Welcome to FastDecisions.org

KPIs and OKRs

Home > Tactics > Measurement Clarity > KPIs and OKRs

Problem: Without clear goals and measurable outcomes, teams may feel disconnected from the company's big objectives.

Solution: Use KPIs (Key Performance Indicators) to track progress and OKRs (Objectives and Key Results) to set clear, shared goals, keeping everyone aligned and focused on important results.

Intro:

The OKR system, originated by Intel's Andy Grove, helps organizations focus on key objectives and measurable results. Objectives represent what you aim to achieve, while Key Results define how you’ll measure success. This dual-layer approach is actionable across various organizational levels (from top management to individual contributors).

Traditional management often overemphasizes “metrics” that lack a clear link to objectives, mission, or strategy, leading to confusion and misalignment. Instead, prioritizing Key Performance Indicators (KPIs) as specific, incremental measures tied to Objectives and Key Results (OKRs) provides meaningful insights into both daily operations and long-term goals, connecting individual productivity with organizational success.

While KPIs measure smaller units of progress, they don’t depend on OKRs—but the two should work symbiotically. KPIs and OKRs inform and strengthen each other, enhancing operational visibility, measurement accuracy, and team empowerment. If OKRs aren’t improving KPIs, it may signal missing or misaligned KPIs.

In this approach, KPIs are shared transparently across the organization. This visibility fosters collaboration and allows everyone to contribute meaningfully to shared goals.

Using KPIs:

  • Every area of the organization has Key Performance Indicators (KPIs) directly tied to organization objectives.
  • Each functional leader owns their team’s KPIs, chosen from among various performance indicators (PIs) the team tracks.
  • Only the most crucial PIs should be elevated to KPIs for clear visibility at the executive level.
  • To make KPIs meaningful, place each in its relevant section of the organization’s documentation, grouped by function and desired outcomes.
  • Clearly define each KPI, specify its data source, and include any formulas used for calculation.
    • Sample KPIs for a Marketing Department might include “Social Media Followers Gained”

Using OKRs

  • The OKR system emphasizes selecting and committing to a limited set of goals, typically three to five per quarter.
    • This focus ensures that teams are aligned on critical tasks, preventing overextension and encouraging intentional resource allocation.
  • OKRs are shared publicly within an organization, from CEOs to entry-level employees, allowing everyone to see how their work aligns with broader objectives.
    • This transparency fosters cross-team collaboration and alignment with the organization’s mission and values.
  • organization-level Yearly Goals set the foundation for top objectives and key results.
    • These high-level goals are reviewed quarterly, ensuring alignment with evolving priorities.
    • Each function should adopt these objectives as a baseline for their own, setting 1-3 functional Key Results that align with organization goals each quarter.
  • While functions can decide how deeply to apply OKRs within their own teams, the Yearly structure should serve as the primary framework for cascading priorities.
  • OKRs include aspirational, “stretch” goals that encourage organizations to push beyond their comfort zones.
    • This approach drives innovation by empowering teams to set ambitious targets, even if they’re slightly beyond reach.
    • Failure is accepted as part of the process, fostering a culture that values learning and experimentation.
  • OKRs follow the organization’s rhythm and drive progress toward Yearly goals.
  • By focusing on quarterly objectives, each milestone we achieve contributes to the larger cadence of our strategy, ultimately bringing us closer to realizing our mission and vision.
  • OKRs act as essential building blocks, linking immediate goals to long-term strategy.
  • Each quarter, OKRs guide our focus, driving progress on our annual Yearly goals.
    • These quarterly OKRs are aligned with the Yearly objectives but not directly tied to the broader three-year strategic pillars.
    • This keeps our focus sharp on what matters most in the near term.
  • Regular check-ins and grading of OKRs support continuous progress tracking and accountability.
    • The system encourages adaptation and course-correction, ensuring that teams remain focused and responsive to changes in business needs or external conditions.
  • OKRs represent our specific quarterly focus—objectives that can shape or impact our Key Performance Indicators (KPIs) directly.
  • OKRs add direction but don’t override essential roles or KPIs. They represent a focused request from leadership, driving alignment on critical goals.
  • Prioritize OKRs unless higher-priority tasks emerge, in which case trade-offs should be flagged for leadership review.
  • Health statuses for KRs should be maintained as a Single Source of Truth (SSoT), denoting each KR as:
    • On Track – Progressing as planned
    • Needs Attention – Some risk, requires focus
    • At Risk – Significant risk, urgent action needed
  • Regular updates allow for real-time adjustments, ensuring that goals remain relevant and aligned with overall objectives.
  • At quarter’s end, KRs are scored based on completion metrics:
    • On-target: 85-100%
    • Off-target: 70-84%
    • At risk: 0-69%
  • Encourage all team members to suggest OKR improvements.

Key Results (The “KR”s in OKR)

  • Some Key Results (KRs) focus on fresh initiatives or untested approaches.
    • In these cases, ambitious but achievable goals are set, allowing for a normal range of high, medium, and low achievement. This supports learning and iterative improvement across teams.
  • When an objective requires collaboration across multiple teams, relevant leaders should share similar objectives with clearly delineated Key Results.
  • For critical results that depend on team efforts, pass-through Key Results can cascade from executive levels to team contributors, ensuring alignment and accountability without double-counting.
  • Key Results should include specific target dates to avoid end-of-quarter rushes and foster timely progress.
  • Define scoring metrics early: if a Key Result misses its deadline, score it accordingly. For flexible goals, consider minor deductions for delays.

A Sample Quarterly OKR Planning Process

  1. CEO Initiates Quarterly OKRs: At the start of each quarter, the Chief of Staff (CoS) collaborates with the CEO to propose key themes. The executive team aligns on priorities, finalizing organization-wide OKRs and sharing them with the organization.
  2. Function-level OKRs Established: Executives propose objectives that cascade from organization OKRs. A minimum of 2-3 Key Results should support each organization objective, with flexibility to add more based on functional needs. Finalized OKRs are shared and approved by the CEO or CoS.
  3. Updates and Dependencies: Executive KRs are reviewed in weekly meetings, and dependencies are discussed to ensure team support. Teams should proactively identify cross-functional dependencies to enable smoother progress on shared objectives.