The power of linking OKR’s to proven KPI metrics
Objectives and Key Results (OKR) has been gaining traction as the most effective way to ensure that a company’s goals translate into execution in an aligned manner even in dynamic situations. Material on OKR as an open management framework is now widely available, and the tools and best practices for implementing OKR is available with an army of consultants and experts. Use of OKR in conjunction with proven KPI’s is a very powerful way of accelerating value from your OKR implementation program.
KPI’s are best used in the Key Results portion of the OKR. The objectives portion of the OKR should be motivational and directional rather than specific. A highly motivational Objective linked to Key Results that are in turn mapped on to templatized KPI’s becomes easy for everyone to adopt, set targets, track, and keep improving.
OKR templates linked to standard KPI’s can be of various types. It can be horizontal (applicable across all organizations), vertical specific (applicable for a specific vertical), or could be a unique one which specialized consultants with deeper insights into a space can tell. When OKR templates are linked to KPI's that are standard across companies, it can be used for benchmarking.
Horizontal Contribution Margin, EBITDA, and Net Margin
Vertical (Prof Services) Billing Utilization, Bench Strength, and Average Billing Rate
Vertical (SaaS) ARR (Annual Recurring Revenue), MRR, Churn%, ACV
Consultant Lead Cost/ Lead, Impression to Lead Ratio, Lead/ Appointment Ratio
During implementation, when key users across levels are presented with the right OKR templates, it helps them choose the right ones, leading to an array of benefits.
1. Learning to set good OKR's
When one is starting out on OKR, team members may be familiar with definitions, but will not be familiar with the specifics of how to sharpen OKR's. By seeing examples linked to KPI measures relevant to one’s own sphere of operations, they can relate to it quickly. They are quickly able to sift through what is relevant, eliminate what is not relevant, indicate what is the specific context in which it is applicable and even create flavours of the original template quickly. Corrections can also be made by looking at the templates. The speed of learning is much better and more effective.
2. Accelerate speed of gaining value from OKR
Setting OKR's correctly and quickly enables quick adoption across layers and functions of the organization and accelerates the pace at which OKR delivers value. The effect is cascading and exponential. Very often organizations start with a standard set of OKR's taken from templates and then adapt it to the situation. While this is not exactly the best practice, it offers good results even in the first pass.
3. Quality/ Effectiveness of OKR's
Template based OKR's introduce best practices given that these are already thought through and working. Measuring KPI's and OKR's in area where none exist offer immediate results given that that these OKR's already fall under the category of 'what matters'
4. Best practices/ benchmarking
Template based OKR's are often linked to KPI's which have published benchmarks for the industry or for the context. A 'click to inquiry' ratio of 7% may be the benchmark in published reports. The very adoption of this OKR enables you to determine how well you compare against the industry. Often one would not know what the target achievement for a quarter one should be is starting out and the comparison to the benchmark not only helps to set it first time but use it as a signpost as time goes by, with objectives to surpass industry averages.
5. Repeatability and trend tracking through time periods and teams
Template OKR's linked to KPI’s can be tracked across time showing progress across longer time periods than periods on which OKRs are set (normally quarter). It can also be set across teams enabling you to compare progress across teams.
6. Separate the good OKR products from the bad ones
A mature OKR products will have templates that are mapped to Key Results and KPI’s to enable you start faster. It is a question worth asking during evaluation so that you know that the product is good, proven, and mature.
7. Helps build template derivatives
A template OKR gives the intention of the measure and hence one can use it to create a variation of the intent as applicable for your context. An OKR linked to a KPI like Fulfilment ratio in recruitment helps to determine the effectiveness of the recruitment fulfilment process. The normal definition is the percentage of submissions to job offers as a percentage. In a situation where several people who are offered jobs do not join, one could switch the ration to percentage of submissions to joining - making it more relevant to the situation.
In short, get a hold of the best OKR template list or even KPI lists applicable for your context. Your OKR implementation will surely be for the better. At Stragiliti we have accumulated many OKR's which we share with our customers during implementation of Stragiliti OKR. Click here to access a free trial of Stragiliti OKR.
This article is written by the founder of Stragiliti OKR, Mr. George Vettath. He has consulted on OKR with a number of organizations worldwide, and was the primary designer of the Stragiliti OKR software. He has over 32 years of experience in IT and Management consulting and has held senior positions in many technology companies. Since 2003 he runs his own firm Kallos Solutions Pvt. Ltd. whose products and services are delivered under the Stragiliti brand. (www.Stragiliti.net), of which OKR is one of the many products.