OKR Objectives FAQ
I’m determined to create as comprehensive of an OKRs FAQ as possible: I spend most days answering questions about OKRs, so why not write as many of those answers down as possible? Here, we’ll dive into some of the questions I’ve been asked about the “O” in “OKRs:” OKR Objectives.
Objectives and Key Results (OKRs) are a method for collaborative goal setting and alignment. In practice, well-formed OKRs can help us fill the gap between our high-level strategy and our tactical implementation decisions, so that what we do is better aligned with achieving our most important outcomes.
This video is from our popular No-BS OKRs Workshop, where you can learn how to create OKRs in a matter of hours — not days or weeks.
Q: What are Objectives?
A. Objectives are directional (usually not measurable) purpose statements, describing what we're pursuing together and why it matters (and sometimes, to whom it matters most). (We'll talk about why Objectives are usually not measurable in Chapter 7 about Objectives.)
Our Objectives serve as a "container" for Key Results, and help us focus on a small number of most important directions for improvement. Typically, we aim for a working group or organization to have three to five Objectives at a time: personally, I aim for up to four (since up to four fit nicely on one sheet of paper so we can keep them top of mind and in view at all times).
There are many different structures for Objectives, but the formula I advocate starting with is a "What Why" Objective. They're quicker to write than other forms; they're clear on their face without needing a lot of additional explanation or context; and they provide an answer to our two most important Objective-forming questions:
What's most important for us to achieve?
Why does that matter?
The "building blocks" of a "What Why" Objective are:
[What's most important for us to achieve] to [Why it matters] [and for whom, if necessary]
And a couple of example Objectives might be:
"Create an inspired, empowered work culture so our people can wow every customer interaction."
-or-
"Product Release XYZ maximizes buzz and positive reputational impact."
NOTE: The above definition is from the No-BS OKRs Playbook, scheduled for release in September, 2024. For more information and to download an excerpt, visit: https://findrc.co/evokrpb or you can read the first few chapters via this blog, starting with this Preview of the No-BS OKRs Playbook here!
Q: How many themes or objectives do you recommend we should have?
A: I tend to recommend four or fewer at the company-level because they fit on a page in a nice two by two. The conventional approach to themes or objectives is three to five at the company level; but five objectives at the company level can be a sign we’re losing focus. Often, if we see more than four Objectives at the company level, it can be helpful to clearly identify the themes of each, and see if any of them collapse into one.
Sometimes also, as you work on your Key Result identification, you might find that two Objectives may merge together like amoebas, to create one. For example, often if we start with an “innovation” Objective, as we work with it, we may find innovation merging with another theme — like innovation and customer might merge, or innovation and product might merge. Often, we might see a more specific theme (like strategic partnerships) merge with a broader theme like “growth” or “financial health.”
On the other hand, there might be really good reasons to keep them separate because then we're really focused on each individual theme from an objective standpoint.
A tiebreaker decision between merging themes and keeping them independent might be: how many high-quality, measurable Key Results do we have that would align in to the themes? If it’s one or two per theme, it may make sense to consolidate them; if you have more than three Key Results per theme, it may make sense to keep them separate.
Organizational and team OKRs (below the company-level) typically benefit from greater focus in their theme-based OKRs: often for a division, it makes sense to identify three (or so) Objectives that align to the company-level Objectives / Themes; and, then often a division may have an Initiative that requires an Objective (because it may be that an Initiative is how the division supports the company OKRs). In that case, because of the division’s focus and selectivity in choosing Objectives, there’s room for their three OKR-aligned Objectives and an Initiative Objective, while still maintaining excellent focus. When we get to teams deeper in the organization, often, they may have multiple Initiatives they’re aligned to — so we may see fewer OKR-aligned or Theme-aligned Objectives for our sub-teams, and more Initiative Objectives that they align to instead.
When creating OKRs for an Initiative or major project, typically one would create a single Objective. It’s rare to need more than one Objective for an Initiative — which doesn’t mean it would never happen, especially for a very large product release or other launch. But if you’re tempted to create more than one Objective for an Initiative, consider whether perhaps you need to localize Objectives (or OKRs) down deeper into the organization rather than creating multiple Objectives at the Initiative level. For example: you may have a single Objective at the company level for a major product release that many different organizations contribute to; and then each sub-organization may “localize” that Objective (and its Key Results) down into their domain, to define how that sub-organization contributes to the company-level Objective (and Key Results).
So, briefly: each group (company, division, team) should try to limit their number of Objectives to about four (sometimes there are exceptions, and more are required — but if so, it’s wise to limit the number of Key Results for each Objective, or else the group may wind up overwhelmed by priorities); and most Initiatives have a single Objective.
Q: Is there any time I might have an Objective without any Key Results?
A: It’s possible! I’ve seen situations where leadership wanted to keep focus on some matter of importance that didn’t have specific progress or success measures identified yet, or that are highly experimental or speculative — so much so that they can’t even predict Key Results — so they included an Objective without listing Key Results. That keeps the matter of importance top of mind since there was labor being contributed to it — so the Objective answered the two important questions of “What’s most important?” and “Why does that matter?” to help guide the choices people make in labor toward that Objective.
By including an Objective, even without Key Results, you remind yourself to not just focus on what's urgent. Your organization gets a reminder every time they look at our OKRs that we need to get the foundation strong enough that we can start thinking about that innovation objective. I can also see this being beneficial if the organization needs to lay some groundwork before focusing on something really innovative and exciting: it’s a reminder that when we get the foundational Objectives and Key Results achieved or improved, then we’ll unlock our capacity to work on that exciting, innovative Objective we’ve been looking forward to.
Q: What are the common motivations or driving factors behind growth Objectives? What if our “Why” is: “Because we’re a business, and have to make money?”
A: When I’m coaching OKR workshops, we first compile their "What’s” — the answers to “What’s most important to achieve?” — and once our “What’s” are prioritized down to what’s really, truly, most essential to focus on for OKR creation, I ask the next question:
“Why does that matter?”
And the room is silent, sometimes for an uncomfortably long time, and then someone blurts out:
“Because we’re a business, and have to make money!”
And often, there’s a nervous chuckle in the room, but there isn’t often any objection or disagreement — it’s usually nods of agreement, or, almost a sense of relief in the truth being verbalized.
That “Why” motivates our sellers (and executives that are incentivized based on attainment of those financial targets); but often, “Because we’re a business, and have to make money,” as a “Why” is demotivating for people outside of sales and the executive team. “Because we’re a business, and have to make money,” doesn’t often give everyone in the organization an idea of their shared sense of purpose or mission. So if people in the organization are craving clarity about why and how their work matters, and the organization’s “Why” is to make money, that’s a mismatch.
Sometimes, “Because we’re a business and have to make money” is the truth, and there is no other true answer to the question. Earlier on in my OKR coaching career, I’d occasionally work with businesses like that — where all of my questions yielded the same answer, and that was that. In organizations like that, OKRs sometimes wind up quite simple (and may be redundant if they have an annual operating plan or budget-based financial targets already) and that’s not a bad thing: it’s better for the goals to be focused on the truth, than for people to participate in an elaborate theater of goal-setting to invent an alternate universe where something else matters (which may be at the expense or risk of performance on what’s really most important: being a business and making money). When that’s the truth of the matter, I vote that organizations be honest and transparent about that reality, since there are people drawn to that type of business and operating environment who can thrive in a situation like that.
But before we chalk an organization up to being a purely profit-making endeavor, as OKR coaches, we ask a few more questions.
One helpful line of questioning is to acknowledge that answer and then get curious:
“Absolutely — this is a business, and you have to make money … who are the constituencies you have to succeed with, in order to do so?”
Or “‘Because we’re a business and have to make money’ is the 'why’ from the perspective of the business: is there anyone else whose perspective we could consider?”
And then once one or more important constituencies are identified, you can prioritize them: for purposes of creating this Objective, who is the biggest determiner of whether or not we’re successful? Whose “why” is most important?
And with that constituency identified, then you can ask the question:
Why does this matter to them?
This is an esoteric explanation, so here’s an example.
Say a software company in the business-to-business software space is creating their growth and financial OKRs. We first ask: “What’s most important?” and they ideate some potential “What’s” like:
Increase recurring revenue by reducing user churn, and
Decrease cost of acquisition of clients
Then as the coach, I’d repeat those “What’s” back, and then ask the question:
“Why does that matter?”
And, after a period of silence, someone blurts out: “Because we’re a business, and have to make money.”
So then I’d say: “Okay, that’s true: is that the only reason? Or is there a constituency who most strongly influences revenue, user churn, and cost of acquisition?”
And in some organizations, that would begin an exploratory conversation about: is it sales? Is it support? Is it our advertising agency?
Then some creative thinker in the room might say: “What if we put our customer at the center of the ‘why?’” and then that’s where things might get interesting.
If we center the customer, then we might wind up with “What / why” draft statements like:
Increase recurring revenue by reducing user churn, and saving our customers time and frustration
or Decrease cost of acquisition of clients by making our customer experience so wow-worthy our customers become our best advertising
And ideas like that may yield an Objective around the theme of financial health of something like:
Improve our financial health by investing in a user experience that makes customers into vocal fans
Now: which Objective do you think would yield higher performance in your current organization? That? Or:
Improve our financial health because we’re a business and have to make money
There isn’t a wrong answer — sometimes the second really is the right choice for an organization. But we always do the additional exploration to see: is there something deeper and more connected to the shared purpose of the people in the organization that might be a stronger Objective?
Q: Financial objectives usually come from top-down during annual planning. What do you recommend in terms of breaking those numbers down into objectives, and should operational excellence be considered as an afterthought or addressed proactively in the planning process?
A: In most organizations, think about what is most important for you to talk about first. Operational excellence doesn't usually come first, unless we're in a transforming organization, or if we're in a turnaround situation — where operational improvement or excellence might be the first topic of critical alignment. In that case, an organization might begin with: “What are our biggest risks?” and then create their first Objective and Key Results around those risks, which are often operational in nature — because if we don't tackle those, any goals around product or customer or financial health may not matter, if we can’t operate to achieve them.
At the company-level, though, most commercial organizations begin with their financial theme Objective; and then create Objectives around whatever themes are necessary to support their financial success. A common pattern is to tackle financial health, then product or customer experience; and once we have clarity about those growth territories, we might consider operational excellence (how do we remove friction to growth?) and people & culture (how do we skill up or enable our people to support growth)?
At the top level, mission-driven organizations often begin with an Objective aligned to their mission, then financial health, then operational excellence, and people & culture.
And some rebellious organizations turn everything on their heads, and put people and culture first, and then other Objective territories follow. But this question specifically asked about financial Objectives, so I’ll loop back to that starting place.
The Objective creation rhythm should begin with whatever theme is most important. Is there one theme that — if we start there — we’ll explore and make a lot of our consequential decisions, so we’ll have greater clarity about the rest of our Objectives when we create them? Is there one that will inform the others to a greater degree? Often that’s financial health, so often organizations start there.
And then the financial health goals themselves: sometimes they do come straight from the budget. Personally, I prefer when it comes to finances to have crystal clear, non-moving goal posts: if there is a budget that sets a target, then I encourage that target to be listed among the Key Results and labeled as a “commit,” so it’s clear that it’s not a stretch goal: that’s the threshold we must achieve. If there are consequences for non-achievement of the goal, that’s a territory where a “commit” makes more sense than a stretch goal. (You can set a secondary stretch goal if you like — but the commit needs to also be clear.)
The risk with only setting and communicating a stretch financial goal is that our stretch goals are speculative: by setting a stretch goal, we’re saying, this is a goal that we’re going to work really hard to achieve, and if we don’t, we’ll learn in the process. We must be “safe” to fail on our stretch goals in the pursuit of learning. But rarely is it truly safe in any organization to fail in the pursuit of a financial goal: so personally, if we have a budget-based committed target for a financial metric, it’s clearer and more trustworthy to emphasize that number (and then incentivize stretching above that target with a Key Result by communicating the benefits of exceeding the committed budget target).
Q: Why do you encourage What-Why objectives instead of trying to write an objective that combines What’s most important, and Why it matters, into a rallying-cry style Objective to get the best of both worlds?
A: A lot of traditional OKR coaching focuses on getting to “state-based” or “rallying cry” (or tagline-style) Objectives — they’re short, memorable, and easy to recite when a quick decision needs to get made. That style of Objectives can be useful, when the organization has shared meaning about what the Objective actually means.
And establishing shared meaning about what the Objective means usually requires that two questions be answered:
What’s most important? and
Why does it matter?
So earlier in my OKR coaching career, I remember seeing organizations work to develop Objectives, and they may start with building blocks of:
What’s most important? Increasing how often we delight our customers instead of disappointing them.
Why does that matter? Because our customer satisfaction determines whether we’re ultimately successful and achieve our goals.
And then the wordsmithing begins, and the leadership team may emerge with a tagline-style Objective like:
Do the Right Thing
And the people in the room when it’s created are excited, and they all were in the room, so they know what they mean when they say it, and then we get to our Town Hall meeting and the CEO reads out the Objectives and gets to “Do the Right Thing” and the people attending the Town Hall hit the chat window with their questions:
“What does that even mean?”
“Who determines what the right thing is?”
“Is that the right thing for the customer, or for the business? Because those two things are often at odds?”
And the CEO explains: What we’re talking about is doing right by our customers — we need to delight them far more than we disappoint them; because ultimately, our customers are who decide whether or not we’re successful and achieve our goals.
So in other words, we need to “Delight our customers far more than we disappoint them, to maximize our success.”
(Which is a What / Why Objective. It may not be as catchy or sexy, but on multiple occasions during OKR workshops, I put the “tagline-style” candidate and the unsexy “What / Why” candidate up for a vote, and 100% of the time, the majority chose the “What / Why” Objective for its clarity.
What / Why Objectives are more accessible: they’re easier for people who join the organization later to pick up.
And then while we work with a “What / Why” Objective, sometimes a rallying cry or tagline-style shorthand emerges — which can be great. Then we have the best of both worlds: shared meaning about our “What” and “Why” to begin with, and the shorthand of an exciting, compelling “rallying cry.”
But setting out to begin with a “rallying cry” style Objective: I’ve rarely seen that be successful. For one, it can take a lot of time and creative revision to get to a “rallying cry” style Objective. And for two, once we do, it typically needs to be paired with a “What / Why” description for it to be meaningful, anyway.
What questions do YOU have about OKR Objectives?
Drop me a note, and we’ll add your question and answer to the FAQ!
