How To Do OKR Planning The Right Way

After reading this post, you should leave with the knowledge of:

1. How to do proper OKR planning

2. What things are needed before planning OKRs

3. The order that OKRs gets defined across the company

But first, a short story on why OKR planning is so important.

Lack of OKR planning will destroy momentum

OKRs are about settings setting clear, laser-focused goals. But it’s also about making sure that things are properly planned.

One of the worst things that can happen in a company is that employees don’t know what’s most important for them to work on. It not only hurts company growth and momentum but also destroys employee motivation and morale.

At a previous company, we experienced the consequences of not planning our OKRs in time. We didn’t have a 3-year strategy so it wasn’t obvious to the team which things they should work towards.

Every time we entered a new cycle, the first two weeks were used on cleaning up things from the previous cycle and figuring out what to do in this cycle. Ultimately, this was a result of faulty leadership and a lack of planning for long-term growth.

In contrast, another place I worked had 5-year plans sketched out that clearly outlined where the company wanted to go. This left zero need for the different teams to have to guess what to work on. They knew. It was right there and they could easily think ahead and plan which objectives and key results would take them closer to those goals.

So to sum up, doing proper OKR planning will give a company:

• Crystal clear long-term direction (“is what we’re working on right now contributing to our 5-year goal?”)

• Alignment across departments (everyone knew how to help each other because of the visible goals)

• Employees focused on their goals (every individual knew that what they were working on drove growth)

• Less micromanagement (goal transparency = employee autonomy)

Things you need before planning your OKRs

Before jumping head-first into the steps I’m about to give you, there are a few things to consider beforehand:

1. The company’s 3-5 year goals and direction

2. The OKR roles (who’s responsible for what?)

The company’s 3-5 year goals and direction

As I mentioned above, one of the benefits of proper OKR planning is the certainty that what you’re working on right now is contributing to the long-term company goals.

Those goals may be 3, 5, or even 10-year goals but that’s not the point. Having clear long-term goals ensures that everyone knows where we want to go.

An example of a 5-year company goal could be:

“We want to have the happiest customers on the market”

Now, whenever the team lead of customer success prepares for new OKR cycles, that person can always look at that goal and think:

“If I succeed with my team’s Objectives for this cycle (by achieving our Key Results), will we have moved (sufficiently) closer to that goal?”

The OKR roles (who’s responsible for what?)

It’s important to note that all employees should not necessarily work with OKRs. Some companies force everyone to engage with OKRs at some level, while others limit it to certain teams or departments.

There’s a way for OKRs to tie together inside a company. And as such, there’s also a natural way to ensure that everyone is contributing to the overall goals.

A company CEO (and board) might decide that the overall objective of the year is to…

“Drastically improve our business operations profitability”

Ultimately, it’s the CEO who’s accountable for achieving this goal.

The COO of the company then discusses this yearly goal with his Operations team and brainstorms how their department can contribute to the company goals. The COO is responsible for these goals, not the CEO. The CEO is responsible for hiring, educating, and mentoring the COO in a way that sets him up for success. What the CEO might do is review and give feedback on the goals that the COO and his team come up with.

So let’s say that the Operations team and the COO decide that their Key Results will be:

“Increase avg. profit margin by 10%”

And:

“Increase revenue per employee by 5%”

The CEO then looks these over and agrees that achieving those would drastically improve the business operations profitability.

From here, depending on the size of the company, the COO discusses further with his different teams how they can contribute to the overall Operations goal. One team inside Operations might work on Purchasing and their angle is to try and negotiate better deals and terms with their suppliers. Another team might look into the standard operation procedures and run tests on how those could be optimized.

This way you can begin to understand which roles take place in the OKR framework:

1. The manager sets her own goals

2. The employee sets her own goals based on manager/company goals

3. The manager reviews and gives feedback on goals

Now that we understand the structure and hierarchy of OKRs, it’s time to get into the essential planning of OKRs. How they can be transformed into being an essential part of everyone's day.

The step-by-step guide to OKR planning

Here are the things you need in order to do OKR planning:

1. Company mission

2. Company yearly objective

3. Department key results

4. OKR cycle length

5. Follow-up cadence

6. Cool-down period

As we went over, defining a company mission and yearly objective is the #1 thing a company should do as they're looking to plan their OKR efforts. To be as specific as possible, let’s create an example to use when going through these steps.

Company mission

Let’s imagine that I just run a startup called TrackerFriend that lets users list their new year's resolution goals and track their progress. My big vision is to help people be more productive with their time and less distracted by all those things that aren’t adding value to their lives. My mission is to become the preferred app for people to use when tracking their yearly goals.

Company yearly objective

My objective for this year is to “Establish TrackerFriend as a successful partner in achieving personal goals”. A great way to know that you're formulating OKRs the right way is to keep a short checklist when setting up new objectives. It's also a great idea to know the differences between OKRs and KPIs before getting started.

For the team I'm expecting to accomplish this year's objective I have a Chief Operating Officer, a Chief Financial Officer, and a Chief Product Officer.

Department key results

The CPO might look at this yearly objective and think:

“How can I, ambitiously, contribute to our overall goal?”

One example of a Key Result could be referenced to the “successful partner” part of the objective. The CPO might also know from his data analysts that retention isn’t what we hoped it would be compared to the market, so he formulates a key result like:

“Increase retention rate to 50% after 4 weeks”

This means that we would expect 50% of our users to still use our solution 4 weeks after they signed up.

OKR cycle length

One of the often-discussed subjects of OKR is

“How long should my OKR cycles be?”

It’s a great question but also a hard one to answer. It really depends on the speed of your business and goals. If you’re an early-stage startup, committing for too long could kill the business. On the other end, if you’re a large enterprise, moving too fast on ambitious projects could have big consequences. A general rule of thumb is to run OKRs quarterly, which gives you 4 cycles each year. It’s based on the belief that 3 months is enough to reach even ambitious goals while it’s still not so long that failed projects will ruin the entire year.

Follow-up cadence

Following the discussion about cycle length, the follow-up cadence is also really important to figure out. What I’ve mostly seen are weekly stand-ups or video calls where everyone working on the same level and the team update each other on the status of the tasks they’re working on.

This ensures alignment across the team and is generally also a great way to pick up discussions about things that need decision-making.

OKR planning happens through parallel tracks

The smaller the company, the harder this is. But equally more important it gets. Planning must be a priority. Managers easily get caught up in day-to-day tasks but they need to prioritize their strategic responsibilities as well, like doing OKR planning. Here’s how:

As the image shows, while doing the work of one OKR cycle, management should already be planning their OKRs for the upcoming cycle.

Cool-down period

Choosing what to spend time on requires time to think. This is why some companies introduce what’s known as a “cool-down period”.

Basically, at the end of each cycle, you decide on a specific amount of time to cool down. This is where some people fix bugs, but it’s also a great time to review and score your previous OKRs as well as plan and submit new ones. The overall company OKRs have already been set in stone. So this time is a great period to figure out the next steps in how you can contribute to that.

Also, spending time thinking about what went well and what could be improved is essential. It’ll help you calibrate how ambitious you can be. Many overestimate what they can get done if they haven’t spent time thinking about the complexity of a task. Key results should be stretch goals, but they should be well-informed stretch goals.