By Rajan Anandan
Hustle is critical for early stage startups, especially at the formation stage – but it just doesn’t scale. Phenomenal execution does.
An important first step to building a world-class execution culture is defining clear objectives, or what the company aspires to achieve, and the key results, or how progress towards these objectives will be measured. An Objectives and Key Results (OKR) framework is a highly effective method of identifying and prioritising the company’s most important goals along with measurable milestones that must be met to achieve them.
Before setting OKRs, however, early-stage startups must ensure they have a product that users love. If your startup doesn’t yet have product-market fit (PMF), focus on that. Keep your team small, and keep iterating until you get to PMF. This is crucial because pursuing growth without PMF is the fastest way for a seed-stage startup to fail.
The OKR methodology was developed by Andy Grove in the 1970s at Intel and was introduced by John Doerr to the founders of Google, who institutionalised OKRs from the very early days of the company. Doerr subsequently detailed OKRs in his book, Measure What Matters, which is a must read for startup founders.
At Surge, we encourage startups that have attained PMF to implement OKRs early on in their company building journey. In a nutshell, OKRs help startups identify what they want to achieve and how to pace themselves. Objectives (the ‘What’) headline the company’s most important and lasting aspirations, while Key Results (the ‘Hows’) are measurable milestones that must be met to accomplish each objective.
As Julian Artopé, the founder of Surge 01 startup Zenyum, once put it: “OKRs enable you to bite off more than you can chew, and then chew it.” OKRs, he added, ensure you “do what you said you would do and don’t compromise on the super important stuff”.
Why OKRs Matter
OKRs help startups chart their path to rapid growth by setting aspirational, qualitative goals (Objectives) to be achieved through measurable and time-bound outcomes (Key Results). There are four main reasons why OKRs work.
- Prioritization: They help identify the most important things to focus on
- Alignment: Align teams on what’s most important for growth
- Communication: Provide a common language to communicate with teams companywide
- Performance management: Holding top leadership accountable (but not for individual contributors in the early stages of the company)
Through prioritization and alignment, startups can translate “To Do” lists into impact-oriented, goal-aligned initiatives. This helps avoid scrambling from quarter-to-quarter—which isn’t a good way to run a company—and inculcates dynamic problem solving and capability building. OKRs also set the stage for cross-functional collaboration as various inputs from teams are sought and aligned upfront. OKR-led reviews bring into sharp focus areas requiring problem solving, thereby enabling course correction, if needed.
What OKRs include
✅ Objectives: No more than three to five most important goals of a company. Each objective is a clear statement and should be, both, aspirational and long-lasting to allow for stretch building at the company level. For example, the objective (or the “O”) for a regional data management startup could be “To become the largest data management provider in the APAC region”.
✅ Key Results: Progress on each objective is reviewed against specific outcomes that are measurable, time-bound, and easy to score as a hit, miss or percentage/number. These outcomes should be sufficient to help you make significant progress towards meeting the objective and, importantly, each KR must be owned by someone on the team. One “KR” for the data management company above might be “Get to XX paying customers by Q4”; another KR might be “Achieve XX revenue by YY time period). The numbers and dates here should be specific targets.
OKRs should be easy to score. If they’re not, go back and recraft them. Companies typically rate their OKRs as red (miss or failure), yellow (making progress) or Green (success or goal attained). Your dashboard should show some yellow and red along with the greens during your quarterly and annual review. If all your KR’s come up as green, you’ve set the bar too low.
OKRs Are Not…
🚫 A laundry list of things to do: They are not tasks or activities, so make sure you don’t make your to-do list your OKRs. Scheduling a certain number of demos or calls, targeting how many blogs to write or potential candidates to meet are all activities rather than aspirational, long-lasting goals.
🚫 Something you can achieve in a few days or weeks: If you can do if very quickly, it’s an activity, not a key result. Think of KRs as desired outcomes of activities such as demos and sales meetings. Growing revenue 10% month-on-month, or increasing conversions from X to Y, would be intended outcomes, or KRs, of these activities.
🚫 Meant to be all green: OKRs need to be stretch goals and results you strive for over time, because building an enduring company takes 10 to 15 years. The ‘sweet spot’ for OKR achievement is 60% to 70% green. All green would mean you didn’t really stretch, whereas all red implies you didn’t execute on anything.
How to Go About Setting OKRs
OKRs are typically first set for the company and cascaded to teams and individuals. Company-level OKRs define the startup’s priorities and goals as it prepares to scale. Team-level OKRs, while aligned with the former, are specific to each team and more granular. Both sets of OKRs should be long-lasting and measurable, with ample room for stretch building. To paraphrase Doerr, OKRs should motivate people to do more than they thought was possible and help unlock their creativity and ambition by pushing their limits without the fear of failing.
OKRs should be aspirational (North Stars or Moonshots for stretch building) as well as committed (must-achieve targets like a sales forecast).Balancing the two helps keep teams motivated and encourages risk-taking. However, there isn’t any one right way, or one-size-fits-all approach to implementing OKRs and several variants have worked for Surge companies in different industries. Like PMF, OKRs too are unique to each company based on the business it is in.
These must be set by the leadership team and not be delegated. Founders must own them. Brainstorm what the company’s overarching purpose is, what it aspires to and/or is committed to achieving and distil that vision into three to five most important goals. Each objective should be communicated clearly using plain language and inspire employees to stretch and work towards attaining over the long haul. Progress on each objective should be measured against a handful of key results or outcomes that are time-bound and easily measurable. Company OKRs align teams on what’s most important for growth and are the mothership from which team-level OKRs are launched.
These are more granular and specific to each team’s role in scaling growth. Team OKRs increase the likelihood of achieving company OKRs and should be set by Team Leaders, preferably in consultation with team members. Team Leaders should analyse the team’s chief activities and “To Do” lists and work backwards to translate these into the broader purpose they serve (objectives) and the outcomes (key results) they seek to achieve. Team activities and to-do lists are not OKRs in themselves. Team OKRs must have clearly defined owners, typically the Team Leader, and can form the basis for assessing her/his performance. However, OKRs must not be used for performance management and review of individual team members, especially at the seed stage, as it may discourage risk-taking and stretching the startup needs to scale.
Review and Refine:
Regular OKR reviews are crucial for assessing progress and, when necessary, refining the OKRs themselves. Founders should pick a review frequency that works best for them. Monthly OKR reviews are better at seed stage, but should cascade to monthly and fortnightly/weekly over time. Implementing OKRs takes time, perhaps several quarters, even years, so stick with the process and phase them in. Founders can keep refining OKRs as they learn more about how to apply them. Getting OKRs right is a game changer and leads to better alignment, faster execution, and greater accountability.
- Setting objectives that are too challenging or not challenging enough
- Or worse, setting and forgetting your OKRs
- Having too many objectives or key results (each of the three to five objectives should not have 10 KRs)
- Not keeping the big picture in mind
- Your KRs are not measurable
- Founders giving up because OKRs are simply “too hard” and returning to “To Do” lists and hustle mode.
Rome wasn’t built in a day, neither was a successful and enduring company like Google. Founders must have a 10-to-15 year horizon in mind, set aspirational and lasting OKRs, and refine them at different stages of their company-building journey. Remember, it’s all about the long game – it’s a marathon, not a sprint.
For more on this topic download The Ultimate OKR Guide by Surge startup Mesh, a performance management platform that makes it easy for people to accomplish OKRs, get timely feedback, and conduct one-on-ones.