OKRs in Early Stage Startups

Andrew Chen has recently published a pretty valid point on most advice on whether OKRs are appropriate for pre- Product-Market Fit / early stage startups.

OKRs are most certainly harmful for [pre-Product-Market Fit] startups because it causes teams to optimize towards goals instead of constantly asking if the goal I even the right one to begin with? Plus the OKR cycles are typically quarters when iteration should be happening weekly.
Every blog post / book on business processes — OKRs, (…) — almost need [sic] a label to describe the stage of [company] the ideas are for.
(…)

Andrew Chen on LinkedIn

The argument regarding OKR literature is strong, and I see myself in it. My 2-part series on OKRs does present a narrow view, centered on the experience it stemmed from — post-Product-Market Fit, B2B product company. But is it still fair to say OKRs are harmful for pre-Product-Market Fit startups?

I responded to Andrew making my case for OKRs to be particularly helpful to early stage startups.

I don’t think that makes OKRs harmful per se, but context is indeed key — and I’m saying this with a guilty consciousness. I’ve recently published a piece on OKRs that had some traction but I do admit it’s heavily biased by the experience I had (post-Product-Market Fit B2B startup). However, if you adapt the cycle time and your choice of objectives to the company stage, what makes OKRs bad for an early stage startup? The way I see it, OKRs are a great framework to bring focus (vs trying to be all over the place), and a company can benefit from that at any stage (particularly pre-Product-Market Fit).

João Pedro Craveiro on LinkedIn

There’s only so much one can convey in a LinkedIn comment. Let’s look at the 6+1 pieces of advice from my original blog post series through the lens of an early stage startup (or an early stage product inside an organisation). Consider this a shot at redemption from the post-Product-Market Fit focus of the original piece (still with a bit of B2B bias to it, though).

#0 – Shared, Cross-functional Objective

At least one Objective (and respective Key Results) should be shared among all functions involved in your product line.

“6 Principles for Truly Effective OKRs (Part 1)”

By all means yes! An early stage startup must move fast, so you must ensure everyone focuses on the same objective. Even if within the 5–10 people there will be people taking different actions (as a result of their different roles in the team), they should constitute coherent efforts concentrated on a common objective.

Good strategy works by focusing energy and resources on one, or a very few, pivotal objectives whose accomplishment will lead to a cascade of favorable outcomes.

Richard Rumelt, Good Strategy/Bad Strategy

For an early stage startup, I’d recommend having no OKRs other than this one. I’m not a big fan of Individual OKRs to begin with, but I trust they’re outright harmful for an early stage company. It’s too early and too small for individualised objectives. At this stage, individuality exists in the actions each member is best positioned to take, but they must converge to a single objective.

#1 – Stable Objective

Let’s assume you revisit OKRs on a quarterly basis. Revisiting is not (necessarily) revising. If you find yourself every quarter feeling like you have no other way than changing your Objective, then either your Objective is not well-framed or you don’t quite know what you’re working towards.

“6 Principles for Truly Effective OKRs (Part 1)”

The main caveat for this one is the length of the cycle that defines stability. Having an Objective remain “the” company Objective for one whole year is certainly too much for an early stage startup. Besides this, the reasoning should hold: changing the Objective shouldn’t come out of a “Strategy of the Week” whim. It should be a deliberate action signaling either:

  • the company achieving a significant milestone; or
  • a pivot.

As a strawman, we can think of an OKR cycle of:

  • an Objective lasting up to a whole quarter;
  • revisiting Key Results monthly;
  • weekly check-in (we’ll talk more about checking in a moment);

but I admit no two startups (or market dynamics) are the same, so YMMV.

The formulation of the Objective itself will naturally differ depending on the stage of the company. We find a great example of this in Christina Wodtke’s book Radical Focus. On the chapter “OKRs for MVPs”, Angus Edwardson proposes using the hypothesis the Minimum Viable Product aims to validate en lieu of Objective.

#2 – Key Results as Outcomes, not Outputs

Key Results should reflect the ends, not the means.

“6 Principles for Truly Effective OKRs (Part 1)”

This is another ingredient that is even more important for OKRs in early stage startups. With a limited runway, you have to be nimble—otherwise, you’ll go bust. You have to focus your limited budget (time, money) on the efforts that bring you the most impact. It’s not about developing the most features, rather the least features that gets you the most important outcome you’re pursuing.

#3 – Measure Once, Cut Twice

When two groups of people (…) are aiming for the same Key Result, they must look at the same number.

“6 Principles for Truly Effective OKRs (Part 1)”

In a small, early stage startup, this one is less of an issue as there are less wires to get crossed. But this stresses the need for everyone to guide their efforts on a shared Key Result. Everyone needs to be aligned on:

  • what the current Objective is,
  • what are the Key Results that indicate progress towards that Objective,
  • how we’re doing, and
  • how confident we are that we’ll to what we set out to – which brings us to the next point.

#4 – Check In Regularly

It’s not enough to be able to measure your OKRs: you have to really do it.

“6 Principles for Truly Effective OKRs (Part 2)”

Andrew’s point on the need for early stage startups to learn and adapt quicker than mature companies stresses this principle. I stand behind my defense of as much stability as possible, but change might still happen; to react quickly (but confidently) to it everyone needs to be on top of how the team is doing.

Visibility of OKRs in early stage startups can be as simple as a sheet of paper posted on a wall. Christina Wodtke proposes such a format in Radical Focus — you can see the napkin sketch in “One Objective to Rule them All“.

Napkin sketch of OKRs four-square, by Christina Wodtke
Napkin sketch of OKR four-square, by Christina Wodtke
(included with permission from the author)

At a glance, everyone can see:

  • the strategic Objective everyone should be focusing on, the Key Results that define success/failure towards the Objective, and how they’re doing (top-right);
  • the team’s intended actions for the present week towards the Objective (top-left).
  • what’s coming up that the team may need to prepare for to protect their progress (bottom-left);
  • the indicators of success that need to not be impacted negatively by pursuing the Objective (bottom-right).

In my original post, I proposed a weekly team checkin, and updating to the wider company at least monthly. For an early stage startup, these two realities are one and the same, so shared visibility should be behind by no longer than one week. This stresses the need for outcome-driven, measurable Key Results — it shouldn’t take more than 5–10 minutes to update the scores.

#5 – Involve Stakeholders

(…) open up to people with whom you don’t collaborate so frequently. Let your stakeholders in!

“6 Principles for Truly Effective OKRs (Part 2)”

It goes without saying that this wording is disproportionate for an early stage startup. For a small team that is abiding by the shared OKR mantra, internal stakeholders will already be naturally involved. So who’s left?

Customers! Allowing your first prospects / customers to co-create the product with you can be a big boost towards Product-Market Fit. You just need keep a healthy balance between

  • catering to their specific needs and
  • generalising them to build a product that serves their wider market segment.

This works particularly well when they’re also early(ish) stage companies. They’ll be more willing to risk going through this journey with you instead of opting for a safer, established alternative.

#6 – Make Learning Safe

After having skills-wise autonomous teams in place, an organisation needs to make it okay to get to the end of a quarter with a 0.0 result in an OKR. Of course you don’t want to keep doing it, but when it happens it should lead to a conversation along the lines of “what happened?”, or “what have we learned?” — not “what the hell have you been doing here all quarter, anyway?”.

“6 Principles for Truly Effective OKRs (Part 2)”

Having a shared Objective goes some way into restricting the room for the blame game to ensue. But let’s say a particular Key Result is specific enough to suggest that its performance is tied to the actions of particular team member. If the shadow of retaliation for a low KR score looms over that team member, it won’t take long for them to start playing safe (for themselves). They might begin to set Key Result target scores they’re sure to achieve (sandbagging), or Results based on output (which are more easily gameable).

In an early stage startup it’s even more important to:

  • push the boundaries of what seems possible; and
  • not be dogmatic about the path it’ll take to get where we set out to, and take some risks.

The team must be able to trust each other to do their best. They’ll sometimes fail, and need to know that when it happens everyone will be candid about what happened in order to improve and succeed — not to assign blame and get some heads rolling. This stresses how decisive first hires are for the odds to make it or break it.


OKRs are good for early stage startups

This is my attempt to make amends with the fact that most literature on OKRs leans heavily towards post-Product-Market Fit companies. I hope these make sense as an argument in favour of OKRs in early stage startups to help them succeed through the challenges specific to that stage. In a “meta” way, this is an early stage idea I’ve developed over a few hours after commenting Andrew’s LinkedIn post; I trust you’ll forgive me if I’m not getting everything right.


Disclaimer

This post represents my individual professional opinion on this subject, not that of any company I work (or have worked) at/for on this subject area.