In this article, we’ll take a closer look at the different goals that drive success for your business.
Activity vs results focus
Organizations are groups of people, and just like people they have ambitions. That ambition is reflected in the ultimate goal (the mission & vision).
Organizations then have their Processes, which are their business-as-usual. They execute those on an ongoing basis in order to maintain the status quo. But they also have an innate drive to realize their ambitions, which is why they’re constantly working on Initiatives, which are all the (temporary) projects and tasks that will help them advance towards their ultimate goal.
For activity-driven organizations, it’s just Processes and Initiatives, which are both output- or activity-driven goals. Their employees go to work every day and start executing the tasks that the organization deems necessary to maintain the status quo and to advance towards their mission & vision.
Organizations that are activity-driven typically just go on and on executing their Processes and Initiatives without regularly revisiting if these are still the right things to do. They have little or no insight into how their Processes and Initiatives help them realize their ambitions.
Results-driven businesses take a different approach. Firstly, they consider their activities (i.e. Processes and Initiatives) to be a means to and end. Instead, they focus on the results that these activities are supposed to deliver.
Secondly, they regularly look at the bigger picture and review what their business-as-usual should be, and what advancements they need to make, in order to realize their ultimate goal.
They use KPIs, Key Performance Indicators, both to define what business as usual is critical, as well as to measure how that business-as-usual is performing.
They use OKRs, Objective and Key Results, to define what key advancements they need to make within a particular quarter or year, and they use these same OKRs to measure whether these advancements are actually being made.
KPIs and OKRs are both outcome- or value-driven goals.
In other words, they create an extra layer where they define and measure the outcomes that their Processes and Initiatives are supposed to deliver — and that’s how they’re able to see if their work is actually moving them in the right direction.
At some point all organizations are forced to make the switch from being activity-driven to being results-driven. The more white collar workers an organization has, the sooner they’ll have to make the switch. If they don’t, they’ll fail to properly manage a growing team and a results-driven competitor will sooner or later outpace them.
KPIs vs OKRs
KPIs and OKRs are different types of goals.
Imagine your organization is a car and you’re driving that car towards a destination (your Mission & Vision). Your KPIs are what you’ll find on your car’s dashboard, like the fuel gauge and engine temperature gauge. They prevent the engine from overheating and make sure you won’t run out of gas, which are all things that you’ll constantly need to watch. OKRs are like your roadmap, they’ll guide you to your destination. OKRs are temporary, they’ll change from time to time. Once you’ve passed a landmark towards your destination, you’ll focus on the next one.
Results-driven organizations need both KPIs and OKRs. If you were only watching KPIs, you’d have no clue how you were advancing towards your destination. Were you only watching OKRs, you wouldn’t see that you’re running out of gas.
Using an OKR to improve a KPI
OKRs are mostly used to help the organization advance towards its Mission & Vision. However, an OKR can also be used to improve a KPI. The best way to illustrate how this works is through an example.
Let’s say that critical business as usual for your Support team is to answer incoming support tickets as soon as possible. You agree with Support that, on average, tickets should be answered within 30 minutes. You create a KPI in Perdoo that measures the average reply time for incoming support tickets.
As long as the KPI indicates an average reply time of 30 minutes or less, you know you’re all good. But what if the KPI indicates the average reply time currently is 52 minutes? You probably want to create an Objective to fix this.
In order to create the right Key Results for this Objective, you’ll need to investigate what exactly caused the average reply time to rise. Perhaps you’ve onboarded a lot more customers recently so there simply are a lot more users but you didn’t hire extra Support agents. Or perhaps you released new features without creating support articles for them on your Knowledge Base.
What differentiates activity-driven from results-driven organizations is that the latter treats activities (Processes and Initiatives) as a means to an end. To them, activities are output goals that will help them achieve certain desired outcomes. Results-driven organizations also have these output goals, but they work with an extra layer of outcome goals — KPIs and OKRs — to define what these desired outcomes are, and to monitor whether these desired outcomes are actually being achieved.
KPIs and OKRs are different types of outcome goals, organizations need both in order to realize its ambitions.