If you’re not seeing results, it might be because you’re focusing on the wrong metrics. Here’s how to set effective KPI’s and OKR’s to forecast results.
- A recap of OKR’s and KPI’s and why we need them both
- The importance of understanding lead (predictive) and lag metrics (output)
- Using The Ansoff Matrix to set growth target OKR’s
- What effective OKR’s and KPI’s allow us to achieve as managers
- A framework for implementation (free guide)
Many have considered the art of KPI and OKR setting to translate our leadership vision into action and bring accountability to our teams for its delivery. However, it’s vital to take a data lens when developing them, so we can build dashboards that make the management of team responsibilities in alignment with our goals both simple and effective.
Note: Dashboarding doesn’t necessarily mean through a data visualisation tool. Whether we get started in excel or automate and embed these principles throughout an organisation, everyone can start somewhere and bring greater accountability to outcomes now.
A recap of KPI’s vs OKR’s:
Firstly, a quick recap on the difference between a KPI and an OKR.
OKR’s were popularised by tech giants like Google and Intel and were used to set ambitious objectives for the business, aligning subsequent, high-level key results to achieve them.
KPI’s are target metrics that help assess performance at a point in time. These metrics should be metrics that when reached, lead to certainty in achieving a key result in your OKR, and thus will be partly responsible for achieving the objective. We call these “lead indicators” (which we’ll explain next).
In brief: OKR’s are forward-looking while KPI’s assess performance that has already happened, to understand how we’re tracking towards those objectives.
Understanding lead and lag indicators:
Lead and lag indicators in the context for marketing measurement were introduced by the brilliant marketing strategist and academic Malcolm McDonald.
A lead indicator is a predictive measurement whereas a lag indicator is the output of such a measurement.
We find this economic lens is helpful to use when discerning the nature of KPI’s (forecasting result metric) vs OKR’s (desired output).
Why is this important?
One of the greatest challenges we face as leaders and managers is both setting the vision and managing its follow through. When deciding how to turn our vision of winning a marathon into a reality, it can often be helpful to take an incremental approach.Just like a coach, we can break that vision down into small sprints of well-designed training programs that orientate our team toward success and keep them accountable at each step along the way. Similarly, to turn the vision for our business into a reality, we must construct an actionable series of tasks or projects with clear milestones.
Setting the most well thought out, effective OKR’s and KPI’s allows us to:
- Achieve confidence in whether we are well placed to achieve our goals
- Bring visibility to whether a strategy needs to change (not reaching KPI’s and thus, will not achieve our vision)
- Hold our staff resources accountable and empower them to solve problems standing in the way of us achieving our targets
Theory in action:
What good is a theoretical framework without an example of how to put the theory in action?
Being data junkies and having built a few KPI dashboards in our time, we’ve learned a few things about combining lead indicators to KPI’s and lag indicators to OKR’s to turn them into an actionable plan for your team.
Based on our years of experience, we’ve developed a matrix that offers examples for possible KPI metrics as they relate to potential OKR’s that your business might choose.
The examples provided have been guided by The Ansoff Matrix, a strategic growth model however we recommend looking at your OKR’s in the context of the market in which you’re operating along with where you are in your business lifecycle to assess risk.
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