KPIs vs OKRs: What's the difference? Thinkydoers Ep 09

okrs thinkydoers podcast May 16, 2023

What's the difference between a KPI and an OKR? And specifically, what's the difference between a KPI and a Key Result? Here's a simple answer, with examples, to help make this concept easy to understand.

You’ll find out what defines KPIs, KRs, stretch goals, and commits, what they mean, how they impact businesses, and how they overlap. We discuss the problems caused by confusing these terms, which can lead to damaged trust, safety, and a reduction in employee engagement. We even use Sara’s personal health and well-being KPIs and KRs as an example to help you understand the differences! So, to hear all about KPIs and KRs and to be reminded of the importance of using clear language, tune in today!

Watch the video version via YouTube, or you can listen to the audio right here (or wherever you listen to podcasts):

Key Points From This Episode:

What a Key Performance Indicator (KPI) is and what it means.
What Key Results (KR) are and what job we hire them to do.
When might a KPI become a KR?
An example of the differences between KPIs and KRs, using health and well-being measures as an analogy.
What’s different about when we miss our goals on commits vs. Key Results (and why – in our definition – a KPI is never “missed,” but may be headed in the wrong direction)
Some organizational issues that can arise when language is not used clearly.
What “Commits” are and why there should be few of them in our aligned goal models.
Some things you should ask yourself as we approach our mid-year reset.

For more information on any of the above, find me at http://redcurrantco.com or email [email protected].

Tweetables:

“Just like we might keep an eye on our blood pressure, abdominal measurement, or [daily steps] to make sure they all stay in a healthy range, we keep an eye on our KPIs in our business to make sure it's healthy.” — @saralobkovich [0:02:39]

“Our key results are our most important measures of progress and success that are actually prioritized for improvement.” — @saralobkovich [0:03:13]

“Where our KPIs are indicators, our key results are goals.” — @saralobkovich [0:03:30]

“We want to keep our number of commits small because if they must be achieved 100% or there may be consequences, they need to be resource supported and not highly speculative.” — @saralobkovich [0:09:11]

“We can eliminate confusion, clarify expectations, and keep everyone on the same page by using language that's [clearer].” — @saralobkovich [0:12:16]

Links Mentioned in Today’s Episode:

Full episode transcript:

EPISODE 09

[INTRODUCTION]

[0:00:04] SL: Welcome to the ThinkyDoers podcast. ThinkyDoers are those of us drawn to deep work; where thinking is working but we don't stop there. We're compelled to move the work from insight to idea through the messy middle to find courage and confidence to put our thoughts into action. I'm Sara Lobkovich and I'm a ThinkyDoer. I'm here to help others find more satisfaction, less frustration, less friction, and more flow in our work. My mission is to help change makers like you transform our workplaces and world. Let's get started.

[EPISODE]

[0:00:47] SL: I'm Sara Lobkovich, Founder and Principal Consultant of Red Current Collective and the creator of Evolutionary OKRs. Our approach to OKRs solves some of the challenges of previous OKR implementation by focusing on operationalizing an actual aligned goal model and achieving behavior changes that help increase goal attainment, performance, and engagement. We're going to do some shorts answering some of the most frequent questions I receive as an OKR coach and workplace performance professional. These are going to be on the ThinkyDoers Podcast as well as the Red Current Collective YouTube channel.

Today's question: What's the difference between a KPI and a key result or a KR? KPI stands for Key Performance Indicator, but this is where things get complicated. Every organization I work with has a different definition of what a KPI is or what that means. There's even less agreement among different organizations and leaders about what job we've hired KPIs to do. Let's unpack that a little bit and I'm going to use some health and well-being analogies to try to make this make more sense since I'm in the middle of studying for my boards, for my health and wellness coach certifying examination, so my brain is more on the body than usual.

Also, these analogies just help. They're a little easier to apply than talking about business settings that might not be like yours. In the connected strategic and evolutionary OKR model that I work with, we use a literal definition of KPIs. KPIs are the performance indicators that we're keeping an eye on to ensure they stay healthy. We think of KPIs as our health measures, just like we might keep an eye on our blood pressure, our abdominal measurement, or even our number of daily steps to make sure they're all staying in the healthy range. We keep an eye on our KPIs in our business to make sure it's healthy. Do we make every one of our daily decisions according to those numbers? Probably not. Do we wake up every morning and check them? Again, maybe some folks do, but generally, if we're in maintenance mode, most of us don't. We keep an eye on them on occasion and just make sure that they're staying in the healthy zone.

[00:03:13] SL: Our key results are our most important measures of progress and success that are actually prioritized for improvement. The job that we hire key results to do is to give us clarity about what we consider measurable progress and success, so where our KPIs are indicators, our key results are goals. In our key results, we identify our starting point and our current target point as a near-term target for progress or success. Our key results are almost always set as stretch measures. They are aspirational, exciting, challenging goals that are difficult and speculative by design. They take us into unknown territory together around growth, change, and innovation. Now we'll talk in a minute about commits, goals that must be achieved 100%.

But for now, let's just say our key results are our stretch goals, where we're focused on improvement, progress, and defining success. Now some of our KPIs might be key results. If we set a target or goal we're aiming to achieve. For example, I have a key result of getting my body mass index back into the healthy range, so that's a goal to achieve a change to my weight, but right now I'm getting a healthy amount of steps in, so I just keep an eye on that KPI around my daily steps. I don't have a specific goal around them. Since I'm getting exercise in other ways, so steps aren't my most important key result for movement. Right now, my key result around movement is to walk my errands on weekdays, so instead of driving my errands on weekdays, I put on a backpack and I walk them. My step count is a KPI. If I see it dip down below around eight thousand steps a day, then I know I might need to do more walking. I might pay more attention to that metric, but the metric that I'm mostly tracking and working to improve is the frequency with which I get real-life movement without having to think about working out and so walking my errands is really helpful there. I'm really proud that my blood pressure is currently healthy after a long journey, but I keep an eye on it too to make sure that it stays healthy.

[00:05:43] SL: In my personal health and well-being example, here's how those metrics break down. I have KPIs or Key Performance Indicators of blood pressure, abdominal measurement, and the number of daily steps I take. I keep an eye on those casually to make sure they stay in a healthy range. I have key results around reducing my body mass index by two points; which would get it into the healthy range and around increasing the number of times per week, I walk my weekday errands from twice a month as a starting point to two times a week now. Those KPIs and key results all work together to help me achieve my ultimate outcome of increasing my health and well-being, but if I were going to set goals around all of them, I'd overwhelm myself with goals. I'd experience a lack of focus around what's most important. Some of them might conflict with each other. If I treated them all as KPIs, I might get a lot of interesting information about my body from my various wearables, but I wouldn't necessarily have the focus and the discipline to focus on achieving my ultimate outcome.

In evolutionary OKRs and connected strategic organizations, that's how we define and use KPIs and KRs. KPIs are our health measures. They're the measures we watch to make sure our business is staying healthy. Key results are the measures that we're actively focused on improving. A health measure or KPI may become a key result if we set a target for improvement for it, but not all of our KPIs are going to be key results at the same time. We need more focus than that in our KRs. In the years I've done this, that's the most coherent approach to KPIs and KRs coexisting that I've developed.

[00:07:51] SL: Recently, a new client threw me a curveball. We were discussing the issues they're having with their current goal model. One of the major conflicts that arose was over a team experiencing negative consequences for not achieving their KPIs. The organization has been using KPI where we would use the term commit. They're considering a more widespread adoption of OKRs, but they're also dealing with some trust and safety consequences of that past experience. I asked them to clarify how they're using KPIs today. The way they're using KPIs is to describe the measurable outcomes that must be achieved. This isn't the only organization I've heard that from. I do see that usage of KPIs in other companies. In the connected strategic model, we would call that a commit, not a KPI. Our commits are the small number of measures, usually financial, sometimes major, most important milestones like product releases that must be achieved 100% or else there might be consequences or harm.

We want to keep our number of commits small because if they must be achieved 100% or there may be consequences, they need to be resource supported and not highly speculative. In other words, far be it for me, a lawyer to use these words, but it's really not fair to hold people accountable to a 100% achievement of a target status and have there be negative consequences for less than 100% achievement if the organization doesn't provide what they need in order to hit that target.

A company can only fully support so many initiatives or goals to that degree. We typically reserve that commit type of goal for our absolutely most critical, must-hit mandatories that the organization is prepared to support through capacity and budget. Using the term KPI to describe what we would call a commit is ambiguous. People bring pre-existing definitions and assumptions about what a KPI is to their work and using the term KPI does not make it clear on its face whether that goal is a must-achieve, a commit or a stretch goal, a key result.

[00:10:35] SL: Not to get too nerdy, but the language of performance indicator would lead my brain to think that's a performance goal, so it's either an outcome or a progress measure which are both by their very nature the types of goals that might be within our influence, but beyond our actual control, which leads me to think it's a stretch measure, but that's just based on language alone. Lots of room for potential confusion. The risk there is that people may not know that they're going to be held to a 100% achievement standard if we're using the term KPI to identify our commits. I've seen teams experience negative consequences for achieving the goal that was set for them, but not exceeding it by enough in the leader or board's retroactive opinion. I've seen goals communicated as stretch and then seen teams penalized for not achieving them by some un-communicated minimum threshold that the team wasn't aware of. I've seen teams within the same organization held to different goal attainment standards which may have a reasonable rationale for the leader making that choice, but without communicating that rationale might lead to an appearance of or actual inequitable treatment.

All of those issues can have a negative impact on trust, psychological safety, and the individual courage to take risks and to speak up for change that's typically necessary to actually achieve improved performance. We can eliminate confusion, clarify expectations, and keep everyone on the same page by using language that's more clear. Commits are the measures that must be achieved 100% and there may be consequences if we fail to achieve them. There should be few of them and they should be supported by resources and capacity to make that achievement more possible. Key results are the most important measures of progress and success that were currently focused on improving or achieving and typically they're set as stretch measures where we're safe to try and even fail if it means that we're learning how to improve in the future. Again, we want to have a small number, because we want to maintain our prioritized focus. KPIs are the health measures that we keep an eye on to make sure that our focus on our commits and key results or changes in our operating environment aren't causing any negative externalities elsewhere in our metrics model.

As we all prepare for our mid-year reset, what maintenance metrics can you move into your KPI dashboard? What metrics are really important to prioritize for change and improvement during the back half of your year? Are you and your colleagues crystal clear about which of your goals are commits and which are stretch key results? Using those terms with those coherent words and meanings as terms of art, with those specific shared understandings, each one hired intentionally for the job you're looking for them to do will increase clarity of expectations and focus. Over time, when leaders behave in line with those responsibilities and practices described earlier can actually increase organizational trust and safety. Those conditions help us do what's most important. Increase the odds that will actually achieve the goals that we've set together.

[00:14:31] SL: That's it for today's short. I'd love to hear your questions about aligned goal setting, objectives, and key results, rhythms of business for goal achievement, healthy conflict for high performance, and well-being at work. Email me at Sara [email protected] and I'll put them in the queue for answering here on the ThinkyDoers Podcast or via the Red Current and ThinkyDoers blogs. If you'd like to keep tabs on new resources from and opportunities to work with me and Red Current Collective, the best place to start is our email list at findrc.co/subscribe. We're getting closer and closer to releasing the full preview of my first book, which I am very nervous and excited about the Evolutionary OKRs Playbook, which is in its final beta read as we speak. If you'd like the sneak peek of the too-long didn't read version that only contains the essential how-to pages and worksheets, you'll find that free download at findrc.co/T-L-D-R-O-K-R. If you've got other ThinkyDoers in your work world, please pass this episode along. We really appreciate your referrals, your mentions, your shares, and your reviews. Thank you for tuning in today and I look forward to hearing your questions for a future episode. Bye friends.

[OUTRO]

[0:17:00] SL: All right, friends. That is it for today. Thank you for joining and listening. I really can't wait to hear from you about what in that intro resonated, where you might have gotten stuck or confused, and remember that's always on me, not you, so I would love to hear your feedback. Don't forget to pop over to findrc.co/waitlists. If you want the one email that includes everything that is about to launch around here, so you can hear about everything all at once.

If there's anything you have questions about, you can find me at Sara Lobkovich pretty much everywhere. I'm pretty sure I'm the only one. It's S-A-R-A-L-O-B-K-O-V-I-C-H and no, nothing here is easy to spell. I'm sorry. I'd be thrilled to have you as an email subscriber for infrequent, more formal, just business messages. You can subscribe at findrc.co/subscribe. I also have a personal list that takes side trails into topics around well-being, mental and emotional health, and my motorcycle racing life, and other serendipity at saralobkovich.com. You'll find a shortcut to the show notes for today's episode via thinkydoers.com. You're always invited to drop me an email. The easiest one to spell is Sara [email protected].

If you've got other ThinkyDoers in your work world, please pass this episode along. We'd really appreciate your referrals, your mentions, your shares, and your reviews. Thank you for tuning in today and I look forward to hearing the questions that this prompts for you.

[END]

KPIs vs OKRs: What's the difference? Thinkydoers Ep 09

Full episode transcript:

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