leadership

KPIs vs OKRs (OKRs Part 3) – which one should you use?

Key Performance Indicators (KPIs) and Objectives and Key Results (OKRs) are both performance measurement frameworks used by organizations to track progress and achieve their goals, but they have some key differences:

1. Purpose:

o KPIs: KPIs are used to measure the performance of an organization, team, or individual against specific, predetermined goals or benchmarks. They are often used to monitor ongoing business operations and track how well an organization is performing against its strategic objectives.

o OKRs: OKRs are more focused on setting and achieving specific, measurable objectives and results. They are typically used to align teams and individuals with the strategic priorities of the organization and drive progress toward ambitious goals.

2. Structure:

o KPIs: KPIs are often quantitative and can be lagging indicators. They provide a way to measure outcomes and results based on historical data.

o OKRs: OKRs consist of Objectives, which are qualitative and ambitious goals, and Key Results, which are specific, measurable, and time-bound milestones that indicate progress toward the objectives. OKRs are typically forward-looking and encourage a focus on outcomes.

3. Scope:

o KPIs: KPIs can be used at various levels of an organization and are often tied to specific departments or functions. They are useful for ongoing performance measurement.

o OKRs: OKRs are typically set at the organization, team, and individual levels, with a strong emphasis on alignment. They are usually set for a specific time period (e.g., quarterly) and are meant to be more agile and adaptable to changing priorities.

4. Frequency:

o KPIs: KPIs are often reviewed on a regular basis (e.g., monthly, quarterly) to assess ongoing performance.

o OKRs: OKRs are typically reviewed more frequently, often on a weekly or bi-weekly basis, to ensure teams stay on track toward their objectives.

5. Ownership:

o KPIs: KPIs can be owned by specific departments or individuals responsible for specific aspects of the business.

o OKRs: OKRs often emphasize collective ownership and alignment, with teams working together to achieve shared objectives.

In many organizations, they use a combination of both KPIs and OKRs to strike a balance between measuring ongoing performance (KPIs) and driving ambitious, outcome-oriented goals (OKRs). The choice between KPIs and OKRs depends on an organization’s specific goals, culture, and the need for agility in responding to changing circumstances.

The Power Of OKRs (OKRs Part 2) – Implementing a Framework That Insures Employees Work Together On What Is Most Impactful

First created in the 1970s by Andy Grove and later popularized by John Doerr in his book Measure What Matters (link below), OKRs (objectives and key results framework) can help any organization to enforce a systematic, disciplined process that makes sure employees are working together on the most important actions that will impact the organization.  This system encourages employees to focus on what’s vital rather than what’s immediately in front of them.  A properly implemented OKR system makes sure that the crucial tasks that will move the business forward get finished first before employees focus on less important activities.

Many of today’s most successful companies regularly use OKRs, including Google, which has been using the framework since the beginning.  This shouldn’t come as a surprise — Doerr was one of the company’s earliest investors.  In addition to Google, many other well-known companies use OKRs, including LinkedIn, 
Twitter, Dropbox, Spotify, Airbnb, and Uber.

Do I need OKRs?

OKRs are helpful for most organizations, independent of size, industry, or organizational structure.  Here are a few questions to ask yourself to determine if OKRs would be helpful to your business:

• Are your teams poorly aligned? Are there evident silos between groups?
• Do you suffer from low or inconsistent employee engagement?
• Do your projects often have unclear outcomes or objectives?
• Do you lack a clear process to determine what a project’s objectives should be?
• If you ask your employees what they accomplished last month, will you likely get a list of tasks they’ve completed rather than results obtained?
• If you ask your employees what the company accomplished that moved it forward last quarter, would you get mostly blank stares?

If you answered “yes” to any or all of these questions, introducing OKRs to your organization may be just the thing you need to resolve these problems.

Common OKR traps and mistakes

When implementing OKRs, there are some common mistakes people make that can set you up for failure.

Problems occur when a leader organizes a companywide meeting and announces, “We’re going to start using OKRs,” but then fails to provide guidance to the organization on how to develop OKRs and actually make proper use of them.  Each team or department then goes off independently and tries to figure out what is expected of them.

Unfortunately, what typically happens next is that each silo in the organization continues to operate as a silo.  Different groups make assumptions about the expectations of other groups and build them into their plans.  When they are not able to successfully deliver on those plans, they claim it’s because the other team didn’t do what they needed them to do.

When OKRs are created in silos, you do nothing more than strengthen the negative aspects of those silos.

It’s easy to fall into various OKR traps that make them not useful, not attainable, or simply irrelevant.  

Here are six common OKR errors (traps) to avoid:

Trap #1 – Confusing committed and aspirational OKRs.  

You need both committed OKRs (those that are mission critical to the company’s success) and aspirational OKRs (those that stretch an individual or team to do better).  It’s important that these two types of OKRs be identified as such.  Otherwise, if someone thinks a committed OKR is merely an aspirational one, they won’t be as fully driven as they need to be to achieve it.  In addition, if someone believes an aspirational OKR is actually a committed one, they may put excessive effort into meeting the objective, and either miss other, more important objectives, or become disillusioned with the process.

Trap #2 – Developing “business as usual” OKRs.

If your OKRs simply define what steps your company is already doing, then they aren’t useful to help you grow or inspire change in your company.  You can’t desire a change or growth in the company but have OKRs that simply outline your current results.  Don’t define an OKR that says, “Have at least as much revenue as last year” when what you really need is to grow revenue by 25% this year.

Trap #3 – Crafting timid aspirational OKRs.

Aspirational OKRs are useful for encouraging growth and stretching the bounds of your company.  If you are timid in defining your aspirational OKRs, you won’t be stretching your bounds.  Almost by definition, only some of your aspirational OKRs should be achieved.  If you are constantly meeting all of your aspirational OKRs, you are not “aspiring” high enough.

Trap #4 – Sandbagging.

Setting an OKR that is very easy to achieve is not useful to you or your company.  Your OKRs need to establish true goals, and not reflect an easy-to- accomplish challenge.  If you are planning on building 20 new features this year, don’t set an OKR that says you will build “at least 10 new features.”  Sandbagging helps nobody.

Trap #5 – Setting low-value objectives.

OKRs should be your most important goals.  Don’t establish OKRs for every metric you monitor, and don’t establish OKRs for low- value objectives.  Setting an OKR for the number of customers that use the new settings menu on your toolbar isn’t important unless increasing the use of that menu is an important goal for the company.

Trap #6 – Pursuing a siloed implementation.

OKRs must represent a cross-functional view of your company, and must be implemented, refined, approved, integrated, and adopted in a cross-functional manner.  Implementing OKRs within silos, without visibility across them, is a quick way to create tension and result in organizational failures.

Next steps: How do I get my organization behind an OKR approach?

When you start the process of implementing OKRs, you must first decide at what level to implement them.  For OKRs to be truly successful, they have to be implemented at the highest possible level of the company and cascade down from there to the rest of the organization.  This is essential, but very few people can influence an entire organization, especially a large one.

If you are the CEO or founder of the company, then you can and should drive the OKR initiative from the top, where it will have the most positive influence on the rest of the company.

If you are a CPO, a GM, or VP of a group or organization, or even a director or senior manager, you can implement OKRs in your area of influence.  But the need for cross-departmental communication doesn’t go away even if the sphere of OKR implementation is smaller.  You need feedback review processes and other communications channels with the groups outside of your implementation bubble in order to enable the needed cross-functional alignment.

Here are the essential steps to get started:

• Determine the highest level within the organization that you have influence over, and at which you can implement the OKR process.
• Establish the OKR process with the leaders at this level of the organization. Then put the processes in place to cascade them down the organizational chain.
• Create review and feedback processes that reach out cross-functionally from your implementation bubble so that other teams have input and feedback into your process.
• Publish your OKRs within your group, and globally outward to the rest of the organization.
• Review and revise your OKRs as necessary. It’s good to review them weekly or monthly, and then update them quarterly or annually (as your business needs require).

If you can only implement OKRs in a relatively small corner of your company, that does not negate their value.  Just remember that the impact of what you do extends beyond your group, and you need to listen and respond to requirements that are provided outside of your more limited OKR process.  If you do that successfully, and OKRs help improve your part of the organization, the effect will be felt outside of your group—and you just might be responsible for creating positive change across the entire company.

A Brief Summary of OKRs (OKRs Part 1) – What are They?

Objectives and Key Results (OKRs) is a goal-setting framework widely used in organizations to drive focus, alignment, and accountability.  

In essence:

1. Objectives (O) are clear, ambitious, and qualitative goals that express what an organization or team aims to achieve. They provide a sense of direction and purpose.
2. Key Results (KR) are specific, measurable, and time-bound metrics that quantify progress toward achieving the objectives. They define how success will be assessed and measured.

What are OKRs Good for?

Objectives and Key Results (OKRs) are a goal-setting framework that can be highly effective for a variety of purposes within an organization. Here are some common scenarios where OKRs are particularly useful:

1. Strategic Alignment: OKRs help align teams and individuals with the overall strategic goals of the organization. They ensure that everyone is working toward common objectives, fostering a sense of purpose and direction.

2. Focus: OKRs encourage teams to prioritize their efforts by setting clear objectives. This focus can help prevent “goal sprawl” and ensure that resources are directed toward the most critical initiatives.

3. Measuring Progress: The key results component of OKRs provides measurable outcomes, making it easier to track progress and success. This data-driven approach helps organizations make informed decisions about where to allocate resources and efforts.

4. Accountability: OKRs create a sense of accountability among team members. When individuals and teams set their own OKRs, they take ownership of their work and are more motivated to achieve their goals.

5. Adaptability: OKRs are often set for shorter time frames (e.g., quarterly), which allows organizations to adapt to changing circumstances and market conditions more easily. If a particular approach isn’t working, adjustments can be made in the next OKR cycle.

6. Cross-Functional Collaboration: OKRs can encourage collaboration between different teams and departments. When OKRs are designed to require cooperation between groups, it can foster a more integrated and cooperative organizational culture.

7. Employee Engagement: OKRs can boost employee engagement and satisfaction by providing a clear sense of purpose and progress. When employees see how their work contributes to larger goals, they are more likely to feel motivated and fulfilled.

8. Innovation: OKRs can be used to encourage innovation and experimentation. By setting objectives that include exploration or learning, organizations can foster a culture of continuous improvement and adaptability.

9. Transparency: OKRs are often shared throughout the organization, increasing transparency. This transparency can build trust and help employees understand the big picture, leading to a more cohesive and informed workforce.

10. Performance Management: OKRs can be linked to performance evaluations and compensation. When done correctly, this can help reward high performance and ensure that individual and team goals align with organizational goals.

In summary, OKRs are versatile and can serve various purposes within an organization.  They are particularly effective in promoting alignment, focus, accountability, and adaptability, which are essential elements for achieving strategic goals and staying competitive in today’s rapidly changing business landscape.