Implementing OKRs. A tale from the trenches.
At PeerStreet, we recently implemented OKRs. The effects were immediate. Here’s what happened.
We recently implemented OKRs and WOW, it had a huge impact. Let me explain.
I worked at Google for almost a decade where OKRs (Objectives and Key Results) were an essential part of the management culture. Everyone had to do them. But I never really appreciated how important they were until I implemented them at my own startup.
PeerStreet is a platform for investing in real estate debt. Essentially we’re solving the problem that most people can’t find attractive ways to get yield, especially in this low interest rate environment (Curious? Watch our explainer video). At the heart of our company is an unusual combination of technology, real estate, finance and law. As I briefly explained in this post, very few people have a background in all of the necessary disciplines to understand every moving piece of this business. So I guess it shouldn’t have been a big surprise that as we grew to about 25 people, my co-founder, Brew Johnson, and I started to hear fairly frequently that people weren’t certain what our biggest priorities were, despite that we had been reiterating our priorities nearly every Monday. On top of that, we had noticed that some things weren’t getting done as quickly as we had hoped while other things had too many people focused on them. If this sounds familiar, read on, it might be time for you to consider OKRs.
When is it time to implement OKRs? And what’s the process?
Good questions. I did OKRs for years at Google, but when we needed to create the whole program, I needed a refresher. I turned to the interwebs and found that one of my old Google pals, Rick Klau had given a very useful tech talk at Google Ventures about OKRs. The video was very helpful, so I sent it around. On top of that, Brian Channell, PeerStreet’s head of User Experience that we had hired away from an illustrious career at Yahoo, fortunately had a ton of experience with OKRs, too (and apparently he paid more attention to the process than your humble author). Lesson number one, it’s important to have an advocate. In fact, without Brian, this might not have ever happened. Lesson number two, make sure to give credit where it’s due. Thanks Brian! :-0
We started by identifying the overarching goal for the year that we needed to achieve and the objectives that would get us there (aka BHAGs). This wasn’t hard to do because they were the things that we were already working on and if we didn’t continue to do them, we wouldn’t succeed as a company. We then made sure we had leaders for each team and the supporting team around each project. At Google, these are major cross-functional initiatives like Chrome, Android, Search, Gmail, etc. At PeerStreet they are things like retail investor acquisition, bank leverage, lender and loan acquisition (this is how we get supply, we call it our fishing boat strategy). In all, we identified nine major Objectives. Most people will tell you not to focus on more than three major Objectives, and that’s good advice, but PeerStreet is a fairly complex business, so this worked for us.
Once we identified a logical lead for each Objective, we canonized who was on each of the sub-teams. These were cross-functional people who were already helping to get each Objective done. I included myself on many of the sub-teams, but tried to own as few of the Objectives as possible. Why? To empower other leaders in the company. And so when Brew and I are off traveling for business, speaking at conferences, pitching on Sand Hill or running around Wall Street, things still get done.
We had our Objectives, our leads and our sub-teams. It was time to set our annual goals for each team. How many lenders do we need to have enough loans to sell $x00 million per month? We took those numbers and we doubled them. Why? Because a) why not? That way if we aimed for twice the volume of our plan and we missed by half, we’d still hit our plan. If we actually hit those goals, even better! And b) because you are only supposed to get 70% on your OKRs. These are stretch goals, so come on, stretch a bit. Yeaaaah, that’s it.
Also, it is important that the goals across the major sub-teams align. In any business, supply and demand should be at least somewhat balanced.
Then to set our OKRs for each quarter, we backed into our quarterly goals from where we intended to be in a year (2x it actually) to where we were now, Q4, Q3, Q2 and Q1. And that gave us our quarterly Objectives.
The final step that we did as a group, was to set our Key Results for the current quarter. These should be measurable and roll up into the quarterly Objective(s) for the team. This can take an hour or two depending on the size of your team.
And that was it. We did that for each team and we had our quarterly OKRs.
Next up was creating individual OKRs. I wasn’t sure how to do this with an agile eng model (meaning they have rotating projects), so I asked on Facebook. My buddy Rick Klau (same guy from the video! Yes, I’m practically famous), and a whole bunch of my old Google colleagues said don’t bother doing individual OKRs at all. For everyone other than engineers, I ignored that advice (sorry Rick!). Why? Because I wanted people to manifest for themselves how they were going to accomplish these goals. The mental shift from saying “how the heck are we going to do X” to, “here’s how I’m going to help us do X” should not be underestimated.
Here’s that Facebook post in case you were wondering…
Side note, I actually agree with the comments above. Over time we probably will drop the personal OKRs. But the first time we did them, writing personal OKRs was gold.
So, did OKRs work? What happened?
I honestly couldn’t believe how much of a difference OKRs made. Our teams became MUCH more focused. We disseminated power from the top through to the rest of the business. People were empowered to make decisions. They were focused on their own roles and the goals they’d signed up for. And they had a much deeper sense of ownership, not just for their goals, but for the company. In areas where people were stepping on each others toes, they stopped. When Brew and I traveled on business, shit got done! Decisions were made! Targets were hit! The effects were immediate and palpable. Everyone understood the business more thoroughly and had a clearer sense of their role in it. In a nutshell, OKRs worked. REALLY well.
We began implementing OKRs in February 2016. By early August, we had over $100 million invested on PeerStreet and we received an award for Innovator of the Year in Lending. We’ve only been open to the public since the end of October 2015. That kind of growth requires intense focus across the entire company, and OKRs really helped us find it.
Why do OKRs work so well?
Once you see what other people are signing up for, and you see the plans they are putting in place to achieve them, you get religion. You believe they are going to hit their goals. And you don’t want to be the only one not hitting her goals. So you work. You work hard. Instead of watching what everyone else is doing and reacting, you start focusing much more on achieving your Objectives and just assume they’ll hit theirs. OKRs help everyone focus, and that drives results.
So should you do OKRs? (Hells yeah. Do it!)
In a word, yes. I’d recommend any company with over 20 people (give or take) seriously look at doing OKRs. Not only are they big at Google, Yahoo and PeerStreet, they are big at most notable tech companies, startups and beyond.
Okay, fine, how do I do them?
Postscript. We didn’t use any fancy OKR tools, we just used Google Apps (Docs, Sheets and Slides, products with such good names, just brilliant). There are a lot of tools out there for OKRs and I’m not opposed to using any of them, we just didn’t want to wait to do a bake off. We wanted to do OKRs now. So we did. Brian and I may be able to share our templates. LMK if you want to use them (update, here is our tracking sheet).
Beyond that, all it takes is a single passionate employee and a sympathetic founder/executive who believes that some planning will help the business. Are you that person? Probably. If this post helps you get OKRs implemented, I’d love to hear about it.
Yes, a few other things (this list may grow over time):
Each sub-team responsible for an Objective will typically meet throughout the quarter, usually once every week or two. Could be more, could be less, that’s up to you and the size of your org. The point is to discuss the tactics you are using to achieve your goals and review the metrics to see how you’re doing against your Key Results. This is where you make the tactical plans, adjustments, etc. necessary to hit your metrics.
Speaking of metrics, how do you grade OKRs? Typically on a scale of 0–1. At the end of the quarter, you are really targeting a .7 (7/10). That way you are setting goals that are a stretch and not things that are easy. If you are consistently above .7, you are doing what’s called “sandbagging.” If that’s the case, aim higher.
Finally, if you want OKRs to work, you’ll want to have the owner of each OKR announce the Objectives and Key Results at the beginning of each quarter. This sets everything in motion because there is now a public forum holding that person and their team responsible for hitting those goals. Then halfway through the quarter, they report on their progress, including what’s working and what’s not. And then they deliver their final grade at the end of each quarter. And it all starts again at the beginning of the next quarter. That gives everyone insight into how each team is doing and creates that extra bit of incentive for everyone to move the ball forward.
Postscript: I’ll end with an example.
This is the kind of OKR that doesn’t work:
Objective: Increase sales (not an aggressive, measurable goal)
1) Create campaigns to drive more leads (that’s a tactic, not measurable)
2) Optimize sales funnel (to what end? These should be about results)
3) Harvest existing accounts (not specific enough, make it measurable)
This is the kind of OKR that works. Measurable, clear and strategic:
Objective: Double sales volume by end of quarter.
1) Increase leads from 300 to 700
2) Improve conversion funnel efficiency by 30%
3) Increase sales volume from existing customers by 70%