Fix Your OKRs - Back to First Principles

OKRs have become the latest management framework to suffer from becoming popular too quickly. In many organizations they have turned into theater/charade: a lot of alignment language, a lot of spreadsheet upkeep, and very little real steering.

That is a shame because OKRs can be genuinely useful when they are used from first principles. They help leaders focus on the few changes that matter, align people around outcomes, and create a feedback loop for working on the business rather than just running the business. The reset starts by asking what OKRs are actually for.

You can choose the video below or the full article right after it.

Let’s start with the basics. What are OKRs even about? 

OKRs aim to help you execute effectively on what matters most (your strategy), while overcoming silos, politics and turf wars, the ongoing grind (aka whirlwind), and other management challenges. To face all of these challenges, OKRs provide organizational alignment and focus. 

As defined by WhatMatters.com:

OKRs - an Alignment Framework - a collaborative goal-setting methodology used by teams and individuals to set challenging, ambitious goals with measurable results. OKRs are how you track progress, create alignment, and encourage engagement around measurable goals.

Let’s now dive into HOW OKRs (used well) set you up for success and what might go wrong. 

OKRs should help you focus on your strategic priorities. Having a small set of strategic objectives reduces context switching and provides a rallying cry that helps cut through silos and politics. 

Choosing where to focus is hard, though. It’s much easier to define an OKR for everything - and then when everything is important, nothing is really important. and that’s exactly what we often see out there. 

So with that in mind - 

Avoid … mapping all planned initiatives to OKRs. 

Try … rallying around 1-2 OKRs. 

Another way organizations drown themselves in OKRs is by having OKRs for everything. 

Running the business doesn’t require OKRs. Key Performance Indicators (KPIs) can be used to manage/monitor operational work. 

OKRs should be used just for development/growth work - work we do to change how we do things. 

As you might imagine, This distinction helps reduce the number of OKRs significantly, leaving a set of fewer, more focused objectives. 

Development/Growth/Transformational work typically involves more uncertainty and complexity than running the business as usual. In this environment, a  lot is unknown - What’s the best way to achieve the goal? Does the goal still make sense? 

Our way of working ON the business might need to look different than our way of working IN the business. (see this article for a deeper dive on what working ON the business might look like)

This environment calls for evidence-based management - a management approach designed to improve outcomes when facing complexity through unleashing empiricism, self-management, and cross-functional collaboration. 

OKRs are designed to be an evidence-based management approach. But there are a couple of key principles and practices that need to be in place for that to take place. 

One key aspect in ensuring OKRs enable evidence-based management is the type of goals we use. Managing outputs and activities can work reasonably well for working in the business since that work is typically operational and defined. 

On the other hand, Using output/activity-based goals to work ON the business fixes plans, specifications, and designs too early. It reinforces a “factory” mindset where people focus on their deliverables rather than the wider problem/opportunity. And it lends itself to heavy-handed command and control. 

For complex, uncertain work, you should set goals using outcomes. Outcome-based OKRs unleash self-management, empiricism, and people’s creativity to explore/discover. They create environments where people are empowered to work together to solve problems. This is how you should be working ON the business. 

One of the challenges with managing through outcome-based goals is that you need to wait longer to see outcomes - making it tempting to manage through outputs or even activities. But remember - the role of OKRs isn’t to manage the day-to-day. It is to provide alignment around where to aim. People can use other processes to manage their work toward the OKRs. 

Instead of breaking outcomes into outputs/activities, experiment with identifying intermediate outcomes. This is challenging but satisfying (TIP: Slicing outcomes is similar to identifying a Minimum Viable Product, Minimally marketable features, and Slicing Stories… so your Product leaders and Agile practitioners can help out on this front). If coming up with outcome-based KRs is too hard, Start with making sure at least the qualitative Objectives are outcome-focused and, over time, evolve from output towards outcome KRs. 

When leaders want to align their wider organization around their strategic goals, they often cascade OKRs throughout the organization. This strict cascading means that by the time you get to the people who will work towards the goals, they are bound to tasks/activities and don’t have the maneuvering room they need to seek the best way to achieve the goal, not to say reconsider what’s the best goal. This looks quite similar to OKR’s predecessor - Management by Objectives (MBO) which was very control-oriented. And it results in people who are disengaged. (did anyone say “quiet quitting”?)

There’s a false dichotomy that many leaders fall for, which is the belief that alignment requires control. Actually, alignment and control are two separate aspects that can work in concert to create effective management. Donald Reinertsen calls this Aligned Initiative. David L Marquet talks about Intent-based Leadership. Henrik Kniberg, in his usual brilliance, maybe nailed it best in this diagram describing Spotify’s “Aligned Autonomy” engineering culture principle (Jason Yip elaborates on this principle here). 

Why does initiative/autonomy matter so much? There are two main reasons. The most important one is that in the creative work that working ON the business requires, the best solutions emerge from the people in the trenches. And by providing them with a clear goal and empowering them to take the initiative, we dramatically improve our chances of achieving the desired outcomes. A secondary benefit is that people are intrinsically motivated by being empowered and provided with the right level of autonomy.

The key, then, is to achieve alignment without strict cascading. Leaders should use OKRs to provide context and direction. To inform about why rather than prescribe what/how. Teams/groups then come up with their OKRs. The connection can be reinforced as part of the “Why Now” for each objective. Teams/Groups share their intent with each other and with relevant leaders to help ensure alignment in an environment of empowerment/autonomy. 

(This might seem like a complex process to pull off… the good news is that there’s a lot to learn from agile ways of working about facilitating such processes. For example, I helped a fast-growing biotech startup create an approach for cross-company OKR planning leveraging a process similar to SAFe’s PI/Big Room Planning)

A key aspect of evidence-based management is the feedback loop. Many organizations set OKRs for the quarter and then forget about them until the end of the quarter. It’s like setting your sales quota and only checking back at the end of the quarter. Recipe for disaster, right? 

The other extreme is to micro-manage OKRs to death. 

It’s all about finding the “goldilocks” cadence that provides frequent enough transparency and the opportunity to inspect and adapt at the right level. There can be a different cadence for everyone involved in achieving an OKR as compared to the cadence involving all stakeholders interested in that OKR. The right cadence also provides an opportunity to reinforce/communicate strategic priorities and focus. 

The Scrum framework provides one example of how such a cadence could look. Consider a cadence that involves Planning, Reviewing, and Retrospecting with a clear distinction between the team working on the OKR and its stakeholders. 

Leaders struggle to manage the cross-functional collaboration and dependencies many OKRs require. The coordination overhead makes it tempting to divide and conquer and cascade the OKRs into focused/defined OKRs for each function/group. The problem is that this immediately turns into output/activity focus and ends up with the same challenges described earlier in the Rally around Outcomes section. Why? Because functions cannot own cross-functional outcomes. 

So what’s the alternative? To organize around OKRs. After identifying the few real OKRs, assess who’s needed to work towards each of them. If they require cross-functional collaboration, create an empowered cross-functional work team to make collaboration easier. Another benefit of organizing around OKRs is that working on a team around a clear business strategic goal with a clear, quantifiable metric that the team is empowered to have a direct impact on boosts the feeling of purpose and creates better engagement and motivation. 

I often see teams and organizations that struggle with the relationship between OKRs and agile ways of working. They’re unsure of the best way to relate OKRs to their Backlogs and feel there’s a redundancy between the agile and OKRs cadence. 

Hopefully, at this point of the discussion, you can see that OKRs and agile ways of working are very similar. Both are based on focus, cross-functional collaboration, alignment, empowerment, and empiricism. 

So how do we address the overlaps? 

Some OKRs map cleanly onto existing teams/groups in a product development organization. In this scenario, they can inform the creation of Product Backlog Items for the team/s to focus on (or the creation of Features/Epics in a higher-level backlog ). If a new product development team or team of teams is created to focus on a cross-cutting OKR, the OKR can become the Product Goal / Vision for this new group. In both cases, how we’re doing on our OKRs should be inspected during Planning and Review events and inform decision-making. There’s no need for an additional ongoing OKR cadence. Quarterly or so OKR review/planning can replace “Release Planning” with a higher focus on outcomes/impact. If needed, this OKR review/planning can include a “dry run” planning exercise along the lines of SAFe’s PI Planning to make sure that the OKRs are both aligned with the business stakeholders and realistic. 

There’s a wider opportunity here, though. While Scrum was created as a framework for managing product development, it is appropriate for working on any complex problem. As we’ve established earlier, work to achieve OKRs is typically complex, even when it’s not product development work. The natural next step is to apply Scrum (or other agile ways of working) as the approach to doing the work towards achieving the OKR. Scrum can become the operating system for working ON the business.

To sum up, OKRs and Agile/Scrum aren’t in conflict. Looking at OKRs with Agile/Scrum lenses reinforces the first principles that OKRs are based on. To use OKRs successfully, you should: 

• Focus on working ON the business vs. IN the business
• Stop starting, start finishing - Focus on a few key strategic initiatives (maybe even just one) 
• Rally around outcomes rather than micro-manage outputs/activities
• Provide alignment and enable initiative through empowered teams/groups
• Organize around value - leveraging OKRs
• Leverage agile/scrum to execute on OKRs
• When in doubt - go back to first principles - Alignment, Empowerment, Focus, Empiricism

The 3-Question First-Principles OKR Diagnostic

Prompt for Converting Output Goals into Outcome OKRs

Help us convert this output-focused goal into an outcome-oriented OKR.

Given our current draft Objective and Key Results:
1. Separate the operational deliverables (tasks, feature releases, system migrations) from the intended business/customer impact.
2. Formulate 1-3 measurable Key Results tracking leading indicators of customer behavior or operational efficiency.
3. Suggest the earliest lightweight check to test whether the strategy is moving the metric before delivering 100% of the project scope.

If you want hands-on help resetting OKRs in your context, see Strategic Alignment and Execution at Scale leveraging OKRs.

This material also ran as an episode of the podcast, where I walk through the first principles and the reset in conversation rather than in outline form.

Listen on the episode page or directly on Spotify.

Evidence-based Management Training (PAL-EBM)