KPI stands for Key Performance Indicator. KPIs are the key metrics that correlate strongly with performance. You use them to define what success looks like and set goals, monitor performance levels, set thresholds or targets for acceptable performance levels, and define targets in goals when change needs to happen.
KPIs are used extensively by all types of organisations to track whether a mission, strategy, company and team objectives or initiatives are successful. They can also be used as a diagnostics tool and way of spotting issues.
Some of the KPIs you you will use are ‘leading indicators,’ some ‘lagging’ indicators, and some can be argued to be both.
Leading indicators – these are the metrics that look forward and can predict future performance, whether that’s an up or a down -m quotes sent can predict Revenue for example.
Lagging indicators – these are the metrics that look back and tell you what has already happened like Revenue and Retention. To influence them you need to improve leading indicators and there’s a time lag before improvement happens.
In Marketing, Leading Indicators might include:
These will predict KPIs further down the KPI hierarchy like MQL, sales appointments and ultimately Revenue.
In Sales, Leading Indicators might include:
The Lagging Indicator being Closed Won Deals.
In Customer Service is Leading Indicators might include:
The Lagging Indicator being Retention and Upgrades.
KPI planning and selection is a key process for every organization and team. You need to measure what is important – ‘measuring what matters’. Sometimes you’ll find that you have the KPIs you need already, and others times you will need to start tracking them, starting with getting a baseline.
Once you have your KPIs you need to think carefully about setting whether the KPI being monitored or is a target for change. KPI targets and monitoring is typically expressed like:
If you’re looking for change, level of ambition of any target setting is the subject of some of the best debates you will have. Here are 3 questions to ask to help you get clarity on the KPIs that matter and the target.
KPI ownership, collaboration and reporting is another area to get clarity on.
In order to create a laser focus on what needs to be the focus of goals and improved you also need to monitor what matters, but is NOT the object of improvements.
These KPIs are sometimes called Health Metrics. Having them ensures teams don’t lose sight of the bigger picture whilst focusing the the current quarters improvements via goals.
KPIs also provide a mechanism to recognise the everyday day business-as-usual activities that contribute to KPI performance.
OKR stands for Objectives and Key Results. OKRs are the goal setting framework that was originally adopted by Intel and then Google when Google was small. The people behind the OKR back then were Andy Grove and John Doer. In fact. John Doer’s book ‘Measure What Matters’ is one of the most popular OKR books.
Fast forward 20 + years and OKRs are now one of the most popular ways to set goals for all sizes of organization, with their popularity growing every year. That said, for many they are a discovery where KPIs have been around longer and are more widely understood.
Good OKR planning involves taking a company strategy and creating company objectives from the strategy. Your company objectives are set for the year or quarter.
The Key Results are how success is going to be measured, which in most instances are via specific and important KPIs. The key differences with OKRs being:
This is very different to singular KPIs with no guide, score or label indicating how hard the target is, and flexibility over what success looks like.
The flips side of this is that OKRs focus on where change is required only and use a small subset of your KPIs. Reasons for this are:
This means that OKRs are used to target and inspire change, while KPIs monitor the status of metrics that matter.
So in summary:
You can read more about OKRs and writing OKRs here.
SMART is a simple and popular goal setting framework. SMART stands for Specific, Measurable, Achievable, Relevant, and Time-bound, and most people have used SMART goals at some point in their careers.
Think of this as your Mission Statement for the goal with added details. It’s the ‘what’ and ‘why’ of your goal. It’s not how you are going to achieve your goal. You should also be thinking about who would be working towards the goal. If you’re using Objectives and Key Results or OKRs, this is the Objective.
A good goal is not just measurable, you measure what matters. The question you need to answer is: what metrics would represent goal success? With OKRs this part is where Key Results come in.
The importance of this step alone should not be underestimated. The conversations around what success looks like and how it can be measured are hugely valuable. Even if it turns out that the ‘right’ metrics are not available now, the conversation that allowed you to know that and then the intent to measure it are a big step forward.
This is a check-sum moment. Do you have the necessary skills and resources to work on this. When you agree on a goal it needs to become a commitment, and something you are prepared to stop other things in order to progress it. If you can’t commit there is an obvious issue somewhere that needs to be addressed.
This is different to the idea of goals being hard. OKRs have the concept of difficulty as a core part of the framework with OKR scoring being used to calibrate both difficulty and what success looks like. The benefit of this is backed by scientific evidence. Only hard goals are proven to improve and prolong focus and stimulate learning, collaboration and innovation.
This is a requirement to have considered how the goal aligns with broader goals? With OKRs the idea of showing alignment with either another OKR or single Key Result is baked into the framework and there are mechanisms for showing how goals align in OKR Software like ZOKRI.
The cadence at which goals are set is an interesting area. Too long and you can run the risk of goals becoming irrelevant. Too short and you can find that you might not have allowed enough time to set an ambitious outcome that would require sustained and prolonged focus. The balance that most companies have adopted in quarters, especially when using OKRs.
Every quarter the task is to define the most important goals that need to be committed to, set the bar high enough to access the benefits of the stretch, and then work in an agile way to achieve it. If a goal takes more than a quarter you can role it over where required.
OKRs have SMART goal characteristics a their core. In many ways using OKRs makes following and managing SMART goals much easier as there is more structure.
For example, with platformed OKRs you have assigned owners and collaborators as part of the definition process and the cadence is already optimized around quarters.
The bonus features OKRs bring is they have a mechanism for having multiple ways of expressing success via small group of Key Results. They also allow you to share ‘how’ you’re going to achieve your goals via Initiatives, which could be considered Projects or Tasks as well.
OKR workflows and processes also have check-ins and agility operationalised as part of the framework, so goals are not set and forgotten. The most typical check-in cadence is weekly. During a check-in plans for the week ahead are shared, progress, confidence levels and issues or blockers are also shared.
SMART goals are accused of undervaluing ambition, are often guilty of focusing too much on individual performance, and don’t encourage the ongoing discussion that are need to maintain focus, improve collaboration and be agile.
You will see why OKRs are therefore more aligned with FAST goals than SMART goals, and more the best of both, not because they are trying to be different, OKRs are doing what has proven to be highly effective.
Good goal setting actually doesn’t choose. KPIs are need universally. OKRs are a form of SMART, just extended with a few more best-practices that matter.
As such, OKRs are probably the best goal setting frameworks to use if you want a more agile, aligned and ambitious way to set goals.
Platforming OKRs or if you’d prefer SMART goals or FAST goals, is easy to do, easy to manage and more likely to be of benefit in ZOKRI vs spreadsheets. This is because setting goals is only part of the opportunity. Focusing and collaborating effectively on goals in teams and across teams, tracking and sharing progress, resolving challenges and systemising best-practice performance management is the bigger picture.
So in summary, if you make the leap to OKR, you’re going to be using KPIs and SMART. The difference being that who sets the goals, how often you set goals, how hard you make the targets, and how often you share and discuss goals, progress, problems and wins is likely to increase, along with engagement and performance.
And Share Your Experience With Other Teams
If you’re totally new to OKRs you can start with OKR Pilot – perhaps just in one team:
Work out exactly what to measure – set KPIs that get the results you’re looking for by using our KPI examples as inspiration.
Company OKRs are top of the OKR hierarchy. They are often Annual or Quarterly and are an extension of your strategy.
Sales are one of the most Metric Driven team in any business. So what’s the difference between a Metric and a KPI?
Marketing is a department that has more metrics than most. This is due to the width of the complexity of the discipline.
The primary goal of SEO is to increase revenues from search engine results pages, without paying for the click.
SaaS, like most types of business, should involve a data lead Leadership Team. Consider using these KPI examples.
We’ve created OKR examples for common departments and teams within a company to help inspire your own.
Company OKRs are top of the OKR hierarchy. They are often Annual or Quarterly and are an extension of your strategy.
The finance team are often the custodians of a companies most important metrics and as such are usually aware of set targets.
Human Resources OKRs have a huge impact on a business – and OKRs can be used to measure HR effectiveness.
Marketing is one of the teams that sees significant performance increases from using Objectives and Key Results.
Sales teams are used to having goals, but setting OKRs are quite different. Sales have their tools but they lack transparency.
Whether you call your department Customer Service or Customer Success, it’s all about keeping them happy.
Engineering build the products that underpin competitive advantage. OKRs will really help to streamline this.
Product Marketing OKRs are really important to growth. Improvement ensures your product is understood and trialled.
Product Management OKRs are where you will express the biggest priorities you’re facing right now as a department.
CEOs must monitor whether they are delivering business results. Learn about the metrics to watch out for.
Nobody likes annual performance reviews. But what if you could find a way to flip them? Learn how to do this in 3 steps.
Rethinking how we manage performance is long overdue. Start with the concept of “managing performance.”
John Doerr talks about how the right goals can mean the difference between success and failure and how we can use OKRs.
Unclear Objectives don’t allow companies to track progress in an effective manner. Learn how to measure the right data.
Read the latest tips and examples to help you create and execute on SMART goals. Free downloadables and worksheets included.
Management teams often switch off when reviewing KPIs. Be reminded that KPIs are about stakeholder relationships.
KPIs sound good but it’s doubtful whether some really enhance performance. Learn why and what to do about it.