In the early days of a startup, you do not need a complex goal setting framework. You just need to survive. Everyone knows the goal: build the product and get the first customer. However, as the team grows from five people to fifty, alignment breaks down. The sales team chases revenue while the product team chases reliability. You are moving fast, but in different directions.
This is where OKRs come in. OKR stands for Objectives and Key Results. It is a goal setting framework for defining and tracking objectives and their outcomes. Originally popularized by Intel and Google, it has become the standard operating system for high growth startups.
The framework is deceptively simple. It asks two questions:
- Where do we want to go? (The Objective)
- How will we know if we got there? (The Key Results)
The Objective: The Qualitative Dream
#The Objective is the “what.” It should be aggressive, inspirational, and qualitative. It is designed to get people out of bed in the morning.
A bad objective is “Increase sales by 10 percent.” That is boring. That is just a number.
A good objective is “Dominate the direct to consumer shoe market in California.” That is a mission. It sets a clear direction without getting bogged down in the math yet.
Objectives should be significant. If you achieve your objective, the company should look materially different than it did at the start of the quarter.
The Key Results: The Quantitative Truth
#The Key Results are the “how.” They ground the airy objective in cold, hard reality. They must be quantitative and measurable. If there is an argument about whether a key result was achieved, it was written poorly.
For the objective above, the Key Results might be:
- KR1: Achieve $1 million in monthly recurring revenue from California zip codes.
- KR2: Secure partnerships with 5 major influencers in Los Angeles.
- KR3: Maintain a Net Promoter Score of 70+.
Notice that these are not tasks. A common mistake is listing “launch the website” as a key result. That is an activity, not an outcome. A key result measures the impact of the activity, not the activity itself.
The 70 Percent Rule
#OKRs are designed to be stretch goals. If your team hits 100 percent of their OKRs every single quarter, you are setting the bar too low. You are sandbagging.
In the OKR philosophy, hitting 70 percent of a highly ambitious goal is better than hitting 100 percent of a mediocre one. This psychological shift encourages risk taking. It tells the team that it is safe to aim for the moon and land among the stars.
However, this requires a culture of psychological safety. If you punish people for missing the 100 percent mark, they will stop setting ambitious goals.
Alignment, Not Hierarchy
#The true power of OKRs is that they are not just for the CEO. They cascade down.
The company sets the top level OKRs. Then, each department sets their own OKRs that support the company goals. Finally, individuals set their OKRs to support the department.
This creates a tree of alignment. An engineer can look at their specific key result and trace the line all the way up to the company’s mission. They understand exactly why their work matters. This prevents the “cog in the machine” feeling that destroys employee engagement.