OKRs & KPIs in simple

Latin America is increasingly understanding the value of OKRs. They are a vehicle of value. It's that simple, that easy. They are an excuse to bring the business to the table of team conversations. A way to create a sense of internal urgency and seek to deliver value to the client or organizational benefits in an increasingly shorter period. A way to move the elephant.

Latin America has been intensively promoting an increasingly deeper understanding of OKRs. Many started by reading John Doerr's book Measure What Matters; however, we quickly realized that there was something strange about it. The examples reduced KRs (Key Results) to simple milestones or projects that talked about the work and not about the result of it.

This has led to several essays on, for example, the difference between OKRs and KPIs. Frankly, the examples in the book leave a lot to be desired and are probably the source of many of the inconsistencies we see today in organizations that are seeking to use OKRs. If this is your short-term goal, use this book as a historical and basic source to understand how OKRs work, but don't use them as an example.

Today OKRs have evolved diametrically and this is mainly due to the introduction of a concept that comes from English but that we understand better and better (out of necessity), which implies: outcome.

Understanding Outcomes makes the examples in the book seem pretty poor today. An outcome talks about the value of your work (regardless of how you achieve it). It is the result for which you work 8 hours a week. It doesn't talk about what you do, but about the value you generate with what you do. And this is what we need to understand to differentiate an OKR from a KPI.

The outcome is the heart of the OKR. The nature of a good OKR is defined by its ability to demonstrate the value we generate, not to show the work we do. When we define a KR correctly, we think of an indicator that captures the value generated for the client or the benefit we generate for the organization from our work. On the other hand, the KPI mainly measures the operation, the work and our performance in it. The outcome changes everything and is the key to understanding this difference.

If we wanted to use a KPI, we could have, for example, the speed of the team, the number of errors in production, the number of items delivered from the backlog, compliance with the plan, budget, scope or time, among others. If we pay attention, each of these indicators does not tell us how much benefit we generate with our work or our operation, it only tells us how well or poorly we did it, it tells us how well we operate.

A KR goes further. A KR shows the value we generate with our work. What do we achieve with a faster team? Maybe we deliver more functionality to the client and, with that, we can better satisfy their needs. In this sense, the associated outcome is customer satisfaction. Speed per se does not generate value. The result of it (along with other variables) does.

It is very common to measure compliance. It is an interesting KPI that helps us monitor the execution of our plans and/or projects. A plan or project is a means to achieve value for the client or benefits for the organization. Compliance with it is not a guarantee of the value perceived by the client. Today the challenge is to look beyond. The specific question would be: What do we achieve with the execution of the project?

Clearly, moving the satisfaction index, the NPS, generates some kind of savings or income. Compliance (in all its forms) is an interesting indicator to follow but it is not, by itself, an indicator of value.

To recap, the fundamental difference between a KR and a KPI is that the latter tell you about your work, they measure it, monitor it, and help you track your operation. KRs are based on indicators that measure a factor that your main stakeholders consider valuable. This last point is important. Yes, I talked about stakeholders. Your team is part of an interconnected system that seeks to generate results together.

You can deliver value directly to a customer or you can deliver value or benefits to other teams like yours. The nature of what they consider “valuable” matters a lot. For strategic visibility, you could have some operational indicators (KPI), such as a key result. Yes, it is possible. That is why OKRs can never be considered a method, because there is nothing absolute.

This interaction can cause the concept of value to be impacted by a pressing or strategic need to position some operational indicator as a key result, and you can do so; however, it should be an exception and not a rule. I have not found any operational activity that cannot be measured or associated with some value indicator.

The tip:

Before choosing an indicator as a key result, constantly ask yourself: Does this indicator speak about my work or about the result and value I generate with it? If it only measures my work, would the stakeholder to whom I deliver the result of my work value moving this indicator?

If the answer is yes, you have a good key result. If the answer is no, explore which indicator you could choose that really demonstrates the value of your work.