Goal setting within a business not only measures operational performance against a set of benchmarks but additionally provides HR with an objective measure of performance when evaluating staff. Both Objectives, Key Results (OKRs) and Key Performance Indicators (KPIs) are management tools to help make goal attainment measurable. KPIs exist in most companies and you may have used them for years in your own team. However, when the team and company are growing, KPI based tracking stops being satisfactory. KPIs provide a tangible metric to track work, but they don’t inspire your team and don’t help you keep focus. That is why a lot of smart leaders are following the likes of Google and have started looking at Objectives and Key Results (OKRs) methodology.
What are KPIs?
Key Performance Indicators (KPIs) are performance metrics that evaluate the success of an organisation or of a particular activity. KPIs can apply to projects, programs, products, and a variety of other initiatives. As they are metric-based they can be used to measure all areas of a business from finance, management and sales through to specific department performance such as social media metrics.
What are OKRs?
Objectives and Key Results (OKRs) are metrics that outline the company and team ‘objectives’ along with the measurable ‘key results’ that define the achievement of each objective. OKRs represent aggressive goals and define the measurable steps you’ll take towards achieving those goals. They can be used to set quarterly goals and annual planning. The rising popularity of OKRs is mainly attributed to Intel and Google, who have adopted this technique for their planning.
The history of OKRs
In the late 1960’s, Andy Grove (co-founder of Intel) revamped an old goal setting methodology from the called Management by Objectives (MBO) into the OKR model that we know today. In 1974, John Doerr joined Intel as an intern and learnt OKRs from the master. He later left Intel to join a VC firm who were early investors in Google. John gave the gift of OKRs to the Google founding team very early on – and the rest is history. Today, companies like Microsoft, Amazon and Uber use OKRs company-wide to manage their goal setting activities.
What’s going to work for your business?
It depends on what you want to achieve. If you’re looking to simply measure the success of a program or initiative, KPIs work well. But if you want to really inspire and ‘stretch’ your teams, OKRs are the better tool. Strongly written OKRs articulate the aggressive (but realistic) “what’s” and the 4-5 measurable milestones describing the outcomes.
How to write strong OKRs
A strong OKR should be written to ‘measure what matters’ and like any good goal needs to be descending from company to department to individual. While the objective is the qualifying goal, the key results underneath are measurable indicators of success for the objective.
To demonstrate what a strong OKR looks like, here is an example of a business Objective and Key Results descending down to a departmental OKR.
A corporate OKR might be:
Objective: Position 1 in the Australian market for Product/Service.
- Key Result 1: Annual sales revenue for Product/Service of >$20M.
- Key Result 2: Maintain profit margin for Product/Service of +30%.
- Key Result 3: Annual client churn to remain <10%.
A sales department OKR might then be:
Objective: Generate 100 new unit sales of Product/Service.
- Key Result 1: Conduct a minimum of 300 sales demonstrations
- Key Result 2: Generate a minimum of 500 product/service enquiries
- Key Result 3: Sales discounting to be no greater than 10% from list price
More information on OKRs
For a more in-depth explanation of OKRs ad examples of how other businesses have adopted and succeeded using this goal setting methodology, we suggest reading “Measure What Matters” by John Doerr or visit Google’s goal setting guidelines ‘ReWork’. At Employment Innovations, we use OKRs to track and measure goals and our HR Consultants provide advice on how to integrate strong OKRs into our client’s businesses.
About Employment Innovations
Employment Innovations is one of Australia’s leading providers of employment services designed to increase productivity and ensure compliance. Its services and solutions include all the tools that every Australian small to medium-sized employer needs – including workplace advice, legal services, payroll solutions, migration, human resource management & HR software.