Success criteria and types of Key Results
What is Success?
Every organization, every team, every project needs a clear definition of success. We all need a definition of what it means to be successful.
But success means different things for different people. If I asked your team what success looks like for your company, I would probably get one different answer for each team member.
When used properly, OKR helps teams and organizations define shared success criteria. They define clear, measurable criteria for reaching success.
OKR not only makes sure the criteria exist, but that those criteria are shared, transparent and communicated to other teams, employees and even outside partners.
The shared success criteria concept is key when setting OKRs. We always have to ask ourselves: are those Key Results describing what success looks like?
Don’t turn your OKRs into a task list
Imagine a hamster in its cage, running non-stop on its wheel but never actually moving. Is that how you feel about your company or your team? Lots of work, lots of effort, but never getting anywhere?
Who is considered successful in your company? Those who work long hours, not sleeping, working on weekends, or those who deliver actual results? Do you want a team of hamsters – with lots of effort that get you nowhere – or people that deliver results?
When setting your OKRs, try to evaluate:
- Are you measuring effort or results?
- Are your OKRs focused on your main objective or on the means to get there?
Two types of Key Results
There are two basic types of Key Results:
- Activity-based Key Results: Measure the completion of tasks and activities or the delivery of project milestones or deliverables;
- Value-based Key Results: Measure actual results and the successful delivery of value (or a value component) to the organization. Value-based Key Results measure the outcomes of successful activities.
Examples of Activity-based Key Results are:
- Release beta version of the product;
- Launch a monetizing tab;
- Create a new training program;
- Develop a new lead generation campaign.
Activity-based Key Results usually start with verbs like launch, create, develop, deliver, build, make, implement, define, release, test, prepare and plan.
The Key Results of our OKR example are all Value-based:
- Increase average weekly visits to 3.3 per active user;
- Increase non-paid (organic) traffic to 80%;
- Reach a NPS (Net Promoter Score) of 52%;
- Reduce revenue churn to 1%;
- Increase engagement (users that complete a full profile) to 75%.
Value-based Key Results usually are built around a specific metric that represents a value lever for the organization.
The typical structure of a Value-based Key Result is:
Increase/Reduce ABC-metric from X to Y
If this is a new Key Result (i.e. for a new product yet to be launched) the typical structure of the Value-based key result is:
Achieve X of ABC-metric
A Value-based Key Result does not have to be a measure of the end objective of the company (i.e. revenue, profits or EBITDA), but it can be a component of a metric that has a correlation to generating value.
OKRs should be Value-based
As we mentioned before, when used properly, OKRs define success criteria for an organization. OKRs should define whether a person or a team achieved success. But in order to do that, OKRs cannot be based on activities for 3 main reasons:
1) We want a results-focused culture, not one focused on tasks.
As per the web traffic example above, we want a culture that is focused on delivering the results we want, not on tasks.
2) If you did all your tasks and nothing improved, that is not success.
Success is improving something: customers are more satisfied, sales are higher, costs have been reduced. If you did all your tasks, but they got you nowhere, that is not success.
OKR author and thought leader Christina Wodtke has a great tweet about “success”:
Success is not checking a box.
Success is having an impact.
So in spite of the “Project Management Triangle”, the fact is that delivering a project on time, on scope and on budget is not enough. The project must be delivered successfully – meaning that the objectives that motivated the project in the first place have to be reached.
3) Your action plan is just a series of hypotheses
The Lean Startup methodology taught us that an idea is just a non-validated hypothesis. In the same way, in the real world, we don’t know if our action plan will actually improve our results or add value to the organization. The action plan is just a hypothesis, so you cannot attach your OKRs to a non-validated bet.
When setting OKRs, focus on the destination, not on the means to get there.
OKRs and action plans
One of the things that OKR can learn from the Balanced Scorecard is the clear separation between your goals and the initiatives to achieve them.
The Balanced Scorecard has four components:
- Objectives (What do you want to achieve);
- Measures (How you are going to measure progress towards your objective);
- Targets (The target value of the measure, the actual goal to be achieved);
- Initiatives (Actions and projects to be executed in order to achieve the objective).
In OKR, you should also separate the results you want to achieve from the action plans to achieve those results. The action plans should be tracked alongside the OKRs, and replaced if not validated.