OKRs (or Objectives and Key Results) is a framework for setting goals and measuring progress. This approach was popularized by Google and seeing the company’s incredible financial success, organizations around the world have adopted OKRs.
Despite their popularity, if you’ve worked on goal setting most likely you have experienced how they can go wrong. You’re not alone. Employees in every company that I’ve worked with, often share their frustrations on OKRs.
The Downside of OKRs
Even Google, which has advocated for OKRs, revealed that OKRs can be harmful. When Google tied OKRs around product usage to people’s compensation, people started gaming the system to get their bonuses. To quote Google’s Lazlo Bock, “The very idea of tying monetary incentives to hitting key results was thus deemed detrimental to both the product and the broader culture.”
But this only gets to only the tip of the iceberg of how OKRs go awry. In a joint paper titled Goals Gone Wild, researchers from Eller College of Management, Harvard Business School, Kellogg and Wharton, caution that goal setting should be prescribed selectively, presented with a warning label, and closely monitored.
OKRs often cause product diseases such as Hypermetricemia. You may have seen this in your company if your OKRs led you to optimize for a few metrics, but it turned out that those weren’t the right goals to deliver a truly great product.
In my workshops, many of you have shared that the process of setting OKRs makes you groan - it feels like you’re limited to show result on just those metrics that you’ll be measured on. In fact, research shows that when you set goals on complex tasks that don’t have an obvious answer, goal-setting discourages experimentation and limits innovation.
It’s paradoxical that OKRs which are supposed to drive growth often end up stifling innovation.
The problem with OKRs doesn’t lie in tracking metrics; it lies in setting targets for metrics. It’s important to measure progress and learn from it. But setting targets for metrics is the equivalent of setting an end of the year exam where employees are graded based on numbers - people will go to great lengths to cram for an exam to make sure they don’t fail. Remember those days? A final end of the year exam doesn’t lead to real learning or progress.
Radically Rethinking OKRs
What we need is a radical new approach to communicate where we want to go and measure progress. This is where Radical Product Thinking comes in. Here’s how you can apply this approach to harness the benefit of OKRs without the negative side-effects.
Step 1: Craft a clear vision to communicate the impact you want to have.
Often the company’s vision statement is very broad (for example, “To be the leader in data storage”). When you have such a broad vision, OKRs help you communicate the details on what you’re trying to achieve. It’s important to recognize that OKRs are serving as a Band-Aid to the real problem - the right solution is to rethink your vision.
You can write a Radical Vision Statement to help you and your team share a clear visualization of the end state you’re trying to bring about together.
Step 2: Align your team and get buy in on what you measure.
Instead of setting just a few goals which leads to tunnel vision and will be limiting, think of your vision and strategy as hypotheses. As a team, identify the metrics that will help you validate if your strategy is working. Instead of setting goals and targets, agree on what you’ll measure to see if your experimentation is working.
Step 3: Talk about metrics and what needs improvement.
Often the data that offers the most value is not metrics that show how well you’re doing, but rather what you could do better. When you set targets, teams feel like they’re studying for an end of the year exam. People will be more inclined to share what targets they’ve achieved - it’ll be tempting to sweep under the rug any metrics that indicate where there’s room for improvement.
To uncover these nuggets of value, you need to have collaborative discussions on what you’re learning from your measurements and which metrics need more attention. To encourage innovation as a business leader, instead of managing by objectives, you need to offer regular feedback in a culture that offers psychological safety.
In its blog in 2016, Spotify announced that the company is moving away from using OKRs.
“What went into the OKR process was often already outdated when we got that far. So the OKRs that came out were too. We noticed that we were putting energy into a process that wasn’t adding value. So we decided to ditch it and focus on context and priorities instead. We make sure everyone knows exactly where we are going and what the current priorities are, and then we let the teams take responsibility for how to get there.
Ditching OKRs and taking the alternative of making sure everyone understands the direction, priorities and is able to take responsibility for making it happen, is exactly the Radical Product Thinking way.
Learn more about how you can build vision-driven products in Radical Product Thinking: The New Mindset for Innovating Smarter.