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 to 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 correctly, OKR helps teams and organizations define shared success criteria. They establish 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 critical 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 nonstop 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 produce results?

When setting your OKRs, try to evaluate:

• Do you measure effort or results?
• Are your OKRs focused on your objective or on the means to get there?

There are two basic types of Key Results:

1) Activity-based Key Results: Measure the completion of tasks and activities or the delivery of project milestones or deliverables.

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 such as launch, create, develop, deliver, build, make, implement, define, release, test, prepare and plan.

2) Value-based Key Results: Measure the delivery of value to the organization or its customers. Value-based Key Results measure the outcomes of successful activities.

The example Key Results from the first section are all Value-based:

• Improve Net Promoter Score from X to Y.
• Increase Repurchase Rate from X to Y.
• Maintain Customer Acquisition cost under Y.
• Reduce revenue churn (cancellation) from X% to Y%.
• Improve average weekly visits per active user from X to Y.
• Increase non-paid (organic) traffic to from X to Y.
• Improve engagement (users that complete a full profile) from X to Y.

The typical structure of a Value-based Key Result is:

Increase/Reduce ABC-metric from X to Y

Where X is the baseline (where we begin) and Y is the target (what we want to achieve).

Using the “from X to Y” model is better than writing a percentual change because it conveys more information. Compare the two options below:

1. Increase NPS by 20%.
2. Increase NPS from 40 to 48.

Option 1 can be confusing since it’s hard to tell how ambitious the target is. Are we talking about increasing NPS from 5 to 6 or 40 to 48?

Other options for Value-based Key Results can be:

• Maintain ABC-metric in X (When we want to sustain one metric).
• Reach Y on ABC-metric  (When we are doing something new).

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.

Below is a list of examples of Activity-based Key Results and the equivalent Value-based Key Results.

OKRs should be Value-based

As we mentioned before, when used correctly, OKRs define success criteria for an organization. OKRs should determine whether a person or a team achieved success. But to do that, OKRs cannot be based on activities for three main reasons:

1) We want a results-focused culture, and not one focused 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.

My colleague Christina Wodtke has a great tweet about “success”:

Success is not checking a box.

Success is having an impact.

If you complete all tasks and nothing ever gets better, that’s not success.

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 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.

Objectives, Key Results, and Initiatives

When focusing on Value, we need to separate the OKRs from the activities and tasks that we plan on doing to achieve the OKRs. This leaves us with three components:

• Objectives: What we want to achieve.
• Key Results: How are we going to measure our progress?
• Initiatives: What we are going to do to reach our OKR: projects, tasks or activities.

It is important to understand that we still need to track the delivery of the initiatives. Without them, we will not achieve our OKRs. But initiatives are just bets and have to change if the numbers aren’t improving.

Delivering an initiative is not enough. We must fulfill it successfully.

Nobody works on initiatives as a hobby. Behind every initiative is a desire to improve one or more metrics. So, instead of tracking the delivery of a project, we should measure the indicators that motivated it in the first place.

Migrating from Activities to Value-based OKRs

When teams start with Value-based OKRs, it is common for them to get stuck listing activities as Key Results.

To convert those activities into value, think about what would be the consequences of being successful with this task. What would be the desired outcomes?

Some teams find this simple tool to be useful to identify the desired results, especially when first dealing with value-based OKRs:

If we are successful with (this initiative),

we will

(Key Result #1)

(Key Result #2)

(Key Result #3)

…

Example:

If we are successful with the new campaign,

we will

Increase NPS from 29 to 31%

Reduce churn from 3.2 to 2.7%

You can also create an OKR to measure if a high-priority initiative will be delivered successfully:

Successfully migrate the platform

• Reduce infrastructure costs from X to Y.
• Maintain availability during migration in 99,99%.
• Maintain revenue of $ X.