomy will be diminished if teams or individuals sign-up for goals outside of their control. This applies whether they meet the goal or not.
If a team or individual has an objective that is not 98-100% under their control they either need to define actions to bring it within their control, find another person or team who does control it, or admit that the objective is not controllable and take it out of their OKRs.
Business objectives are separated from product objectives
Business objectives (revenue, LTV, customer acquisition, etc) need to be separated from product objectives (engagement, purchases, click-rates, etc). Most of the time product teams are not able to impact business metrics within 98-100% of their control. What they do control and should sign-up to change are user behaviors.
Objectives measure outcomes
Objectives need to measure outcomes, not outputs. Doing so strengthens all of the factors mentioned above (competence, belief in the mission, relatedness, and autonomy) and helps align outcome-based objectives throughout the organization.
OKRs are not linked to performance evaluations
Staff performance evaluation should not be based on product OKR attainment. Separating performance and personal development evaluation from product attainment is a good way of reducing stress within product teams. This may be more appropriate for less experienced product teams, particularly pre-product/market fit where outcomes can be highly volatile and unpredictable.
Intrinsic motivation - doing something for the love, the sense of satisfaction, the joy of doing it, and seeing a pleasing outcome - are extremely powerful and should take preference to extrinsic motivations wherever possible.
Did you pass or fail?
If you pass each point on the checklist, you may be ready to set OKRs. If you’re not confident that you pass each point on the checklist, you will almost certainly run into problems with OKRs.
The Role of Management
Outcome-based objectives should be shared from the top down. This will mean the founders and management team determining annual and quarterly outcomes (business focussed).
These then need to be translated into product metrics/product outcomes by, for, or with each product team:
- By the product team: when the product team has experienced leaders who are comfortable translating business outcomes into product ones.
- With the product team: when the head of product works between their management team and their product teams to build a bridge from business outcomes to product ones.
- For the product teams: when the head of the product defines the outcome that the product team should reach. This is always a tempting shortcut but ultimately erodes the sense of competence and autonomy needed to make a team successful.
Ready for more?
In part 2 I’ll walk you through how to tie OKRs to the bigger-picture objectives of your business.
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