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3.4 OKR's ⭐️

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This section includes a mandatory Assignment ⭐

Objectives and key results, better known as OKRs, is a framework used by many tech companies for setting and tracking goals on a company, team, and even individual level.

First introduced by Andy Grove at Intel in the 1970s, OKRs made their way in 1999 to a startup named Google. They became central to Google's culture, and cofounder Larry Page credits much of Google's amazing success with their use. Today, the adoption of OKRs is so widespread among tech companies that you're going to spend this entire checkpoint learning about them.

Companies love to measure performance. But how do you decide on useful, achievable performance goals? How do you set performance improvement targets for the next month, quarter, or year? How can you keep track of your progress on big initiatives? And what should you do when someone throws a wrench in your plans?

OKRs provide a framework to handle this. Even if your company doesn't use OKRs, you'll be a better product manager if you create your own goals and try to achieve them. Below, you will dig into how you can do this.

By the end of this checkpoint, you should be able to do the following:

  • Explain what OKRs are and how they help companies achieve success
  • Describe how companies set and use OKRs for tracking progress
  • Create your own OKRs that are more than just goals

Why set goals?​

Even before digging into OKRs specifically, you should learn about why goals matter.

First, setting a goal helps you prove that you made an impact. Imagine that you're in charge of the registration flow for Paypal and that you manage to improve sign-ups by 100 people over a quarter. Given the huge number of users that Paypal already has, this negligible increase would not be viewed as a success. By contrast, imagine you could time-travel back to the early days of Paypal when only 100 new people were signing up per day. If you had doubled daily sign-ups by adding 100 people per day, that would be a huge achievement. By setting goals, you can establish what a good result looks like and increase your likelihood of having a measurable impact.

Second, setting goals helps you to achieve them on a psychological level. A goal with a specific outcome and concrete measurement is better than one with fuzzy criteria like "improve X." You can declare victory and celebrate once you pass that specific threshold, or you can put in some extra work if you're not there yet. In short, goals create motivation and urgency.

To learn more about setting goals in the product management arena, check out the video below.

What's an OKR?​

OKR stands for objectives and key results. The objectives are clearly defined goals you want to achieve. The key results are appropriate metrics that determine whether or not you've achieved those goals.

Many companies find OKRs useful because they ensure that all employees are aligned with the company's top goals. At the end of a quarter (or whatever your OKR measurement period is), it's easy to see if you or the company have met your separate goals.

OKRs are usually set through a collaborative process and are made public to your coworkers throughout the company. Most companies set OKRs for the next quarter right before that quarter begins.

Your OKRs can be specific, like "increase the average order value by 5%," or fuzzier, like "run three experiments to learn which part of the checkout flow can be improved the most." The second one is a little more vague, but it's still measurable. You either ran three experiments by the end of the quarter, or you didn’t.

Here's a hypothetical list of OKRs from a product manager (say a hypothetical PM Janet) trying to improve conversions at a B2B startup for one quarter:

  • Reach 2,000 active daily users created by the registration flow
  • Conduct 10 interviews with current customers on their product use
  • Increase registration conversion rate 15% from last quarter
  • Ship fixes for the top two support issues in registration
  • Take ownership of the two-year roadmap for my product

This PM might have a bunch of other smaller goals or other metrics she's monitoring, but she is prioritizing these specific goals as OKRs because they're the most important ones for her, her product, or her company. Below, you'll dig further into this process of setting and using OKRs.

How are OKRs made and used?​

Many companies use OKRs, from Amazon to Zynga and everyone in between. They're generally used for aligning your company as a whole in a decentralized fashion. Some companies use OKR results to evaluate employee performance.

Most companies set their OKRs in a top-down fashion each quarter. Here is an example of this.

  • The board or executive team sets the company targets for the next few quarters
  • Each team (marketing, sales, product, etc.) sets its own OKRs based on how they contribute to the company's goals
  • Each individual on the team decides their own OKRs based on their role in the team
  • Everyone shares and checks each others’ OKRs to ensure they're all aligned on the goals

At the end of a quarter, teams and individuals evaluate themselves on their OKRs, usually on a scale from 1 (poor) to 4 (great). They set an overall score for how they did based on the individual scores. Then, they set their OKRs for the following quarter based on the previous quarter's results, taking into account any changes to their team's or company's OKRs.

How do you set OKRs?​

Setting your OKRs is an important ritual at a lot of companies. You'll have deadlines for OKR drafts, manager approval, feedback from coworkers, and more. Every company has its own process for creating and approving OKRs, so make sure you learn how it's done at your company.

Setting OKRs is a group project. Your contributions can help other teams achieve their goals. And similarly, you'll need help from other teams to accomplish yours. If you're planning OKRs that will affect other teams, you should spend time with them to ensure you are all aligned. The last thing you want is to set an OKR that has a dependency on another team only to find out that that team has not prioritized that same goal.

For example, if you're managing the tools YouTube uses for content moderation, the content moderation operations may have an OKR for improving their efficiency, while you have a similar OKR on your team to provide features that improve efficiency. Another example: if you're a PM running a B2B SaaS app and your sales team needs a few key features to hit their sales goals, you should have OKRs for developing those features. You must choose the appropriate OKRs so that both your team and the sales team can hit your goals.

On the flip side, people sometimes use OKRs defensively if they don't want to work on specific items. For example, say your top OKR is to increase the conversion rate of users on your site. Your sales team wants you to launch a few new internal tools to help them manage demo accounts. You say no to your sales team, because your OKRs are focused on registration, not demo tools. This is one more reason why you need to be aware of other teams' OKRs. If you don't know what they're aiming for and why, you might miss the opportunity to collaborate and achieve bigger success together.

When it comes time for you to set OKRs for your team, start by having a conversation with your manager and your teammates—especially those in product, design, and engineering. Ask yourself—and your counterparts—the following questions:

  • What are the most important things we can accomplish this quarter as a team or company? What about in the next two years?
  • What goals do you have (either personal or team goals) that you need my help with? What goals do I have that I need your help with?
  • What do I need to do to ensure we're successful at achieving those goals? What do I need to do for myself versus for the team?
  • What other personal goals do I want to make progress on?

You should be able to come up with many goals, a few of which you'll focus on for your OKRs.

What makes a good OKR?​

Not every goal is an OKR. A good OKR has a few qualities that set it apart from other kinds of goals.

  • It's an outcome, not an activity. A good OKR describes the effect of what you did (such as "a 5% increase in conversion rate"), not the action itself (such as "a change marketing strategy").
  • It's SMART: specific, measurable, achievable, realistic, and time-bound.
  • It contributes to a larger goal, like your team OKRs or company OKRs.
  • It's important enough to be a top goal. It usually refers to a KPI or other important metrics.
  • It's a personal improvement, piece of individual work, or contribution to your team.

You could be monitoring 20 different metrics to evaluate the health of your product, but only one or two of those metrics is important enough for setting OKRs. Similarly, you could have lots of plans to improve your product via new features, but only the features that you're launching in the very near future are worth covering in your OKRs.

Good OKR, bad OKR​

Go back to the B2B product that was used as an example earlier in this checkpoint. When setting goals for the next quarter, do you think the following OKR is good or bad?

Increase weekly sessions per user by 10%

This is a pretty good OKR—it sets a specific metric, it's easy to measure, and 10% is probably a reasonable amount to increase within the timeframe.

Now, how about this next one?

Increase weekly sessions per user by 200%

You're aiming for a huge increase—more than doubling a metric. If you have a realistic plan for how to do it, then it could be a good OKR. But, in general, any time you see goals this ambitious, you should adopt some healthy skepticism and critically examine if the goal is actually achievable.

What about the next goal?

Increase total users by 10%

As discussed in the previous checkpoint, "total users" can be a vanity metric. In most cases, this is a poor OKR. You should find some other usage statistic instead, such as "sessions" or "active users."

How would you judge the following OKR?

Participate in one sales call per week

This is a pretty good OKR if you're looking for a goal to emphasize keeping in touch with your users. But, this could also be a vanity metric, unless you can translate it to other goals, like improving other KPIs.

Become a better presenter

This is a bad OKR. How can you measure your improvement? And who gets to decide whether you've become a better presenter? In this case, you're better off with a specific goal to put you on the right path, such as "give one presentation a week."

Handling issues in OKRs​

At some point in your career, you'll get some new high-priority item that will threaten your OKRs. Maybe the CEO wants you to launch a demo of an iPhone app next month, but you don't have any OKRs for this. You don't even have designs. What do you do? Here are a few tips for dealing with these kinds of OKR situations.

Say yes or no, not maybe. As discussed earlier, you can always just say no and tell others that you can't take on the additional work because it will prevent you from accomplishing your existing goals for the quarter. Conversely, you can just say yes—replace your OKRs with new ones, but make sure everyone understands the trade-offs and consequences. Bottom line—you'll need to weigh the new directive against the existing priorities and current work being developed, and fight for what you believe is the right outcome. If you say no, you may not win the argument, but at least you stood up for your work and product. Don't say maybe. Have an opinion.

Come back with research. Much of the time, threats to your OKRs will be based on external pressure, like a conversation with one angry customer or a push from the board of directors. Do your research to make sure you understand the problem in detail and ensure there's a real fit for it in the product. Share your results with appropriate stakeholders. Sound research and data can be especially useful if you need to say no to someone high in the hierarchy, like your CEO or CTO. Again, you may not always win, but you'll have a much better chance of shifting an unsuccessful trajectory into a successful one.

Schedule in extra time. New priorities will come up all the time, and some will be worth taking on. One way to anticipate this is to under-commit at the start of a quarter—that is, set your quarter's worth of OKRs to less than a quarter's worth of work. When new opportunities come along, you'll know that you already have some time set aside for handling the new work items.

Make your goals fuzzier. Instead of putting "launch the new registration error checking to increase conversion rate 5%” in your OKRs, you can instead go with a lighter version like “launch three improvements to the registration flow 5%." Doing this will give you some space to choose any features you want. When a new idea comes along for improving the registration flow, you can take it on and still be on track to accomplish your OKRs.

If your company doesn't do OKRs​

You should do your own OKR and goal setting even if your company doesn't. Goal setting will motivate you and allow you to measure progress. Setting and publicizing your goals makes you more likely to accomplish them. If you succeed, you get to celebrate your wins. You might even be able to shift your team or company into embracing OKRs.

Companies that don't do OKRs as a formal process still probably do some kind of goal-setting activities. Try to participate in these activities as much as you can. You may find ways to help your company accomplish its goals, and it will allow you to become a good translator of the company goals to the rest of your coworkers.

Assignment 03 ⭐​

In your notion page/notebook, answer both of the questions listed below.

  1. Imagine you're the PM overseeing each of the following products. For each product, write up a set of OKRs for the next quarter. Ask yourself what the top goals are for each company and how OKRs for this specific product could help the company achieve its higher-level goals:
  • Gmail message composer on a web browser
  • Amazon Prime subscriptions
  • Good Call, save a contact
  • LinkedIn Learning subscriptions
  1. Imagine you are starting your first role as a product manager and need to set your own OKRs. What do you think your first 30, 60, and 90 days on the job should look like? Write out five personal OKRs. Think about when you should achieve each and how you will measure whether you met your goal or not.

Submission​

Submit a link to your answers in the slack channel #assignment-03. Feel free to type the answers directly in slack as well but make sure you save them somewhere.