KPIs, OKRs, and What’s Probably Missing from Your Quarterly Strategic Plan
March 17, 2018
Spoiler alert: that thing that’s probably missing? It’s the objectives that give your company a shared sense of direction.
Whether you use KPIs or OKRs (or some combination of both!), regularly sharing objectives can help teams focus and collaborate to move forward together in the same direction.
Reflecting on KPI-driven Operations
Previously in my career, the way that I measured success in my role was something like this:
- Every quarter, I’d look at a company-wide One-page Strategic Plan for the quarter (it usually looked a lot like this template);
- Next, I’d write my own One-page Strategic Plan for my department with a list of goals as they related to KPIs (key performance indicators) and I’d plan a short list of projects to complete;
- Throughout the quarter, I’d pull my weekly numbers for KPIs and log them in a big company metrics spreadsheet that Leadership Team reviewed in a weekly meeting;
- At the end of the quarter, I’d scramble to roll all my numbers up into a table of goals against the targets I’d set;
- Then, I’d make a pretty slide deck with all the numbers from the past quarter (including a breakdown of which projects got done and which ones didn’t) plus a list of all the fun things I planned to do next quarter, and I’d present this slide deck in front of the company at a Quarterly Meeting.
For me, there was a lot of failure in this process. Targets for goals often felt solidly arbitrary. Projects would change in scope or get massively derailed. Halfway through a quarter, I’d be looking at my projects-in-progress thinking, “Why did I even think this was important to get done?! Oh well—better finish what I started, else I’ll look unreliable…”
Lather, rinse, repeat. Quarter-over-quarter.
And, lemme tell ya—quarters are slow. 13 weeks is a long time to be working on anything that you don’t believe is going to have an impact. It’s also a long time to wait before you can start eyeing your next win to repair your broken ego.
Beneath the repeating quarterly cycles of projects were KPIs. Our business-as-usual KPIs were the metrics that we always watched and continuously worked to improve. Sometimes these KPIs were truly meaningful, and sometimes they were just the numbers that were easiest for us to report with the tools and systems we had in place.
But, at the end of the day, all the KPIs were supposed to drive one key thing: more MRR (monthly recurring revenue).
“What’s our plan for this year?”
“Make more money.”
This is not a terrible way to run a business. MRR matters. KPIs are great. Operate this way if it’s motivating for you.
But, if you’re chugging along for long enough in a results-only work environment (ROWE), you might start to feel like something’s missing…
Why are we always measuring this KPI?
Why are these the projects we’re choosing to get done this quarter?
How do these projects relate to the KPIs we’re measuring?
How does all of this relate to our big picture strategy?
Where are we going with all this work we’re doing?
Everyone in your organization should be able to answer those questions with confidence, and come up with the same answers.
All of those whys and hows and wheres come together to give you a shared sense of direction.
Direction is more than how much money you want to make in the next three years; it’s a sense of orientation toward the vision for where the company will be and what it will look like when you get to that next big revenue goal together.
If you feel like some direction is missing from your operations, consider layering some objectives on top of your projects and KPIs.
Embracing Objectives-based Operations
Objectives are clearly stated initiatives that relate to your larger business strategy. They can be written for the short-term or the long-term. Well-written objectives inspire focus and a shared sense of purpose.
For example, here’s a pretty good objective:
Become a must-have tool for startups.
This objective is good because it:
- Tells you something about a big picture initiative;
- Lets everyone know which customers you’re focused on serving;
- Leaves room for cross-department collaboration; and
- Gives individuals the freedom to set attainable goals against the direction.
Bonus: When you’re sharing this objective, it could be helpful to present it along with an additional statement that clarifies why you’ve set this objective, i.e. “Let’s position ourselves as a must-have tool for startups. This is important because we want to build a groundswell of happy customers who can advocate for our product, and we believe that opening ourselves up to startups (instead of serving enterprise alone) will help us cover more surface area, which will pay off later.”
And, here’s a less good objective:
Increase revenue from startup-sized customers by 20%.
This isn’t an objective; it’s an example of a measurable result that should happen if we do the right things related to some broader objective.
Key Results (KRs) are the activities and the results that help support your larger objectives. KRs can be scored on percentages (based on progress) or a numerical scale (such as 0.0 - 1.0), and you might have multiple KRs to support a given objective.
So, if your objective is:
Become a must-have tool for startups.
Then, you and your colleagues might plan the following activities or projects to support your objective:
- Define a startup pricing tier and make it accessible within our app’s billing page
- Publish 3 new Knowledge Base articles targeted to educate startup users
- Launch a startup discount with a popular incubator
Now, the trick is that you’ll need to tie those projects back to some KPIs in order to measure whether the activities you execute actually support your objective effectively. That’s where Scoring Rubrics can be super helpful.
For example, if you’re measuring your Key Results on a scale of 0.0 - 1.0, you might assign the following scoring rubric to the first example activity:
- .2 for defining the pricing tier
- .4 for making the pricing tier accessible in the app’s billing page
- .2 for increasing revenue from startup-sized companies by 10%
- .2 for increasing revenue from startup-sized companies by 20%
But, wait—why not make the key result an all or nothing score based on hitting your numbers?
It’s valuable (and motivating) to break KR scoring rubrics into manageable chunks where some chunks are based on execution and some chunks are based on results.
As it relates to the larger objective, some progress executed is more valuable than no progress at all. If you deliver something and it doesn’t achieve the results that you anticipate, you can at least iterate or expand on what you’ve already delivered.
And, weighing some chunks on results (not specific to execution), gives you the freedom to adjust plans in pursuit of the results you want.
For example, imagine that halfway through a cycle, you realize that there’s a technical limitation and you can’t actually make the pricing tier accessible via the app’s billing page within the given time frame. You might still be able to get to the measurable results with an alternative process that lets people discover and buy the defined pricing plan outside of the app’s billing page. And, because you’ve given yourself a rubric for partial points, that success could be reflected in your score.
The important thing is to have at least some component of your Scoring Rubric that relates to a measurable KPI. Otherwise, your KRs could devolve into public-facing task lists.
(Although, a public-facing task list has intrinsic benefits of its own; at least you’d have some cross-org transparency around who’s doing what!)
But, wait—what if I can’t easily measure the thing that relates to my objective?
Do I have to wait on doing the thing I strongly suspect that I need to do until after I have a reliable KPI and a running baseline?
Getting your hands on metrics that don’t exist out-of-the-box can be hard work. If you don’t immediately have the access or skills to pull a new metric all on your own, you may need to prove the importance of measuring the metric to multiple parties so you can get resources to engineer a way to pull the reports that you want. Even after you’ve got a number you can watch, it may take time to develop a baseline to report against.
In this case, do two things:
- Make a plan to execute on measuring the ideal KPI as soon as you can, and
- In the short term, look for the closest proxy that’s easy to measure and go ahead and start doing the right things.
How does all this come together?
Once everyone collaborates together to:
- Write planned KR activities, and
- Define scoring rubrics to measure execution and results
Then, you basically end up with a list of company-wide SMART goals that relate to a common, defined timeframe (the basis of which is your “OKR cycle”).
Your OKR cycle can be slow (quarters, if you must). Or, if you’re feeling agile, break your OKR cycles down into sprints closer to 5-7 weeks in length.
A five week sprint might feel like a crunch, but the limited timeframe can be comforting. If you go hard and fast in the wrong direction, you won’t be stuck waiting for a long time before you get to recalibrate for a more purposeful goal or more attainable win.
Simple OKRs Template with Point-based Scoring Rubrics [TEMPLATE]
Once you’ve shared your objectives and collected KRs, the whole thing comes together in a single place, like so:
You can view and copy this template in Google Sheets here.
CYCLE LENGTH - Defined in weeks, set by leadership
OBJECTIVE(S) - Inspirational statements, set by leadership, shared with everyone ← note: limit objectives to 4 or fewer
KRS - Defined by individual contributors, in support of the objectives, clearly measurable
- Activity - What you plan to do
- Results - Measurable results you want to see from your activity, relating to a KPI or easily accessible metric
- Scoring Rubric - How you’ll score the KR on a scale of 0.0 - 1.0, where weight is distributed partially between execution and results
- Reporter - Which human will report on this KR?
- Collaborators - Which humans will help execute this KR?
SCORES - How are we doing? ← note: these can be in percentages or points, but however you do it, make sure everyone is using the same scoring unit types
A fun reality of adopting this method: if all of the KR reporters update a shared Google Sheet every week, everyone across your org can have instant access to information about company-wide progress without needing to wait on a manager to deliver a report.
Even if you don’t adopt an OKR practice for your business, be sure that you have a method for sharing your business strategy and objectives across your organization on a regular basis.
When employees know why you’re paying attention to the numbers you’re measuring or why you’re investing resources in specific areas, they’ll feel more empowered to make the right decisions to help you move in the right direction together.
And, once you’ve adopted a KPI, don’t keep optimizing for it forever without revisiting. Different KPIs make sense at different points in time as business evolves. Don’t be afraid to archive old KPIs or adopt new ones as you grow.
Resources and Continued Reading
- What is OKR
- OKR vs. KPI: How They Compare and How They Work Together
- The Ultimate Guide to SaaS Growth Metrics