OKRs matter. When approached deliberately and implemented effectively, they can sharpen your organization’s focus, generate alignment between the different teams, and propel them toward achieving ambitious goals.
But OKRs are often misused or poorly implemented. In these cases, though rarely rendered completely useless, OKRs can become a waste of time, energy, and resources for your business. Fortunately, these mistakes can be avoided.
In this guide, we’ll dive deeper into how and why OKRs can help your business, and the mindset shift required to make them work. Then, we’ll detail what the common pitfalls when implementing OKRs look like—and how to avoid them.
Why OKRs Matter
Generally, for a startup to succeed at achieving ambitious goals requires a high degree of organizational effectiveness. Your teams, however many there may be, need to work in harmony with one another while also being effective in their own right.
One way to think about this is that as a leader of an organization, your job is to guide people in rowing a boat. In order for the boat to go where you want it to, each person needs to row in the same direction, at a similar tempo, and with the same destination in mind. Otherwise, you’ll just be spinning in circles.
In other words: to succeed, your organization needs to be greater than the sum of its parts.
OKRs can help you with this. They are a tool for enabling seamless cross-functional coordination within a company which, in turn, paves the way for organizational effectiveness— When teams are working together toward a shared goal in ways that complement each other’s efforts, harmony ensues and the organization becomes something greater.
What OKRs actually are (hint: not KPIs)
Simply put, OKRs—objectives and key results—are a framework for setting and charting progress toward ambitious strategic goals.
You can think of the first part, the objective, a big picture goal. An example objective might be “Become the leader in market share in our industry.”
Each objective has its own set of ancillary key results. A key result is a specific target that measures progress toward your objective. For example, the objective “become the leader in market share in our industry” could be supported by a KR such as “Acquire 10 new Fortune 500 clients this quarter.” Commonly, one objective is accompanied by three to five KRs.
OKRs, then, are ambitious strategic goals and the specific targets that you’ll use to assess your progress toward said goals.
A common point of confusion is the distinction between OKRs and KPIs. OKRs differ from KPIs in that KPIs give you a look at how the company is performing, while OKRs spell out how to actually improve the company’s performance.
You can think of a key result as a KPI with an added target, and a date by which you want to hit that target. The two concepts work in tandem with one another, with KPIs sometimes turning into key results.
Adopting the OKR mindset
While defining OKRs is fairly straightforward, their successful implementation has its challenges. This is in part because achieving success with OKRs involves leading a mindset change throughout your organization, rather than just instituting a set of protocols.
The crux of this mindset change is to be effective, not just efficient. Efficiency prioritizes outputs, whereas effectiveness prioritizes outcomes. Outputs are what you produce. When you optimize for outputs, you’re focusing on efficiency for efficiency’s sake. Outcomes, on the other hand, are the difference made by what you produce. When you optimize for outcomes, you’re prioritizing effectiveness, which drives the business forward.
For OKRs to work, everyone in your company needs to optimize for outcomes, not outputs.
Crafting the right mindset for success with OKRs also means approaching them with a sense of humility and experimentation. Getting them right is an ongoing process and what works for one company won't necessarily work for another. Be patient and recognize that it may take some trial and error (and time) before you find the optimal setup for your organization.
The payoff is worth it—as mentioned above, getting OKRs right can help you grow into a mission-driven, values-oriented company that’s focused, aligned, transparent, and engaged at all levels of the organization.
Six OKR Mistakes To Avoid
Now that we’ve looked at what OKRs are, how they differ from KPIs, and the value of an outcomes-based mindset—let’s consider six of the most common mistakes organizations make when implementing OKRs and how you can avoid them.
1. Not sharing why you've adopted OKRs
As you implement OKRs in your organization, make sure you communicate why you’re doing it, and what changes will follow once you do.
It’s easy to get overzealous as you push for the adoption of this new system—you’re eager to dive right in and make things happen, and understandably so. But OKRs work best when everyone is fully aligned around them. This is because OKRs exist to spur culture changes more than process changes.
For any culture change to take root and flourish, it needs widespread buy-in across the company. Consequently, it’s important that you clearly communicate the reasons you’re adopting OKRs and what the changes mean for everyone involved.
But don’t stop at communicating this message; overcommunicate it! Repeat the why behind your OKR initiative frequently. Team members should be borderline annoyed by how incessantly you discuss them. This kind of repetition is necessary for the actual mindset surrounding OKRs to take hold throughout the company.
2. Setting too many OKRs
A second mistake to be wary of when rolling out OKRs is setting too many of them. For most teams (or individuals, even) the natural impulse is to set a laundry list of OKRs that’ll match the scale and breadth of their ambition.
But while ambition is an essential ingredient for OKRs, they won’t work without its complement: focus. OKRs are a means of harnessing ambition through focus. When you set too many OKRs, you lose focus and whatever progress you make will be spread across your many OKRs, which means you’ll fail to make a significant dent on any single one.
In other words: if everything is a priority, then nothing is a priority. OKRs are about what you're not focusing on just as much as what you are focusing on.
One way to keep the volume of OKRs in check is by having every individual write and own one—and only one—OKR each quarter.
This requires a great deal of restraint and might even feel painful like you’re missing out on opportunities. But the truth is that it's okay to sacrifice things for the sake of outcomes that better the business.
In fact, it’s necessary. The point of doing OKRs is to clarify your thinking around these sacrifices and to deliberately choose the ones that you’d like to make. Limiting the number of OKRs you set will help you accomplish this.
3. Setting only top-down OKRs
There are two competing schools of thought on how to develop OKRs. The first suggests that they should be created and enforced from the top down. The thinking goes that OKRs are about company vision, and the vision comes from company leaders.
A second camp, on the other hand, argues that this process should be bottom-up, each individual or team setting their own objectives because they know themselves best.
The reality of it is that both processes can, and probably should, exist together. That is, with the right approach, you can set OKRs from the bottom up as well as from the top down.
You can do this by setting OKRs at the highest level of the company while also giving your teams the freedom to set their own OKRs that map to these. It’s not that exclusively setting top-down OKRs is necessarily incorrect, but it misses out on an opportunity.
So what’s this opportunity?
For one, teams and individuals know themselves and how they can contribute best. By giving them the ability to set their own OKRs, they’ll be able to leverage their unique strengths and motivations to help manifest the big strategic goals of the company in the most effective way they can.
But also, the freedom for your teams to figure out what to do on their own spurs conversations across functions. What you may find is that they come up with shared “glue OKRs” that align them with each other in ways that the top-down process would never have produced.
For example, if the engineering team feels they lack compelling OKRs tied specifically to their own function, they might take on commercial OKRs that align them with the enterprise sales team. Product might do something similar that finds them aligned with the partnerships team.
When you allow teams to set their own OKRs, they often come to alignment with other teams in unexpected ways that spur cross-functional innovation.
4. Crafting OKRs in isolation
While bottom-up OKRs are an important piece of the puzzle, setting top-down OKRs remains vital. These are what drive the company vision and the goals that support it. Because of this, it’s especially important to anticipate the stumbling blocks that come with top-down OKR-setting.
The most important of these is to ensure that the leadership team isn’t crafting OKRs in isolation from one another. This creates silo effects where, for example, your customer success and sales teams might end up devising OKRs that are completely misaligned.
Company leaders should develop OKRs together in a collaborative environment. OKRs that aren’t conducive to cross-functional alignment defeat the entire purpose of the exercise.
This will look different depending on team structure and the extent to which your company is distributed across cities and time zones, but the heart of the matter is that you all work on the OKRs together, which means each leader needs to have a hand in shaping the process.
A collaborative environment creates a space for cross-functional magic to take place. The effect is that company leaders all coalesce around a shared vision for the organization and the roles their functions can play in achieving it.
5. Including OKRs in performance reviews
This might be a polarizing suggestion to some: OKRs are a strategy execution management tool, not an employee evaluation tool. Consequently, you should keep them out of performance reviews and bonus calculations.
It’s all about creating the right incentives. OKRs require a level of calculated risk-taking, so to develop sufficiently ambitious OKRs, you need to set goals that you might not be able to achieve.
Including OKRs in performance reviews, consequently, disincentivizes risk and ambition. It encourages team members to instead game the system by setting targets that they know they can hit, all to ensure their achievements will look good on paper.
This is the precisely wrong way to structure OKRs. Unambitious OKRs are a loss for the organization — you’re not striving to get better with each and every quarter; you’re simply trying to hit your mark.
All of that said, separating OKRs from performance reviews doesn’t mean you need to divorce them from the discussion of performance altogether. It’s important to evaluate how employees are approaching their OKRs process, more so than whether they’re hitting their targets.
To do this tactfully consider:
- How they’re setting their OKRs
- How they’re focusing on their OKRs throughout the quarter
- How they’re helping others to achieve their OKRs
Provide feedback based on the answers to these questions, but keep this feedback away from performance reviews and conversations around compensation.
6. Not going all in
Another mistake that companies often make when implementing OKRs is that they implement them partially, only rolling them out to certain teams. This mistake can be fatal. It undermines the purpose of OKRs by making it impossible to harness their greatest benefits such as the aforementioned cross-functional alignment they help generate.
This gives us one final rule for rolling OKRs out in your organization: if you’re going to do it, go all in. OKRs should be a company-wide initiative that spans as many teams as possible, bridging them together.
This isn’t to say you need to go all in all at once. It’s okay to start small, provided you do it right. If you’re going to start small with OKRs, implementing them only in a select group, start with the leadership team. This way, you have cross-functional representation.
Cross-functional representation in the OKR process ensures you cultivate the same approach to OKRs throughout the company. This prevents OKRs from starting in separate pockets that might then independently develop their own OKR cultures and protocols that don’t gel well with one another.
If implemented successfully, this aligned approach to OKRs will then trickle down from the leaders as they establish OKRs within their own respective functions. A strong OKR culture proliferates organically down and across the organization.
OKRs can guide you to the mountaintop
By now, you may be wondering if OKRs are right for your company at this stage, or if you’re too early. Every company is different, but the reality is that it’s hardly ever too early to get started with OKRs.
More than a process that’s specific to your company’s stage, they’re a cultural mindset for your company to adopt, and the earlier you begin crafting a winning company culture the better.
As you bring them to your organization, remember to avoid the six common mistakes we touched on, recapped below:
- Not sharing why you’ve adopted OKRs
- Setting too many Objectives or KRs
- Setting only top-down OKRs
- Crafting OKRs in isolation
- Including OKRs in performance reviews
- Not going all in
If you can sidestep these and really get OKRs right, you’ll be one step closer to building an organization on the path to being as effective as it can be.
John Doerr, who literally wrote the book on OKRs, sums it up perfectly: “OKRs are not a silver bullet. They cannot substitute for sound judgment, strong leadership, or a creative workplace culture. But if those fundamentals are in place, OKRs can guide you to the mountaintop.”