Should I Use KPIs or OKRs with Development Teams?
Among the most popular strategic tools lately for setting goals and evaluating performance, at the level of organizations, teams, and individuals, are KPIs and OKRs.
In the lines ahead we'll go through these two tools, where they overlap, where they differ, when it makes sense to pick one over the other, and maybe where they can be used together.
First, KPI (Key Performance Indicators)
The simple definition of this tool is
A quantifiable measure of performance over time for a specific objective
Put in plainer words to help us understand: a numeric measure of progress within a time frame for a specific goal.
Let's put this definition into a practical mold in three steps
1- We'll write a specific goal, say (increase sales of product X).
2- Let's give this goal a measurable number (increase sales of product X by 10 percent).
3- Let's give this measure a time frame (increase sales of product X by 10 percent during the second quarter of the year).
That's the general shape of setting measures and tracking them with KPIs.
All we need to use this tool is clarity on the goals and their time frame. The organization (company or institution) sets its big goals, then each team sets its own goals that feed into the organization's goal, and each person on the team sets their own goals that feed into the team's goal.
A really nice, simple system for setting goals and tracking progress in a clear, simple way.
It works in almost any situation, like starting new businesses or teams, or organizing existing work and processes. It's also a good fit for motivating teams that are already doing great work.
Each team aims to hit their goals at one hundred percent or beyond, so the goal counts as done and achieved, maybe attaching some justifications if it wasn't.
That was a quick (and probably not exhaustive) tour of KPIs.
Let's move quickly to
OKR, which stands for (Objectives and Key Results)
Let's take an initial definition, then try to unpack it and see how to put it to work
a collaborative goal-setting methodology used by teams and individuals to set challenging, ambitious goals with measurable results.
A collaborative way of setting goals, used by teams and individuals to define ambitious, measurable goals.
To start, setting OKRs has to have a few traits
They're set collectively, meaning the teams involved in achieving the goals take part in choosing them.
The goals are ambitious (maybe dreamy) to the point that hitting 100% is unlikely, and reaching 60 to 70% is what's expected.
They're specific and measurable.
Let's take the earlier example, "increase sales of product X by 10 percent during the second quarter of the year," and rewrite it OKR-style
The goal becomes (increase sales of product X by 40 percent during the second quarter of the year)
Or (increase sales of product X by 10 percent every month)
So hitting 70% of the goal is what's expected, since the goal is ambitious, and hitting 100% counts as a leap.
Read the example twice and it'll be clear 😂
When is it used?
It's mostly used with ambitious, motivated teams. It puts a lot of pressure on the team, and its main point is to push the team to take ambitious steps and double the effort, or to bring creativity and invention, to reach goals that are hard to hit.
That was a quick look at this tool.
We see a lot of overlap between them: both define goals and make sure they're measurable. And we see a difference in how the final target is set and measured.
Organizations might use one of these tools or both, say the organization sets its goals with KPIs while individuals set theirs OKR-style, or the other way around.
The highest aim of adopting these tools in organizations and teams is a clear vision and clear targets at the organization level, then giving teams and individuals a sense of responsibility toward those targets and showing them their part in contributing to them. Everyone knows their role and what's expected of them, and that becomes a strong motivator for teams and individuals to contribute as much as they can to the organization's progress.