Setting the right goals is a vital part of product management for both the development teams and the stakeholders. Product managers should know how to collaborate with the product team and define the objectives and key results, called OKRs, that define the product’s success in the form of measurable and realistic outcomes.

In this guide, we explore OKRs, their importance, why they’re used, and some examples of effective ones.

What Are OKRs?

OKRs are used by organizations to define their objectives and set measurable goals for a product. However, you shouldn’t confuse OKRs with Key Performance Indicators (KPIs). KPIs are indicators that help a team track its performance. Meanwhile, OKRs are the framework — they’re what you’re aiming for.

Although there are no hard and fast rules, it’s good practice to have a maximum of ten objectives for each quarter. Every objective can have one or multiple key results, depending on its complexity and the team working on it.

OKRs help you keep track of the big picture. You should set reasonable goals that can be accomplished in the given timeframe, such as a quarter or a year.

What Are the Principles of OKRs?

Every company or product team manages its OKRs differently, depending on the product roadmap. However, the following principles are standard and can make the OKRs more effective.

  • Stability: Your OKRs should be stable. That doesn’t mean that they need to be written in stone and immutable, but it does mean that the objective should be sustainable and stand the test of time.
  • Agility and Simplicity: OKRs are usually set quarterly, giving the organization an opportunity to adjust goals as conditions change.
  • Transparency: Share your OKRs within the organizations. It will create transparency and help stakeholders at all levels and departments align, ensuring that everyone is working towards the same goals.
  • Bidirectionality: OKRs don’t necessarily go from top to bottom. First, the product team sets strategic OKRs, and then every group creates tactical OKRs to align with the strategic ones.

What Are the Main Elements of OKRs?

Your objective is what you want to achieve. It’s an ambitious goal that, preferably, is inspirational and must be action-oriented. With a clear objective, the product team can keep ineffective execution and confused thinking at bay. Meanwhile, the key results are your monitoring system to make sure that the team will achieve the objective. They should be time-bound and realistic. More importantly, they should be measurable so that the team can determine if they met the objective or not.

Let’s look at an example:

  • Objective: Develop a new product vision
  • Key Results:
    • Interview customers and get their feedback.
    • Get internal feedback from the sales team.
    • Get scores from 30 prospective customers on the UX mockups.

In this example, the product team will get feedback from customers, identifying their unmet needs and opportunities for expansion using a tool like Parlor. They will then get scores on the UX mockups and attain insights from internal stakeholders, like the sales teams. Using this information, they can work to come up with a vision for the new product.

OKRs help teams create alignment, encourage engagement, and track progress. Besides the overall product OKRs, individuals and groups can also create OKRs for personal goals that will eventually assist them in meeting the original objectives.

Why PMs Use OKRs

Product managers use OKRs because they align a team. Objectives in OKRs are like short-term mission statements that the team has to accomplish. Instead of having an overall organizational objective, it’s better to have individual objectives that inspire every person in a product team. Meanwhile, key results quantify the inspirational language of an objective and keep everybody on track.

Without OKRs, individual employees can feel disconnected from the organization. How is their work benefitting the organization? In the absence of OKRs, it’s hard to make people feel like they’ve achieved anything concrete. OKRs let everybody know how they’re contributing to the success of the organization as a whole.

What Are the Benefits of OKRs for Product Managers?

Companies like Microsoft and Google use OKRs because of their inherent benefits. OKRs help product managers:

  • Connect individual employees to the organization’s overall goals
  • Give clear directions to every individual employee or team
  • Track progress regularly
  • Make informed decisions
  • Achieve transparency, measurement, and accountability
  • Empower the product teams and increase their productivity through action-oriented goals
  • Make team management manageable

How Can Product Managers Get the Most Out of OKRs?

To make the most out of OKRs, product managers need to ensure that they are:

  • Well-Defined: The OKRs should be clearly defined. Vague objectives are no good. Instead of “we want to make the customer like our product more,” your objective should be “encourage customers to refer the product to friends and family.”
  • Measurable: At the end of the quarter or the year, you should be able to measure your success quantitatively. For instance, you can numerically measure how many customers recommended the product to their friends and family through referral codes or links.
  • Comprehensive: Product managers must ensure that the objectives are comprehensive and tie in with the work every team or individual does in a day. Every team member should be able to use them to build OKRs for their individual role.

How You Can Build Effective OKRs

To start building your OKRs, here are 5 examples.

Example 1

Objective: Make our new product launch a success

Key Results:

  • Collaborate with the PR team to provide technical specs of the product.
  • Give a pre-launch update to partners and customers as per the audience engagement strategy.
  • Finalize sales enablement information and product datasheets.
  • Finish the updates on the product website.

The key results are directly linked to the objective and clearly indicate what every team needs to do. The web developers work on the website while the sales and marketing teams work on getting a product pre-launch in order.

Example 2

Suppose you want to increase the learning potential and opportunity for the product team. You can set an OKRs around these lines.

Objective: Increase learning opportunities for the product team

Key Results:

  • Start a mentorship program.
  • Conduct training sessions with at least 90% participation.
  • Complete ten knowledge-sharing sessions by product managers.

Example 3

Likewise, if you want to deliver new product features quickly, you can set OKRs for that too. Here’s an example.

Objective: Speed up the delivery of new product features

Key Results:

  • Increase the velocity of the sprint team from 30 to 38 points.
  • Lower the time from defining product features to its delivery by six weeks.
  • Reduce the bugs-per-feature metric from 1.9 to 1.3.

OKRs are meant to give you simple yes or no results. There’s no in-between. You succeeded, or you didn’t.

Example 4

For instance, you may aim to increase your conversion rate this quarter.

Objective: Convert more visitors

Key Results:

  • Increase the number of demo signups by 30%
  • Increase the signup rate for self serve by 10%
  • Keep demo cost under $40

As you can see, these key results are directly linked to the objective.

Example 5

Once your product is out for release, you may want to make the activation experience a breeze for your customers. The OKRs for it could look like this.

Objective: Offer a smooth activation or user onboarding experience

Key Results:

  • Increase the rate or profile completion from 25% to 60%
  • Raise the NPS score from 40 to 75
  • Reduce the churn rate during onboarding from 50% to 30%

If you want to make the last key result even more specific, you can identify the steps to reduce the churn rate. For instance, you can say that you want to reduce the churn rate in step 2 to step 3 of your activation funnel.

These examples would have made it clear that the key results ultimately help you get closer to the objective since they’re associated with its accomplishment.

How Can You Measure the Success of Your OKRs?

You can create a format for grading the OKR based on your organization. For instance, a partner at Google Ventures, Rick Klau, recommends giving your Key Results a score between 0.0 and 1. In the third OKR example above, the first key result states that you should increase the velocity of the sprint team to 38 points. If you manage to do it, you give the key result a score of 1. If you only manage to raise the velocity to 34 points, the OKR gets a score of 0.5.

Alternatively, you can grade your key results from A to F or score them 0% to 100%. In most cases, high scores for the key results translate to the accomplishment of the objective, but not always. It’s possible that even though your key results score high, you still didn’t achieve your objective. In that case, your key results weren’t actually helpful for the objective, so you need to rework them.

Best Practices for Defining and Using OKRs

The correct use of OKRs can be highly beneficial for a product team and an organization as a whole. Here are some good practices for using OKRs:

Pair Objectives with Key Results

Every objective should have three to five key results. Make sure these key results are measurable and relatively “aggressive.” Google and some other companies use ” stretch goals” to create a challenge. For instance, if they want to reduce the product delivery time by seven weeks, they set the stretch goal to five weeks, but they still consider the objective met at seven weeks.

Align Employee OKRs with Company OKRs

The ambitious goal you set for the product team should align with the company’s overall goals. It’s good to set the company OKRs first and then set individual or department OKRs.

Report Progress Regularly

The product manager should keep an eye on the progress of OKRs, and they should share it to make sure that everybody’s on the same page.

Challenges of Defining and Setting OKRs

Product managers might face the following challenges and pitfalls in setting OKRS:

  • Not Having an OKR Champion: When you roll out product OKRs, there’s inevitably a learning curve, so you need a senior team member who can knock down these obstacles.
  • Lack of Direction: If you don’t engage the employees or align their individual goals with the OKRs, the results at the end of the quarter will be underwhelming. It’s important to provide adequate training and guidance to employees so that they are familiar with the OKR methodology and can derive personal goals from it.
  • Too Many OKRs: You should make sure you don’t have too many OKRs to achieve. Too many will produce unnecessary friction in the organization.
  • Too Easy: If your organization is able to meet 100% of its objectives, the OKRs might be too easy. OKRs are meant to stretch out the teams, making everyone do more than just the usual. That said, they still need to have realistic goals. An unattainable goal won’t motivate anybody.

When you’re defining and using OKRs, avoid putting too many OKRs in the queue for one quarter. Instead, use OKRs for the prioritization of objectives.

Start by listing the objectives for the year. What does the organization need to achieve this year? Now, you can prioritize which objectives need to be met first. Divide your yearly objectives into four quarters based on their level of priority.

Moreover, focus on the outcome rather than the tasks. Many companies habitually plan around deliverables. Although this is imperative for strategy execution, you can’t use this approach for OKRs. OKRs are outcome-driven.

Conclusion

Whether your organization has a customer-centric or product-centric approach, OKRs can be very effective at spelling out the objectives for everyone, from product managers to development teams. The OKR framework requires you to set a realistic and ambitious objective. Then, you have to specify three to five key results that will eventually help you meet the objective.

A good OKR is meaningful, inspiring, measurable, and audacious. If it has these characteristics, your team will get it done, and your goals will be met.