How to set Objectives and Key Results (OKRs) for your startup?
''Measure What Matters’ by John Doerr highlights the importance of having clarity and focus to achieve your goals.
There’s a great quote by Steve Jobs - “People think focus means saying yes to the thing you've got to focus on. But that's not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully. I'm as proud of the things we haven't done as the things I have done.”
Objectives and Key Results (OKRs) help your startup focus on getting to your next milestone, whether that is to raise your next round of funding or to get to revenue sustainability.
What are OKRs?
Every startup founder has 10 ideas every day. What is difficult is to execute on one that you can make work and impact the world in some shape or form. ‘Measure what Matters’ enables you to focus on execution and set objectives and associated results to get there.
Several companies such as Intel, Google, Amazon, the Bill Gates Foundation, and LinkedIn have had success using this methodology.
OKRs is a management methodology that helps the company focus efforts on the same important issues across the entire organization. An objective defines what has to be achieved, nothing more, nothing less. Your objectives should be significant - which means that they matter to your company’s success. They are concrete and action oriented. And if you do them well, they're also inspirational.
The key results are how you benchmark and monitor how to get to the objectives. They're specific, time bound, aggressive, but also realistic. And most of all, they're verifiable. It should never be the case that you cannot measure, or verify one of your key results. And the way to think about it when you're writing them out is to complete this sentence - “We will achieve a certain objective as measured by the following key results”.
Why are OKRs important? It enables you to focus and commit to priorities and to align and connect for teamwork.
If you have OKRs set for your startup you empower your team members to understand what they can contribute towards and how they can do so. As a startup team, everyone knows each other well and you play to your strengths. However, as your team grows, you might not know every skill, expertise, or network connection that someone brings.
As your team scales, OKRs provide focus, clarity, and transparency to the entire team. Everyone is held accountable to their respective OKRs.
At BonBillo, we have a small team that runs social entrepreneurship training programs across multiple countries and we’ve largely achieved this because we have very clear OKRs. If something doesn’t contribute to our OKRs, we just don't do it. It's that level of prioritization that allows you to make progress as a small team with limited resources.
OKRs are meant to push you to stretch goals. If you hit between 60 to 70% of your company's OKRs, you should be doing well and it puts you on a wonderful growth path towards your next milestone. If you hit 100% of your OKRs consistently that means you’re not setting aggressive enough goals.
OKRs vs MBOs
OKRs differ from management objectives, an older, more typically used methodology across larger companies. OKRs are used to define the what and the how - the results that you're going after providing the how as well.
OKRs are meant to be comprehensive which means that if you hit your key results, your objective should be achieved.
The timeframe is typically shorter - monthly and quarterly compared to MBOs, which are set every year.
OKRs are public and transparent across your entire team. MBOs are typically more siloed.
The main difference is that your goals are not only set top down with OKRs but also bottoms up. In a small startup team, the CEO will typically set and align the team on the company's OKRs. For individual OKRs, there's a split between what comes from the CEO and what you choose to contribute towards. And that's a conversation that empowers the team to identify key areas where they can make an impact.
Typically, OKRs are not related to compensation, enabling the team to set aggressive goals.
Best practices when setting OKRs
Best practices include having a maximum of three to five OKRs per cycle which allows teams to focus on what matters most. In the beginning, startup teams are small and more resource constrained, and even just one OKR may be enough for the startup to achieve their next key milestone.
It is important to set goals from the bottom up to promote team engagement and ownership. Individual members should be encouraged to create roughly half of their OKRs - it's a cooperative social contract.
As an early-stage startup, you’re at the stage where you're either validating your value proposition, or you are figuring out product market fit. You are iterating on your product based on learnings from customers to build something that adds value to their lives. Your OKRs from last month or last quarter may no longer be relevant with new learnings that come from your customer. You must be flexible and nimble to change OKRs when it makes sense to do so. If you have new learnings or customer insights, you should be able to act on that very quickly and update your OKRs.