How to Align Your OKR vs KPI Terminologyby Stacey Barr
Terminology with KPIs, performance management, OKRs and strategy often misaligns and confuses people. Here’s how to build a glossary to make it all clear.
There has always been a struggle to find a standardised set of terms to use across the different but related approaches we use for designing, measuring, aligning, executing and monitoring the strategic direction and operational priorities in our organisations.
Ayça Tümer Arıkan is one of our licensed PuMP Contractors in Europe, and she’s been working with a client, Hello Chef, on integrating OKRs and PuMP. Early in this process, they bumped up against the terminology problem:
“The measurement terminology they used was what they learned from the OKR literature and some other reference books, which were all mixed up in terms of PuMP’s clear point of view. For example, sometimes they had a measure as a KR (Key Result of the OKR), but sometimes a change initiative was also written as a KR. Also, some terms were understood differently by different people. So, we realized that the first thing needed to be done was to get aligned on terminology, so that everyone understands the same thing from a term used and we can start talking the same language.”
Have you noticed any confusion among your colleagues about what each performance management term might mean, in your organisation or business?
Why you need to align your OKR and KPI terminology
While there have been some attempts to define OKR, KPI and performance management terms, each attempt is just another variation that adds to the confusion! If you want examples of what I mean, compare the first three definitions of KPIs versus metrics that I found with Google, and notice the variation:
- KPIs are the key targets you should track to make the most impact on your strategic business outcomes. KPIs support your strategy and help your teams focus on what’s important.
- Metrics measure the success of everyday business activities that support your KPIs. While they impact your outcomes, they’re not the most critical measures.
From Fox Consulting Group:
- KPIs, or Key Performance Indicators, are those metrics that directly tell of success or failure for a business. They are strategically outlined to support business objectives, and hence become the most important metrics to study…
- The most granular form of data, Metrics describe the exact numbers that make up the data. Put more simply, they are the raw ingredients that make analytics possible.
From The KPI Institute:
- Key Performance Indicator (KPI) – A measurable expression for the achievement of a desired level of results, in an area relevant to the evaluated entity’s activity.
- Metric – Metrics refer to something we can measure, a value, or a quantity. When metrics reflect the achievement of a desired state, they become Key Performance Indicators.
So, are KPIs targets? Are they always strategically important? Are metrics raw data or business-as-usual operational measures, or even sometimes a KPI?
Who’s right? We’ll never know. And that’s the primary reason you can’t ignore this terminology problem in your organisation.
The only workable answer is the one you create yourself.
How to create your OKR/KPI terminology glossary
A good performance management glossary of terms is the answer to the terminology mess. You can start easily, by listing the keywords that your strategy and OKR methods refer to, and also the keywords your KPI method refers to.
But don’t get hung up on each keyword. It’s far more important to nail the concepts those keywords are referring to. Different people in different organisations or businesses will use different keywords to refer to the same concept. For example, one concept is a ‘performance result’ and keywords like ‘objective’, ‘goal’, ‘output’, ‘outcome’, and ‘impact’ are all used to refer to that concept. (More examples here.)
PuMP has its own performance management terminology glossary, which you’re welcome to download and use as your starting point. This PuMP glossary was the starting point for mapping to Hello Chef’s own performance management terminology, including OKRs. Here’s an excerpt, to show you how it looks:
Terms in italics are defined elsewhere in this glossary.
|Hello Chef Term
|Responsibility for routinely monitoring the important Performance Results, validly
interpreting the Performance Measures of those results, and initiating action, only ever when action is required to improve Performance and reach Targets.
|The current level of Performance, expressed quantitatively, for a Performance Measure, and based on the Central Line in an XmR chart. Used to calculate a Performance Gap.
|Goal / Objective
|“O” / Objective
|A statement that describes a desired changed level of Performance in a specific area.
|The quantitative difference between the current level of performance of a Performance Measure and its Target.
|A quantification that provides objective evidence of the degree to which a Performance Result is occurring over time.
|Performance Measure + Baseline + Target
|“KR” / Key Result
|A KPI to which a Baseline and Target values and a deadline are added.
|A quantitative value that represents the level of desired Performance for a Performance Measure, coupled with the date by which that level will ideally (or realistically) be reached.
For your organisation, there may be other terms you use which we don’t use in PuMP. But it’s important to include those in the glossary as well. Be clear about the definitions you give to each term, too. The more you can define, and the clearer you can define it, the better everyone will understand how to do their bit with performance management.
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