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When we onboard new customers at Perdoo, there is one thing that every organization struggles with: creating Key Results that measure outcomes instead of outputs.
So what is the difference between an outcome and an output? Why is it difficult to differentiate between the two? And why is it crucial that Key Results measure outcomes and not outputs?
Outputs vs outcomes
An output is something you do, an outcome is something that happens as a consequence of what you do. “I’ve had a demo with a prospect” is an output, “I’ve closed a customer” is an outcome. Most people naturally focus on outputs. It’s relatively easy to come up with a list for what you need to do today, this week and this month. However, as Stephen Covey explains in his book The 7 habits of highly effective people, outputs always come last. In order to be successful, you need to start with the end in mind.
At Perdoo, we’ve developed a simple process that you can follow which ensures that you always start with the end in mind:
- Where do I want to go?
- What are the results that I need to achieve in order to get there?
- What do I need to do to achieve those results?
In OKR terms:
- Key Results
- Initiatives (an Initiative can be any output from a task or todo to a project or deliverable)
Starting with outputs (i.e. Initiatives) is impossible unless you don’t care what these outputs should accomplish. When Alice asked the Cheshire Cat in Alice in Wonderland: “Which way do I ought to go from here?”, the Cat replies “That depends on where you want to get to”. Alice then says “I don’t much care”, upon which the Cat concludes that it then doesn’t matter which way you go.
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Are you activity- or results-driven?
In order to start with the end in mind you need to start with the Objective first, then Key Results and then Initiatives. First define the outcome you want to achieve before you define the outputs that will get you there.
For many people, focusing on outcomes instead of outputs requires a significant shift in culture and thinking. Defining outputs is easy, we’re all focused on doing things. Doing something releases dopamine in our brain and makes us feel good. Doing things to achieve a certain outcome is a lot more complicated, and now success is not measured anymore by the percentage completion of your output.
This can be scary for some, but will be thrilling for others: now you can see the consequences of your actions and learn what you can do to achieve certain results. The faster you learn, the better you get, as an individual, a team, and a company.
For executives and managers, the question is how do you want to measure performance within your business? Are you activity- or results-driven? Are you happy when a 1000 prospects have been called this week or is what really matters to you how many customers you closed? I argue for the latter. As long as Key Results are on track, as the CEO of Perdoo I prefer to not get involved at the Initiative-level. However, if we’re off-track, I like to have a look at the Initiatives to get a feeling for what’s been done so far, helping the team to figure out why it’s not working, and brainstorming what other Initiatives we could try to get things back on track.
Why Key Results should measure outcomes
Creating Key Results that measure outcomes and not outputs can be quite a challenge. Let’s see what happens if you measure outputs as Key Results.
Imagine a Marketing team who has the following Objective: Fuel top of the funnel growth. They create a Key Result to Run a €200K AdWords campaign (an output).
They run the campaign and spend €200K, so they update progress on that Key Result to 100%. This, in turn, increases progress on the Objective, so people looking at the Objective would think “Oh wow, Marketing is really growing top of the funnel!”. Is that really the case though?
All they did is spend €200K on AdWords. To know whether that had an impact on top of the funnel growth, you would need to look at Key Results that accurately measure your intended outcome: top-of-the-funnel growth.
Adding outputs as Key Results gives a false impression of progress. It also prevents the team from learning. Had the Key Result been Generate 1000 leads and Run a €200K AdWords campaign was added as an Initiative, then as their Initiative progressed they would have been able to see whether or not the Initiative was generating leads (and try something else if it wasn’t).
If you want to improve your organization, then focus the team on outcomes instead of outputs. Focusing on outcomes puts the end in mind first, tracks the progress of what really matters, and enables you to learn.
Focusing on outcomes will not only boost performance, but it is also a natural protection against micro-management. Don’t tell sales reps how many outbound calls they need to make today (output), instead make them responsible for closing a certain amount of customers each month (outcome).