10 Bad Assumptions About OKRs Versus KPIsby Stacey Barr
Here are 10 assumptions about what OKRs are, compared to what KPIs are, and why none of them are true!
OKRs – or Objectives and Key Results – are not defined all that well, but John Doerr (author of Measure What Matters) defines them like this:
“An objective is simply WHAT is to be achieved… Key Results monitor how we get to the objective… they are measurable and verifiable.”
And if you’ve read any of my work over the last 20 years, you’ll know that I define a KPI (or metric or performance measure) as:
“a quantification that provides objective evidence of the degree to which a performance result is occurring over time”
Because the definitions of both OKRs and KPIs vary depending on who you ask, it’s easy to make some trivial assumptions about what each of them can and should do. Here I share the first 10 assumptions I’ve come across, and why they aren’t true, and definitely not useful.
Assumption 1. OKRs link to strategy but KPIs link to processes or BAU.
Many experts and the vast majority of organisations I’ve worked with around the world very much believe that KPIs at all levels need to be aligned to strategy. OKRs came later to that party. And in the context of an organisation’s strategy, some process results are strategically important, while others are business-as-usual. We can meaningfully measure either. But the measuring is always done with what most people these days call performance measures, metrics, or KPIs.
Assumption 2. OKRs refreshed quarterly but KPIs linked to annual.
Both parts of this assumption are wrong and neither are good. Every measure we use – whether it’s tracking something strategically important or something business-as-usual – will have its own cadence. And that cadence depends on the speed with which we can pick up signals of change.
Assumption 3. OKRs have owners but KPIs don’t require owners.
What happens if a KPI doesn’t have an owner? Who will monitor it, and interpret it, and initiate action if and when action is needed? Anything that measures an important result (or goal or objective) needs an owner to be sure that measure is heard and responded to.
Assumption 4. OKRs have multiple KRs per objective but KPIs are single-focused.
No KPI should be used in isolation. Without context, it’s too easy to misinterpret it or choose actions to improve it which sabotage other related performance results. Goals and their relationships to one another provide the right context, and that’s the case for both OKRs and KPIs.
Assumption 5. OKRs can include project KRs but KPIs do not measure projects.
Performance measurement and project management are separate processes. They are related, but evidence of getting something done is never evidence of it creating the improvement it was done for. For any objective (or goal or result) that we want to achieve, we need both measures of impact and actions to achieve that impact.
OKRs objectives change with strategy but KPIs remain constant over time.
KPIs, performance measures or metrics that are aligned to the organisation’s current strategy should evolve with strategy as it changes. No matter the reason or trigger for the change. Business-as-usual KPIs, performance measures or metrics may also change, but less often, and usually the trigger is a change in the organisation’s purpose, products, services, or processes.
Assumption 6. OKRs focus attention and activity but KPIs cover everything regardless of importance.
One of the common problems in the performance measurement world is measuring too many things that don’t matter. It’s not free to measure anything. It costs time, money and attention. With limited resources, the only way that organisations will achieve their strategy and create high performance is to only measure what they should, can and will improve.
Assumption 7. OKRs are about transparency but KPIs are area-specific with limited access.
Very often one of the reasons that strategy execution fails is poor communication throughout the organisation of what the strategy means. Weasel words are one of the culprits, but less-than-careful cascading of the strategy is a culprit as well. A PuMP Results Map helps to solve both problems, making the strategic direction clear enough for everyone to see what and how they’re contributing.
Assumption 8. OKRs are easy to understand but KPIs are for the “graphologists”.
Any KPI or performance measure or metric can be understandable if it’s clearly described and defined. KRs and KPIs alike can be interpreted by anyone if they’re displayed in a way that makes changes over time unambiguous and statistically valid. And they all need to be displayed this way in order to tell us anything useful about achieving our objectives or goals.
Assumption 9. OKRs don’t cover employee compensation but KPIs do.
If you know me then you know I will never be convinced that any kind of quantitative KPI, performance measure or metric should be used to financially remunerate employees or executives. Measuring people is proven over and again to drive the wrong behaviours that won’t improve organisational performance.
Assumption 10. OKR metrics are outcomes lagging but KPIs are leading and lagging.
Because organisations are systems within larger systems, and are made up of smaller systems, there really isn’t sense in saying a KPI is either leading or lagging. Any measure can be leading or lagging depending on its position in a cause-effect chain, from the front line all the way up to the board room and then beyond into the organisation’s operating environment.
I think that sitting beneath assumptions like these is a constrained appreciation of the fundamentals of strategy design, execution and performance improvement. Too many people grab onto terms like OKRs or KPIs as though they have clearly defined meanings. And they don’t.
What other bad assumptions have you discovered about OKRs versus KPIs or performance measures?
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