Many organizations use Key Performance Indicators (KPIs) to measure performance and milestones toward their goals. For today’s customer-centric organizations, it is critical to align metrics that show the impact of programs designed to meet their strategy. We’ve seen this is easier said than done. Just last year, 73% of budget decision makers felt that 2017 will be a very good year, but already 52% of respondents said that things aren’t going according to plan. It’s clear that there is a disconnect, and proving that the strategies put into place are bringing the desired results is not an easy task.
In the recent webinar, Margo Visitacion of Forrester Research encourages flipping the perspective of traditional KPI measurements and focusing instead on OKRs – Objectives and Key Results. Essentially, businesses that want to deliver real value to customers need to measure that value. Sounds good, but how do you go about doing that?
The biggest shift here is a change in mindset. Getting stakeholders and users aligned with measuring toward what matters. Insights shift from customer-aware to customer-led. The business climate goes from data-rich to insights-driven. Siloed departments become connected, and it all plays into fast paced and results driven culture. In order to drive toward an objective and key result, you need to define what matters to the business and how your organization is supporting that initiative. If a business objective is to grow revenue, and most are, then you need to set KPIs to measure this objective such as % revenue growth from a specific channel. This might mean an account manager trying to grow upsell revenue has complete account information and targeting, and that is reviewed regularly. In this example, the KPI (accurate account information) doesn’t go away, rather the focus is on the objective and the KPI is just a means to the end.
Traditional KPIs don’t go far enough to track and measure performance toward business objectives. Most KPIs focus on the wrong metrics and teams become too focused on their KPI, losing sight of the business value of their efforts. Improving KPIs tends to focus on improving efficiency. As a result, companies tend to over-pivot toward efficiency over effectiveness. Organizations end up focusing on moving forward instead of pausing to re-focus on value.
So, if it’s too easy to build the wrong KPIs, how do you determine the right metrics? Forrester suggests best practices to ensure that the correct metrics are being gathered. Ultimately, OKRs can deliver that focus and pragmatism. Here’s the basis of OKRs:
- Define and track objectives and their outcomes
- Bring focus to efforts to make measureable contributions
- Highly visible and useful at the organization, team, and individual level
- Powerful tool for continuous improvement
By achieving this high level of visibility, OKRs can create traceability to get everyone on the same page to do the right thing at the right time. This becomes a living exercise and a tool for planning and continuous improvement. When it comes to reinventing your management approach, Forrester recommends these best practices:
- Identify cross-functional key results so you can stop thinking in solos
- Employ a big-room planning session to identify objectives – having the right people in the room provides immediate feedback and identifies dependencies faster
- Start with the end in mind and ask the right questions
- Clarify prioritization of the “how-tos” so you can focus on key results and how to achieve them
- Measure together in collaborative reviews using OKRs to gain transparency
Project Portfolio Management helps organizations drive toward their objectives by starting with a top down approach. Aligning projects toward business goals and measuring the impact of those projects in business terms enables you to work within the OKR mindset, and get the team on the same page. KPIs are then set by data points and align to objectives rather than projects. With this, you can identify high value projects and plan the portfolio around what success looks like for the business.
Want to learn more about how you can start measuring toward objectives and key results in your organization? Watch the on-demand replay, Improving PPM Using Objectives & Key Results.