What is a vision? What about a mission? What do Key Performance Indicators (KPIs) and Objectives and Key Results (OKRs) have to do with either of them? When and where can you use them?
A vision statement is a picture of the future. It defines the end goal. The future the company wants to achieve.
A mission statement, on the other hand, says what you’re going to do to enable that vision.
Which leaves us with KPIs and OKRs. KPIs are a cornerstone of Management by Objectives (MBO). They’re how you measure your progress against the defined objectives. And in OKRs your key results tell you if you’ve met your objectives. Two ways to organize, manage, and track that sound like the same thing, right?
MBO/KPI and OKR may both use the words objectives and key, but, in reality they’re pretty different. The simplest difference is in expectations. In MBO, the expectation is that you achieve all of the KPIs. With OKRs, not so much. Typically 70%-80% is considered success.
A more significant difference though, is the overall philosophy. OKRs are pretty directly tied to the vision and mission. They describe and measure both the what and the how. The objectives are tied to the change that the vision represents (the what) and the key results let you know if the method (the how) is working.
You should be able to express your OKRs with this simple formula.
We will (objective) as measured
(these key results)
The formula provides the overall framework that ties the company vision/mission to team objectives. The OKRs are built bottom up, in service to the vision/mission and partner team’s OKRs.
The other important part of OKRs is that they’re tied to value. If nothing else, they’re tied to the value that the vision brings. They describe the value of the objectives to the customer, whether that’s an internal or external customer. Which leads to the big difference between key results and KPIs.
KPIs are thresholds on measurements. Average page load time less than X. Daily cloud spend less than Y. But there’s no indication of what changes or why. No description of how that adds value. Key results, on the other hand, help describe how much value meeting the objectives brings.
To that end, Key results come in two basic flavors, activity based and value based. Activity based KRs are typically used in the 0 -> 1 case. If you are going to add value by starting to do something. By building, launching, or starting something new. You can add a lot of value with a step change to a system. Value based key results are more typically used to describe an incremental change. They let you know how effective your activity has been, without defining the activity. They describe how much value you’ve added by saying how much you’ve improved the result.
When possible prefer value based KRs. For example, let's say you’ve got an objective to “improve developer efficiency”. You might be planning to do that in part by reducing build time by enabling remote builds. You could have a KR that was “enable remote builds”. An activity based KR. You’ve succeeded in the KR by enabling it. But have you made developers more efficient? A better KR might be “reduce build time by 50%”. While not a direct measure of developer efficiency, build time is a much better proxy. And still very measurable,
Finally, when and where can you use OKRs? Now, and everywhere. Whenever you have a goal or a vision OKRs make sense. You can use them to create and maintain alignment inside a company, across an industry, or with your own personal board.