It’s OKR season again. When everyone prepares for next year, goal setting is a useful method for aligning everyone in the right direction.

I must admit I love OKRs, when done correctly. Dealing with the qualitative part (objectives) separately from the quantitative part (key results) is very powerful. You have to understand what you are trying to achieve before you can measure whether or not you succeeded.

For every company, there comes a time when it decides to work with OKRs (or any other goal-setting methodology) across the board for the first time. While it seems like a straightforward effort, there is actually a learning curve before you can do it right.

Many companies I work with have attempted to do it before but it worked so poorly for them that they abandoned it altogether. But we don’t want to throw the baby out with the bathwater. Just because implementing OKRs is hard, we don’t want to give up on this extremely powerful thinking framework (for that’s what it is first and foremost, way before it’s an operational tool for aligning the entire organization and measuring your progress over time).

Part of the challenge is due to the fact that product OKRs are different in nature than classic OKRs that can be used in the quantitative parts of the organization (namely sales and marketing). When the OKRs aren’t as straightforward, people come up with all sorts of implementations that do not necessarily serve the purpose of goal setting to begin with.

To help you do it right, I collected here four of the fundamental mistakes I see companies make when implementing the OKR methodology for product teams. Unless you have someone experienced who did it right in their previous company, you will most likely run into these yourself. To help you get started, or improve your current implementation of OKRs, I wrote this quick guide.

Note: you’ll see that these mistakes are all related to the objectives, not the key results. That’s because if you don’t set the right objectives, how you measure success doesn’t really matter. It also means that you can use this guide with any goals methodology you are using, whether it’s OKRs or anything else.

Mistake #1: Creating Separate Objectives for Product and R&D

In companies like Google (which is largely responsible for the popularity of the OKR methodology in modern tech companies), the OKRs run through the entire organization in a hierarchical manner. The company has OKRs, and then each division, and these are broken down further until finally, each team has its own OKRs.

When a company implements OKRs for the first time, it is tempting to try and do the same. You set the company OKRs and then ask each member of the management team to create their own OKRs accordingly. 

Sales create revenue goals. Marketing creates lead goals. That’s easy. 

But what about product and engineering? When thinking about them in isolation, it is very tempting to create OKRs that are related to the department processes and methodology rather than to the company OKRs at the top level. For example, I have seen product teams that create OKRs around meeting with customers, and engineering teams that create OKRs around closing the tech debt.

The problem with this approach is that it leaves a huge gap in the company’s ability to deliver on its top OKRs: the product itself. The product is a huge factor in the company’s ability to meet its goals, but this factor is now entirely missing from the OKRs that are spread around the company hierarchy. 

The question of what the product needs to achieve in order for the company to meet its goals is different from the question of what the product department needs to achieve in order to do so. And the former can only be answered when you think about the product as a whole – including at least the product and the engineering departments.

My recommendation is to include even more than that: you want to create a hierarchy of OKRs that is applicable to the entire company, and only split to departments at the last level. For example, to meet your revenue goals you might need a number of separate efforts: entering a new market, lowering churn, and reducing costs. Each of these applies to everyone in the company. Now you break these down further, for example – lowering churn might require you to bring customers that are similar to your ideal customer profile and not just anyone you are able to sell to, have a tighter feedback loop and quicker response times with your existing customers, and ensuring product stability since this might be the #1 cause for why you are losing customers.

You can still have departmental goals, but they need to be secondary to the goals that drive the results the company wants to achieve.

Mistake #2: Creating Objectives That Are Efforts and Not Outcomes

Now that we have established that product goals are about the product and not about product management, what should these goals be?

The path that many product organizations take is to convert their roadmap (which is usually a work plan and not a real outcome-based roadmap) into the OKRs format. So you will see things like “release a mobile app”, “add analytics”, or “integrate with [a certain platform]”.

While these are definitely needed for the teams to know what to do, they are bad OKRs, in the sense that they are not accounting for anything other than delivering software.

But your responsibility as a product leader is not to ensure software is delivered. It is to make sure the right one is, and if you weren’t able to bring the results expected with this software, you are not done yet.

Good product OKRs are tightly related to the business success of the product and are part of a larger context as explained above. For example, a good objective for entering a new market could be having happy design partners from that market (‘happy’ is the important part here because that’s where the results are).

Mistake #3: Objectives That Don’t Add Up

Setting the overall company OKRs seems easy: many companies have one OKR with their revenue goal and another for each strategic initiative (e.g. entering a certain market). 

The problem with this approach is that it leaves the goals at a very shallow level of discussion, and breaking them down further into smaller OKRs that make sense is very hard to do. This is especially true if you are trying to break down the OKRs along with the organizational structure as mentioned above.

For example, how will you break it down if you have a revenue goal of $1M ARR? If that’s all you know, all you can do is split the amount between your salespeople. In B2C companies, this often translates into initiatives with a very rough guesstimation of how much ARR will each initiative bring.

There are much better ways to break the $1M ARR goal down, but they require an in-depth discussion that in most companies simply doesn’t happen. This discussion includes questions like: where are you hoping to get this ARR from? What types of customers are you going to serve? Is the goal realistic, in the sense that the numbers add up? 

For example, you might be currently working with medium-sized companies, and the average ARR per customer is $10K. Let’s say that you are in $300K ARR currently (which accounts for 30 customers). So you need an additional $700K in ARR, plus whatever amount you are about to lose for churn.

$700K ARR at a $10K average means 70 new such customers. Is that realistic? What is the pipeline size that you would need in order to meet this goal? Are there so many potential customers in your currently addressable market? What level of churn can you afford? 

At a higher level, is this aligned with what you are really trying to achieve at a company level? For example, maybe you want to start selling to larger enterprises. That’s not a numeric goal, but it definitely should impact how the $1M is broken down. Maybe you want to prove that you are ready for enterprise customers, so you want one such happy customer by the end of the year. If you are trying to double down on enterprises, you might want to have a more significant percentage coming from that segment. If your sales cycle is long, you need to understand if the product can be ready not by the end of the year but by the time you need to start selling it in order to complete the sale on time.

All of these questions often go unnoticed unless someone provokes them. As a product leader, you are in a great position to be the one to do so, since unless they are answered it will be very difficult for you to create meaningful OKRs.

Mistake #4: Creating Too Many Objectives

The last mistake I see defeats the purpose of OKRs as a whole, and that’s to help you focus and align on the most important things. If you are creating too many OKRs, no such focus can exist. In other words, when everything is important, nothing is.

How many is too many? The bar is much lower than you think. While I’ve seen companies with 200 people and 20 OKRs, you don’t have to be as problematic to have too many OKRs. Generally speaking, people can only remember around 3 OKRs at the top level, so that’s what you should aim for. Then you can break down each to a similar number of OKRs, but you don’t want to go too crazy on that one too. A nice sentence I once heard says that there are only so many things you can think about in the shower. You want your OKRs to be clear and simple enough so that people can carry them with them and think about them when they have time. If they need to open a presentation, email, or dashboard to remember what the OKRs were, it will never happen.  

Let me be super clear on something here: the OKRs you set DO NOT need to account for everything you will be working on during this time. Instead, they need to be the compass that tells you what is important, and that everything else is second place.

The mere discussion on these priorities will be of great value to you, even if you don’t use it at all for setting OKRs eventually.

So the next time you need to create OKRs, see if you are making one or more of these mistakes. These are the most common ones because they are so easy to make. If you see that the company is going in the wrong direction with this, don’t be afraid to raise it and open the discussion. Ask the hard questions upfront, so that you have fewer hard conversations to make down the road.