The Beginners Guide To OKR - Merged PDF

The Beginner's Guide to OKR Felipe Castro
THE BEGINNER'S
GUIDE TO
OKR
Felipe Castro
The Beginner’s
Guide to OKR
Objectives and Key Results
Why I wrote this guide?
There are several guides to OKR. But they lack the solid foundations that will allow you to
start at the beginning and will enable to to successfully adopt OKR.
I wrote this guide for first-time OKR users, but in my experience many long-time OKR
users also find it valuable. Many of them lack the proper concepts to win with OKR.
My advice is that you should read this guide cover-to-cover, as each section builds upon
the previous ones. Reading it from start to finish will help you understand how the
different OKR building blocks fit together and why OKR has been successfully adopted by
great companies such as Google, Spotify, Twitter, Airbnb and LinkedIn.
Felipe Castro
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Table of contents
What is OKR?
What are the benefits of using OKR?
Strategic vs. Tactical OKRs: Nested Cadences
OKRs do not Cascade
Success criteria and types of Key Results
How ambitious should your OKRs be?
Creating Alignment
Tracking Results with the Weekly Check-in
A Typical OKR Cycle
Why you should separate OKR and compensation
Common OKR mistakes
What's Next?
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What is OKR?
OKR (Objectives and Key Results) is a goal setting system used by Google and other
companies. It is a simple approach to create alignment and engagement around
measurable and ambitious goals.
The big difference from traditional planning methods? OKRs are frequently set, tracked,
and re-evaluated – usually quarterly. OKR is a simple, fast-cadence process that engages
each team’s perspective and creativity.
OKR exists to create alignment and to set the cadence for the organization. The goal is to
ensure everyone is going in the same direction, with clear priorities, in a constant rhythm.
OKR’s original concept came from Intel and spread to other Silicon Valley companies.
Google adopted OKR in 1999, during its first year. It supported Google’s growth from 40
employees to more than 60,000 today.
Besides Google, other companies use OKR, including Spotify, Twitter, LinkedIn, and
Airbnb.
But OKR is not only for digital companies. Walmart, Target, The Guardian, Dun and
Bradstreet, and ING Bank are also using OKR.
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Understanding the OKR Components
John Doerr is one of the most successful venture capitalists of all time. He started his
career at Intel and went on to invest in companies such as Google and Amazon. Doerr,
who introduced Google to OKR, has a formula for setting goals:
Doerr’s Goal Formula

I will ____________________ as measured by _______________________.
A proper goal has to describe both what you will achieve and how you are going to
measure its achievement. The key words here are “as measured by,” since measurement is
what makes a goal a goal. Without it, you do not have a goal, all you have is a desire.
Doerr’s formula is the best way to explain the structure of an OKR:
I will (Objective) as measured by (this set of Key Results).
So, as the name implies, OKR has two components, the Objective and the Key Results:
Objectives are memorable qualitative descriptions of what you want to achieve. Objectives
should be short, inspirational and engaging. An Objective should motivate and challenge the
team
Key Results are a set of metrics that measure your progress towards the Objective. For each
Objective, you should have a set of 2 to 5 Key Results. More than that and no one will remember
them.
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All Key Results have to be quantitative and measurable. As Marissa Mayer, a former Google’s Vice
President, said:
If it does not have a number,

it is not a Key Result.
Example One
First of all, we need an Objective. An example might be “Create an Awesome Customer

Experience.” This sounds great, but how would you know if the experience is awesome?
Remember, without measurement you don’t have a goal.
That is why we need Key Results. How can we measure if we are providing an awesome
customer experience? Net Promoter Score and Repurchase Rate would be two good
options. Do our customers feel so good about dealing with us that they would
recommend us and buy again?
But measuring NPS and repeat purchases alone can send the wrong message. It might
encourage us to make the customer happy at any cost. Therefore, we can include a
countermeasure such as Customer Acquisition Cost. We want to make our customers
happy while keeping the costs under control.
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The complete example would be:
Objective:
Create an Awesome Customer Experience
Key Results:
➔ Improve Net Promoter Score from X to Y.
➔ Increase Repurchase Rate from X to Y.
➔ Maintain Customer Acquisition cost under Y.
Example Two
Now consider a team that wants to increase the engagement with a digital service:
Objective:
Delight our customers
Key Results:
➔ Reduce revenue churn (cancellation) from X% to Y%.
➔ Increase Net Promoter Score from X to Y.
➔ Improve average weekly visits per active user from X to Y.
➔ Increase non-paid (organic) traffic to from X to Y.
➔ Improve engagement (users that complete a full profile) from X to Y.
Once more having a set of Key Results helps create a healthy, sustainable OKR. We want
to increase the weekly visits, but we want it to be organic, not through an expansion of
marketing spend.
Key Results are crucial. Most of all, they define what we mean by “Delight our customers.”
A second team or company could use the same Objective with different Key Results.
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What’s unique about OKR?
There is not a single way to use OKR, each company or team can adapt and tweak it,
creating different versions of it. But there are some core concepts:
Agile Goals
Instead of using annual static planning, OKR takes an agile approach. By using shorter
goal cycles, companies can adapt and respond to change.
Simplicity
Using OKR is straightforward, and the OKRs themselves are easy to understand. Intel’s
original model set goals monthly, which required a lightweight process.
Companies that adopt OKR reduce the time spent setting goals from months to days. As
a result, they invest their resources in achieving their goals and not on setting them.
Transparency
The primary purpose of OKR is to create alignment in the organization. To do so, OKRs are
public to all company levels — everyone has access to everyone else’s OKRs. The CEO’s
OKRs usually are available on the Intranet.
Nested Cadences
OKR understands that strategy and tactics have different natural tempos since the latter
tends to change much faster. To solve this, OKR adopts different rhythms:
➔ A strategic cadence with high-level, longer term OKRs for the company (usually
annual).
➔ A tactical cadence with shorter term OKRs for the teams (usually quarterly).
➔ An operational cadence for tracking results and initiatives (usually weekly).
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Bidirectional Goal Setting

Instead of using the traditional top-down cascading model that takes too much time and
does not add value, OKR uses a market-based approach that is simultaneously
bottom-up and top-down.
From the company’s strategic OKRs, teams can understand how they can contribute to
the overall strategy. In this process, around 60% of the tactical OKRs are set by the teams
in alignment with the company goals and then contracted with the managers in a
bubble-up approach.
This model creates engagement and a better understanding of the strategy while making
the process simpler and faster.
Ambitious Goals
The philosophy behind OKR is that if the company is always reaching 100% of the goals,
they are too easy.
Instead, OKR targets bold, ambitious goals. Besides aspirational objectives, OKR believes
in enabling the team to set challenging goals. Goals that make the team rethink the way
they work to reach peak performance.
Decoupling Rewards
Separating OKRs from compensation and promotions is crucial to enable ambitious
goals. Employees need to know they will not lose money if they set ambitious goals. It is
hard to set ambitious goals when you need the bonus to pay for your kids’ college tuition.
OKR is a management tool, not an employee evaluation tool.
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Tips for writing good OKRs
For Objectives:
➔ First of all, Objectives should be simple, short and easy to memorize. If you have to
stop to breathe while reading your Objective, you are doing it wrong.
➔ Second, Objectives shouldn’t be boring. They can fit the organizational culture and
be informal and fun. You can use slangs, internal jokes and even profanity –
whatever fits your culture.
For Key Results:
➔ Separate metrics from tasks.

➔ Set few of them. Usually between 2 and 5 per objective.
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What are the

benefits of using
OKR?
The main advantages of using OKR are:
Agility
Shorter goal cycles enable faster adjustments and better adaptation to change,
increasing innovation and reducing risks and waste.
Alignment and cross-functional cooperation

The use of shared OKRs improves collaboration among different teams, solving
interdependencies and unifying competing initiatives.
Reduced time for setting goals

OKR simplicity makes the goal setting process faster and easier, drastically reducing the
time and resources spent on setting goals.
Clear communication
Transparency and simplicity enable the team to understand the goals and priorities of the
organization as well as how each individual can contribute.
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Employee engagement
OKR bottom-up approach for goal setting connects the employees with the company’s
objectives, increasing engagement.
Autonomy and accountability

Teams receive a clear direction and are free to choose how to achieve their OKRs. They
become responsible for their objectives, with clear success criteria known to the whole
company, creating mutual obligations.
Focus and discipline

The reduced number of goals creates focus in the organization and more disciplined
efforts and initiatives.
Bolder goals
Decoupling OKRs from compensation and using stretch goals, even partially, enable the
team to set ambitious, challenging goals.
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Strategic vs.
Tactical OKRs:
Nested Cadences
It is a common misconception that OKR only works with quarterly cycles, which was the
model Google used until 2011. After retaking the CEO role at Google, Larry Page decided
to adopt both annual and quarterly OKRs.
We can only speculate about what drove Page's decision, but most companies eventually
discover that using short-term OKRs can cause teams to miss the big picture and focus
only on what they can accomplish in three months.
Most mature OKR implementations understand that different goals have different
rhythms as tactical goals tend to change much faster than strategic goals. So OKR
decouples strategy and tactics by adopting a nested model, as I mentioned in the first
section:
➔ A strategic cadence with high-level, longer term OKRs for the company, which are
not set in stone. The organization should maintain a continuous conversation about
strategy and review the company OKRs as necessary.
➔ A tactical cadence with shorter term OKRs for the teams.
➔ A follow-through cadence with regular check-ins for tracking results along the way.
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Think of Strategic OKRs as high-level OKRs that would interest the board of directors - if
you chose to show it to them.
A pattern I see in successful OKR adoptions is:
➔ Annual strategic OKRs for the company (and sometimes for very large departments
and business units).
➔ Quarterly tactical OKRs for the teams, with a mid-quarter review.
➔ Weekly check-ins for tracking results.
Some organizations also set quarterly OKRs for the company, but I would not
recommend that in the beginning.
Choosing your OKR Cadence
It is important to note that organizations can customize the cadences for their needs. For
example, Spotify uses a strategic cycle of six months while its teams set OKRs every six
weeks. It is an interesting story since they returned to OKR after trying to create its own
approach.
Some companies are adopting shorter cadences for OKR, as Salim Ismail, founding
executive director of Singularity University, wrote in his book, Exponential Organizations:
Many [organizations] are now implementing high-frequency OKRs – that is, a target per
week, month or quarter for each individual or team
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Most teams that are trying to set monthly OKRs are using OKR as a to-do list. When teams
use OKR to measure value, as we will see in the following sections, the quarterly cadence
makes sense since you need time to develop initiatives, measure their impact and iterate.
As a general rule, the shorter the cadence, the smaller the OKR-setting overhead needs to
be. And the longer the cadence, the lower the business uncertainty needs to be.
So to adopt shorter cycles, you have to make sure you have a streamlined process for
developing the OKRs in place, or you will be spending too much time setting goals.
On the other hand, if your business deals with uncertainty or your market changes too
quickly, longer OKR cycles will not help you.
If you are starting with OKR, I recommend using a quarterly tactical cadence with a
mid-quarter review. That will enable you to learn and adapt your model. Most
organizations can work with this cadence.
Start with Unified Cadences
In Silicon Valley, some mature companies have distinct cadences for different functions.
For example, some companies set annual OKRs for the sales team while using quarterly
OKRs for engineering and product teams.
I recommend starting with the same cadences for everyone since it reduces complexity.
The best approach is to have an incremental rollout, beginning with a simpler model and
evolving it as you learn.
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If you want to try to set different cadences inside your organization eventually, you should
try to maximize the number of “synchronization opportunities.” For example, having one
team use a 4-month cadence while the rest of the company uses three months means
teams will only sync once a year which could drastically affect alignment.
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OKRs do not
Cascade
In traditional organizations, goals cascade. It seems it is just something that they do. Goals
start at the top and then cascade down. That is very common. And flawed.
What are the characteristics of a cascade (or waterfall)?
It’s a top-down, one-way, irreversible flow, with no feedback cycles that ends crashing on
the rocks. Everything an agile, innovative organization does not want to be.
The cascading model is a residue of a command & control mindset in which decisions
simply flow downwards from the top. We have to stop using top-down analogies. Words
and images are powerful and help shape the culture of organizations.
Although cascading goals is an improvement over the previous approaches, it takes way
too much time. As James Harvey wrote:
[The traditional model] is a top-down approach and often

takes too long to achieve alignment. Direct reports are often
dependent on the completion of their supervisor’s goals
before they can begin building their own goal plan.
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I have seen global corporations in which the goal setting process takes 4-6 months. Not
only it is a massive waste of resources, but it also leaves employees without clear goals for
almost half the year.
There has to be a better way.
Bidirectional Goal Setting
As Laszlo Bock, Google’s former VP of People Operations wrote in his book Work Rules!:
On the topic of goals, the academic research agrees with

your intuition: Having goals improves performance.
Spending hours cascading goals up and down the
company, however, does not. It takes way too much time
and it’s too hard to make sure all the goals line up. We
have a market-based approach, where over time our goals
all converge, because the top OKRs are known and
everyone else’s OKRs are visible. Teams that are grossly out
of alignment stand out, and the few major initiatives that
touch everyone are easy enough to manage directly. So far,
so good!
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That is why I created Castro’s First Rule of OKRs:
OKRs never Cascade.

OKRs Align.
OKRs should be set in a parallel process in which teams define OKRs that are linked to
the organization objectives and validated by managers, in a process that is simultaneously
bottom-up and top-down.
From the company OKRs, the teams can get a clear direction and understand how they
can contribute to reaching those OKRs.
Each team then defines a set of tactical OKRs for the quarter that contribute to the
strategic OKRs and that roughly align with them. Teams’ OKRs don’t have to be 100%
aligned with the company’s OKRs since they may also choose to include a local OKR.
Creating Tactical OKRs
When creating their Tactical OKRs, each team has to answer two questions:
➔ How can we contribute to the Strategic OKRs?

➔ Which of the Key Results included in the Strategic OKRs may we impact?
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Tactical Key Results can be:
➔ A slice of the company OKR (Ex: The company will sell 100, my team will sell 20).
➔ Hypotheses or bets about how to contribute to the Strategic OKRs (Ex: We will
reduce the number of customer complaints because we believe it will increase
the repurchase rate).
Teams may have “local” OKRs, but most of the OKRs should contribute to the Strategic
OKRs.
There is a rule of thumb is that around 60% of the OKRs should be defined by the team,
bottom-up, meaning that the managers also have a say on what the OKRs are.
In my experience, if you have a healthy environment tracking this percentage is hard.

Usually, the team develops a draft for the OKRs and then there is a conversation with the
managers. The company may also choose to standardize a few OKRs between similar
teams (i.e. every product team has to increase customer engagement).
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Success criteria
and types of Key
Results
What is Success?
Every organization, every team, every project needs a clear definition of success. We all
need a definition of what it means to be successful.
But success means different things to different people. If I asked your team what success
looks like for your company, I would probably get one different answer for each team
member.
When used correctly, OKR helps teams and organizations define shared success criteria.
They establish clear, measurable criteria for reaching success.
OKR not only makes sure the criteria exist but that those criteria are shared, transparent
and communicated to other teams, employees and even outside partners.
The shared success criteria concept is critical when setting OKRs. We always have to ask
ourselves: are those Key Results describing what success looks like?
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Don’t turn your OKRs into a task list
Imagine a hamster in its cage, running nonstop on its wheel but never actually moving. Is
that how you feel about your company or your team? Lots of work, lots of effort, but never
getting anywhere?
Who is considered successful in your company? Those who work long hours, not sleeping,
working on weekends, or those who deliver actual results? Do you want a team of
hamsters – with lots of effort that get you nowhere – or people that produce results?
When setting your OKRs, try to evaluate:

➔ Do you measure effort or results?
➔ Are your OKRs focused on your objective or on the means to get there?
There are two basic types of Key Results:
1. Activity-based Key Results

Measure the completion of tasks and activities or the delivery of project milestones or
deliverables.
Examples of Activity-based Key Results are:

➔ Release beta version of the product.
➔ Launch a monetizing tab.
➔ Create a new training program.
➔ Develop a new lead generation campaign.
Activity-based Key Results usually start with verbs such as launch, create, develop, deliver,
build, make, implement, define, release, test, prepare and plan.
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2. Value-based Key Results

Measure the delivery of value to the organization or its customers. Value-based Key
Results measure the outcomes of successful activities.
The example Key Results from the first section are all Value-based:
➔ Improve Net Promoter Score from X to Y.

➔ Increase Repurchase Rate from X to Y.
➔ Maintain Customer Acquisition cost under Y.
➔ Reduce revenue churn (cancellation) from X% to Y%.
➔ Increase Net Promoter Score from X to Y.
➔ Improve average weekly visits per active user from X to Y.
➔ Increase non-paid (organic) traffic to from X to Y.
➔ Improve engagement (users that complete a full profile) from X to Y.
The typical structure of a Value-based Key Result is:
Increase/Reduce ABC-metric from X to Y
Where X is the baseline (where we begin) and Y is the target (what we want to achieve).
Using the "from X to Y” model is better than writing a percentual change because it
conveys more information. Compare the two options below:
A) Increase NPS by 20%.

B) Increase NPS from 40 to 48.
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Option A can be confusing since it's hard to tell how ambitious the target is. Are we
talking about increasing NPS from 5 to 6 or 40 to 48?
Other options for Value-based Key Results can be:
➔ Maintain ABC-metric in X (When we want to sustain one metric).

➔ Reach Y on ABC-metric (When we are doing something new).
A Value-based Key Result does not have to be a measure of the end objective of the
company (i.e. revenue, profits or EBITDA), but it can be a component of a metric that has
a correlation to generating value.
Below is a list of examples of Activity-based Key Results and the equivalent Value-based
Key Results.
Activity-based Key Results Value-cased Key Results
➔ Improve employee engagement from X

Create engagement program
to Y
➔ Generate Y MQLs (Marketing Qualified

Leads).
Develop 3 new landing pages ➔ Increase lead conversion from X to Y.
➔ Reduce CAC (Customer Acquisition Cost)
from X to Y
➔ Reach Y Daily Active Users of the free

version.
Launch new product ➔ Achieve Y% conversion rate from free to
paid users.
➔ Achieve a Net Promoter Score of Y%.
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OKRs should be Value-based
As we mentioned before, when used correctly, OKRs define success criteria for an
organization. OKRs should determine whether a person or a team achieved success. But
to do that, OKRs cannot be based on activities for three main reasons:
1. We want a results-focused culture, and not one focused on tasks.
2. If you did all your tasks and nothing improved, that is not success.
Success is improving something: customers are more satisfied, sales are higher, costs have
been reduced. If you did all your tasks, but they got you nowhere, that is not success.
OKR author and thought leader Christina Wodtke has a great tweet about “success”:
Success is not checking a box.

Success is having an impact.
So in spite of the “Project Management Triangle,” the fact is that delivering a project on
time, on scope and on budget is not enough. The project must be delivered successfully –
meaning that the objectives that motivated the project in the first place have to be
reached.
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3. Your action plan is just a series of hypotheses
The Lean Startup methodology taught us that an idea is just a non-validated hypothesis.
In the same way, in the real world, we don’t know if our action plan will improve our
results or add value to the organization. The action plan is just a hypothesis, so you cannot
attach your OKRs to a non-validated bet.
When setting OKRs, focus on the destination, not on the means to get there.
Objectives, Key Results, and Initiatives
When focusing on Value, we need to separate the OKRs from the activities and tasks that
we plan on doing to achieve the OKRs. This leaves us with three components:
➔ Objectives: What we want to achieve.

➔ Key Results: How are we going to measure our progress?
➔ Initiatives: What we are going to do to reach our OKR: projects, tasks or activities.
It is important to understand that we still need to track the delivery of the initiatives.
Without them, we will not achieve our OKRs. But initiatives are just bets and have to
change if the numbers aren't improving.
Delivering an initiative is not enough. We must fulfill it successfully.
Nobody works on initiatives as a hobby. Behind every initiative is a desire to improve one
or more metrics. So, instead of tracking the delivery of a project, we should measure the
indicators that motivated it in the first place.
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Migrating from Activities to Value-based OKRs
When teams start with Value-based OKRs, it is common for them to get stuck listing
activities as Key Results.
To convert those activities into value, think about what would be the consequences of
being successful with this task. What would be the desired outcomes?
Some teams find this simple tool to be useful to identify the desired results, especially
when first dealing with value-based OKRs:
If we are successful with (this initiative), we will

(Key Result #1)
(Key Result #2)
(Key Result #3)
…
Example:
If we are successful with the new campaign, we will
Increase NPS from 29 to 31%
Reduce churn from 3.2 to 2.7%
You can also create an OKR to measure if a high-priority initiative will be delivered
successfully:
Successfully migrate the platform

➔ Reduce infrastructure costs from X to Y.
➔ Maintain availability during migration in 99,99%.
➔ Maintain revenue of $ X.
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How ambitious
should your OKRs
be?
Ambitious goals are so important that Google’s “Ten things we know to be true.” mentions
them directly:
We set ourselves goals we know we can’t reach yet because

we know that by stretching to meet them we can get further
than we expected.
Ambitious goals are also called stretch goals. But what exactly is a stretch goal?
The stretching analogy
Let’s think about the characteristics of stretching:
➔ While you are stretching, it feels uncomfortable, even slightly painful. Stretching
takes you out of your comfort zone;
➔ Stretching may be uncomfortable while doing it, but it makes you feel good
afterward;
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➔ The whole idea of stretching is to try to reach a place that you know you can’t
reach. You have to keep trying to reach your feet even though you know you can’t
reach it;
➔ After stretching regularly, you start to reach farther than you could if you haven’t
been stretching. You may still not be able to reach your feet, but now you can reach
places that you couldn’t reach before;
➔ Although stretching is supposed to feel uncomfortable, you shouldn’t strain a
muscle. You should not try to go so far as to harm you. You can try to be as Jean
Claude Van Damme but take your time.
How this applies to goal setting?
When you think about this analogy, you can say that stretch goals are goals that:
➔ Take you out of your comfort zone;

➔ Make you go after targets that you think you can’t reach (at least not yet);
➔ Make you achieve things you couldn’t do before;
➔ Should be hard but not as hard as to harm (or demotivate) you.
Think of stretch goals as goals that are so hard that make the team rethink the way they
work, ask hard questions and have the difficult conversations that have been avoided.
Stretch goals make teams wonder how far they can go.
In fact, in a meta study of 35 years of empirical research, goal-setting theory pioneers

Edwin Locke and Gary Latham found scientific evidence that shows that “the highest or
most difficult goals produced the highest levels of effort and performance.”
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As Larry Page wrote in the foreword for How Google Works, making people think big is
hard, and bold goals are key:
[Teams] tend to assume that things are impossible, rather

than… figuring out what’s actually possible. It’s why we’ve put
so much energy into hiring independent thinkers at Google,
and setting big goals.
Is 70% the new 100%?
In his now classic video presenting OKRs, Rick Klau mentions that:
Objectives are ambitious, and should feel somewhat uncomfortable.
The “sweet spot” for an OKR grade is .6 — .7; if someone consistently gets 1.0, their OKRs
aren’t ambitious enough. If you get 1s, you’re not crushing it, you’re sandbagging.
Klau's statement led to some questioning that “if 70% is the accepted result, isn’t 70 the
new 100?”.
This issue only happens if the team is not stretching. Allowing the 70% as the target
would be like only touching your leg without trying to reach your feet – i.e. not stretching
at all. The whole idea of a stretch goal is to keep trying to reach the 100%, even though
you know that most of the time you won’t reach it.
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Moonshots vs. Roofshots
The type of OKRs that Klau is describing is called “Moonshots.” In practice, there is also a
second type of OKR, the “Roofshots.” The table below explains both:
Moonshots Roofshots
➔ Stretch goals. ➔ Goals that are hard but achievable.

➔ Just beyond the threshold of ➔ Success means achieving 100%.
what seems possible.
➔ Success means achieving 60-70%
Moonshots are a foundational building block of OKR, but they require a lot of
organizational maturity. In my experience, moonshots can cause a few issues:
They can demotivate the team

People like to beat goals. Only achieving 60% of the OKRs can demotivate a lot of them,
especially in the beginning.
Lack of accountability and commitment

Moonshots can be misinterpreted by some, creating a culture in which you don’t have to
reach your goals: “Hey, it doesn’t matter. It’s just a stretch goal”.
Alignment issues
Especially when using activity-based Key Results, moonshots can cause alignment issues
between interdependent teams. One team needs something from another but the
second one is unable to deliver it since it was a stretch.
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That is why roofshots exist and are used by several teams inside Google, usually mixed
with moonshots. One approach I like is setting one moonshot key result per OKR – the
others are all roofshots.
I strongly recommend that you start by using roofshots only. To develop a results-focused
culture, begin by focusing on beating goals. Afterward, when the culture is more mature,
you can evolve to moonshots to start questioning how far the organization can go.
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Creating
Alignment
OKR is first and foremost an alignment tool. But alignment can only happen when teams
have structured conversations with each other to set priorities and solve
interdependencies.
Creating OKRs in isolation, without talking to others, is a widespread mistake. It usually

prevents the team from achieving their OKRs by:
● Setting OKRs that are not feasible, since they are not a priority for the necessary
groups;
● Defining OKRs that are overly optimistic due to the time needed by a third party to
deliver a required action (the other party will either take too long or will start it too
late to move the needle during the quarter).
To avoid this mistake, OKR uses three different alignment mechanisms: Transparency,
Shared OKRs, and 360º Alignment.
Transparency
OKRs are visible to all company levels — everyone has access to everyone else’s OKRs and
current results. If you have a top-secret Key Result, it may be kept private, but the vast
majority of your OKRs should be public.
Transparency increases alignment since if one area of the business is not aligned with the
others, it can be quickly noticed by the other teams and fixed.
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Shared OKRs
Shared OKRs are the most effective tool to create alignment between multiple teams or
functions. In a shared OKR, two or more teams share the same OKR, but each team has
different initiatives.
Instead of splitting a single goal among teams and have them set separate OKRs – which
can lead to teams losing sight of the real objective – a single shared OKR is created
among the teams.
The shared OKR creates a virtual team that meets regularly to sync progress and track
results and initiatives for the duration of the shared OKR
For example, imagine that a product team wants to launch a new product and needs
that the platform team develops new features while the business development team
signs content deals with partners.
Objective:
Successfully launch Acme product
Key Results:
➔ Reach 500,000 Daily Active Users of the free version;
➔ Achieve 5% conversion rate from free to paid users;
➔ Achieve a Net Promoter Score of 35%;
➔ Less than 5 critical or blocker bugs reported;
➔ Achieve at least 40% revenue share with 5 of the target content partners.
34
Instead of having 3 different goals that could be individually achieved without generating
the desired business result, this single OKR is shared between teams. Each team has
different initiatives, but they all share the same OKR – the same definition of success.
For the duration of this OKR, all three areas that will meet regularly to track progress.
360º Alignment
One of the problems of the cascading model is that it is focused on vertical alignment –
making sure your goals are aligned with your boss's goals and with her boss's goals –
which can create silos.
OKR focuses on 360º Alignment - top, down, and sideways - eliminating silos and
addressing interdependencies.
Teams can solve interdependencies by having structured conversations with each other
to create 360º alignment. If a team needs something from another, they can discuss it
and set shared OKRs priorities or even delay the initiative for the next quarter.
35
Tracking Results
with the Weekly
Check-in
Don’t let your OKRs turn into New Year's resolutions. You have to make them part of the
work routine of each team by using the Weekly OKR Check-ins.
The Check-in is a short ceremony for tracking results. The idea is not to increase the
managerial overhead or to add more meetings but to make existing meetings more
productive and even to merge or eliminate some of them.
Check-ins should happen every week. Having monthly meetings to track results is
intuitive when you have annual goals, but since you are using quarterly OKRs, you should
also have more frequent Check-ins.
They should be short and limited to one hour or less. I have worked with dozens of
executive teams, and they all managed to keep it under one hour - usually around 30 to
40 minutes. Teams check-ins tend to be shorter, with some teams doing 15-minute
stand-up Check-ins.
Weekly Check-ins are probably the most powerful tool to make OKRs a part of the
company culture.
36
Having the right mindset during the Check-in is critical:
➔ Improving OKRs vs. putting out fires: Several teams have regular staff meetings,
but they are usually dedicated to putting out fires and not on improving results. The
Check-in reverses that: we will begin by measuring our OKRs.
➔ Focused on improving results and not on giving excuses: The Check-in should be
about how we are going to improve our OKRs and not about listing all the
explanations for the disappointing results that may eventually occur.
Forget "Scoring"
A common approach to OKR includes the practice of scoring, where you give grades to
each Key Result at the end of the quarter. Scores usually range between 0 and 1.0, with
expected values being around 0.6 and 0.7 in average.
My experience is that scoring has several problems:
➔ By defining OKRs at the beginning of the quarter and scoring them only at the end,
you are setting yourself for failure. Without a regular cadence of measurement and
follow-through, the numbers will not improve. The Check-ins create that.
➔ Most teams find the scoring process to be confusing since it can be extremely
subjective ("What is a 0.5?").
➔ If you define the scores in advance, meaning you agree in the beginning of the
quarter on what is a 0.3, a 0.7, and so on, you will increase complexity by 3x to 5x.
For each Key Result, you will have to set three to five achievement levels, which is
not a recipe for simplicity.
➔ Scoring brings almost no benefits if you are using Value-based Key Results.
37
That is why my recommendation is: forget scoring. Use Value-based Key Results and just
measure them. It will be simpler for the teams, and it will drastically reduce the time
spent setting OKRs.
The Check-in Structure
I have had the opportunity to coach hundreds of Check-ins. After experimenting with different
approaches, I discovered that the best model for the Check-in includes four elements, described
in the 2x2 matrix below:
OKR Progress Confidence Levels
With the information we have today,

What changed in the Key Results
how confident are we that we will reach
since the last Check-in?
each Key Result?
Impediments Initiatives
What is slowing down What are we going to do to

the team? improve results?
38
During the Check-in, the team goes through each element for each Key Result:
OKR Progress
The Check-in starts with data. What is the current measure of that Key Result? What
changed since the last Check-in?
Confidence Levels
If the OKR progress is the quantitative aspect of the Check-in, the confidence levels bring
the qualitative aspect. What is not in the data?
For example, is there an important initiative running late or a key client about to cancel?
Maybe one of our hypotheses has been invalidated?
To set the confidence level, the team has to answer the following question: Considering
the information we have today, how confident are we that we will reach each KR?
Some companies use a 1 to 10 scale to set the confidence levels, but in my experience, it
can be as confusing as scoring the Key Results. I recommend adopting three levels, either
using colors (Green, Yellow, Red) or emoticons (Happy, Concerned, Sad).
Confidence Level Description
We expect to reach it.
There is a risk we will not reach it, but we

believe we can do it.
We do not believe we will reach it unless
we take a new approach.
39
Two tips about the confidence levels:
➔ What matters is the conversation: all members of the team should discuss them.
The confidence levels are an excellent alignment technique that will also allow you
to assess the engagement of each team member quickly.
➔ Red (or "sad") does not mean the team should give up. It means the team should
change their approach.
Impediments
What is slowing the team? Is there an external factor that, if solved, could improve results?
For example, does the team need better tools or is an initiative from another team
delayed?
Initiatives
What are we going to do to improve results?
Remember that standing still does not work as the Check-ins are not just about
measuring numbers. You have to do something to improve your Key Results. Or, as
Donald G. Reinertsen wrote:
If measuring alone solved problems, buying a

scale would make you lose weight.
40
A Typical OKR
Cycle
A common OKR cycle would be:
1. At the beginning of the year, the company defines a set of high-level strategic OKRs –
preferably with input from the team.
It is important to understand that the high-level strategic OKRs for the organization
should not be set by the top executives in isolation, without inputs from the team. In his
article titled Should You Build Strategy Like You Build Software?, Keith R. McFarland
describes a model to create a more refined and execution-ready strategy:
Since people at many levels of an organization make daily tradeoffs that impact the
company’s strategic success, the process needs to be designed to tap into ideas from all
corners of the organization – more than just the top executives.
2. The executive team then validates the company OKRs, gathering feedback from the
team.
41
3. Teams develop their Tactical OKRs using the bidirectional approach described above.
4. Teams map interdependencies and ensure alignment with other teams and initiatives.
5. Teams have weekly check-ins to track results and initiatives.
6. For companies using quarterly OKRs, it is common to review the OKRs halfway down
the quarter during a mid-term OKR review.
7. At the end of the cycle, you can have a quick retrospective/lessons learned and start
over.
The simplest way to conduct a retrospective is the start-stop-continue format. In this
model, each team member is asked to identify specific things that the team should: Start
doing / Stop doing / Continue doing.
OKRs that haven’t been achieved in the previous cycle are re-evaluated so they can be
included in the next quarter or discarded if they are no longer necessary.
Some companies view the Objective as a “vision” that the company and teams will pursue
over time, so Objectives may rollover from one quarter to the next. For example, an
Objective such as “Delight our Customers” is something that a company could use over
several quarters, creating new Key Results at each tactical cycle.
Even some of the Key Results themselves can be the same over time, just changing the
targets. Metrics such as Revenue and Net Promoter Score tend to be present in almost all
quarters of all companies that I have seen. But the value drivers that each team will use to
improve those metrics will change over time. 42

Why you should

separate OKR and
compensation
OKR is a management tool, not an employee evaluation tool. As such, a second tenet of
the OKR framework is to separate OKRs from compensation and promotions.
As Intel’s Andy Grove wrote:
[OKR] is not a legal document upon which to base a

performance review, but should be just one input used to
determine how well an individual is doing.
Rick Klau wrote:
OKRs are not synonymous with employee evaluations. OKRs

are about the company’s goals and how each employee
contributes to those goals. Performance evaluations – which
are entirely about evaluating how an employee performed in
a given period – should be independent of their OKRs.
43
This approach is very different than the traditional model, which is showing signs of aging.
A study by Willis Towers Watson showed that regular pay for performance tools are not
effective at driving improved individual performance, nor at rewarding it:
➔ Only 20% of employers in North America say merit pay is effective at driving higher
levels of individual performance at their organization;
➔ Employers give short-term incentives low marks. Only half say short-term incentives
are effective at driving higher levels of individual performance, and even fewer
(47%) say that these incentives are effective at differentiating pay based on
individual performance.
The tale of two bonuses

There once was an organization that had two employees on the same team: Paul and
Mary.
➔ Paul was smart, focused and delivered results. But he was driven by monetary
rewards and was always trying to figure out how to make more money.
➔ Mary was also smart and focused, but she was driven by her achievements. She
believed that if she delivered, money would follow.
The organization used a simplified bonus formula, connecting goals to rewards:
Bonus paid = ƒ(% of goals achieved * salary grade)
This formula means that the size of the bonus was a function of the employee salary
grade and the percentage of goals that the employee achieved.
44
And then, the following happened:
➔ Paul achieved 110% of an easy goal that he successfully reduced after several
rounds of negotiation with his managers;
➔ Mary achieved 80% of an ambitious, going way beyond anyone in the company
thought was possible. A real moonshot.
Who deserved the higher bonus? Mary, of course. But who got the bigger bonus in the
end? Paul.
This tale is a classic example of a perverse incentive. Our incentive system is, for all
practical purposes, rewarding the inappropriate behavior.
We are all Paul and Mary

Everyone has a bit of Paul and Mary inside. Your incentive system should work for real
people in real life. And even if you have a team full of Marys, why would you have a system
that incentivizes something you do not want to happen?
If you want to create a culture in which setting stretch goals is the norm, you should think
about dropping the formula-based (or tightly coupled) model for both bonuses and
promotions.
What’s the alternative?

The alternative is to adopt a system in which the achievement of goals is input to the
performance evaluation process, in which bonuses and promotions are defined. In this
model compensation and goals are loosely coupled.
45
The performance evaluation considers not only the percentage of the goals achieved but
also the goals themselves: the difficulty and the impact on the business. Think about it as
the Difficulty Score in gymnastics: you get more points for performing routines that are
more difficult.
“But this is too subjective”
One of the common complaints about this model is that it is “subjective” while the
formula-based model is “objective.”
The problem is that using a formula at the end of a process does not make it objective.
People simply think it is objective because all they can see is a bit of math:
➔ Several companies around the world use, at least sometimes, spot bonuses or
discretionary bonuses to compensate or complement the bonus policy. Both are
100% arbitrary, following subjective rules;
➔ Calculating the bonus based on who has the best negotiating skills to reduce the
goals is “subjective”;
➔ Project/resource allocation is arbitrary. Sometimes the organization needs

somebody to turn around a troubled project, which may hurt his/her bonus in the
short run – which is usually compensated by spot bonuses.
As with moonshots, I strongly recommend that you don’t adopt this model in the
beginning. Do not change your compensation model before having a stable and mature
OKR capability in your organization.
46
And how about sales quotas?
Sales teams are different since the result is easier to measure. You can attach
compensation to a sales quota, but you should avoid any model that rewards employees
that negotiate a reduction in the quota.
47
Common OKR
mistakes
Those are the most common mistakes we encounter in OKR implementations, starting
with the most basic ones:
➔ Setting non-measurable Key Results: Remember John Doerr’s formula. Every Key
Result has to be measurable.
➔ Too many OKRs or Key Results: OKR is not a laundry list of everything you do. It is a
representation of your top priorities. Less is more here.
➔ Including tasks as Key Results: A Key Result is not something that you do. It is the
successful outcome of what you did.
➔ Setting OKRs top-down: OKRs do not cascade. Trust your team and help them
understand how they can contribute.
➔ Creating OKRs in silos: Teams have to talk to each other when setting OKRs,
otherwise achieving alignment will be impossible.
➔ “Set it and Forget it”: Don’t treat your OKRs as new year’s resolutions. OKR has to be
part of the culture of your organization and has to be tracked at a regular cadence.
48
➔ Including OKRs in a compensation formula: OKR is not an employee evaluation

tool. OKR is a management tool.
➔ Trying to copy Google blindly: There is not a single way to adopt OKR. Even inside
Google different teams use OKR in a variety of ways. Understand the principles
involved and adapt your implementation to your organization.
49
What's Next?
Now that you have read The Beginner's Guide to OKR, there are a few things that you can
do:
➔ Send me your questions or comments

I would love to hear from you. You can follow me on Twitter @meetfelipe or email me at
info@felipecastro.com.
➔ Learn how to customize OKR for your company

OKR is not a one size fits all approach. You should think of it as a set of customizable
building blocks that you can leverage to transform how your company uses goals.
Download this paper to learn how to adapt the OKR model to your particular context and
culture.
➔ Download more OKR resources

Get OKR templates, cheat sheets and more at my resources page.
50
How to leverage OKR if your company is not Google
By Felipe Castro, Dan Montgomery, and Daniel Karrer
Companies should approach OKR as a set of customizable building blocks

they can leverage to transform their goal setting process
OKR (Objectives and Key Results), the Silicon
Valley goal setting framework used by Google, What is OKR?
Twitter and LinkedIn, is quietly taking over the
corporate world driven by the trends of Agile, Agile enterprises are increasingly adopting a
Lean Startup, Digital Transformation and radical new approach for goal setting with the
Continuous Performance Management. unassuming name of OKR (Objectives and Key
Results). Unlike traditional top-down methods of
Walmart, Target, Schneider Electric, The planning, OKR is a simple, fast-cadence, bottom-
Guardian, Dun and Bradstreet, Sears, Kroger, up process that engages each team's
and ING Bank are among the enterprises that perspective and creativity.
are known to have implemented or to be
experimenting with OKR. Many others are The big difference from traditional planning
evaluating it. methods? OKRs are set, tracked, and re-
evaluated frequently - usually quarterly. In a
Even if your company is not in a fast-paced typical OKR environment, at least 60% of the
environment like software, every industry is goals are set bottom-up, rather than being
facing increasing levels of uncertainty and cascaded down, creating a more engaging
complexity. OKR is designed to meet that environment for the teams setting the goals.
challenge.
OKR has two components:
When presenting OKR to our clients, we
usually frame it around a set of provocative Objectives are a qualitative description of what
questions that challenge the traditional you want to achieve and should be aspirational,
approach to goal setting: engaging and actionable.
! Why do goals have to be annual? An example might be "Create an Awesome

Customer Experience."
! How can we set goals in days or weeks
instead of months? This Objective sounds great, but how would we
! Do goals have to be boring? How can we know in a more precise way that we are creating
make goals more fun and engaging? better Customer Experience?
! How can we ensure that our goals deliver Key Results are a set of 2-5 quantitative metrics
actual value to customers? you will use to measure your progress towards
! Do we have to cascade our goals top-down the Objective. Appropriate Key Results for that
or can we include a bottom-up component? objective might be Net Promoter Score and
Repurchase Rate. Do our customers feel so
! Do all goals have to have the same good about dealing with us that they would
rhythm? Shouldn't we set shorter tactical recommend us and buy again? But, measuring
goals and longer strategic goals? NPS and recurring revenue might encourage us
! How can we encourage more ambitious to make the customer happy at any cost. So, a
goals? countermeasure such as Customer Acquisition
Cost might be applied.
"But we are not Google!" Objective: Create an Awesome Customer
Experience
Many companies struggle with how to adapt
OKR to their business and context. Google is Key Results:
unique, and some of its cultural traits are very
hard to emulate. Not every company is ready • Improve Net Promoter Score from X to Y.
for that level of openness and autonomy. • Increase Repurchase Rate from X to Y.
• Maintain Customer Acquisition cost under Y.
We propose that OKR should not be seen as a monolithic, one-size fits all,
approach, but as a set of customizable building blocks that can be
leveraged by non-Silicon Valley companies to transform how they set and
manage goals, even without adopting the whole OKR model.
The OKR Capability Model

Our proposed framework for leveraging OKR (the OKR Capability Model) begins with the capabilities
that each organization is trying to develop with the OKR implementation. Each building block
contributes to one of three organizational capabilities: Responsive Rhythm, Engaged Autonomy, and
Aligned Ambition.
Responsive Rhythm: This capability creates a pace that enables the organization to quickly respond
to change by adopting a continuous model for planning, decision making, and tracking results. Using
goals gets so simple that they become what they should be: essential management tools, embedded
in each team's work routine.
Each company's rhythm should match the existing level of uncertainty: organizations in more uncertain
environments or striving to be more innovative should set goals more frequently.
Responsive Rhythm is the foundation for effective goal setting. Goals need to be straightforward and
actionable with rapid feedback. It’s the first thing an enterprise should do before moving on to the other
capabilities we will describe below.
The building blocks that contribute to this capability are Agile Goals, Simplicity, Tracking Ceremonies,
and Nested Cadences.
Building Block Description
Instead of using an annual static planning process, OKR uses shorter

Agile Goals goal setting cycles, usually quarterly, enabling organizations to quickly
respond and adapt to new information or changes in the marketplace.
The process is incredibly simple, and the OKRs themselves are clear and
easy to understand. Intel’s original model set goals monthly, in a
lightweight, straightforward process.
Simplicity
This simplicity makes the goal setting process faster and easier,
drastically reducing the time and resources spent setting goals.
Too many companies suffer from the "Set it and Forget it" problem, where
goals are ignored and detached from the real work.
Tracking Ceremonies
To avoid that, OKR uses regular Tracking Ceremonies to help teams
improve performance and achieve the desired results.
Strategy and tactics have different natural tempos, as the latter tends to
change much faster. To solve this, OKR adopts different rhythms:
! A strategic cadence with high-level, longer term OKRs for the
company (usually annual).
Nested Cadences
! A tactical cadence with shorter term OKRs for the teams (usually
quarterly).
! An operational cadence for tracking results and initiatives (usually
weekly).
Engaged Autonomy: This capability connects the employees with the organization's strategy while
giving them the freedom to decide how they can contribute to it in a way that adds actual value.
To enable real autonomy, it is critical to shift from activities toward valuable outcomes - results that add
value to the company strategy. i.e. Making your product faster may have no value if it adds cost within
a low-cost positioning.
Engaged Autonomy allows the team to participate in the strategic conversation, harnessing insights
from anywhere within the organization. People don't feel merely accountable for delivering results;
they engage with them. They care.
The building blocks that contribute to this capability are Engaging Goals, Value-based Goals,
Transparency, and Bidirectional Goal Setting.
Goals are communications tools; they exist to communicate priorities. As

Engaging Goals such, they should be memorable instead of boring.
Objectives should be engaging and fun. They can be informal, using

slangs, jokes, and even profanity – whatever fits the company culture.
A common goal-setting mistake is to use goals as macro To Do lists,

binding the team to a fixed action plan that may or may not work.
On the other hand, Value-based OKRs measure the delivery of value to

the organization or its customers, creating a culture focused on valuable
Value-based Goals
outcomes instead of outputs.
When focusing on Value, teams separate the OKRs from the Initiatives,
your initial hypotheses of actions and projects to achieve the Objective
that may change over time.
OKRs are public to all company levels — everyone has access to

Transparency
everyone else’s OKRs and current results.
Instead of using the traditional top-down cascading model that takes too
much time and does not add value, OKR uses a market-based approach
that is simultaneously bottom-up and top-down.
Bidirectional Goal From the company’s strategic OKRs, teams can understand how they
Setting can contribute to the overall strategy. In this process, around 60% of the
tactical OKRs are set by the teams in alignment with the company goals
and then contracted with the managers in a bubble-up approach.
This model creates engagement and a better understanding of the

strategy while making the process simpler and faster.
Aligned Ambition: This capability breeds organizational alignment around ambitious goals that
create shared success criteria between different teams while ensuring that those goals are healthy
and sustainable in the long run.
Aligned Ambition catalyzes a culture of organizational reinvention in an environment where bold goals
are usual and where the reward structure does not punish ambitious failures.
The building blocks that contribute to this capability are Countermeasures, 360 Alignment, Decoupling
Rewards, and Moonshots.
Goals are known to create perverse incentives and harmful side effects
(See the paper "Goals Gone Wild").
Countermeasures
The OKR structure has multiple Key Results per Objective, embedding
Countermeasures that address adverse consequences, creating OKRs
that are healthy and sustainable.
The traditional process focuses on creating vertical alignment: your goals

are aligned with your boss's goals and with her boss's goals, which can
create silos.
360º Alignment
OKR's marketplace approach focuses on 360º Alignment - top, down,
and sideways - eliminating silos and addressing interdependencies.
Separating goals from salary and promotions is crucial to incentivize

challenging and aspirational goals. If those who reach a lower
percentage of their OKRs receive a smaller bonus, no matter how hard it
Decoupling Rewards
was, we would be in fact penalizing ambitious goals.
OKR should be a management tool, not an employee evaluation tool.
The philosophy behind Moonshots is that if you are always reaching

100% of your goals, they are too easy.
Instead, OKR targets bold, ambitious goals that are just beyond the
threshold of what seems possible and make the team rethink the way
they work to reach maximum performance.
Moonshots
Moonshots are so important that Google's "Ten things we know to be
true." mentions them directly:
"We set ourselves goals we know we can’t reach yet because we know
that by stretching to meet them we can get further than we expected."
It is important to understand that an organization does not have to adopt

all the blocks from a capability. The framework allows you to choose them
individually.
How complex is it to adopt each building block?

Some building blocks are easier to implement while others may present significant challenges for
traditional organizations. We have grouped them in different levels of complexity: Small, Medium, and
Large.
It is important to understand that the complexity levels are not time estimates, but also incorporate the
degree of novelty and uncertainty which creates mental overhead for the team.
Although the complexity of each building block may vary depending on the organizational context,
those are the levels we have found in many OKR implementations. They are included in this paper as
a guideline for companies looking for quick wins in their OKR implementation.
Building blocks such as Bidirectional Goals and Transparency may face cultural resistance within
hierarchical companies, and their complexity can change a lot depending on the context. The closer
the organizational culture is to the Silicon Valley ethos of openness and autonomy, the simpler their
adoption will be.
Other elements are easy to understand but hard to master, such as 360 Alignment.
Creating a Moonshot culture, where people set truly ambitious goals and without fearing punishment
for not reaching them, is such an organizational challenge that it stands on its own.
The table below lists the building blocks, capabilities and complexity levels:
Using the OKR Capability Model

Each block can be customized both at the company level or at the team or functional level. Not all
organizations are the same, and different groups may have different needs. For example:
! Most companies use quarterly OKRs, but some choose different tempos: some companies set
OKRs every 30, 45, 120 or 180 days. Different business units may choose different cadences
to fit their needs.
! Although adopting weekly Tracking Ceremonies is highly recommended, some functions find
that it is hard to move - or even measure - their Key Results every week. Teams dealing with
employee engagement, for example, may want to track results monthly while tracking their
initiatives every week.
! Companies may want more ambitious goals from teams in product or engineering while
expecting more predictability from accounting or sales. Instead of Moonshots, those teams
focus on "Roofshots," goals that are hard but achievable.
The following scenarios illustrate how companies could customize OKR to their specific needs using
the Capability Model:
1. GoalRevamp Corp: Creating a Responsive Rhythm
At GoalRevamp Corp., goals were set over months and completely detached from the daily work of
the employees. They were seen as yet another mandatory corporate tool that adds no value and is
quickly forgotten - the classic "Set it and Forget it" mode.
GoalRevamp Corp. decides to develop the Responsive Rhythm capability, by adopting the building
blocks Agile Goals, Simplicity, and Tracking Ceremonies. The company chooses to implement Nested
Cadences incrementally, starting with a pilot with two project-based tactical OKRs and adding the
strategic cadence during the second quarter, after the process was more mature.
After examining the other building blocks, the company also decides to adopt Value-based Goals to
develop a culture focused on measuring and delivering value.
Note: Organizations that are starting to use goals could follow a very similar approach.
2. LowHangingFruit Inc.: Concentrating on the Quick Wins
LowHangingFruit Inc. wants to develop the three capabilities, but it prefers incremental
implementations since they reduce complexity, add flexibility and deliver value faster.
The company opts to concentrate on the quick wins by adopting the building blocks with smaller
complexity first: Agile Goals, Simplicity, Tracking Ceremonies, Engaging Goals, Value-based Goals,
and Countermeasures.
After experimenting with those blocks, LowHangingFruit Inc. will evaluate the implementation of the
remainders.
3. ConventionalCorp: Adopting OKR within a Hierarchical Culture
ConventionalCorp has a more hierarchical, top-down, culture that traditionally resists openness.
Although the executive team wants the benefits of OKR, they feel that they are not ready for a more
transparent, bottom-up approach or for changing the compensation model.
For now, they decide to adopt all the building blocks except for Transparency, Bidirectional Goal
Setting, Decoupling Rewards, and Moonshots, which they will re-evaluate in the future.
4. MorphingCorp: Enabling Engaged Autonomy
MorphingCorp is undergoing a Digital Transformation and transitioning its organizational structure

towards cross-functional teams. The CEO understands that fostering autonomous teams is critical do
becoming an Agile enterprise.
The company decides to develop the Engaged Autonomy capability by implementing Engaging Goals,
Value-based Goals, Transparency and Bidirectional Goal-setting. They also need to develop the
foundational capability Responsive Rhythm and the corresponding building blocks.
Note: Examples 3 and 4 could happen inside the same organization. Two of us have worked with a
commodities company that wanted a more traditional approach for its manufacturing operations but
needed to enable autonomy inside its new ventures and biotech arm. The two approaches could
coexist within the same integrated model.
Transform your Goal Process
If you want to understand more about the OKR Capability Model and how it could help your
organization leverage OKR, please contact us at LeverageOKR@leanperformance.com.
About the Authors

Felipe Castro is the Founder of Lean Performance and the author of the upcoming book Agile Goals
with OKR: Using Objectives and Key Results to create Value-Driven teams.
Dan Montgomery is the Managing Director of Agile Strategies and the co-author of The Institute Way:
Simplify Strategic Planning and Management with the Balanced Scorecard.
Daniel Karrer is a Founder and Managing Partner at EloGroup, a consulting firm specialized in
producing high impact transformation for large organizations.
Step by Step Guide to OKRs 2
Table of contents
Introduction................................................................................................. 3
Getting the Right Tasks Done..................................................................... 5

Things to know about setting goals.................................................................................. 7
Benefits of Setting OKRs............................................................................. 9
How the ball got rolling: History of OKRs............................................... 11

From Andy Grove to Larry Page and Beyond................................................................ 13
OKRs in Weekdone: A History................................................................... 14
Setting Objectives...................................................................................... 16
Setting Key Results.................................................................................... 19
What are Hierarchical OKRs..................................................................... 22

OKR progress monitoring................................................................................................ 23
Grading and reviewing OKRs........................................................................................... 24
Examples of OKRs...................................................................................... 29
Conclusion.................................................................................................. 31
Introduction
By: Ben Lamorte
Objectives and Key Results (OKR) is a critical thinking framework and

ongoing discipline that seeks to ensure employees work together, focusing
their efforts to make measurable contributions. This is how I’ve defined
OKRs and you’ll find an analysis of this definition in the 2016 book on
OKRs that I co-wrote with Paul Niven. Paul’s really the author here and I’m
really the OKRs coach. So how did a guy like me become an author? Simple
answer: I set OKRs.
My Key Result was “OKRs book published by a leading publisher such as

Random House or Wiley”. It was a major stretch for someone who’s never
written a book before. It felt nearly impossible, and I almost gave up after
a few months. Then, I decided to publish a white paper as a first step. The
next thing I knew, Paul read the white paper and suggested we co-write a
book. The rest was history.
I’m amazed at the immediate impact OKRs can make in almost any organi-
zation. And I see the positive impact all the time, even with larger organi-
zations such as Zalando, eBay, CareerBuilder, and Dun & Bradstreet, and
Booking.com.
Whether you, your team, or your company deploys OKRs, I expect that
you will experience a tremendous increase in focus, engagement, and
alignment. When I say OKRs is a critical thinking framework, I mean it’s all
about asking questions. Questions like “is this really the right objective?”,
“does this key result really reflect achievement of our objective?”, and
“what is the intended outcome of that task?” I’ve found it can be easier to
just go to work and do your job without asking these questions. However,
my mentor, Jeff Walker, asked me “when you go on a hike, do you have
a destination?” It’s amazing what you can accomplish at work when you
pause to define and align on your destination. The OKRs model is a simple
way of defining and aligning on your destination at work. And, more and
more of us are embracing the OKRs model.
Just two years ago, I complained that there were no books covering the
topic of OKRs. Today, we have Christina Wodtke’s Radical Focus, Niven &
Lamorte’s Objectives and Key Results, and this eBook on OKRs created by
the team at Weekdone. While I expect this eBook will answer many of your
basic questions about OKRs, I truly hope it inspires you to define and align
on your destination at work. And get there!
Good Luck,
Ben Lamorte
Co-author “Objectives and Key Results”
http://www.okrs.com/
OKRs process helps the company to

envision how success looks like.
Henry Mason - Managing Director of TrendWatching
Getting the Right Tasks Done

Getting the right tasks done. Profit. This is probably the most simplified
business model that fits any company. And it seems easy. Well, it isn’t.
When you finish this book, you’ll know how to set clear OKRs, like this:
Figuring out exactly what you have to accomplish is hard for any business.
You may have a great idea, an inspiring vision, and an impeccable gut feel-
ing, but that’s not enough.
This book is about that: about getting the right tasks done. It’s about set-
ting and communicating the right goals and understanding how to achieve
them. It teaches you how to manage a team better and more efficiently. It
shows you how to get the maximum out of your team, thus giving a feeling
of success. It’s about Objectives and Key Results, better known for their
acronym: OKR.
What are OKRs:

•Set goals - Objectives
•Measure progress – Key Results
•Share it with co-workers
•One direction. Everyone works towards
•Aligned hierarchy:
–Company - Department - Team -
Personal
•Transparency. Open, clearly
communicated teamwork
Things to know about setting goals

Objectives and Key Results (OKR) are an increasingly popular methodology
for increasing you and your team’s productivity and focus. In simple terms,
OKR is an easy process of setting company, team, and personal goals then
connecting each goal with 3-4 measurable results. As you achieve those
results, the whole objective gets marked done.
In recent years, OKR popularity has increased greatly. We’ve seen com-
panies big and small, from churches to Fortune 500, implementing it with
success. As the world becomes increasingly more integrated, OKRs are a
simple way to create structure for companies, teams, and individuals.
The most surprising aspect of OKRs is that it suits everyone, regardless of

their industry or size. Each team can find an optimal way for implementa-
tion. Keeping this in mind, it’s always fascinating to learn how successful
corporations are using OKRs.
Sam, a 30-something year old ex-Silicon Valley founder, was re-

cently hired as a marketing manager for a small company with
100 people working from 3 different offices across the US.
He was brought in as things were not looking good. Revenue had

been declining for a few years, the marketing team’s morale was
low, and the executives felt a breath of fresh air might do the trick.
The marketing team was disengaged. Despite their best efforts they
hadn’t been able to achieve positive results. What’s more, their sal-
ary was tied to revenue which meant their income was declining as
well. There were talks of layoffs and everyone was worried about
the end-of-year review.
Luckily, Sam became a much-needed breath of fresh air for the

company. His ideas would change both the team and the com-
pany. Of course, nobody said the process was going to be easy. All
good things require work and commitment. But in this case it was
well worth the struggle.
.
“It makes it easier to align what every individual

of the company wants to achieve each quarter”
Lyle Stevens, CEO of Mavrck
Benefits of Setting OKRs
Importance of having
Objectives.
•Vision of where you want to get
•Prioritization of how to get there
•Know what’s expected of you
•Guide people towards the right path
•Daily focus on most important goals
In every team, department, and company, all workers have a specific role
to play. Like gears, these employees work together to keep the machine
(the company) running.
But humans are not machines, they won’t work mindlessly. They need to
know what they are doing and why they are doing it. Not to mention, how
it affects everyone else and the company.
If you’re in a leadership position, you probably have a good understanding

about why things are as they are in your company.
It’s easy to forget that employees, doing their day to day jobs, dealing with
all the small mundane tasks, don’t have access to this big picture. The ben-
efits of OKR methodology is just that: to make sure everyone knows what
they are expected to do and why.
OKRs, on a personal, team. and company level make up a system that

shows how everything one person does connects to the work of others.
If an employee knows that not meeting his goals makes achievements
harder for people in other departments, they will want to try harder. When
everyone knows how their work matters, it increases overall engagement,
motivation, and determination. It’s a psychological effect: no one wants to
be the weakest link, so they’ll try harder. This is a very powerful tool.
OKRs should become more important,

the more senior an employee becomes.
Jeff Weiner, CEO of LinkedIn
How the ball got rolling: History of OKRs

OKR methodology started its climb to popularity when John Doerr intro-
duced OKRs at Google in 1999, but OKR methodology had been champi-
oned even earlier by Andy Grove, the late CEO of Intel during the 1970s.
Doerr has said: “I remember being intrigued with the idea of having a
beacon or north star every quarter, which helped set my priorities. It was
also incredibly powerful for me to see Andy’s OKRs, my manager’s OKRs,
and the OKRs for my peers. I was quickly able to tie my work directly to the
company’s goals. I kept my OKRs pinned up in my office and I wrote new
OKRs every quarter, and the system has stayed with me ever since.”
The actual birth of OKRs can be traced back to Peter Drucker, one of the
first managerial thinkers, who, in the 1950s introduced a system called
“Management by Objectives” (MBOs) that called for setting objectives for
everyone who works in a company. These goals had to “lay out what con-
tributions a given individual and their unit are expected to make to help
other units obtain their objectives.”
With his startup background Sam was used to getting results. In

the Valley he had developed a mentality of getting things done by
being agile and flexible.
The key to that, he knew, was setting meaningful and impactful

goals to be executed right away. After extensively researching goal
setting techniques (using Google search), he ended up with OKR
methodology. The question now was, how to implement them on
a demoralized team, who still saw him as an outsider?
From Andy Grove to Larry Page and Beyond

Andy Grove reshaped the MBO system into a simpler form that answers
the questions:
1. Where do I want to go?
2. How will I pace myself to get there?
He also suggested objectives should be set more frequently, on a quar-

terly or monthly basis, as the fast-paced world requires constant feedback.
He also believed multiple performance management tools should be used
in conjunction with OKRs. Finally, he believed OKRs should be stretch goals
and achieving them 100 percent should be next to impossible. Having
gotten a lot of leadership lessons from Grove, John Doerr introduced the
system to Larry Page and Sergey Brin, co-founders of Google.
Nowadays, OKRs have been implemented at many companies from

LinkedIN and Spotify to smaller SMEs.
Weekdone has helped me to stay connected

and keep on collaborating with my team
Michele Puccio - Sales Director at Arrow
OKRs in Weekdone: A History

22.01.2013 30.09.2013 1.10.2013
Weekdone public launch Introducing Company and Team Objectives Gold Prize in Estonian Design Awards
17.10.2012
Weekdone beta launched
11.2013 14.11.2013 1.10.2013
2013
$200k investment round closed Weekdone wins Slush pitching contest iOS app launched
6.2014
14.04.2014 Estonian Best Mobile application award 1.07.2014
2014
Android app launched Estonian Secure Mobile E-service award Objectives and Key Results launched
3.2015 1.2015
2015
Apple features Weekdone as "Best of Productivity" Company becomes & stays profitable
10.2016
2016
Weekdone 3 released
�
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0100100000
The only way to meet you quarterly objectives is to work hard on them
every day. Leaders want to constantly know what’s going on in their teams
without being inundated with useless information.
Weekdone offered PPP progress tracking, “Plans, Progress, Problems”, for

that for four years. It is one of the easiest weekly monitoring methodolo-
gies imaginable. Weekly status reporting consists of 3 different questions
or categories:
• Plans. What are you planning? (Future)
• Progress. What have you done? (Past)
• Problems. What problems are you facing? (Present)
Each week, employees answer these questions and a manager can get an
overview of what’s going on.
Customers had been using Weekdone for their weekly planning for about
a year when many of them started asking: could we start using Weekdone
to manage long-term objectives as well? It was a great idea and Weekdone
incorporated OKR into the app.
We can see that combining these two methodologies yielded marvelous

results. The interest in OKRs has been rising rapidly over the last year and
every week more companies from small three person teams to Fortune
500 companies want to try it. And for a good reason.
I hadn't seen the combination of PPP reporting

and OKRs done anywhere else and I really liked
the simplicity of how they all merge.
Shawn Rucks, Deverus.
Weekdone helps to train people to use

objectives and key results in the right way.
Scott Wolfe Jr., CEO of zlien
Setting Objectives
Objective:
Set Objectives for other teams
Most companies have some sort of goals, or at least an idea about how to
make money. In the OKR framework objectives are much more than that.
It takes a lot of thought to set good quarterly objectives. On the one hand,
they must be broad, visionary strokes, but they must also be relevant and
focused.
Objectives should be qualitative and describe the desired outcome. For

example: Understand customer needs. There is no need to have numeric
metrics for objectives (you’ll have those with key results, but that we’ll
discuss a little later.).
You can see examples of different objectives for different teams at the end
of this book.
The main characteristics of objectives are:
• Actionable: Objectives should be goals that a person or a team can
execute independently.
• Inspirational: They should excite employees and give them a reason
to be excited on Monday morning when going to work.
• Time Bound: OKRs should be set quarterly so that people can get
them done as fast as possible.
Sam wanted his team to get results fast, so quarterly OKRs were
a good fit. He also needed a new way to motivate the team, so he
decided that employee goals should not be tied to their salary. It
was a tough sell to management, who has always believed money
to be a good motivator. Luckily, Sam’s idea prevailed.
Sam argued that for the younger workforce, money is not as big of
a motivator as most people think. Money is a motivator, of course,
but if you pay employees enough, other factors come into play.
Besides money, employees also need meaningful tasks that make
them excited about their work.
Everyone on the team and in management agreed that the pur-

pose of the marketing team was to increase revenue, yet no one
really understood why it was declining. To set OKRs, a team meet-

ing was called. OKRs should always be set as a team: not only
does it make sure that people can give their input, it ensures that
everyone understands the final goal clearly.
For the first quarter, they decided to set one company objective:
“Understand the company’s revenue and the factors that influence
it.” This is a good baseline objective example to help you get started.
Notice, the objective itself has no indicators to measure success,

yet it is still a goal that everyone can understand. What’s more, it
ties directly to the company’s overall goal of increasing revenue.
If you are using an OKRs based management approach,

Weekdone is the best tool I have seen for documenting what
the objectives are and keeping them all aligned to each other.
Lyle Stevens – co-founder and CEO of Mavrck
Setting Key Results

Key results measure how far from reaching your objective you are. It adds
metrics to objectives. The easiest way to set Key Results is to follow the
SMART model. SMART is a methodology that sets criteria to the tasks you
set. The KRs must be Specific, Measurable, Achievable, Relevant, and Time-
bound. The questions you need to ask for each goal are:
• Specific: is the KR well-defined and understandable for everyone?

• Measurable: can you measure success or failure?
• Achievable: is it realistically possible to do?
• Relevant: is this KR important for your objective?
• Time-bound: have I clearly established when the goal must be met?
For OKRs this time is usually one quarter
For the Product team, you can measure percentages of job done; for sales,
you can measure their success in dollars or another currency. You can also
go binary with the “Done-Not Done” scale.
KEY Result types:

•0-100% progress
•Any % value or x% to y%
change
•Euros, dollars
•Items, units, articles, people
•1-5 or 1-10 grade rating
•Milestones, stages, project
phases
Deliverables, tasks, outcomes
While the objective was inspirational and got people thinking

about the right things, the key results needed to give clear direc-
tions on what to do and how to do it.
Sam decided on 3 KRs for their objective to keep it as simple as

possible. Each KR was assigned to a different person in the team
so it would be absolutely clear who was responsible for what.
The final plan looked like this:
As one can see, all the KRs are easily measurable and give clear
instructions for day to day operations. Of course, these are not the
only things the marketing team will do. The OKRs don’t list every
weekly mundane task that people do.
OKR is a shining beacon for guiding everyone in the right direction.

It also makes sure, the most important tasks get done as efficiently
as possible.
The OKRs definitely help to foster the idea of

continuous improvement and pushing longer goals
rather than just getting through the workweek.”
Andrew Nelson, Exxact Corporation
What are Hierarchical OKRs
To get the best results OKRs should be aligned to one another. Each part
of your company must know what’s going on and how each part contrib-
utes to the whole. Our belief is that in order to get all the employees in
your company working as one, they all should share an aligned, hierarchi-
cal tree of objectives and key results.
The more visible, transparent, and up to date everyday progress is, the
better it works. True success only arises if teams do what’s best for the
whole company and employees do what’s best for the team.
The first question that comes up is: should defining the OKRs happen
bottom-up or top-down?
There is no wrong or right way in this case. In some case upper manage-
ment or the CEO outlines the company OKRs first and then asks team
managers to set their team goals in accordance with the company ones,
followed by personal employee goals based on team ones.
In other cases, all employees are asked to come up with suggestions for
their next quarter’s activities. In both cases, you come together at the
team level to reiterate them and add, delete, or modify some of them.
In the end the process moves both ways. You need to go over the compa-
ny level objectives and personal objectives many times before they work
well together. That is all part of the process of setting and aligning goals.
OKR progress monitoring

One of the main problems with any sort of goal setting technique is that
after a lot of effort has been put into designing and shaping goals, people
forget them and only remember them when they are due. OKR methodol-
ogy addresses this problem with constant monitoring.
The progress toward Key Results should be measured weekly to see how
much has been done. If a week has passed and you’ve got no progress,
there is a problem that should be addressed by the team leader and the
person responsible for the goal.
It is crucial that we receive reports that show our OKRs

and what progress we make each week to achieve those.
I was pleased that this was customized by Weekdone for us.
Bianca Courtenay, SnapShot
Common mistakes for

setting KRs
• Over 5 Os or KRs
• Listing too small unimportant tasks
• KRs not measurable, not numeric
• Not understandable to co-workers
• Continuous ongoing Q-to-Q goals
have no growth
• Not challenging enough
Grading and reviewing OKRs

OKRs should be reviewed weekly to avoid discovering that you have no re-
sults at the end of the quarter. However, and this is important: you should
not grade success based on your objectives. The grading goes on at the
Key Results level.
There are companies who like grading objectives by adding a binary

“done-not done” mark on it. This commonly used model states that an
objective is done if you complete all the KRs. So if you had 3 KRs and didn’t
hit the mark on one of them, the objective stays at 0. This tends to reduce
morale and increase confusion as OKRs are often set very high and the
risk of failure with some KRs is not only common but expected. KRs must
always be measurable, and you need to figure out that criteria when set-
ting them. With OKRs, it’s important to set them high enough that 100% is
uncommon. Getting 100% should be a near-impossible feat that only a few
teams accomplish.
In general, you should probably set up expectations like this:
100%
70%
30%
0%
It is very common to finish your first quarter with mostly 100% or with
mostly zeros, especially if you had no prior experience in setting OKRs. It’s
important to remember that OKRs are not a project you run for 3 months.
To work well, they must be used constantly and the progress must be
improved every quarter. In 3 or 4 quarters, you should have a clear idea
on how they work and most of your KRs should fall into the 70% category.
Then you’re all set.
Over the next 3 months, Sam started each of their weekly meetings
with questions about OKRs. “What did you do last week to make
progress?”
For the first few weeks, the answers came hesitantly as people
hadn’t become used to the system yet, but by month two, everyone
was on board.
When the quarter ended, the results looked like this:
The results were discussed during a team meeting where people

could explain the results. It turned out, that (For KR1) clients were
not so keen on answering surveys, even though the person respon-
sible tried to contact them every week.
For KR2 and KR3, the mapping process was so extensive that there
wasn’t enough time to analyze the results.
All in all, Sam was happy with the results and the engagement level
of the marketing team had improved considerably, which in turn
meant that, though not shown in the OKRs, the sales numbers had
started to improve a little.
The data they collected was not only helpful for their team but
helped other people working in the company as well. It’s important
to understand that everyone in the company is connected, the suc-
cess and failures of one team directly affect others.
Sam understood that some mistakes had been made when setting
OKRS: Both KR2 and KR3 should have been split into two separate
key results and could have been added under a separate Objective
for clarity. It’s better for a KR to have one variable. In that case, the
Objective would have looked like this:
As Objective 1 was mostly completed and the hypothetical Objec-

tive 2 was left undone, Sam decided to use Objective 2 as one of
the Objectives for the next quarter. And their work continues.
Over the next year the success of the marketing team convinced
the executives to start using OKR methodology throughout the en-
tire company. Sam continued running the marketing team while
also helping other managers get started with OKRs. The company
improved. The numbers went up and it also became a desired
working environment. And they lived happily ever after.
Sam was at a disadvantage as there was very few materials avail-

able on the methodology. This is a disadvantage that has now
been eliminated thanks to many writers and leaders who believe
in Objectives and Key Results. Now, everyone can easily do what
Sam did.
Examples of OKRs
Example company or sales OKR:
 Increase Q2 recurring revenues
KR Increase average subscription size by $500 dollars per month
($0 - $1500)
KR Increase the share of monthly subscriptions vs one-time contracts sold
to 85% (50% - 85%)
KR Increase annual renewals by 50% (0% - 50%)
Example company or HR OKR

 Improve internal employee engagement
KR Conduct a monthly “Fun Friday” all-hands meetings with an external
motivational speaker (0 - 3 meetings)
KR Start using OKR in all 10 teams and 5 departments (0 - 1 done)
KR Conduct face to face interviews with 48 employees on their needs.
(0 - 48 interviews)
Example Finance OKR

 Improve annual budgeting and business planning
KR Submit all 5 budget proposals before 1st of September (0 - 5 submitted)
KR Conduct a 4 planning session with each of the 5 division manager be-
fore their proposals (0 - 20 sessions)
KR Close the final budget by the end of November (0 - 100%)
Example Product Management OKR

 Implement new 360-degree product planning process
KR Finish documentation that divides clear roles between sales, marketing,
design and development (0 - 100%)
KR Decide on and implement the input methods from design and develop-
ment back into product management (0 - 100%)
Example Marketing OKRs

 Successfully implement the weekly newsletter
KR Grow subscriber base at least 5% per every week (0 - 65% increase)
KR Increase the CTR% to above industry average of 3.5% (0 - 1 done)
KR Finalize the content strategy, key messages and topic structure for the
next 6 months (0 - 100%)
 Activate user-testing
KR Conduct at least 4 face to face testing sessions per month
(0 - 12 sessions)
KR Receive at least 15 video interviews from Usertesting.com
(0 - 15 interviews)
Conclusion
This book has both the basic knowledge and practical examples you need
to start implementing Objectives and Key Results in your team.
We hope that your journey to become a goal setting master does not end
here. Instead, we wish you many productive quarters of clear Objectives
and well set Key Results.
To make sure your team has clear goals and a strong synergy, try out
Weekdone. Implementing Weekdone is instant. Just sign up for our free
trial at weekdone.com, invite your employees and you’re all done. In less
than a week, you will get your first structured employee progress report
via e-mail from your people, one that you can quickly give feedback on.
Go and make your goals a reality.

THE ULTIMATE CHECKLIST
Launching Objectives & Key Results
Make sure your Objectives fit the criteria below:
Quarterly
Measurable (Complete/Incomplete is measurable despite not having a number)
An Objective is just a statement / headline of WHAT you want to achieve
Can be aligned below to or contributed to from below
Set only 3-5 Objectives total

You should set only 3-5 objectives per quarter plus keep your Key Results to just
1-3 per Objective. Keep it simple - less is more. If you have too many Objectives
or KRs, it becomes too distracting and your team will be running in too many
directions to try to hit them.
Ensure the OKR process is 70% bottoms-up

Don’t just give objectives and directives to your team but instead start by sharing
your top objectives and then ask everyone for what objectives they propose to
set for themselves so that your top objectives can be achieved. This way you get
the buy-in and your people will be more committed to their objectives. Plus you
will have tapped into the collective wisdom of your team rather than merely telling
them what to do.
Check on progress every single week without fail

This is the most critical step in executing and achieving your OKRs. A great deal
happens during the span of a week and there are only 13 weeks each quarter. If the
executive or a manager does not check in on the progress weekly and doesn’t know
the status or the bottlenecks/obstacles then it is impossible to course correct.
Designate operational vs. aspirational

Some objectives can be “operational” and in this case achieving 90%-110% of the
KR is an acceptable outcome. But you may also want to have “aspirational” also
known as moonshots and then even if you achieve 60%-70% of the KR then you
should consider that a win.
Specify the tactics that will achieve each Objective

It’s important to plan the tactics you will use to achieve the key result
simultaneously as you set your KRs. If you don’t do that then you won’t know
which knobs to turn and levers to pull in order to achieve your KRs.
The Definitive Guide to
OKRs by Qulture.Rocks
How Objectives and
Key-Results can help your
company build a culture of
excellence and achievement.
Francisco Souza Homem de Mello

ISBN 978-0-9904575-7-2
© 2016 Qulture.Rocks, Inc

To my partners Chris, Fred, Caio, João, and Felipe.
CONTENTS
Contents
Introduction . . . . . . . . . . . . . . . . . . . i
Why set goals . . . . . . . . . . . . . . . . ii
TL;DR . . . . . . . . . . . . . . . . . . . . . . . 1
Introduction . . . . . . . . . . . . . . . . . . . 3
A Brief History of OKRs . . . . . . . . . . . . 5
A bit of goal-setting science . . . . . . . . . . 10
OKRs and Hoshin Kanri . . . . . . . . . . . . 15
Results-orientation . . . . . . . . . . . . . . . 16
MBOs x OKRs . . . . . . . . . . . . . . . . . . 18
OKRs and Strategic Planning . . . . . . . . . 22
How goals contribute up . . . . . . . . . . . . 28
The Definitive Guide to OKRs | Qulture.Rocks

CONTENTS
The OKR cadence . . . . . . . . . . . . . . . . 34
Troubleshooting . . . . . . . . . . . . . . . . . 44
The End . . . . . . . . . . . . . . . . . . . . . . 51

Introduction i
Introduction
We at Qulture.Rocks have a big dream: to bring ag-
ile, ongoing performance management to each and
every company worldwide. We think better perfor-
mance management practices, that include meaning-
ful goal-setting, constant feedback, and greater align-
ment and purpose drive engagement, happiness, per-
formance, and more profits and sustainability as a -
much wanted - byproduct.
Agile goal setting is one of the bedrocks of a great
ongoing performance management system, and OKRs
are but one of a few different ways you can call and
organize agile goal setting in your company. After
being widely publicized by Google in a number of
videos, presentations, and blog posts, the methodol-
ogy, that was supposedly invented by Andy Grove at
Intel and brought to Google by a venture capitalist
called John Doerr, has drawn a lot of attention from
the management community.
So the goal of this book is to explain in detail how
OKRs work. There’s a LOT of confusion on how they
work and how they should be applied. Pundits and
influencers alike are of no help: they frequently cite

Introduction ii
what is believed by agile goal-setting experts as wrong

examples of OKRs. So we felt HR professionals, en-
trepreneurs, and executives deserved a better source
of knowledge on the subject.
We truly hope you like it!
Why set goals

Well-set goals drive people to produce better results
in myriad ways ¹:
• they motivate people into achieving better re-

sults (what we’d call the “effort” component)
• they drive people of expend effort in the right
direction, or, in the corporate setting, in align-
ment with what the company’s strategy (what
we’d call the “direction” component)
• they increase focus on the activities that have
the highest leverage towards the intended re-
sults
¹New Developments in Goal Setting and Task Performance, edited by
Edwin Locke and Gary Latham, is the most comprehensive piece of science in the
effect of goal setting on performance. It’s a meta-study of more than 500 papers
and theses on the subject, and will be cited by us extensively. We won’t for time
sake, be using formal scientific citation formats, because it’s 2016 and frankly we
don’t have time for it.

Introduction iii
Note that we’ve mentioned well-set goals. There’re a

number of scientifically-proven best practices, which
we’ll cover in the present ebook, that should be ob-
served when designing and executing a great goal/OKR
practice.

TL;DR 1
TL;DR
OKRs are an acronym for Objectives and Key Re-
sults. Objectives are high-level, qualitative goals. Key-
Results are specific, SMART goals that support the
Objective. When we say support, we mean Key-Results
should include metrics that trully translate Objective
accomplishment.
Some pundits use a very simple statement: We will
achieve ________ as measured by ____, ____, and __-
______. The first space is filled by your Objective, and
the second to fourth are filled by Key-Results. Let’s
use an example to illustrate our definition:
Objective
• Increase the profitability of the company
(Since OKRs belong to cycles, if they don’t have

a “date” stamp to them, you should automatically
assume the goals should be completed before the end
of the cycle.)
Key Results
• Increase revenues by 10%

TL;DR 2
• Reduce costs by 3%
• Maintain general, and administrative expenses
nominally constant
As you can see, the Objective is a bold goal, specific,

time bound, but still achievable (as opposed to dou-
bling my profit in a month).
Key results are the actual targets, as measured by
KPIs, that will really acid test Objective achievement.
They are what, in MBOs, we know by “goals”. As
you can see, I’ve used Andy Grove’s method of Key-
Results breakdown: using KRs as milestones for goal
achievement. There are other possible approaches.
Some people defend that Objectives have to be quali-
tative, whereas Key-Results have to be quantitative.

Introduction 3
Introduction
If we come to think about it, there’s a blurred line
that separates a job description, a goal, and standard
operating procedures.
Job descriptions would be fine by themselves if we
substituted humans with robots, and robots were al-
ways pre-programmed with job descriptions and a
manual of standard operating procedures: they would
perform their jobs and responsibilities perfectly, capped
only by the machines mechanical/processing limita-
tions. But it turns out there are many tasks we haven’t
figured how to program robots to do better than us,
yet. We humans are very good at having common
sense, and transferring knowledge from one set of
applications to another; at figuring out weird patterns;
and at coming up with novel solutions to problems.
With this set of amazing skills comes also some limita-
tions at performing and sustaining performance at our
fullest potential, two problems that are closely related
to our - unique? - faculty: volition. That could happen
because a lack of challenge (related to our frontal
cortex) or a lack of purpose - the “why” of what we’re
doing it. If we’re supplied only with job descriptions,

Introduction 4
we may forget them, or lose our motivation to perform

it at our best. We may even lose track of what “best”
means.
Goals come in to fill this need. They help us find
a sense of purpose when we properly participate in
their setting, but also by linking our responsibilities at
tasks’ outcomes to greater outcomes, like the success
of the group we work in/with; they provide us with
a challenge to constantly perform at our best; they
provide gratification when we reach them, which
reinforces the cycle.
OKRs are basically goals: an old staple of business
management, rebranded, repurposed, and tweaked to
21st century necessities of companies and profession-
als.

A Brief History of OKRs 5
A Brief History of
OKRs
OKRs are an old staple of business management,
rebranded, repurposed, and tweaked to 21st century
necessities of companies and professionals.
It all started with the fathers of management, Taylor,
Ford, and the sorts, who began facing business like
a science. How so? They figured they could measure
outcomes, and then formulate hypotheses as to how
they could improve these outcomes. The main out-
comes back then were productivity, as measured by
output per employee. These guys figured out optimum
work schedules, break times, and lightning arrange-
ments for factories. They also started streamlining
production, adding specialization to the factory floor.
These practices all brought incredible, tangible im-
provements.
In the 50s, a fellow named Peter Drucker, who’s
believed to be the greatest management guru that
ever lived, figured out that adding goals to managers
could be a great thing. Not only they had to improve
their outcomes, as Taylor and Ford had, but they

also had to aim at specific target outcomes from time

to time. Drucker called this framework Management
by Objectives, or MBO, a concept introduced in his
seminal book The Practice of Management.
Since the introduction of MBOs, practically every
modern Fortune 500 company practices some sort of
goal setting. It’s proven to bring better results than
not having goals . Some companies set them once
a year; some companies set them twice a year. A
number of them tie variable compensation to reaching
your goals, and another number of them perform
some sort of performance review based on these goals
and results. The term OKRs was introduced by Andy
Grove, a de facto cofounder of Intel (he joined the
company on the day of its incorporation, but is not
listed as a cofounder,) and its former CEO, in his great
management book High Output Management . Grove
didn’t bring any transformational insight to MBOs,
but spoke about appending key-results to goals, and
calling goals objectives. But making key-results an
integral part of the MBO process is very important: it
brings clarity to how goals can and should be attained,
and makes this “how” evident and transparent to
everybody.
In Grove’s view, key-results had to be chronological
milestones that took professionals in the direction of
reaching their goals: a one-year goal could be broken

down into 12 monthly key-results, or 4 quarterly key-

results. He treated them specifically as “milestones.”
That use was attuned to Intel’s 80s reality: a large
company, already on the top of its game, looking to
translate its strategic planning into actionable goals
and milestones for the whole organization.
Another Grove tweak to MBOs was his belief that
goals (objectives) and key-results had to be set in a
bottom-up process, from the employee up, so as to
bring buy-in and empowerment to the process. Before
that, companies would shove goals down the orga-
nization, from the Board to the CEO, down to VPs,
and so on. Grove enabled employees to set their goals
according to a broad guidance from the company, to
be then calibrated with direct managers.
Last, but not least, Grove insisted that OKRs be ag-
gressive, meaning – very – hard to achieve, what he
called “stretched.” He went further along, and insti-
tuted 70% as the new 100%, meaning that achieving
70% of your goals was as good as hitting them, since
they were purposely baked very hard .
In the late 90s, OKRs spread out to other Silicon Valley
companies, through the inspiration of Jon Doerr, a
partner of Kleiner Perkins Caufield Byers, one of the
world’s foremost venture capital firms. Doerr had
worked for Intel under Grove’s leadership, and got

acquainted with its use of OKRs, later thinking it

could be adapted to other companies of KP’s portfolio.
That’s how Google, and later on Zynga, became fierce
advocates of OKRs, tweaking the tool to their specific
needs.
But what made Google’s version of OKRs different
from Intel’s? Not much. Google shortened – a lot –
the OKR cycle, making it a quarterly process. That
means the company, its senior executives, and basi-
cally every employee, sets his or hers objectives and
corresponding key-results quarterly, a practice more
attuned to the incredibly fast-paced reality of web
2.0 technology companies. Google enforced Grove’s
position that goals should not be cascaded down the
organization in a top-down manner, and greatly ex-
panded upon it, according to Laszlo Bock, its SVP of
People Operations:
“Having goals improves performance. Spending hours
cascading goals up and down the organization, how-
ever, does not. It takes way too much time and it’s too
hard to make sure all the goals line up. We have a mar-
ket-based approach, where over time our goals con-
verge, because the top OKRs are known and everyone
else’s OKRs are visible. Teams that are grossly out of
alignment stand out, and the few major initiatives that
touch everyone are easy enough to manage directly.”

That means at Google, everyone’s OKRs are set by

themselves, and made public via its intranet. Google
ensures that individual OKRs are aligned with its own
through a mix of supervisor oversight, peer pressure,
and psychology.

A bit of goal-setting science 10
A bit of goal-setting
science
(Or, the goal of having goals.)
Goal-setting has historically been used in the corpo-
rate world for two main purposes:
• To motivate employees (efficiency)

• To assess their performance
Let me explain this: HR common sense has always

said that goals motivate employees towards achieving
better results. Goal achievement, on the other hand,
has historically been used as a proxy for performance:
if I’ve hit 100% of my goals, it must mean I’m a good
performer. But we thought it made sense to briefly
review goal-setting theory, or GST. We think HR
professionals deserve to have this widespread practice
correctly understood with a theoretical basis, because
there is more to it than just these two axes of purpose.
According to GST, ˆfoo3² goals serve three main pur-
²MarionEberly,DongLiu,TerenceMitchell,ThomasLee;
AttributionsandEmotionsasMediatorsand/orModeratorsintheGoal-
StrivingProcess

poses:
Focus
Presuming that goals have been come up with ac-

cording to the company’s long, medium, and short-
term strategies, according to myriad methodologies
like BSC, Hoshin Kanri, etc, goals help the company
focus effort, attention, and energy on what’s relevant,
relative to what’s not relevant. According to Johnson,
Chang, and Lord (2006), “goals direct individuals’
attention to goal-relevant activities and away from
goal-irrelevant activities.” It is proven that “individ-
uals cognitively and behaviorally pay more attention
to a task that is associated with a goal than to a task
that is not.”
Effort
Another very important purpose of goals is to increase

the level of effort that people exert at work. It is
also proven that “goals energise and generate effort
toward goal accomplishment. The higher the goal, the
more the effort exerted.” This is a tricky equation: too
hard a goal, and, as you’ll see in a bit, employees get
demotivated; too easy a goal, and employees will also
get demotivated. In sum, there’s a right amount of
hard, which pushes people to challenge themselves,

but within a reasonable chance of achievement, that

optimizes performance, which links us to
Persistence
Persistence is probably the trickiest thing to get right

when setting goals: The right ones produce high effort
input for longer periods of time, but the wrong ones
can really wreak havoc: “large negative discrepancies
may lead to a withdrawal of effort when individuals
are discouraged and perceive low likelihood of future
goal attainment.” (Carver & Scheier, 1998). As we’ll
see, there are derivative factors that influence persis-
tence towards goals.
Getting goals right
When GST researchers goal efficacy, a lot of atten-

tion is given to how individuals relate to their goals,
and especially, to hitting and not hitting their goals.
When there are negative gaps, or when individuals
perform below their goals, they seek to attribute the
reasons as to why goals haven’t been met (“When
individuals face negative goal-performance discrep-
ancies, they will likely consider the reasons why they
are behind., which systematically determines their
subsequent behaviors.”), and different reasons mean
different impacts on how these same individuals take

on their future goals: “attributions therefore are an

important motivational mechanism that may explain
under what circumstances individuals persist in goal
pursuit or adjust their goal levels ˆfoo4³.”
Here’s a list of the main attribution mechanisms, and
how these may affect future goal-setting:
• Internal (self) and external (locus of causality)
If I think I’ve hit goals because of my own compe-

tency, I’ll set higher goals in the future, whereas if I
think I’ve not hit goals because of my own incompe-
tence to do so, I’ll try to set lower goals in the future
• Stable and unstable
Additionally, if I think the reason I haven’t hit my

goals is not going to change (stable), I’ll try to set
lower goals, whereas if I think the reason I haven’t
hit my goals was a one off, I’ll set higher goals. So if
I think it was my lack of effort, it’ll be better than if
I think it was my lack of competence, with is more
stable.: “when individuals perceive the cause of the
failure or negative goal-performance to be stable and
this likely to remain the same in the future, they will
³Lowertheirgoals/sandbag

likely expect the outcome (i.e.m failure to reach their

goal) to recur.”
• Controllable (under the person’s control) and

uncontrollable
“If people believe that causes for failure are control-

lable, they will provably continue or renew their effort
and commitment to their original goal, but be less
likely to do so if the cause of a negative discrepancy or
failure is perceived to be due to uncontrollable causes”
• Higher goals/purpose
“When making an internal attribution for goal failure,

an individual may be more likely to continue goal
pursuit when the goal contributes significantly to a
highly valued superordinate goal. The individual may
be more likely to revise the goal downward when the
goal is tangential to the superordinate goal’s accom-
plishment”

OKRs and Hoshin Kanri 15
OKRs and Hoshin

Kanri
We believe that Objectives and Key-Results can be
best implemented if used in tandem with many learn-
ings from the Japanese Hoshin Kanri discipline, the
strategic planning portion of TQM, or Total Qual-
ity Management. Actually, if we dig into Hoshin
Kanri studies, we may think we’re reading present-
day praise for OKRs. In Hoshin Kanri,
• Senior executives set company-wide goals and

CEO goals
• Goals are then unfolded to the next level down
throughout the organization via discussions be-
tween the parties involved
• The practice is believed to encourage deep and
meaningful bottom-up participation in goal-
setting

Results-orientation 16
Results-orientation
Goals should be tied to KPIs whenever possible. KPIs
provide the means against which progress towards
goals is measured in the organization. KPIs, or Key-
Performance Indicators, can be Lagging and Leading
indicators of results.
Lagging indicators are easy to measure (e.g., sales,
production output, miles, gold medals) but very dif-
ficult to influence and manage. Leading indicators,
on the other hand, are harder to measure, but can
be managed and influenced before they materialize
into results (e.g., sales calls, meetings done, prospects
opened, hours trained).
Whenever possible, goals should focus on results, as
opposed to efforts or means to achieving results. Sales
are the most intuitive example of a results-oriented
KPI to base a goal upon. Therefore, sales teams have
an easy time setting results-oriented goals.
Even though goals should be generally based on lag-
ging, results indicators, they should be mixed and
matched with the right effort-goals (those based on
leading indicators) to ensure that the organization

Results-orientation 17
learns how to best achieve goals, and that it remains

capable of achieving goals in the future.
A great example is profit. Profit may be the ultimate
results-oriented KPI on which to base goals upon. But
if increasing current year profit is the sole goal of an
organization, it runs the risk of, for example, jeop-
ardizing its ability to generate future profits by not
balancing this goal with other, effort goals, based on
leading KPIs that ensure future sustainability. There-
fore, at the top level, your company should mix prof-
itability goals (or sales goals, if you’re a startup) with
effort-based goals, such as maintaining a baseline Net
Promoter Score with customers.

MBOs x OKRs 18
MBOs x OKRs
OKRs look basically like goals to me. What’s the big
fuss about them? Great point. OKRs are no big deal:
a tweak to the MBOs framework. Here’re some of the
differences between regular goals and OKRs:
• Shorter cycles: OKRs are set and reset in shorter

cycles, from monthly to quarterly.
• More transparency: OKRs are usually public
within a company. Since they are less directly
tied to compensation (see below), publicizing
OKRs is less of a problem.
• Bottom-up: OKR are set in a more bottom-
up way. In MBOs, goals tend to be cascaded
down the organization in a formal, rigid matter.
Adding every individual goal in the company
in thesis adds up to the company’s goals. OKRs
are more flexible: employees are encouraged to
set their OKRs themselves in alignment with
higher goals (like their team’s, or the com-
pany’s), and then check them in with their
managers.
• Moonshots: OKRs are achieved when their 70%
hit. So, you ask, 70% is the new 100%? Not really.

MBOs x OKRs 19
The idea is that if you aim higher, you’ll reach

higher. So the % of completion means less than
the actual results achieved.
• OKRs are less directly linked to compensation:
in hard-core meritocratic organizations, goal
achievement is basis for variable compensa-
tion. If you achieve 100% of goals, you make Y
times your monthly/annual salary. (Some com-
panies may even compose this formula with
company-wide triggers), that may increase or
decrease payout. But that may lead to sandbag-
ging throughout the organization – setting low
goals so that you hit them and make your bonus.
Therefore, the % of completion doesn’t matter
in OKRs, but the actual results achieved. (In
MBOs, the quotient (% of completion of a goal)
is what matters, or a proxy for results).
Criticism
Most of the literature available out there about OKRs

doesn’t help eager professionals to learn how to im-
plement them. One of the leading companies uses:
“Put a man on the moon by the end of next decade”
as an example of an Objective. I know, I know. It’s
figurative. But it’s also confusing. That’s clearly not
an Objective for OKR purposes. It’s not something
achievable in a 3-month, or even 1-year cycle. It’s

MBOs x OKRs 20
more of a multi-year company-wide Objective . What

we call a Dream, or a Mission (We’ll get to those very
bold, long-term goals in a second, when I introduce
you to the concept of a Dream, that’ll turn OKRs into
DOKRs).
To help achieve this understanding goal, we would
kindly suggest you to limit your objectives to the
cycle length you prefer to adopt. Start out with shorter
cycles, so you can correct, iterate, and learn by doing.
Another great source of confusion is that examples
tend to mix a number of different taxonomies:
4 OKR Approaches
We believe in the school of thought that defends that

Key-Results should be results whenever possible, as
opposed to parts of a whole, chronological milestones,
or a plan of action. This is what wrong OKRs look like
(according to the Results approach):
Objective
• Learn how to cook the basics by September 1st

MBOs x OKRs 21
Key Results
• Buy and read “The 4-Hour Chef” by Tim Ferriss

by June
• Enroll at a cooking 101 course at the local
community center by July
• Cook dinner for parents and siblings by August
15th
• Ace cooking knife work by September 1st
This example is great: if you achieve each of the 4

goals, does it mean you’ve “learned how to cook”? Not
necessarily. These Key-Results are tasks, that at best
can be thought of being highly correlated to knowing
how to cook, but that do not ensure that the Objective
was achieved.

OKRs and Strategic Planning 22
OKRs and Strategic

Planning
Even though in today’s ultra fast-paced world multi-
year strategic planning may sound ludicrous, a com-
pany still has to have a vision of what the future will
look like, against which to plan - and steer itself -
even if that means recalibrating these plans often. In
an OKR-using company, we propose a system where
OKRs are set in two concurrent cycles:
• Yearly OKRs: set at company level, the yearly

OKRs are what should be achieved in the cur-
rent year, to drive the company closer to its
long-term vision (Dream, as you’ll see below)
• Quarterly OKRs: set at company, team, and
sometimes individual levels, the quarterly OKRs
are the tactical progress that should be made by
the company to drive it closer to its yearly goals
Dreams + OKRs
The long-term vision of the company should be sim-
plified into a Dream, which, in Google’s case, means

to “organize the world’s information and make it

universally accessible and useful.” This Dream should
serve as a guiding star to the company’s most impor-
tant decisions, and a stepping stone for every cycle of
OKR setting, be it yearly or quarterly.
Dreams should be, as put by Jim Collins, author
of Good to Great, Big, Hairy, and Audacious Goals.
They should be very aggressive, tied to the company’s
greater purpose. As Jorge Paulo Lemann, a Brazilian
entrepreneur, and currently the biggest individual
shareholder in companies like Anheuser-Busch InBev,
Burger King, and Heinz Kraft, says, “you have to
dream very big dreams, because big dreams and small
dreams take the same amount of effort.” Google’s
Larry Page and Eric Schmidt say the same, as well
as Amazon’s Jeff Bezos. Henry Ford’s famous quote
goes that way to: had he not thought of making cars
a mass-market product, people would still be riding
their horses to work.
The Ongoing Unfolding Process

Unfolding is the process through which Dreams be-
come Objectives. If you think about it, Objectives
stand to Dreams just as Key Results stand to Objec-
tives . If we go on unfolding our first dream from last
example, we’ll get the following goal tree, that’s got

objectives for the next six months:

Dream:
• Become the largest SaaS company in Latin Amer-

ica
Objectives for the Year
• Be ready for Series A (a)

• Have a top-notch product ready for the large
enterprise (b)
• Create and iterate a Sales Machine (c)
Objectives for the Quarter
• Raise a series-seed round (a)

• Have a pilot running with at least one large
enterprise (b)
• Book at least U$ 50k in sales with a hired
salesperson (c)
Key-Results:
• U$ 100k in MRR (a)

• Generate 200 leads within our Ideal Customer

Profile (a)
• Create 5 high-quality user success cases (a)
• Have all users using mobile website (b)
• Put first layer of gamification features to work
for engagement testing (b)
• Create full suite of notifications/logistics (b)
• Implement at least 80% of roadmap-coherent
user feedback (b)
• Hire first SDR to generate at least 150 leads by
quarter-end (c)
• Have a proven ICP to reach U$ 1 mio MRR (c)
As you can see, each Objective is consistent with

the Dream we’ve cascaded, and each Key-Result is
consistent with the Objective we’ve cascaded. That’s
why I’ve labeled each with a letter (a, b, and c) at
the end of every item, to make the relationships more
evident. There really isn’t any rocket science to it. On
the other hand, I’m sure some sort of OKR method is
surely helping Elon Musk and SpaceX find their way
to Mars.
Another representation of the unfolding process can
be viewed in the diagram below:

DOKR Cascading
Criticism to unfolding OKRs

“Having goals improves performance. Spending hours
cascading goals up and down the organization, how-
ever, does not. It takes way too much time and it’s too
hard to make sure all the goals line up. We have a mar-
ket-based approach, where over time our goals con-
verge, because the top OKRs are known and everyone
else’s OKRs are visible. Teams that are grossly out of
alignment stand out, and the few major initiatives that
touch everyone are easy enough to manage directly.”
• Laszlo Bock, VP People Operations, Google
Experts preach that there is no need for a rigid, top-

down unfolding process to take place in OKRs (as

opposed to MBOs). They believe having company-

wide OKRs, as well as upper management OKRs,
widely publicized would naturally drive people to
align their OKRs to the company’s larger goals, so that
time is more efficiently spent in other activities.
We at Qulture.Rocks believe that it is optimal to start
practicing OKRs in a very relaxed manner (mostly
bottom-up) which will, as expected, produce a very
wide dispersion of OKR quality across the organiza-
tion. The second step, as people gain more maturity
and comfort with the process, would be to insert top-
down cascaded OKRs into the equation, which help
educate people as to how their own OKRs should
contribute to the company’s goals and greater strat-
egy. Depending on the maturity level of the company,
management can then revert back to a more bot-
tom-up OKR setting process as people gain a mature
understanding of how their OKRs contribute to the
company’s.
Anyways, all serious adopters of OKRs we know off
do cascade yearly company-wide goals into quarterly
company-wide goals, and these into the CEOs and
VPs goals, and from VPs down to most of the impor-
tant teams and squads on the organization.

How goals contribute up 28
How goals
contribute up
Goals can be unfolded in two ways: A and B. Until
you’ve reached a point where unfolding is not neces-
sary, it is very important to train employees on how
exactly their activities contribute to the company’s
goals, and teaching them about A and B-types of
contributions really helps in a mathematical sense.
A-type unfolding
In A-type unfolding, a goal is unfolded down to the

next hierarchical level down the organization with the
same KPIs and measurements of the original, upper
goal. What changes is the amount of the goal that is
attributed to each person. An example may help:
VP Sales Key-Result for the quarter: U$ 100k in sales
• Director Sales 1 Key-Result for the quarter: U$

50k in sales
30k in sales


20k in sales
As you can see, all second-tier goals (the directors’)

add up to the first-tier goal (the VP’s). The KPIs are all
the same (sales). So each director has a “direct share”
of the VP’s goal.
B-type unfolding
In B-type unfolding, a goal is broken down into it’s

components to the next hierarchical level down the
organization with different KPIs and measurements
of the original, upper goal. So everything changes.
Another example:
CEO Key-Result for the quarter: 10 percentage points
growth in profit margin
• VP Sales Key-Result for the quarter: U$ 100k in

sales
• VP Marketing Key-Result for the quarter: 5%
price increases without negative volume impact
• VP Production Key-Result for the quarter: 15%
cost reduction in all manufacturing lines
• VP Finance Key-Result for the quarter: 5% re-
duction in financial expenses

As you can see, the CEO’s goal was unfolded down to

the VP’s, but was broken down to each VP’s area of
accountability and responsibility. If all VP’s hit their
goals, the CEO will have hit his goal, but they aren’t
the same as in the A-type example above.
If your people will really understand how their OKRs
contribute to the company’s OKRs, strategy, and vi-
sion, it is important that they understand, mathemat-
ically, or even casuistically, how this happens. It is
management’s responsibility to teach people how this
happens as the level of OKR maturity of the company
grows.
Who should set individual OKRs?

This is a very delicate subject. Some OKR coaches, like
Felipe Castro, founder of Lean Performance, defend
that multi-discipline teams should have only team
OKRs, and not individual OKRs, since finding indi-
vidual accountability/ownership of results and KPIs
is very difficult.
For example, let’s think about an e-commerce com-
pany that has a team composed of designers, engi-
neers, and product managers tackling the e-store’s
conversion rates. One of the projects is to reduce
the drop-out rates of customers in the shopping cart

section. This team’s Objective is clear: Improve con-

version rates. One of their key-results will surely be
Reduce cart drop-out rates by 5%. How can this team
goal be further divided, or unfolded, to the different
members of the team?
Easy: the designer’s goals is going to be to think of dif-
ferent colors to A/B test buttons. Engineers will then
implement these changes. The product manager will
talk to customer. Etc. But these are not results. These
are tasks, and tasks should not be goals. They aren’t
ends. They’re means to an end. Now you know the
argument against individual goals in multi-discipline
teams.
Exercise: Completing the unfolding

process
You should now start unfolding your dreams into

Objectives that you want to accomplish in the next
several months. Every dream should be cascaded into
3 to 5 Objectives, that must be, remember, BSMAT
(The original acronym is SMART, and stands for Spe-
cific, Measurable, Attainable, Relevant, and Temporal.
But I think Bold is just as – or even more – important
than the others, and must be included. Relevant, to
me, is self-evident, so doesn’t deserve a coveted spot at
the acronym. And Temporal is weird, so I’ve swapped

it for Time-bound. After spending five minutes trying

to come up with a nice-sounding acronym, I gave up.
BSMAT it is. If you have a better idea, shoot me an
email at kiko@qulture.rocks):
• Bold
• Specific
• Measurable
• Attainable
• Time-bound
Now write them down: three to five Objectives that

you want to achieve in the next 3 to 12 months, and
that, most importantly, will lead you to achieving one
of your dreams:
Table 2: Dream>Objective Cascading Worksheet
Now for each Objective, you should break down three

to five key results you must achieve in the next few

months, that will lead you, either as milestones or

parts of a whole, to achieving your objectives (re-
member, this table is only an inspiration for you to
brainstorm your dreams, objectives, and key-results).
I’ll supply a better table for you at the appendix,
for complete organization, as well as a Google Sheet
available for download:
Table 3: Objective>Key Results Cascading Worksheet

The OKR cadence 34
The OKR cadence

More important than setting goals are the rituals that
form the OKR cadence, or what we’ll call monitoring.
Monitoring is where the rubber meets the road. It’s
where the benefits of OKRs (enhanced performance, a
high delivery bar, more alignment, learning, etc) come
to life and produce better company-wide results.
Learning from goals

The first, most important part of goal monitoring is
learning from the goals. It is very important that the
organization foster a learning culture for goal and
KPI monitoring, so that nobody is afraid of breaking
“bad” news, like a below-target leading indicator that
may be managed up in time for goal-achievement. In
Dean Spitzer’s Transforming Performance Measure-
ment, the author explains:
“One of the major reasons why performance measure-
ment is seldom able to deliver on its positive potential
is because it is almost never properly “socialised,” that
is, built in a positive way into the social fabric of the
organization. It is this building of a positive environ-

The OKR cadence 35
ment for performance measurement that I believe is

the missing link between basic, workmanlike perfor-
mance measurement and the truly transformational
kind.”
But what’s wrong with the way we currently measure
and learn from goals, if we’ve been grown accustomed
to gradings and scores in school and sports? Dean
Spitzer summaries it neatly:
“Why is the attitude toward measurement at work
so different - ranging from ambivalence to outright
hostility? Because too many people are accustomed to
measurement’s negative side, especially the judgment
that tends to follow it - too much traditional perfor-
mance measurement has been seen as ‘the reward for
the few, punishment for the many, and a search for
the guilty.’”
The first part of building this learning culture into
your culture is to know the types of cases that will
be discussed for learning purposes, and which I’ve re-
produced below from Vicente Falconi’s Hoshin Kanri
book:
Goal Completion Analysis

The OKR cadence 36
Action Plans
Basically, for every goal, there should
be an action plan that outlines what
will be done, and by whom, in order
for that goal to be met. To find out
what the action plan is, the team T>
must convene, and brainstorm possible
solutions to the “problem” at hand, ei-
ther through 5-Whys, a Fishbone Di-
agram, or other problem-solving tech-
niques. Once a number of contributing
T> causes - and possible attack fronts -
are found, the team decides on which
to tackle based on Pareto’s principle,
which 20% of activities will produce 80%
of the results required.
The analysis table basically groups goals in two axes:
• wether the goal was surpassed, met or not met,

and
• wether the action plan was executed or not
Therefore, we’re able to analyze, basically, if a goal

was met or not “on purpose” or by “chance”. Here’s
how to handle the 6 possible cases:

The OKR cadence 37
• Case 1: Actions were executed according to

plan, but goal was not met. In this case, either
the plan was wrong, or there was some new
variable affecting the problem that appeared
after the plan was made. The team has to either
learn why the plan was wrong in the first place,
or to tweak the plan for the next cycle taking the
new variable into account.
• Case 2: Actions were not executed according
to plan, and goal was not met. It is important
to understand why the plan was not executed.
If there were impeding factors that were pre-
venting the plan from being executed, the team
must understand why these weren’t neutralized
with new actions or alternative paths of action.
plan, and goal was met. Even when goals
are met, teams must thoroughly analyze the
achievements, and evaluate if they were met in
great part because of the action plan, or because
of external factors. Which external factors were
these? Why weren’t they foreseen? The team
must understand the whys behind each answer.
• Case 4: Actions were not executed according
to plan, and goal was met. Again, it’s im-
portant to understand which unforeseen factors
contributed to the goal, and why they weren’t

The OKR cadence 38
foreseen. It’s also important to understand why

the action plan was not executed. It will hardly
have been a conscious effort to not execute the
plan.
plan, and the goal was surpassed.
• Case 6: [][][]
Five Whys
The Five Whys are a method to get to the root cause

of a problem. When people stay at the first layer of
a problem (the first “why”) they tend to overlook the
real root cause. Therefore, the tool is to ask Why five
subsequent times (or as many times as needed) until
the final root cause of a problem is found.
In our example:
Q: Sales fell by 10%. Why? A: Because of the demon-
stration. Q: Why the demonstration affected sales?
A: Because some streets were closed, and our trucks
couldn’t reach merchants. Q: Why didn’t we use
smaller trucks to deliver goods on that day? A: Be-
cause we don’t own them.
There! You’ve reached the root cause of the sales drop,
which is much more subtle and specific than merely
blaming the demonstrations.

The OKR cadence 39
The root cause often makes an action plan to solve

the problem obvious. In this case, the suggestion is to
buy a smaller truck for use during the demonstrations
scheduled for the next month. If sales are maintained
after the experiment, the company then adopts a new
standard: having smaller trucks for those events.
The fishbone graph
The fishbone graph (also called an Ishikawa Diagram,

or Cause-and-Effect diagram) is nothing more than
a way to plot possible causes after the Five Whys
reasoning, to clear up the thought process of all the
involved parties. Let’s plot our example in a fishbone
graph:

The OKR cadence 40
Figure 14: Fishbone graph application
Mondays: problem-solving
meetings
Every monday you should gather your team to discuss
OKR progress. The idea is to discuss % of attainment
of every Key-Result, then discuss the outlook for every
Key-Result, then to go over what’s the game plan
of critical tasks that will help the team walk toward
each Key-Result, and lastly, problem-solve every Key-
Result that has a negative outlook.
Problem-solving is a critical skill to be dominated,
because it creates the right mindset towards a high-
performance culture. The idea is to understand what’s

The OKR cadence 41
happening, and not point fingers and find blame.

So it is very important to not discourage people, by
humiliating them or criticizing them, if they publicly
aknowledge that a Key-Result is on negative outlook.
The right path to be taken is to have the group brain-
storm ideas, remove roadblocks, and find solutions
that will enhance the person’s or team’s ability to
improve the Key-Result’s outlook.
This is very similar to Alan Mulally’s working to-
gether method. He ensured no messengers were shot
at Boeing, so that bad news could flow freely, and
problems could be promptly solved with the help of
the group. He liked to say you can’t manage a secret.
Two powerful tools to guide your team through prob-
lem-solving are the 5 Whys, and the Fishbone Dia-
gram:
Fridays: Time to celebrate

According to Cristian Wodtke, author of Radical Fo-
cus, a book about implementing OKRs as a way to
drive, er, radical focus in startups, Fridays should
hold a sacred time to celebrate. No problem solving,
no KPI monitoring, whatsoever: just celebrating the
accomplishments of the week, in a way that really
enforces progress. Celebrating, and giving positive re-

The OKR cadence 42
inforcement, is crucial, and should never be forgotten

or overlooked.
Grading OKRs
There’s some discussion around how OKRs must be
“graded”. The Google approach is to keep it incredibly
simple, and grade OKR completion with only 5 possi-
ble levels, which are agreed upon by the company as
a all-encompassing rule for OKR grading:
• 0.0: No progress made

• 0.3: Small progress made (what’s accomplish-
able with minimal effort)
• 0.5: Reasonable progress (what’s accomplish-
able with considerable effort)
• 0.7: Expected progress made (what’s accom-
plishable with expected effort - as we discussed
before, 0.7, or 70%, is Google’s 100%)
• 1.0: Amazing progress made (more than was
expected)
This grading scale invites considerable subjectivity,

and adds considerable burden on the backs of HR
professionals and managers, that have to “calibrate”
OKR achievement just like performance reviews.

The OKR cadence 43
Another way to grade OKR achievement, a much

more precise one, is to measure it based on actual
progress made: if the goal was to reduce customer
churn from 10% per month to 5% per month, and
churn at the end of the cycle was 5%, 100% of the
OKR was achieved (of course, if churn at the end of
the cycle was 10%, 0% progress was made, and so on,
and so forth). An OKR may also be binary, like a
partnership deal: the deal was either completed or not,
and therefore, the OKR can be either 100% or 0%.
If you’re investing in a results-oriented, high-per-
formance culture, monitoring KPIs is a must, and
therefore, OKRs should be based on KPIs. That will
ease the OKR grading process by a lot.

Troubleshooting 44
Troubleshooting
OKR efforts fail for a myriad reasons. Here we’ll
discuss a number of them, and help you steer away
from trouble.
Not doing it gradually

OKRs should be implemented gradually:
• From less goals to more goals

• From company goals to individual goals
• From shorter cycles to quarters
If you try too many things at once, like unfolding 5

Objectives from the company all the way down to the
individuals in an anual cycle, it will most certainly
fail. People won’t know what the f%ˆ& it is all about,
won’t remember their goals, won’t monitor them, etc
etc etc. It is very important that the company get
the cadence of goals right. And that means warming
up the engines gradually, enforcing the right rituals,
and creating habits. Actually, OKRs are an amazing
example of a corporate habit.

Troubleshooting 45
So start out with one company-wide Objective and

three or four key results in a one-month cycle. That’s
it. See how it goes, learn from the process, and repeat.
After three months, cascade company-wide goals down
to teams. Again, one objective per team, cascaded
from the company’s goals. Three more monthly cy-
cles. And so on and so forth.
Setting too many OKRs

One of the best things about OKRs is that they are
conducive of hard focus. By shortening goal-setting
cycles, it is possible to reduce the amount of goals
being pursued in each cycle, so as to increase focus.
The total number of Os + KRs of any single entity
should (or dare I say must) not exceed a person’s
fingers. More than that, and they won’t even be re-
membered. And because Objectives are groups goals
(Key Results) thematically, there shouldn’t be more
than 3 general priorities in an employee’s head at each
cycle.
Let’s see a practical example of Fred the Product
Manager’s OKRs for the 1st quarter of 2016:
Objective 1 + Improve engagement across the recur-
rent billing product

Troubleshooting 46
Key Results + Increase unique page views by 15% +

Increase average time spent on each page in 5%
Objective 2 + Generate high level of customer satis-
faction
Key Results + NPS > 8 with > 90% of customers
responding
Objective 3 + Roll out new features
Key Results + Have credit card reconciliation feature
rolled out and used by at least 4 customers on a daily
basis
As you can see, Fred has three things he has to focus
on this quarter:
• Engagement
• Customer satisfaction
• New reconciliation feature
These priorities are backed by 4 key results, that

support them. That’s highly manageable, and highly
rememberable without the aid of systems and spread-
sheets. As Marcel Telles, former CEO of AmBev (now
SAB Miller + Anheuser Busch InBev) says, “goals have
to fit in the fingers of one hand”. We’ve extended the
number of fingers a bit to fit OKRs :)

Troubleshooting 47
Not monitoring OKRs

Goals have absolutely no reason to be if they are not
monitored. Accountability is key: employees have to
be the owners of their OKRs, and goal attainment
should be monitored and discussed on an ongoing
basis. There are a number of reasons for that:
• By discussing the WHYs of every goal, the orga-

nization learns what works and doesn’t work.
What good is there in knowing that someone
hit his goals, if he or she doesn’t know what
specific course of action lead to the results being
evaluated?
• Constant monitoring shows that the organiza-
tion cares about the OKRs. Many companies
spend time and effort setting OKRs, only to
not talk about them until the end of the cy-
cle. If the company’s not monitoring its goals,
teams, managers, and employees, will not mon-
itor their goals. So that’s something that has
to be lead by example, from the top down.
Company-wide OKRs should be monitored at
all-hands meetings; team OKRs should be mon-
itored at team meetings. Never skip an OKR
monitoring meeting: zero tolerance. Just like it
worked for public security in NYC, it will work
for your high-performance culture.

Troubleshooting 48
OKRs that are either too aggressive

or too easy
There’s scientific evidence (Locke) that harder goals
produce better performance. That’s why there’s a lot
of talk about setting stretch goals. Carlos Britto, de
CEO of AB InBev, says optimum goals should be “the
ones you know 80% how to hit. The other 20% will be
learned along the way.” Science also suggest that goals
should be achievable. Setting goals that are too hard
frustrates people (that have to believe they can reach
them).
Locke and Latham say:
“Nothing breeds success like success. Conversely, noth-
ing causes feelings of despair like perpetual failure.
A primary purpose of goal setting is to increase the
motivation level of the individual. But goal setting
can have precisely the opposite effect, if it produces
a yardstick that constantly makes the individual feel
inadequate. Consequently, the supervisor must be on
the lookout for unrealistic goals and be prepared to
change them when necessary.”
Too aggressive goals
One of the most common mistakes first-time OKR

adopting companies make is setting too many stretch

Troubleshooting 49
goals to start with. Since many don’t have a firm

grasp of KPI levels due to the ever-changing nature of
startup companies, they try too err on the aggressive
side, by fear of not challenging workers, and lured
by “roofshots”, “moonshots”, and the like. Needless to
say, goal-setting’s first impression is terrible, OKRs’
image is tarnished, and people start thinking that not
hitting goals is the norm, or worse, they drop the
practice altogether.
The right way to do this is to set conservative OKRs
to start with: levels that are not a stretch, but not easy
as well, and which OKR owners are highly confident
can be achieved. After a few cycles of most goals been
met, the company can start slowly stretching goals, in
an ongoing fine-tuning process.
After a high maturity level is reached with the goal-
setting practice (think the company, as a whole, hits
70 to 80% of goals, misses 10%, and surpasses 10%
consistently), people should start having the freedom
to set one truly stretched goal per cycle, but not really
more than that.
Google, the world’s most famous OKR practicing
company, sends mixed signals in that sense: it preaches,
basically, that 70% is the aim (although Google’s VP
of People Operations disagrees with us, it essentially
sets 70% as the new 100% of achievement). Its lead-

Troubleshooting 50
ers believe that systematically setting harder goals

(or aiming for 100%) company-wide will yield better
overall performance. We think that in practice people
will consider 70% the new 100%, and therefore the
effect will be neutralized. If it didn’t, as science also
suggests, people would become systematically frus-
trated and would be leaving Google in troves.
Too easy goals
Alternatively, goals can’t be too easy. Research points

that easy goals bring low motivation and energy
levels, for the lack of challenge they present workers:
“One of the most consistent findings concerning the
level of goal difficulty is that when goals are set
too low, people often achieve them, but subsequent
motivation and energy levels typically flag, and the
goals are usually not exceeded by very much.”
You can’t set too aggressive goals, but you also can’t
set too easy goals. It’s a fine line.

The End 51
The End
I hope you liked this e-book. It’s an intro: very short,
straight to the point, just like every business book
should be. John Collison, founder of Stripe, a Silicon
Valley company, commented about a book he read –
and most business books – “Like most business books,
it should be 1/5 the length.” I agree with him, and did
just that: cut it to the bone. You can read it in an hour,
and take a lot of good stuff on with you. Produce more.
Reach your goals.
If you are interested in knowing how to apply OKRs
or DOKTs at your company, reach out to me at
kiko@qulture.rocks or go to http://qulture.rocks. We
can help. Qulture.Rocks is passionate and committed
to creating high-performance cultures. Why? To help
you with performance management, we can get you
the software and the wetware (brains) you need to
adopt some of the most sophisticated tools and prac-
tices available.

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The Beginner's Guide to OKR Felipe Castro

Why I wrote this guide?

What are the benefits of using OKR?

Strategic vs. Tactical OKRs: Nested Cadences

OKRs do not Cascade

Success criteria and types of Key Results

How ambitious should your OKRs be?

Tracking Results with the Weekly Check-in

A Typical OKR Cycle

Why you should separate OKR and compensation

Common OKR mistakes

Understanding the OKR Components

Doerr’s Goal Formula

Doerr’s formula is the best way to explain the structure of an OKR:

I will (Objective) as measured by (this set of Key Results).

If it does not have a number,

First of all, we need an Objective. An example might be “Create an Awesome Customer

The complete example would be:

What’s unique about OKR?

Bidirectional Goal Setting

OKR is a management tool, not an employee evaluation tool.

Tips for writing good OKRs

For Key Results:

➔ Separate metrics from tasks.

What are the

Alignment and cross-functional cooperation

Reduced time for setting goals

Autonomy and accountability

Focus and discipline

➔ A tactical cadence with shorter term OKRs for the teams.

A pattern I see in successful OKR adoptions is:

➔ Quarterly tactical OKRs for the teams, with a mid-quarter review.

➔ Weekly check-ins for tracking results.

Choosing your OKR Cadence

Start with Unified Cadences

What are the characteristics of a cascade (or waterfall)?

[The traditional model] is a top-down approach and often

There has to be a better way.

Bidirectional Goal Setting

On the topic of goals, the academic research agrees with

That is why I created Castro’s First Rule of OKRs:

OKRs never Cascade.

Creating Tactical OKRs

➔ How can we contribute to the Strategic OKRs?

Tactical Key Results can be:

In my experience, if you have a healthy environment tracking this percentage is hard.

Don’t turn your OKRs into a task list

When setting your OKRs, try to evaluate:

There are two basic types of Key Results:

1. Activity-based Key Results

Examples of Activity-based Key Results are:

2. Value-based Key Results

➔ Improve Net Promoter Score from X to Y.

The typical structure of a Value-based Key Result is:

Increase/Reduce ABC-metric from X to Y

A) Increase NPS by 20%.

Other options for Value-based Key Results can be:

➔ Maintain ABC-metric in X (When we want to sustain one metric).

Activity-based Key Results Value-cased Key Results

➔ Improve employee engagement from X

➔ Generate Y MQLs (Marketing Qualified

➔ Reach Y Daily Active Users of the free

OKRs should be Value-based