OKRs: Objectives and Key Results IV

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OMAHA
       We are not referring to the city in Nebraska or the landing site of Allied troops in Normandy on June 6, 1944. Our Omaha is the phrase recently retired American football legend Peyton Manning uttered many times at the line of scrimmage over the last few years of his career. Even if you are not a football fan, we are confident you are aware of Peyton Manning – the National Football League’s all-time leader in a trove of categories, including touchdowns thrown, passing yards, wins, and many more. Manning, who is famous for his meticulous preparation, would approach the line, survey the defense, and when he was ready, yell “Omaha.” Then the ball would be snapped, and the play was on. In order to maximize his team’s chances for success, Manning never called for the ball until he was completely prepared to take advantage of whatever vulnerabilities the defense was displaying.

         We are about to shout Omaha to you. Before you can begin using OKRs, and reaping the many advantages we touted in Chapter 1, you need to be prepared and able to create robust and effective objectives and key results. In this chapter we will share with you how to do that. Then the game is truly on!

       It is here that we will show you exactly what goes into creating OKRs. Specifically, we will outline the characteristics of quality OKRs, supply you with tips to make the job easier, and warn you of the pitfalls that can stand in the way of effective objectives and key results. Among the many other topics covered in the chapter are: The health metrics, how to score OKRs, how often you should set them, how many are appropriate, and of course how to specifically create them. In case you are wondering, Manning never revealed why he used the word Omaha, and appears to have taken the secret with him into retirement. But you know why we are using it. Ready? Omaha.
 
CREATING POWERFUL OBJECTIVES
       Recall our definition of objectives from Chapter 1: An objective is a concise statement outlining a broad qualitative goal designed to propel the organization forward in a desired direction. Basically, its asks, “What do we want to do?” At face value, this is not what most of us would term an intellectually challenging concept. However, from our work with clients around the world, and in conversations with other thought leaders and consultants, it is clear that many organizations struggle to create high-value objectives. It is difficult to make the hard choices (which probably explains the fact that Americans devote more time to choosing a TV than to setting up a retirement account), and often companies will default to choosing pedestrian objectives that do little in advancing their charge towards strategy execution.
 
       One challenge faced by those new to OKRs is a lack of context for the exercise. “What exactly is a good objective?” They wonder. To assist you in overcoming that potential barrier, we will begin by outlining a number of criteria you should keep in mind when constructing your objectives.
 
Inspirational
       A well-written objective is more than a short collection of words that string together to describe a business goal. Anyone could mash together a few pieces of business lingo that, taken in the aggregate, represent something you would like to do. However, we are challenging you to create something bigger and much bolder. Your objectives should compel people to a higher standard of performance based on the inspirational power of the message. People should be forced to think differently based on the inherent challenge and inspiration of the objective. Upserve (formerly Swipely) is a company that uses artificial intelligence to help restaurants improve performance. CEO Angus Davis captured the essence of inspiration well, when he said:

       It is not enough to say you want to see 10 percent improvement when you know that is well within your reach.         
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2.        It means you will just keep doing the same things, just working ever so slightly harder. But if I said to you, I need 50 percent improvement in what you are doing, you would probably say, “Gosh, in order to do that, I would have to completely solve this hard problem,” or “I need to completely rethink how I am addressing X or Y.” That is what OKRs are supposed to do. When you aim higher, you think harder about the steps you need to take to really accomplish something.  
 
Attainable
       It is no accident that this item appears directly below our call for inspirational objectives. Finding the balance between inspiration and reality is one of that work. We encourage you to push the limits of employees’ imaginations when setting objectives, but please do be cognizant of the line, the damage can be especially deleterious to your company. In one aptly titled study, “Goals Gone Wild,” the authors discovered several side effects of excessively demanding objectives, including corrosion of culture, reduced motivation, and the temptation to engage in risky or unethical behavior. Another study found that managers who believed they had been presented with a goal that was unattainable are more likely to abuse their subordinates. As the authors point out, it is the corporate equivalent of kicking the dog because of your troubles. Although there is no steadfast rule for assessing the attainability of objectives, in the spirit of learning from the crowd, gathering feedback from a cadre of employees will assist in making the determination.
 
Doable in a Quarter
We will discuss the cadence for OKRs a bit later in the chapter, but assuming you are creating objectives each quarter, you will want to advance something that can, indeed, be accomplished during the subsequent three months. If, after drafting an objective, the collective wisdom of the team suspects it will take a year to realize, then perhaps what you have developed is closer to a strategy or even a vision. While each have their place (as we argued in Chapter 2) objectives must be time-bound to the rhythm you establish, most likely quarterly. We.  Recently worked with a client whose communications department developed this objective: “Increase sellers’ success through communication.” That actually resembles a mission; their core purpose as a department. Despite changes in the business model, they will always want to increase sellers’ success through communication. Clearly this is not something that can be accomplished over 90 days and forgotten.
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2. Controllable by the Team
       Whoever drafts the objective, whether it is at the corporate, business unit, department, team, or individual level, must be able to control the outcome. OKRs that generate cross-functional coordination are critical (and we will explore that topic in Chapter 4); however, when you create a new objective it is with the explicit understanding that you independently possess the means to realize it. If, at the conclusion of the quarter, your objective n has not been reached and your first temptation is to say, “Well, sales did not deliver, so we missed our objective,” you are missing the spirit of the exercise.
 
Provide Business Value
       Our narratives will become shorter as the criteria become more obvious, like this one. Your objectives should be translated from your strategy and directed toward creating tangible value for the enterprise if achieved. If there is no promise of a business benefit at the end of the day, there is little need to expend the resources necessary to accomplish the objective.
 
Qualitative
       This one is especially brief. Objectives should represent what you hope to accomplish, and therefore, be expressed in words and not numbers. The use of numbers will be thoroughly covered with key results (see Exhibit 3.1)
 
 
 
   
TIPS FOR CREATING OBJECTIVES
 
       In the previous section, we laid out the characteristics you should strive for when constructing objectives. To help you get there, we have compiled several tips and practical suggestions to consider.
 
Avoid the Status Quo
       Our advice is consistent with what we discussed in the preceding section on ensuring your objectives are inspirational and add business value. You aim always to identify new objectives that tug at the edges of your capabilities. Therefore, you should avoid those who recite what you are already doing, for example: “Maintain market share” or “Keep training employees.” If you can accomplish an objective with virtually no change in how you work, it will most likely prove to be wholly ineffective in moving your business forward.
 
Use Clarify Questions
       We’ve both witnessed the endless debates that seem to be isolated exclusively to corporate meeting rooms. You’ve undoubtedly endured a few yourself: the kind in which words are swirling back and forth through the air, but little progress is being made on the task at hand. Often, the best way to cut the confusion is to ask, “What do you mean by… sincerely?” When creating objectives, there will be an onslaught of ideas and concepts that may contain a nugget of value but are frequently wrapped in nebulous phrasing. If, for example, someone offers that you must “Create value for our customers,” assume the role of an OKR anthropologist and try to ascertain the specifics of that comment. Are they referring to a particular segment of customers?  All customers? What does value mean in this context? Escalating from abstractions to specifications will help you unearth the true objective that requires your focus.
 
Frame Objectives in Positive Language
       Ideally, your team should feel compelled to work towards achieving your objectives. Therefore, you should carefully consider how you frame them.
 
         Research demonstrates that humans are much more comfortable approaching what we want rather than avoiding what we don’t. As an example, let’s say you want to improve your eating habits. When designing an objective, you have two choices. You could say, “Reduce the amount of junk food I eat.” Or you might term it this way: “Eat more calories from healthy food.” Choosing the latter will force you to research healthy foods. Identify those you’d like to experiment with, ultimately providing a greater likelihood of success.

       Framing in positive language promises to open additional creative space and facilitate adaptability in pursuing objectives.
 
Use Simple Rules
       A recent study experimented with approaches for sparking creativity among 180 Chinese high school students. The students were assigned two tasks – to complete a story and design a collage from stickers – and divided into three groups. The first group was simply given the assignment, while the second group received the additional instruction “please try to be creative.” The third group received the assignment and simple but specific rules on how to complete the activity, such as “fold or tear the stickers to vary the shape and size of the materials.” Four independent judges assessed creativity and found the third group, the one that received the simple but specific rules, was the most creative. The concrete guidance gave the students a starting point and channeled their creativity. Brainstorming remains an extremely popular tool, but the truth is, starting from a blank canvas can overwhelm and actually inhibit our ability to create. Before you embark on creating objectives, draft your own set of simple boundaries. As a starting point, you might want to assemble a checklist that includes the items we presented in the previous section dealing with the characteristics of practical objectives.
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2. Start with a Verb
       Very essential advice, but frequently ignored. An objective is a concise statement outlining a broad qualitative goal designed to propel the organization forward in a desired direction. That implies action. Thus, every objective must begin with a verb to denote the action and desired direction. For reasons of simplicity and brevity, some organizations will truncate their objectives. For example, take the seemingly innocuous customer loyalty. As written, it is not an actual objective so much as a vague hope, offering little value in providing employees with direction on how to act to achieve it. Does the company want to maximize loyalty, build loyalty, and leverage loyalty? Each of these is quite different and would drive diverse actions. Action verbs are what bring your objectives to life.
 
What’s Holding You Back?
       It was 1841 in London, and American portrait painter John Goffe Rand faced a frustrating challenge plaguing artists of his day – keeping his oil paints from drying out before he could use them. The best solution available to Rand and his contemporaries was utilizing a pig’s bladder sealed with string. To expose the paint, an artist would prick the bladder with a tack, but of course there was no way to completely seal the plug afterward, leading to the vexing problem of prematurely dry paint. Additionally, pig bladders were not the best travel companions, frequently bursting open and wasting what was then an expensive commodity. Rand studied the problem extensively and devised a solution – the tin paint tube. Although it was slow to catch on, it eventually proved to be exactly what Impressionists required to escape their studios and capture inspiration from the natural world around them. Thanks to Rand’s Portable invention, for the first time in history it was possible for a painter to produce a work onsite, whether in a café, a garden, or waterfront. The paint tube also revolutionized the use of color since it was now practical and affordable to produce and carry dazzling new pigments such as chrome yellow and emerald green, allowing the artist to capture the full majesty of any moment. So important was this invention that Renoir declared, “Without colors in tubes, there would be no Cezanne, no Monet, and no Impressionism.”

       The moral of this story is the power of recognizing and overcoming problems to improve your situation, which applies as much to objectives as it does to Impressionism paintings. When considering possible objectives ask yourself what problems are holding you back from executing your strategy. Taking an unvarnished look at the problems that separate you from the successful execution is a great starting point in the creation of objectives.
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2. Use Plain Language
       We’ve emphasized this point elsewhere, but it bears repeating here as well. Given the many functional specialties represented in the modern business environment it would be very easy for experts to offer up objectives teeming with esoteric words and phrases that only they and their colleagues can decipher. While you don’t want to shy away from using words that accurately convey the essence of the objective, you should err on the side of choosing language that everyone can immediately understand to generate widespread comprehension of the objective and why it's important. We also suggest sparing use of acronyms. Should you include any, ensure everyone is aware of their meaning.
 
 
OBJECTIVE DESCRIPTIONS
       Following the advice offered in the preceding section will ensure you select objectives that are poised to provide immediate value to your business. The last recommendation centered on using plain language to ensure everyone grasps the objective. However, our experience shows that, even when you attempt to make the objective as simple as possible (without dumbing it down), its meaning and relevance for your immediate business context may not be immediately apparent. For that reason, we suggest you write short descriptions for each objective.

       Objective descriptions clearly articulate what is meant by the objective, ensuring all readers are literally on the same page as to what the objective encompasses. They aren’t lengthy; a couple of sentences will almost certainly suffice in most cases. Included in the description is a summation of why the objective is important, how it links to a corporate-level objective, any specific dependencies, and internal customers it supports or relies on for achievement. Think of your description as the objective’s rationale for being, like a note to the CEO justifying why this objective should exist.

       If you’re at all tempted to skip in the name of efficiency, let us share a very pragmatic reason for investing the relatively small amount of time necessary to create objective descriptions. Depending on your implementation schedule, you may create both objectives and key results in the same workshop. However, it's also possible that you’ll split the tasks over two or more sessions, creating objectives first and allowing time to contemplate what you’ve developed, share with others for feedback, and make any necessary adjustments. Should you follow that path a funny thing tends to occur when you reconvene to draft the key results. You’ll tee up the discussion of an objective, eager to assign key results when it dawns on you that you really don’t remember what you meant when the objective was created. This is simply human nature, especially if some of your objectives are open to interpretation, for example, “Enhance Productivity.” Some broad themes may linger from your discussion, but the specific nature and tone of what you meant may be a complete mystery, rendering it nearly impossible to write effective key results. To ensure this doesn’t happen, we suggest you write draft descriptions immediately upon agreeing to the inclusion of an objective.
 
  CHARACTERISTICS OF EFFECTIVE KEY RESULTS
       The previous sections took us deep into the world of objectives, examining criteria you should adhere to, and sharing tips on how to create them. But, of course, objectives are just one part of the OKR framework. In the pages that follow we’ll examine their crucial counterpart, key results (see Exhibit 3.2)




   
  In Chapter 1, we defined a key result as a quantitative statement that measures the achievement of a given objective. If the objective asks, “What do we want to do?” the key result askes, “How will we know if we’ve met our objective?” Sounds easy enough, especially since tracking results is something that comes almost naturally to most of us now, given the rise of Fitbits and other wearable devices. However, creating effective key results for your business, those that accurately gauge progress on your objectives can sometimes prove elusive. Whether the problem stems from vague and difficult-to-quantify objectives or poorly conceived key results that simply don’t accurately represent the objective, without sound metrics to hold yourself accountable, you won’t reap the benefits the OKRs framework promises. Therefore, as we did with objectives, in the space below, we’ve outlined several criteria to adhere to as you build your key results.
 
Quantitative
Objectives are always qualitative, representing a desired action, while key results are necessarily quantitative, so we can apply numbers to determine whether we’ve met the objective confidently. It could be a raw number (number of new visitors to your website), dollar amount (revenue from new products), percentage (percentage of repeat customers), or any other form of quantitative representation. Progress on a key result should never be a matter of opinion, and that’s why numbers are so powerful. They scrub away any confusion about whether you’ve hit your objective, providing clarity through objectivity. But numbers can do more than assess progress. As Niket Desai, Former Googler and now chief of staff at Flipkart, tells us in this story, they can also stimulate innovative thinking.
The company I was working with had a standard web-publishing model with three participants: the readers, the bloggers, and the advertisers. It was found that every campaign led to more readers, which would grow the audience and cause the advertisers to spend more money, creating a cycle effect for rapid revenue growth. We learned that we needed more campaigns, but we also noticed most advertisers only ran one campaign. So, our growth objective included two key results:
 
 

• 50 percent of signups run a campaign within two weeks.
• Increase the average number of campaigns per advertiser from 1 to 5.

To increase the average number of campaigns, we had to think differently.
We came up with the idea of offering discounts on campaigns run within the first week, which led to many businesses running repeat campaigns. This greatly increased revenues since companies were purchasing three to four full-priced campaigns after a single discounted one. The measurement aspect leads to a special focus that is more effective than making broad statements about improvement. It’s hard for qualitative results ever to be substantial, and they are highly subjective.
 
 
Aspirational
The results of years of goal science research are quite clear and compelling: Setting the bar high leads to improved performance and enhanced satisfaction at work. Conversely, if you decide to draft easy-to-attain results, you can expect achievement, but subsequent motivation and energy levels will likely fall. So, when drafting your key results, we urge you to stretch the limits to challenge your teams to think differently, as Niket Desai shared in the previous section. However, the apparent caveat (one we touched upon in the objectives segment on attainability) is ensuring the results are ultimately achievable. One way to walk this tightrope is by effectively scoring key results, a topic we’ll explore later in the chapter.
 
 
Specific
Clarifying terms and concepts and ensuring shared understanding is critical when writing key results should you hope to foster communication among teams and avoid unnecessary and damaging ambiguity. Here’s an example of what can happen when you don’t specify exactly what you mean by the words comprising the key result. As part of their OKRs, the CEO of a company insisted on the key result of “100 percent of use cases are available on the new platform.” IT (information technology), which was the group in charge of putting the use cases on the new platform, didn’t know what the CEO meant by use cases, so it put up what it could, based on its limited comprehension of his request. At the end of the quarter the CEO asked: How did we do? IT answered, “Great! We got all the use cases on there.” Sure enough, what they posted had nothing to do with what the CEO was referring to when he said use cases. This waste of time, effort, and most likely engagement for OKRs could have been easily avoided with some simple dialog at the outset of the drafting process.
 
  Owned
In the previous example, we saw the problems that can occur when a key result is instituted by executive will, without the benefit of proper understanding by all involved. In that case, although IT accepted responsibility for the key result, it didn’t in fact take “ownership” for it, and that is a critical distinction. Those responsible for delivery key results must be actively engaged in the process, principally in the creation. You will always be more prepared (and disposed) to execute on something that you helped create, since you molded your intentions based on a common understanding of the desired result, and your willingness to find innovative ways of achieving it. Most OKRs should originate from you, the OKR owner, and not from corporate mandate. In practice, we expect a mix of top-down and bottom-up OKR creation, something we’ll discuss further in Chapter 4.
 
 
Progress-based
Harvard Professor Teresa Amabile has written extensively about what she terms “The Progress principle.” It suggests that:
Of all the things that can boost emotions, motivation, and perceptions during a workday, the single most important is making progress in meaningful work. And the more frequently people experience that sense of progress, the more likely they are to be creatively productive in the long run. Whether they are trying to solve a major scientific mystery or simply produce a high-quality product or service, everyday progress – even a small win – can make all the difference in how they feel and perform.
This finding has major ramifications for your key results. It’s imperative that your key results be amenable to demonstrating progress frequently, at least every couple of weeks. If you won’t know whether or not you’ve met the key result until the last day of the quarter, you’re robbing yourself of the opportunity of enhancing motivation and engagement through frequent check-ins.
 
 
Vertically and Horizontal Aligned
We’ll have much more to say on the topic of alignment in Chapter 4. For now, we’ll underscore the importance of ensuring your key results are vertically aligned by reviewing them within your team and leadership and horizontally aligned by sharing and reviewing with teams upon whom you depend or who depend on you.
 
 
Drive the Right Behavior
Several pithy statements relate to measuring performance, perhaps the best-known being, “You get what you measure.” That is often the case. Once you shine a metaphorical light on anything, you will necessarily be drawn to it and pay more attention to it.
 
  At times, the devotion to meeting targets you set can become single-minded and lead to dysfunctional decision-making at best and unethical behavior if left unchecked. Therefore, we suggest you think carefully about the behavior each key result you generate may engender in people. Here’s an example. A colleague of ours tells the story of a client in the fast-food industry who, despite the best of intentions, chose a measure that led to disastrous results. It seems this organization found its restaurants were disposing of a lot of cooked food at closing time, and obviously, that was draining their profits. To put a stop to such a hindering practice, it instituted an efficiency measure for each outlet, charting the quantity of food they disposed of each day, Clever managers, not wishing to be chastised for poor performance, quickly devised a method to ensure great scores on the measure.  If their restaurant closed at midnight, they would not cook any food between 11:00 and midnight until a customer entered or ordered. There was very little chance of having any refuse at the end of the day. Of course, customers did not share the zeal of “chicken efficiency” and soon began staying away in droves once they learned this restaurant had effectively taken the fast out of fast food. The measure was devised with noble motives but drove a behavior that proved to be completely counterproductive.
 
 
TIPS FOR CREATING KEY RESULTS
We’ve already thrown a lot your way in this chapter, and there is more to follow. If it feels like a fire hose aimed directly at you, try and reframe the experience from an assault by the water to being soothed by its coolness on a hot summer’s day. Our intention is not to overwhelm you but to equip you with all the information you require to create a set of OKRs that can transform your business. These sections encompass criteria and tips that are essential to capturing the most effective OKRs. Let’s conclude this phase of our journey with some practical tips to remember when developing your key results.
 
  Key, Not All
This exercise is not an excuse to demonstrate how overworked and overburdened you are by cataloging every conceivable action you’re considering for the next quarter. On the contrary, it’s a strategic endeavor focused on highlighting and maximizing the most critical value drivers of your business. If, for example, you hire another 10 in the next, don’t list “Hire 10 new people” as a key result. It’s simply business as usual and, while the additional staff may aid productivity and ultimately accelerate the execution of your strategy, it’s not a key result that demands any innovative thinking or stretch on the part of your teams. Maintain exclusive emphasis on identifying the key results that denote actual progress on your objectives.
 
 
Describe Results, Not Tasks
Regarding the item above, your goal is to isolate key results, not create a list of tasks or activities. To clarify our terms, when we say task, we’re referring to something that can typically be accomplished in a day or two, something that would reside comfortably on a to-do list. “E-mail a prospect” or “Meet with the new VP of Sales” are tasks, not key results. “Add twenty-five qualified opportunities to the pipeline” is a key result. It demands problem-solving and focus to meet with success. To distinguish between a task and a key result, look at the verb you assign. If you find yourself using “help,” “participate,” “assess,” or other relatively passive verbs (passive in this context, at least), you’re most likely offering up tasks rather than key results. If that’s the case, move up the value ladder by asking, “Why are we helping, participating, or assessing?” What is the outcome? Once you do that, a more solid key result featuring an action-oriented verb will likely emerge.
 
 
Use Positive Language
We shared this advice when discussing how to create objectives; it holds equally well here. Bigger is better with key results. Rather than offering a “Lower error rate of 10 percent,” consider the messaging power inherent in “Increased accuracy of 90 percent.” The positive framing will enhance motivation and increase commitment.
 
 
Keep Them Simple and Clear
We shared this device when discussing how to create objectives and it holds equally well here. Bigger is better with key results. Rather than offering “Lower error rate to 10 percent,” consider the messaging power inherent in: “Increase accuracy to 90 percent.” The positive framing will enhance motivation and increase commitment.
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2. Keep Them Simple and Clear
We once worked with a client that, because of the nature of their industry, had to demonstrate environmental stewardship to both their shareholders and community. Thus, it was inevitable that a key result would relate to environmental performance. The director of the group went off to deliberate and after some time suggested a key result that we’d like to share with you, but we can’t. Not because of confidentiality, but because we have no idea what it meant. To this day, after much explanation, we still don’t know what this ultra complex metric was intended to capture. And we’re not alone; members of the company’s leadership and the director’s own team were equally dumbfounded as to its nature, meaning, and efficacy. Needless to say this key result was ultimately scrapped and replaced by something that, while perhaps not as sophisticated or arcane, was understandable by all. Creating robust key results doesn’t mean you should require a PhD to decipher them.
 
 
Open to all Possibilities
When contemplating the best key result for an objective, a seemingly logical candidate may spring to mind with virtually no effort on your part. You’re so confident that this is the perfect key result for the objective that you eschew any further discussion and select it. This is an excellent example of the overconfidence bias in action. Stanford researchers observed the effect in practice at a fast-food chain whose executive team was focused on improving customer satisfaction and profitability. With little proof to back their claim, they steadfastly clung to the notion that employee turnover drives happy customers. Thus, they selected it as a key metric and invested substantial money to lower turnover. As the data accumulated, however, executives were shocked to discover that some stores with high turnover reported happy customers and increased profitability. In contrast, others with low turnover produced anemic results. With time and enhanced analysis, the store manager’s turnover drove satisfaction and profitability. When you begin selecting key results, it’s essential to possess the humility to acknowledge that you don’t have all the answers and thus be open to numerous possibilities.
 
 
Be sure to Assign an Owner.
A well-known phenomenon in social psychology literature is the diffusion of responsibility. Distilled to its essence, it suggests that people are less likely to act or assume responsibility when others are present. The quintessential example is someone suffering a heart attack on a busy urban street with nobody stopping to help because they all think someone else will. Less dramatically, key results may suffer the same fate if an owner is not assigned (i.e., since no individual is ultimately responsible for the results, no action is taken, and the goal languishes). Key results owners are not singularly accountable for the achievement of the key results but are designated as the go-to person for information related to that particular key result. They also update the company on progress during, and at the conclusion of, the quarter.
 
  One of our favorite quotes comes from a book titled How to Think Like Leonardo de Vinci. And who wouldn’t want to think like one of the greatest polymaths in history? The book’s author, Michael Gelb, has this to say about the task of making difficult choices: “The discipline of ordering … the discipline of choosing one over another, ranking on a level higher than another, and then articulating why you chose the way you did requires a depth and clarity of consideration and comparison that inspires richer appreciation and enjoyment.” We can think of no better way to describe the arduous but ultimately rewarding process of selecting objectives and key results of genuine value. Although it’s a difficult assignment, the hard work of making the demanding choices will leave you with a richer appreciation of what you select.
 
 
TYPES OF KEY RESULTS
Depending on the maturity of your performance monitoring systems and the data availability at your disposal, you may use more than one type of key result. In practice, we see three primary varieties. Each is outlined, with examples, below and illustrated in Exhibit 3.3
 The table below describes the five types of key Results and when to use them.

Type	When to Use	Examples
Baseline	You do not have a metric to reflect an important objective.	Obtain a baseline for online coupon redemption.
Positive Metric	Set a target for a metric where more is better.	Increase revenue per email sent by 10%
Negative Metric	Set a target for a metric where less is better.	Reduce invoice processing time from five weeks to two weeks.
Threshold Target Metric	Set a target range for a metric.	Maintain consultant utilization rate between 70 and 80%.
Milestone	You cannot express the result as a metric.	Release push-notification functionality.

 
 
Baseline Key Results
Consider a company that has just refreshed its strategy and decided to focus on forging strong and lasting relationships with customers as its value proposition. You may recall from Chapter 2’s strategy discussion that this is customer intimacy. An objective for this might be “Increase customer loyalty.” The team then deliberated and decided that “20 percent of customers redeem online coupons” is an essential key result. However, since the strategy is relatively new, they’ve never measured coupon redemption in the past and have no baseline for setting appropriate targets. In this case, they would use a baseline key result such as “Obtain a baseline for online coupon redemption.” During the quarter, they will find the baseline number that can be used as the source for the target setting of an actual key result in the next quarter.
In opening this section, we noted that the type of key results you use will partly depend on the maturity of your measurement systems. If you’ve recently pivoted to a new strategy or are new to OKRs and have scant experience with performance measurement, there is a strong likelihood you may need to rely on at least some baseline key results when you’re getting started with the program.
 
  Metric Key Results
These are by far the most common and will be instantly recognizable to you as they are comprised of what we typically think of when considering the topic of measurement. Metric key results track quantitative outcomes designed to gauge success on your objectives. There are three sub-types.
Positive metrics typically employ words like increase, grow, build, etc. For example: “Increase revenue per e-mail sent by 10 percent.” The key result is framed in positive language. Conversely, we have negative metrics composed of verbs such as reduce, eliminate, lower, or decrease. “Reduce invoice processing time from five to two weeks” is an example of a negative metric. They are a viable option; however, as noted in the tips section on page 74, we recommend using positive language to foster motivation toward the goal. Finally, there are threshold target key results. These are used when you require a range to describe the key result adequately. Take, for example, a consulting firm. Their revenue depends on having associates working with, and hence billing, clients. Therefore, utilization rates for consultants would likely represent an important key result, However, it’s tricky to pinpoint the exact target for utilization. Obviously the higher the utilization rate the more revenue the firm generates. However, utilization over a certain point may lead to burn out, stress, and poorer performance. In this case, you may institute a range of acceptable levels, for example: “Maintain consultant utilization rates between 70 and 80 percent.”
 
 
Milestone Key Results
Occasionally, you may encounter things that, despite your best efforts, are very difficult to translate into a metric key result. This often occurs when you have a seemingly binary outcome: we either did it or we didn’t. Did we ship the new product or not? Did we issue the report or not? However, yes or no, binary responses are unacceptable in an OKR framework. You need to translate everything into numbers to assess your progress towards the objective properly. In these cases, a milestone key result may be appropriate.
All of the key result types we’ve shared thus far will benefit from scoring, but for milestone key results it is especially essential. You may wish to jump ahead to page 80 to review our guidance on scoring. With that as context you can return to this page. Outlined below is an example from a recent client that highlights the milestone key result approach.
 
  The company’s engineering group had this objective: To release push notification functionality in various countries. The release to various countries was the obvious key result, but it appeared binary – either they did or didn’t release the push notification. By applying scoring, they were able to transform this into a much more effective milestone key result. A score of 1.0 would be achieved should they release the functionality to all countries. Obviously, this was an enormous stretch and most likely not realistic. The still ambitious but reachable target of releasing the functionality in Canada and two additional countries was represented by a score of 0.7 and likely signified their most applicable target below that they instituted a 0.5 target level for releasing push notifications just in Canada. Finally, should they simply ensure push notification functionality passed QA and had scheduling tested in Canada, they would receive a score of 0.3. By applying scores, they were able to convert a potentially inadequate binary metric into one that stimulated progress and innovative thinking to meet the targets.
 
Health Metrics
In our discussion of baseline key results, we used the hypothetical example of a company changing its strategy to one of customer intimacy. This fictional organization aimed to " increase customer loyalty,” and the key result was that “20 percent of customers redeem online coupons.” Why would they want customers to redeem online coupons? To increase revenue of course. Not much of a brain teaser there, right? But it actually runs deeper than that. Coupons are just one method this company will likely engage in order to drive profitable revenue growth. Key to its strategy is loyalty, creating a genuine relationship with patrons, leading to match higher lifetime value for each customer. Over time, the company might use in-store promotions, rewards programs, online marketing, and several other methods may change, it is ultimately interested in whether the interventions are leading to enhanced loyalty. Thus, it might utilize a metric like Net Promoter Score (NPS), which denotes the likelihood to recommend a product or service, to determine ongoing loyalty. The key word in that sentence was ongoing. It won’t take the pulse of NPS just once and move on. It will be a critical and enduring metric as the company continues its efforts to execute the strategy.
In this instance, NOS can be considered a health metric, which we define as something the company will monitor frequently (over years, perhaps) because it represents the successful execution of its strategy. You can probably think of several other metrics under the health banner. Employee engagement is an obvious candidate. Without engaged employees willing to provide discretionary effort to achieve goals you have little chance of success, regardless of the brilliance reflected in your strategic plan. Certain financial metrics will also likely fill your roster of health metrics: Revenue growth, net profit, and return on assets are all standard indicators of fiscal well-being and should be examined on an ongoing basis. Health metrics should derive directly from your strategy and be considered a complement to your OKRs. In fact, a good diagnostic test of OKRs is their ability to positively move the needle on a health metric. If you’re considering the adoption of an objective and associated key results, but don’t envision any line of sight toward an overall health metric (and thus your strategy), perhaps you should go back to the flip chart and try again.
 
  SCORING OKRs
Let’s say you’ve created the following key result, “Obtain 20 new customers this quarter.” It’s a stretch goal that excites the team, and everyone is eager to do their part in attracting new customers to the firm. At the end of the quarter, you’ve attracted 12 new customers. Is that great, good, or just okay? The answer to that question depends entirely on past results and your expectations for the future. If, during the preceding quarter, you obtained just one new customer, then 12 looks like a staggering achievement. However, if 15 new customers came on board last quarter, 12 will unlikely have people high-fiving in the hallways. To create effective key results that allow you to learn more about your business – and a primary purpose of any measurement is to do just that – you need to calibrate your expectations, creating a series of targets that specifically delineate exceptional, sound, and mediocre performance. Scoring OKRs does just that.
The score should be applied immediately after you agree on the wording for a key result. Doing so allows you to communicate expectations, enables continuous learning, and provides valuable clarity around what progress looks like for the key results. We suggest the following scale (see Exhibit 3.4):
 
  1.0: An extremely ambitious outcome that may appear nearly impossible to meet. This is where you begin; all key results should be written as the 1.0 to foster breakthrough thinking. In our previous example of obtaining new customers, twenty is our 1.0 target. It may appear to be a shot in the moon if the company has never come close to attaining that level of performance.
07.: This level represents progress that is difficult but ultimately attainable. To continue our example, securing 15 new customers could represent a valid 0.7 target level of performance because it’s a lofty number well on the way to our stretch but achievable based on past results.
03: We can phrase this as the “business as usual” target level. It represents a performance we can achieve with standard effort and little or no assistance from other teams. Our fictional company may believe acquiring five new customers is something it can do with minimal effort and therefore use that as the 0.3 level target. Considering the emphasis of OKRs is challenging teams to break from their current paradigms and devise new ways of working to meet inspirational goals, you may wonder why we would include a 0.3 target since it implies no extra effort to achieve. There is still learning value from this mediocre increment. If a team can only reach 0.3 on a key result (or results) at the end of the quarter, you’ll want to ascertain why. Did their priorities shift? If so, why? Were shared expectations unrealistic? Was the key result deemed irrelevant at some point? These queries, and many others, will reveal insights into how your teams work and the nature of setting effective key results you can draw upon in subsequent quarters.  
       Setting targeted performance levels is one of the trickiest aspects of any monitoring system. Even if you possess years of baseline data to draw on or industry averages you can confidently apply, you must still use subjective judgment when making the final determination of what targets are suitable for you. The right numbers fall somewhere on the art versus science continuum, and your challenge is pinpointing their exact location. Our advice is to take advantage of any quantitative background material you have (baseline data, industry averages, customer requirements, etc.), but don’t entirely shy away from subjective evaluations and “gut feelings.” Nobody should know your business better than you, and thus, professional judgment should be an important element to making final target decisions.
One final word on the scale presented above: The 1.0, 0.7, and 0.3 levels are what we recommend to our clients and what we’ve encountered most frequently in practice. However, you may wish to alter the scale if doing so is consistent with your business practices or culture. Some organizations find 1.0 simply too small a number and feel a grander scale might impel a greater drive toward the goal. Thus, they’ll use 100, 70, and 30, or sometimes 1000, 700, and 300.
 
  Mid-Quarter Check-Ins
You know that old saying, the only thing worse than bad news is bad news late? It applies to key results. You’ll grade your key results at the end of the quarter, determining whether you reached a 1.0, .7, or .3, but the last thing you want are surprises, especially in poor performance. For that reason, we strongly recommend you check in with teams and assess their progress throughout the quarter.
Our colleague, the OKR expert Christina Wodtke, has an easy-to-apply and practical suggestion to facilitate conversations during these mid-quarter check-ins. When setting key results at the beginning of the quarter, assign a confidence level of 5 out of 10. Remember, your 1.0 target must be ambitious, so a fifty percent chance of getting there should seem appropriate. With that as context, during the quarter you can assemble teams and ask where their confidence level currently resides. Has it jumped to 8 out of 10? Or, has it plummeted to 2 out of 10? Either way, the answers will be revealing and help you channel resources to either get the team back on track, or if they’re surpassing expectations, assist others with their key results. We’ll expand on this topic in Chapter 5.
 
 
What to Expect When Grading Key Results
Speaking of Chapter 5, it also delves into reporting, and managing with, OKRs, but at this point you may be curious about what to expect when grading your key results for the first time. Is it an abject failure if you have nothing but zeroes across the board? Or, conversely, does meeting every 1.0 target mean you’ve left substantial value on the table by not setting the bar nearly high enough?
In our experience, those new to OKRs will tend to encounter one of two outcomes in their initial foray with the framework; either they will have all ones, or at the opposite end of the spectrum, they’re left scratching their heads because, despite their Herculean efforts, their reports are littered with zeroes. As we noted previously, establishing targets is challenging, and most organizations have little experience proficiently. Therefore, depending on their culture and past experiences, they will either declare wholly unattainable, dent-the-universe type targets or, at the other extreme, accomplish goals that require virtually no effort to surpass. If either of these scenarios describes your company, don’t panic; it’s par for the course. What is most important when experiencing these initial bumps in the road is to exercise patience and trust in the process. With additional experience, your target-setting dexterity will improve, and you will enjoy the many benefits OKRs offer.
 
  Eventually, after a few quarters (more or less, every organization is different), your key result grades should begin averaging close to 0.6 to 0.7. Anything higher, and perhaps your targets are not aggressive enough, meaning you’re unable to take full advantage of the talent and potential your teams have to offer. On the other hand, results below 0.6 may indicate overly ambitious aspirations. If you’re consistently falling short, you’ll want to engage in a frank discussion with your teams about the attainability of their targets before they become demotivated and skeptical of the entire notion of OKRs.
 
 
Should You Score and Grade Objectives?
The short answer is no. Recall once again the definition of an objective – a concise statement outlining a broad qualitative goal designed to propel the organization forward in a desired direction. The objective is to inspire the team to new heights of growth and innovation. Through objective quantitative means, the key results let us know whether we’ve achieved the objective.
 
       Having said this, some organizations will attempt to score and grade objectives, employing various methods in their quest. One company decided an objective was either achieved or not. If each target on all the underlying key results was achieved, the objective was achieved. Otherwise, it was not. So, if it had five key results, and achieved the targets on all but one, it did not achieve the objective, To us, this will lead to nothing but confusion, skepticism, and demoralization on the part of employees who may put their best efforts into achieving key results only to be told their work isn’t good enough. Our recommendation is to focus on scoring and grading key results only.
 
 
HOW OFTEN DO WE SET OKRs?
Compared to many other management disciplines, one of the refreshing aspects of the OKR approach is that, at this point, at least, it can be considered an open-source framework. It’s not akin to generally accepted accounting principles (GAAP) that lay out the rules companies must absolutely follow when reporting financial results. There are no founding fathers or gurus laying down OKR guidelines as if on stone tablets, and this open-source environment is a great boon for organizations because it allows for customization and flexibility in implementation. There are a number of core principles (which we’re sharing with you), but ultimately, our advice is descriptive, not prescriptive, meaning you can alter parts of the model to ensure a fit with your particular business context.
 
  How frequently you set OKRs is one of the areas you might modify. The default answer to how often you create OKRs is, of course, quarterly. As we’ve previously noted, one of the chief virtues of the model is this rapid rhythm, which ensures enhanced communication and learning throughout each twelve-week period. However, quarterly may not represent the most fitting cadence for your business. Sadly, not all organizations recognize this inherent malleability of the model, and we’re aware of some that have abandoned OKRs because they falsely believed they must be set each quarter. Let’s read what John Doerr, who you’ll recall introduced OKRs to Google, has to say on the topic:
The key for any team or any group is that you use this on a regular basis…you should pick what frequency is right for you. When Intel was doing them monthly, National Semiconductor did them every four weeks, so they had thirteen periods in their manufacturing year because they were primarily a manufacturing company… and that was right for their culture. Most companies are quarterly, but some more agile firms are saying no; we want to align them with our sprints or development schedules. A quarter is too long. Instead of every twelve weeks, I’m going to set the timeframe to be every six weeks. Some places choose to do them quarterly and in parallel annually. So, I’ve got a set of annual OKRs and some quarterly ones that I update along the way.
As Doerr correctly notes, the key is using OKRs regularly, but of course, the word regular may take on a different meaning for you than for other companies. He also notes that some organizations will use a combination of both annual and quarterly OKRs. We call this a dual cadence approach. Within organizations using a dual cadence, the company defines a set of annual OKRs and typically breaks this down into a set of OKRs for each quarter. Teams may then create an annual and quarterly set of OKRs or decide to set OKRs only for the upcoming quarter. Among the benefits of the dual cadence is the aid of context provided by establishing annual OKRs. Teams and individuals then possess a direct line of sight from their OKRs to what the company wishes to realize during the year. In this way, an organization balances long-term (annual) strategic priorities with the quarterly victories necessary to meet them. Dual cadence is just one option; there are many others, again depending on the situation in which you find yourself. What matters most, to quote Doerr’s cogent guidance one more time, is using OKRs on a regular basis.
1.
2. HOW MANY OKRs DO WE HAVE?
The late screenwriter Nora Ephron left us with several Hollywood classics, including When Harry Met Sally, Sleepless in Seattle, and Silkwood. All three were Academy Award-nominated for writing. Before she turned her talents to the screen, Ephron was a journalist, and perhaps her greatest gift in that world was the ability to capture the essence of a story. She learned the importance of identifying a story’s core early on at Beverly Hills High School from her Journalism 101 teacher, Charlie Simms. Here’s the enduring lesson Simms passed on to Ephron.
He started the first day of class much the same way any journalism teacher would, explaining the concept of a lead. He explained that a lead (i.e., the leading sentence) contains the piece's why, what, when, and who. It covers the essential information. Then, he gave his students their first assignment: write a lead to a story. He then presented the facts of the story:
Kenneth L. Peters, the principal of Beverly Hills High School, announced today that the entire high school faculty will travel to Sacramento next Thursday for a colloquium on new teaching methods. The speakers will include anthropologist Margaret Mead, college president Dr. Robert Maynard Hutchins, and California Governor Edmund ‘Pat’ Brown.
The students then hammered away on their manual typewriters, outlining their lead. Each attempted to summarize the who, what, where, and why as concisely as possible: “Margaret Mead, Maynard Hutchins, and Governor Brown will address the faculty on…”; “Next Thursday, the high school faculty will…” Simms reviewed the students’ leads and put them aside. He then informed them that they were all wrong. The lead to the story, he said, was, “There will be no school Thursday.” In that instant, Ephron realized journalism was about regurgitating the facts and figuring out the point. It wasn’t enough to know who, what, when, and where; you had to understand what it meant. And why it matters.
 
  Ephron later noted that what Simms had taught her worked just as well in life as in journalism. We’d argue that it also works with OKRs. The day you set foot in a conference room with your team to debate and decide on your OKRs, you’re searching for the business equivalent of the “lead.” Just think of the universe of possibilities that awaits you when someone says, “Okay, what are our most important objectives?” You have customer concerns, shareholders or investors, the community, partners, vendors, employees, competitors, the list is endless. They are the organizational equivalent of the “why, what, when, and who.” Your challenge is cutting through the clutter and pinpointing what is most important to you.
Regarding the number of OKRs you produce, we recommend you adhere to the tried-and-true aphorism: less is more. We know this is a strenuous exercise, and not every organization is initially ready to tackle it. Several factors conspire to drive the number of OKRs to an unsustainably high count. Among them is the desire not to leave anything out (“Everything is important to us right now!”), The fact that it’s always easier to list many things than zero on the most critical, and the rise of software places no upward limit on the number of objectives and key results you can enter the system. However, there is a huge opportunity cost to increase your inventory of OKRs. Primarily, there is a lack of clarity and focus on the company’s priorities. Employees today crave knowledge of what is most important so that they might align their actions toward those goals, which results in significantly enhanced meaning at work. Should you develop eight objectives and 20 key results, it will make it nearly impossible for employees to be subject to the same laws of time as you, and we are to decide where to place their efforts.
As a species, we seem obsessed with maximizing … everything. Did you know the word priority entered the English language in the 1400s? It was singular then, meaning the very first or prior thing. It remained singular for the next five centuries. But in the go-go 1900s, we pluralized the word and began to speak of priorities. We felt that by changing the word, we could somehow bend reality and somehow have multiple first things. By sharing that anecdote, we’re not suggesting you limit yourself to just one objective and a few key results, although for those brands new to OKRs, it is an option to ease into the process. We’re simply restating the apparent principle suggesting that you’ll make little progress on anything if you try to do everything. As for an actual number range, if you examine the literature – and at this point, the literature amounts primarily to blog posts and articles – the consensus seems to propose between two and five objectives, each with two to four key results. However, we believe that is the very high end of the scale. We urge you to conduct the organizational forensics necessary to isolate what matters most to your business. Find your lead!
 
  DO OKRs STAY THE SAME FROM QUARTER TO QUARTER?
Consultants are sometimes criticized (in good humor we hope) for not always planting a flag of certainty and telling clients exactly what they should do to cure whatever ails them. As we can both attest, the answer to many questions posed to consultants is “It depends.” And that is the case with the question above.
Yes, some of your objectives may remain the same from quarter to quarter, especially those critical considering current strategic or operational challenges. The same may be said of key results; some may stay for consecutive quarters and beyond. However, recall our discussion of health metrics on page 79. We described them as measures the company will frequently monitor, perhaps over the years, because they are representative of the successful execution of their strategy. You will likely have objectives and key results that fall into this category of ongoing strategic significance. In the health metrics discussion, we noted the aim of “Increase customer loyalty.” We suggested that Net Promoter Score is a valuable ongoing indication of customer loyalty and, thus, may be elevated to health metric status, remaining unchanged until the company’s strategic direction is altered.
In the same vein, “Increasing customer loyalty” could be a health objective that is key to the translation of your strategy and is unlikely to change in the foreseeable future. If you’re pursuing a customer intimacy strategy, fostering long-term relationships will always be a critical desire. There is little point in adding it to your OKRs quarter after quarter, especially if you match it with the same key result. OKRs are about novelty, innovation, and creativity to spark breakthroughs. Repeating OKRs for years introduces a stale quality that is best avoided.
When you begin your OKR process, we recommend you generate a small number (a handful, most likely) of objectives that are crucial to the execution of your strategy and, therefore, unlikely to be modified anytime soon. When drafting them, it might help to think in terms of the “pillars” of your business: Financial, Customers, Key Processes, and Employees. What is the core set of objectives necessary to successfully win in your marketplace? These are your health objectives. Next, decide on the key results to gauge your success in meeting these objectives. Those, of course, represent the health metrics.
It's easy, very easy, to be sucked into the whirlwind of urgent problems and crises that face us when we set foot in the office each day. Easy, and in some ways seductive, because fighting fires feels good – you’re crossing something off a list, getting things done. But this is often at the expense of what truly matters – executing your strategy. By creating a small set of health objectives and key results you’re creating ongoing context for the OKR process each quarter. Constantly reminding yourself of what is most important and, at the end of the day, demands your utmost attention and care.
 
  CAN OKRs CHANGE DURING THE QUARTER?
Generally speaking, company-level OKRs will not be adjusted during the quarter. But please welcome back our old friend, “It depends.” These may be circumstances that demand a change in OKRs. One of us was working with the State of New Jersey just before Hurricane Sandy devastated parts of the state. In the weeks and months following the disaster, copious changes were made to their performance monitoring systems, reflecting the new reality faced by the many government departments required to provide services.
We’re not suggesting, however, that a natural disaster is necessary to modify your OKRs (at any level of the company) during a quarter. There are many other possibilities as well. For example, perhaps you acquired a significant new customer who initially demands intense resources from your teams. That could warrant the alteration of your current crop of OKRs. Or, you may decide to make a strategic pivot, which would also dictate and update the OKRs. What you cannot do is change objectives or key results simply because you feel they are too complicated, or you may have doubts about their efficacy.
Each quarter you use OKRs, you’re building a muscle, one that grows stronger as you introduce the discipline of setting, monitoring, grading, and, most importantly, learning from what the key results must tell you. Frequent alternations of OKRs during the quarter may be dressed up as “agility” or adaptive behavior, and in some situations, that may be true. But, in most cases, it’s simply an unwillingness to commit to the rigor and discipline necessary to strive for better and better OKRs that push the frontiers of knowledge about what drives your business.
 
  THE PROCESS TO SET OKRs
Throughout the chapter, we’ve provided numerous ideas, recommendations, and tips relating to the characteristics of effective OKRs. We’re certain that at this point, you’re anxious to put them into practice as you develop your initial set of objectives and key results. In this section, we’ll guide you through the actual mechanics of  creating OKRs. The exercise in conveniently represented by the fitting acronym CRAFT, which stands for Create, Refine, Align, Finalize, and Transmit (see Exhibit 3.5).
The process below summarizes the CRAFT process for creating and transmitting team-level OKRs CRAFT can also be used for generating top-level OKRs.

CREATE	Draft 1-3 stretch-level Key Results for 1-3 Objectives TIP: Work in small teams, “dynamic duo”
REFINE	Submit draft OKRs to entire team. Update OKRs in a workshop. TIP: Work with wider team. Develop scoring for Key Results.
ALIGN	Identify dependencies. Jointly define Key Results. TIP: Meet in-person to agree on dependencies with other team/s in small group. Adjust dependent OKRs accordingly.
FINALIZE	Present OKRs to supervisor for approval. TIP: Describe alignment process and outcome during supervisor review.
TRANSMIT	Communicate your OKRs and make them viable. TIP: Load OKRs into centralized location. Communicate OKRs of all hands and/or team meeting.