Goals are important in life.
Just look at a first time homeowner and a financial adviser…
Any seasoned real estate agent will advise a first time homeowner to set realistic goals in their search for a brand new home. Many expert financial advisers tell their clients about goal setting too. They tell their clients to save quarterly to achieve their financial goals. So whether we are saving to move into that mansion in Beverly Hills or simply saving to put away money for a rainy day, goals help us stay on target of achieving what we want in life.
Goals are the glue that hold our plans, dreams and objectives in place.
Leaders in business are no different when it comes to understanding the value of goal setting. In fact, business leaders often refer to a system of goal setting called OKR.
What is an OKR and why is it important?
An OKR is more than just OK… It’s a BRILLIANT concept! OKR is a process created by Intel however, it’s now used in several companies’ business and management models to monitor quarterly goals, communicate effectively with team members and keep positive moral along the way. Similar to the same glue that first time homeowners and rainy day savers like to use holding their dreams together, OKR uses these quarterly goals to hold teams together as well. The OKR mindset is always about working together as one unit but keeping with one main leader on the front-line, the OKR. They all follow the same company mantra and OKR’s set goals by doing employee and team reviews of their work and their productivity results.
What is the OKR acronym?
OKR stands for ‘Objectives and Key Results’. Yes, it’s true… The plural noun ‘objectives’ is just a fancy synonym for GOALS! Not to mention, key results are always important in any goal setting. How can a dream come true if no objectives are met? How can one monitor their personal or business growth without looking for and taking note of the positive and the negative key results in a plan or a goal?
These can be explored on an even deeper level…
What do you mean by objectives? And how are key results determined?
Let’s start with objectives:
In OKR, objectives are broken down from the original reasons for setting them and concluded and calculated by 3-5 key results that can be measured along the way. They can be performance driven objectives or profit making objectives or any category that suits the business model. Therefore, each OKR is unique in which objectives it sets for a team. For example, if a beauty salon sets objectives, they would be about hair salon success and hair related concepts like creating successful popular hair trends, maintaining a healthy profit margin for the salon and keeping positive reviews on its salon website and social media. However, if it was tax preparation service, it would have tax business objectives of avoiding customer audits, finding income sources during the tax off-season and pricing services competitively with other tax services.
If objectives are the beginning of the OKR love story, key results are the happy ever after ending to setting those objectives in the end. Think of key results like a business report card. Ironically, key results in OKR are even set and measure on 0-100% progress scale, similar to the school grading systems we all had growing up. So if that beauty salon had key results for those salon objectives about trendy hairstyles and social media reviews, the key results would be 3-5 measurable facts like maybe a 20% profit margin increase by clients who read positive reviews or from future clients who saw the ads on social media. And that tax prep business that we mentioned before as an example? The tax prep business would have keys results like 30% referrals from happy clients who sent more business their way and/or a high rating from various online tax company directories to bring the company more exposure. The 20% and 30% increases are the measures needed to determine the key results in both of these examples.
So now we see how fantastic OKR is in goal setting and measuring the achievement of those goals. How can this help us on the NEXT level? Let’s rewind a bit to look further into the overall meaning of OKR before we move forward.
What is the meaning of OKR?
Yes, we already know about the Objective Key Results but what does it MEAN?
OKR means that a company genuinely wants to excel and grow from self-improvement and goal setting. Even though Intel was first to use OKR, today OKR is a celebrated system that many Fortune 500 companies rely on in their successful businesses. For example, Google uses OKR to rank their employee objectives, performance and key results. Staying in tune with the OKR formula, Google employees first set their goals within their company objective text field. Next, after they have their objective outlined, the key results are set up so they can be easily measured. As they start their work tasks, the key results are updated along the way.
For Google, they note that the chosen objective is complete once a certain high percentage is successfully achieved. Ironically, there’s a delicate dance between setting objectives too high and not setting them high enough. In this case, Google would see a 100% objective’s key results rating as successfully being met however, the 100% would NOT being a good thing. Instead, if the objective had 100% key results goals met, it seems as if the overall objective were not set high enough therefore making it TOO EASY for employees to meet those expectations.
Fun stuff, right?
Now that we understand all of the excitement surrounding OKR’s and why they are so important in businesses, we can now move on to the next topic that’s directly connected to OKR:
Key Performance Indicators.
What is a key performance indicator (KPI)?
Who would have ever guessed that PERFORMANCE can even be measured nowadays in our business behaviors? In fact, a specific type of performance measurement is called a key performance indicator also known as a KPI. As a performance measurement, a KPI has only one main job: A KPI does a review on the completed success of a certain aspect of a performance or a specific activity. KPI’s are more accurately measured if the performance activity can have a certain type of repetition to follow easier.
For example, imagine that we went to a yoga school.
If you were yoga studio owner and you wanted to conduct a somewhat informal KPI on how your instructor was performing in their yoga classes, it could be a productive KPI plan of action to sit in the classes and calculate how many yoga exercises were done per class session and to conclude that a certain yoga instructor was successfully covering all of the yoga exercises in a given period of time. If it was determined that the instructor was only covering half of the yoga exercises in each class, this KPI could mean that the services offered to clients were not being fulfilled and that they are not getting what they paid for.
In another KPI example, directly in the manufacturing industry, if a production line is supposed to fulfill 100 orders per hour and the machinery and employees are usually on time with getting out all 100 products without defects, imagine if for 3 days straight that there were only 75 products completed every hour? A manufacturer could use the key performer indicator system to determine who and why the other missing 25 products were not being completed in time. A count could possibly be set of how many should be done per minute and from there it can be easily determined where the slow production rate is coming from. Perhaps it could be that the machine was accidentally set at a slower pace or that the employees are not moving as quickly as they usually do. In this case, KPI would help the manufacturer reduce the financial losses of less production and quickly remedy the problem by resetting the correct performance rate with machinery and/or employees.
KPI’s keep businesses where they SHOULD be!
It’s also important to note that KPI’s can only be calculated by a previous performance rate, never from a prediction of a future performance. So if a manager has seen 2 weeks of 20% less production on the work floor, it can assessed and then the issue can be solved to avoid future low productivity once the cause of the problem has been noted and corrected. A hypothesis of why there MAY or may not be lower productivity would not constitute as a key performance indicator. That would be simply a lucky guess, right? It should be based in previous facts.
Problem solving isn’t always easy and neither is locating the SOURCE of the problem. The difference between these two concepts leads us to how OKR’s and KPI’s are similar yet, not quite the same.
What’s the difference between OKR vs. KPI?
Before we can note their differences, let’s back up and first take a second to point out the similarities of OKR and KPI. Since OKR is based on objectives being met by key results being measured and KPI’s are all about measuring performance, it’s easy to see that they both use the idea of ‘keeping count’ as a way of determining overall success in both of their philosophies. In a OKR, how can a person know that they achieved their goal unless they measured their key results? For example, Cindy knows she saved up enough money working all summer to pay off her student loans because her key result was simple. All Cindy had to do to see her key results was to look at her bank account balance and see that she had enough to pay off her student loans. In a KPI mindset, Cindy wouldn’t care so much about the end result of saving the money but, she would have measured how much she was making during set periods of time so that her overall savings would be there by the end of the summer. So noting OKR and KPI similarities through Cindy, she would have used both ideals to save her money all summer just in different ways.
The OKR and KPI similarities can be noted by pointing out the need for calculation in key results and the measurement of performance. They may be close in reasons to use OKR and KPI however, they still are needed for different conclusions and situations. For instance, an OKR can be started BEFORE starting a project with goals being set and then to be measured thereafter. However, a KPI can only be done AFTER the performance can be measured.
Think about it this way…
How can you keep count of a repetitive activity that has not happened yet? Exactly… You can’t.
Key results in an OKR can vary by the type of objectives being set. There may not be a repetitive objective enabling a performance to be as measurable as the results of a KPI. However, in a OKR, there may be a simple objective set that may not even have a countable result. The OKR could have an abstract objective like a manager of a team saying to herself every morning “Think positively at work” and the key result would be higher moral in the office environment. This is not the same as the hard count number of products that come off of a production line with measured performance of why so many or so little were produced in a given set period of time.
So OKR’s and KPI’s may be similar yet they still operate on two totally different levels of problem solving and goal setting strategies. In a lighthearted metaphor, a OKR can be a forecast of what a business wants to happen and note of the key results thereafter hoping for rain. However, if we toyed around with weather as a metaphor, in a KPI, it would not be the forecast of rain but instead only the final weather report of what ACTUALLY happened as a result. A KPI would never be based on a prediction.
Measuring success or failure can be harder to do than we’d like sometimes in our lives.
Setting goals and meeting expectation can also be a huge challenge. OKR’s and KPI’s can help us with those goals. There may be no guarantees in our personal and business outcomes but, by using the systems that set reasonable objectives and monitoring how the key results come out, we all have a fighting chance of achieving the types of goals that can make our businesses more successful and bring us more stability in our personal lives as well. As we continue to change and evolve, it’s also good to rely on measuring our performance rates in both the home and in the office. Maybe if we can watch more closely HOW we do things and then we can ultimately plan better and achieve more in our end results.
Those are KEY results, of course.
How can digital signage improve OKR?
Digital signage can prominently display the list of objectives and results. Digital signage communicates real-time, weekly, monthly and quarterly KPIs (key performance indicators), and reinforces OKR messages. Digital signage delivers newsletters and management messages to reinforce company culture and improve internal communication and employee engagement.