When I got my first job as a product manager, pleasing my stakeholders was the definition of success. That was over a decade ago. To succeed in the role today requires a different mindset.
Of course, “pleasing stakeholders” means different things at different companies. That said, here are some antipatterns I commonly encounter:
This presents several problems:
What does that have to do with OKRs and KPIs? Understanding how to combine OKRs with KPIs can help you avoid the problems described above.
In this guide, we’ll highlight the difference between OKRs and KPIs and demonstrate how you can use them both to drive value and better outcomes.
KPIs are business metrics that show you where you’ve been and where you are currently. OKRs are forward-looking and, in broad terms, help you redesign your present and create a better future.
The key distinctions between OKRs and KPIs are as follows:
| OKRs | KPIs | |
| What | Future measurable objectives and goals |
Key business metrics
|
| Goal | Set an aspirational objective and direction |
Evaluate the past and present
|
| Usage | Actions based on potential threats to objectives |
Reative based on metrics
|
| When | Timeboxed (e.g., quarterly) | Ongoing basis |
| Change | Frequent (e.g., quarterly) |
Remains stable for a long time, even years
|
Objectives and key results (OKRs) is a collaborative method of setting goals and enabling teams to focus on delivering valuable results.
The invention of OKRs is generally attributed to Andy Groove, former CEO of Intel Corporation. He used OKRs to lead Intel successfully for an extended period (you can learn a lot by reading Measure What Matters by John Doerr).
OKRs are widely used in product management because they allow product managers to concentrate on the objectives their business has set out to accomplish and rally others within the organization to focus on them too.
Using OKRs enables product managers to:
Although these are simply a few of the product manager’s many responsibilities, they are usually some of the most important. PMs often dig through data and create reports and dashboards to track progress toward key business goals and communicate updates to stakeholders.
To get the most out of your OKRs, company leadership should align and set important objectives, which should be inspiring and empowering.
As the objectives are set, leadership aligns with teams and explains the importance of reaching such objectives. Teams are responsible for setting measurable key results. It’s fundamental to continuously evaluate results and adapt the actions accordingly.
Here’s an example of what OKRs might look like for an ecommerce product:
Note that the objective isn’t measurable but it does set the direction for the team. The key results are measurable but don’t define how to reach them. They’re also independent of each other.
Misusing OKRs is one of the most common mistakes you will stumble upon. Here are some antipatterns to avoid:
Some companies create several objectives that are highly dependent on each other. As a result, teams have to compete against each other.
It’s better to have a few aligned objectives than several dependent ones.
It’s a mistake to leave accountable teams out of key results definition. Leadership should only define the objectives and empower teams to develop key results.
Leadership can challenge the team, but it should not define the team’s goals.
Key results should leave room for creativity. It should establish what success looks like and let the team figure that out.
Defining solutions will only trap the team.
The result must be measurable. If you set binary results, it’s impossible to see progress, and OKRs lose their power as a result.
The team needs to know how far they must go to reach the ultimate key result.
“We must realize — and act on the realization — that if we try to focus on everything, we focus on nothing.”
― John Doerr, Measure What Matters
KPIs stands for key performance indicators. KPIs are used to understand the health of an organization according to predefined indicators.
The most common KPI types are:
While OKRs point to the future, KPIs help you understand the status quo based on past results.
It’s imperative to define actionable KPIs. Otherwise, you won’t be able to identify problems until it’s too late.
For example, revenue growth is an important KPI for many organizations, but it’s slow to measure. If you realize you missed your target growth, it might be too late to act on it.
That’s why it’s important to understand the actionability of KPIs. In this regard, there are two types of KPIs:
A laggard KPI shows you a problem happened, but you may not be able to change it. It takes too long to measure the result. For example, revenue growth.
A leading KPI is highly actionable. You define leading metrics by asking, “What would lead to this laggard KPI?” By answering this question, you come up with actionable KPIs.
For example, increasing basket size, recurrence, product availability, or new customers will increase your revenue.
When it comes to KPIs, the most common mistakes I’ve seen are:
I’ve seen too many companies going wild with dashboards. These organizations rely solely on numbers to make decisions.
While that has value, you must exchange it with your customers personally. Some insights won’t come from data.
More KPIs don’t mean better decisions. In fact, having too many KPIs can lead to confusion and analysis paralysis.
It’s crucial to understand which KPIs will make the difference for the goals you’re pursuing. Less is more.
Looking at KPIs to make you happy or mad isn’t helpful. Great KPIs trigger action. Focus on leading metrics instead of laggard ones. Nothing can replace contact with real customers.
To reiterate, OKRs point to the future while KPIs look at the past. Combining both will help you progress in the right direction.
Working with OKRs without measuring progress isn’t valuable. Neither is working with KPIs without having a goal in mind.
When you learn how to work with OKRs and KPIs, combining them is a powerful way to ensure your products are driving value.
Here are some best practices for using OKRs and KPIs in tandem:
It’s easy to mess around with OKRs and KPIs. I’ve learned that simplicity and collaboration are essential to thrive in product management.
Keep it simple, and you’ll rock it. Start small, learn from your actions and adapt them accordingly. Progress is what matters most.
You’re set to succeed when you have a valuable OKR and learn to measure with KPI.
Featured image source: IconScout
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