It is our choices . . . that show what we truly are, far more than our abilities.
—J. K. Rowling
Measuring what matters begins with the question: What is most important for the next three (or six, or twelve) months? Successful organizations focus on the handful of initiatives that can make a real difference, deferring less urgent ones. Their leaders commit to those choices in word and deed. By standing firmly behind a few top-line OKRs, they give their teams a compass and a baseline for assessment. (Wrong decisions can be corrected once results begin to roll in. Nondecisions—or hastily abandoned ones—teach us nothing.) What are our main priorities for the coming period? Where should people concentrate their efforts? An effective goal-setting system starts with disciplined thinking at the top, with leaders who invest the time and energy to choose what counts.
While paring back a list of goals is invariably a challenge, it is well worth the effort. As any seasoned leader will tell you, no one individual—or company—can “do it all.” With a select set of OKRs, we can highlight a few things—the vital things—that must get done, as planned and on time.
For organization-level OKRs, the buck stops with senior leadership. They must personally commit to the process.
Where do they begin? How do they decide what truly matters most? Google turned to its mission statement: Organize the world’s information and make it universally accessible and useful. Android, Google Earth, Chrome, the new-and-improved YouTube search engine—these products and dozens more share a common lineage. In each case, the impetus for development came from the founders and executive team, who made plain their focus and commitment through objectives and key results.
But good ideas aren’t bound by hierarchy. The most powerful and energizing OKRs often originate with frontline contributors. As a YouTube product manager, Rick Klau was responsible for the site’s homepage, the third most visited in the world. The hitch: Only a small fraction of users logged in to the site. They were missing out on important features, from saving videos to channel subscriptions. Much of YouTube’s value was effectively hidden to hundreds of millions of people around the world. Meanwhile, the company was forfeiting priceless data. To solve the problem, Rick’s team devised a six-month OKR to improve the site’s login experience. They made their case to YouTube CEO Salar Kamangar, who consulted with Google CEO Larry Page. Larry opted to elevate the login objective to a Google company-wide OKR, but with a caveat: The deadline would be three months, not six.
When an OKR rises to the top line, “all eyes in the company are on your team,” Rick says. “That’s a lot of eyes! We had no idea how we’d do it in three months, but we understood that owning a company-level OKR showed that our work took priority.” By adding so much emphasis to a product manager’s goal, Larry clarified things for other teams, too. As in Operation Crush, everyone rallied to help Rick’s group succeed. The YouTube cadre finished on time, though they shipped one week late.
Regardless of how leaders choose a company’s top-line goals, they also need goals of their own. Just as values cannot be transmitted by memo,* structured goal setting won’t take root by fiat. As you’ll see in chapter 6, Nuna’s Jini Kim discovered the hard way that OKRs require a public commitment by leadership, in word and deed. When I hear CEOs say “All my goals are team goals,” it’s a red flag. Talking a good OKR game is not enough. To quote the late, great Bill Campbell, the Intuit CEO who later coached the Google executive team: “When you’re the CEO or the founder of a company . . . you’ve got to say ‘This is what we’re doing,’ and then you have to model it. Because if you don’t model it, no one’s going to do it.”
For sound decision making, esprit de corps, and superior performance, top-line goals must be clearly understood throughout the organization. Yet by their own admission, two of three companies fail to communicate these goals consistently. In a survey of eleven thousand senior executives and managers, a majority couldn’t name their company’s top priorities. Only half could name even one.
Leaders must get across the why as well as the what. Their people need more than milestones for motivation. They are thirsting for meaning, to understand how their goals relate to the mission. And the process can’t stop with unveiling top-line OKRs at a quarterly all-hands meeting. As LinkedIn CEO Jeff Weiner likes to say, “When you are tired of saying it, people are starting to hear it.”
Objectives and key results are the yin and yang of goal setting—principle and practice, vision and execution. Objectives are the stuff of inspiration and far horizons. Key results are more earthbound and metric-driven. They typically include hard numbers for one or more gauges: revenue, growth, active users, quality, safety, market share, customer engagement. To make reliable progress, as Peter Drucker noted, a manager “must be able to measure . . . performance and results against the goal.”
In other words: Key results are the levers you pull, the marks you hit to achieve the goal. If an objective is well framed, three to five KRs will usually be adequate to reach it. Too many can dilute focus and obscure progress. Besides, each key result should be a challenge in its own right. If you’re certain you’re going to nail it, you’re probably not pushing hard enough.
Since OKRs are a shock to the established order, it may make sense to ease into them. Some companies begin with an annual cycle as they transition from private to public goal setting, or from a top-down process to a more collaborative one. The best practice may be a parallel, dual cadence, with short-horizon OKRs (for the here and now) supporting annual OKRs and longer-term strategies. Keep in mind, though, that it’s the shorter-term goals that drive the actual work. They keep annual plans honest—and executed.
Clear-cut time frames intensify our focus and commitment; nothing moves us forward like a deadline. To win in the global marketplace, organizations need to be more nimble than ever before. In my experience, a quarterly OKR cadence is best suited to keep pace with today’s fast-changing markets. A three-month horizon curbs procrastination and leads to real performance gains. In High Output Management, his leadership bible, Andy Grove notes:
For the feedback to be effective, it must be received very soon after the activity it is measuring occurs. Accordingly, an [OKR] system should set objectives for a relatively short period. For example, if we plan on a yearly basis, the corresponding [OKR] time should be at least as often as quarterly or perhaps even monthly.
There is no religion to this protocol, no one-size-fits-all. An engineering team might opt for six-week OKR cycles to stay in sync with development sprints. A monthly cycle could do the trick for an early-stage company still finding its product-market fit. The best OKR cadence is the one that fits the context and culture of your business.
The history of the infamous Ford Pinto shows the hazards of one-dimensional OKRs. In 1971, after bleeding market share to more fuel-efficient models from Japan and Germany, Ford countered with the Pinto, a budget-priced subcompact. To meet CEO Lee Iacocca’s aggressive demands, product managers skipped over safety checks in planning and development. For example: The new model’s gas tank was placed six inches in front of a flimsy rear bumper.
The Pinto was a firetrap, and Ford’s engineers knew it. But the company’s heavily marketed, metric-driven goals—“under 2,000 pounds and under $2,000”—were enforced by Iacocca “with an iron hand. . . . [W]hen a crash test found that [a] one-pound, one-dollar piece of plastic stopped the puncture of the gas tank, it was thrown out as extra cost and extra weight.” The Pinto’s in-house green book cited three product objectives: “True Subcompact” (size, weight); “Low Cost of Ownership” (initial price, fuel consumption, reliability, serviceability); and “Clear Product Superiority” (appearance, comfort, features, ride and handling, performance). Safety was nowhere on the list.
Hundreds of people died after Pintos were rear-ended, and thousands more were severely injured. In 1978, Ford paid the price with a recall of 1.5 million Pintos and sister model Mercury Bobcats, the largest in automotive history. The company’s balance sheet and reputation took a justified beating.
Looking back, Ford didn’t lack for objectives or key results. But its goal-setting process was fatally flawed: “The specific, challenging goals were met (speed to market, fuel efficiency, and cost) at the expense of other important features that were not specified (safety, ethical behavior, and company reputation).”
For a more recent cautionary tale, consider Wells Fargo, still reeling from a consumer banking scandal that stemmed from ruthless, one-dimensional sales targets. Branch managers felt pressured to open millions of fraudulent accounts that customers neither wanted nor needed. In one case, a manager’s teenage daughter had twenty-four accounts, her husband twenty-one. In the fallout, more than five thousand bankers were fired; the company’s credit card and checking account businesses plunged by half or more. The Wells Fargo brand may be damaged beyond repair.
The more ambitious the OKR, the greater the risk of overlooking a vital criterion. To safeguard quality while pushing for quantitative deliverables, one solution is to pair key results—to measure “both effect and counter-effect,” as Grove wrote in High Output Management. When key results focus on output, Grove noted:
[T]heir paired counterparts should stress the quality of [the] work. Thus, in accounts payable, the number of vouchers processed should be paired with the number of errors found either by auditing or by our suppliers. For another example, the number of square feet cleaned by a custodial group should be paired with a . . . rating of the quality of work as assessed by a senior manager with an office in that building.
Table 4.1: Key Results Paired for Quantity and Quality
|
Quantity Goal |
Quality Goal |
Result |
|
Three new features |
Fewer than five bugs per feature in quality assurance testing |
Developers will write cleaner code. |
|
$50M in Q1 sales |
$10M in Q1 maintenance contracts |
Sustained attention by sales professionals will increase customer success and satisfaction rates. |
|
Ten sales calls |
Two new orders |
Lead quality will improve to meet the new order threshold requirement. |
Google CEO Sundar Pichai once told me that his team often “agonized” over their goal-setting process: “There are single OKR lines on which you can spend an hour and a half thinking, to make sure we are focused on doing something better for the user.” That’s part of the territory. But to paraphrase Voltaire: Don’t allow the perfect to be the enemy of the good.* Remember that an OKR can be modified or even scrapped at any point in its cycle. Sometimes the “right” key results surface weeks or months after a goal is put into play. OKRs are inherently works in progress, not commandments chiseled in stone.
A few goal-setting ground rules: Key results should be succinct, specific, and measurable. A mix of outputs and inputs is helpful. Finally, completion of all key results must result in attainment of the objective. If not, it’s not an OKR.*
Table 4.2: An OKR Quality Continuum
|
Weak |
Average |
Strong |
|
Objective: Win the Indy 500. Key result: Increase lap speed. Key result: Reduce pit stop time.. |
Objective: Win the Indy 500. Key result: Increase average lap speed by 2 percent. Key result: Reduce average pit stop time by one second. |
Objective: Win the Indy 500. Key result: Increase average lap speed by 2 percent. Key result: Test at wind tunnel ten times. Key result: Reduce average pit stop time by one second. Key result: Reduce pit stop errors by 50 percent. Key result: Practice pit stops one hour per day. |
As Steve Jobs understood, “Innovation means saying no to one thousand things.” In most cases, the ideal number of quarterly OKRs will range between three and five. It may be tempting to usher more objectives inside the velvet rope, but it’s generally a mistake. Too many objectives can blur our focus on what counts, or distract us into chasing the next shiny thing. At MyFitnessPal, the health and fitness app, “We were putting too much down,” says CEO Mike Lee. “There were too many things we were trying to get done, and then the prioritization wasn’t clear enough. So we decided to try to set fewer OKRs, and to make sure that the ones that really matter are the ones that we set.”
For individuals, as I found out for myself at Intel, selective goal setting is the first line of defense against getting overextended. Once contributors have consulted with their managers and committed to their OKRs for the quarter, any add-on objectives or key results must fit into the established agenda. How does the new goal stack up against my existing ones? Should something be dropped to make room for the new commitment? In a high-functioning OKR system, top-down mandates to “just do more” are obsolete. Orders give way to questions, and to one question in particular: What matters most?
When it came to goal setting, Andy Grove felt strongly that less is more:
The one thing an [OKR] system should provide par excellence is focus. This can only happen if we keep the number of objectives small. . . . Each time you make a commitment, you forfeit your chance to commit to something else. This, of course, is an inevitable, inescapable consequence of allocating any finite resource. People who plan have to have the guts, honesty, and discipline to drop projects as well as to initiate them, to shake their heads “no” as well as to smile “yes.” . . . We must realize—and act on the realization—that if we try to focus on everything, we focus on nothing.
Above all, top-line objectives must be significant. OKRs are neither a catchall wish list nor the sum of a team’s mundane tasks. They’re a set of stringently curated goals that merit special attention and will move people forward in the here and now. They link to the larger purpose we’re expected to deliver around. “The art of management,” Grove wrote, “lies in the capacity to select from the many activities of seemingly comparable significance the one or two or three that provide leverage well beyond the others and concentrate on them.”
Or as Larry Page would say, winning organizations need to “put more wood behind fewer arrows.” That, in very few and focused words, is the essence of our first superpower.