The Power of OKRs, Metrics, and KPIs in Achieving Organizational Success

The Power of OKRs, Metrics, and KPIs in Achieving Organizational Success
Written by Heather L. Cole on May 30th, 2024

In today's fast-paced business environment, it's essential for organizations to have a clear direction and a roadmap for achieving their goals. This is where OKRs (Objectives and Key Results), metrics, and KPIs (Key Performance Indicators) come into play. These tools provide a framework for defining, tracking, and measuring success, helping organizations stay focused and aligned on their journey toward achieving their objectives.

What are Metrics and KPIs?

Metrics are measurements that help evaluate the success of an organization. There are two types of metrics - quantitative and qualitative. Quantitative metrics are expressed numerically and can be objectively measured, while qualitative metrics cannot be expressed numerically and often involve subjective evaluation.

KPIs (Key Performance Indicators) on the other hand, are measurable values used to evaluate the success of an organization. KPIs should be specific, measurable, attainable, relevant, and time-based. They provide a way to measure success, identify areas for improvement, and track progress toward goals.

History of KPIs and Measures. 

The idea of KPIs or performance measures can be traced back to 1919 when the DuPont Corporation developed a performance measurement system to evaluate the efficiency of their operations.  The concept became all the buzz in the 1990s with Robert Kaplan and David Norton introducing the Balanced Scorecard as a strategic management tool. It was a framework that typically included four perspectives: financial, customer, internal processes, and learning and growth.

About the same time as the balanced scorecard buzz, John Doerr began using a slightly different approach at Google.  He wanted a way for organizations to define and track their objectives and outcomes to stay focused on what matters most and OKRs (Objectives and Key Results), were born.

What are OKRs?

OKRs are a framework for defining and tracking objectives and their outcomes. An objective is a specific goal for an organization to achieve, while key results are quantitative measures that track progress toward achieving the objective.   OKRs help organizations stay focused on what matters most and ensure that everyone is working towards the same goals.

Have I confused you?  Are you wondering what’s the difference between a KPI and a Key Result?  Not a lot.  In fact, a KPI could be the same as a Key Result.

WARNING You MUST Have Alignment! 

It's important to note that OKRs and KPIs should be aligned with the overall goals of the organization. If KPIs are not aligned with the organization's objectives, it can lead to confusion and misdirection.

Let us look at a couple of cases of Measures Gone Bad.

Wells Fargo

In 2016, Wells Fargo, the second-largest bank in the USA, was fined US$185m by the Consumer Financial Protection Bureau for opening around 2 million accounts and credit cards without customers' knowledge or consent. This was done by employees to meet the bank's aggressive sales targets and KPIs for new accounts. As a result, more than 5,000 employees were terminated. This scandal had a significant impact on the bank's reputation and led to changes in its sales practices and management.

Pinto

Pinto

Focusing on the wrong measures can have disastrous consequences, as was the case with the Ford Pinto. The Pinto was designed with a focused goal of being under 2,000 pounds and under $2,000, with an emphasis on being a true subcompact car with low cost of ownership and clear product superiority. However, the organization was missing one important measure: safety. To save money on the vehicle, the organization did not provide enough protection for the gas tank in the event of a rear-end collision, resulting in exploding cars.  They had several options including placing a plastic baffle between the fuel tank and the differential housing at a cost of $2.35 per vehicle. But sadly, none of the protective devices were used.  (SOURCE)

This decision ultimately cost the company in terms of lawsuits, damage to its reputation, and loss of consumer trust. You can read more about the history of the Pinto here.

In Conclusion

OKRs, metrics, and KPIs are powerful tools that can help organizations achieve their goals and succeed in today's competitive business environment.  However, KPIs and measures done wrong can have disastrous results.  If you are looking for help in defining your OKRs and KPIs check out our earlier blogs, Create Support for KPIs Across the Organization, and Developing KPIs Executives Use.  

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