There are enough acronyms tossed around in the strategic management of business to make your head explode. And worse, there are at least as many opinions about what they mean. The truth is that for most businesses, just a few are useful.
In episode eight, we discussed two valuable tools for any business, especially a responsible business: the goal-setting framework called Objectives and Key Results, or OKRs, popularized by John Doerr and Key Performance Indicators or KPIs, well-known metrics for tracking day-to-day operational and financial performance.
KPIs and OKRs complement business strategy and performance management. While OKRs are potent tools for setting, coordinating, and achieving goals, KPIs add value by providing ongoing metrics that help monitor the steady state of the business.
Here's why both are beneficial:
• KPIs reflect the performance and health of the business in critical areas, like sales, new customers, customer satisfaction, and the like. KPIs help monitor continuous operations and ensure the company meets its fundamental goals, the things that keep the business running.
• OKRs, on the other hand, are goal-setting frameworks that help businesses set ambitious objectives and measure progress - Key Results along the way - toward meeting goals. OKRs are often change-oriented and focus on driving improvement in strategic areas.
Sometimes, KPIs are Key Results within an OKR framework. They provide the measurable outcomes needed to track the achievement of the Objectives.
In his book "'Measure What Matters," John Doerr provides the example of a museum. If the museum's Objective is to become more relevant to the community, a Key Result could be to increase the number of local visitors, which is also a KPI.
So, KPIs and OKRs may complement each other. While KPIs are essential for day-to-day business performance measurement, OKRs are indispensible for company-wide direction setting, taking ownership, and continuously pursuing and improving strategic initiatives.
The strength of OKRs made available openly is that they involve and inform everyone, from the CEO to Production Line team members and vice-versa, about who is working on what. The idea is to avoid duplication of effort and to have everyone pulling in the same direction. On-the-fly revision of OKRs is encouraged if necessary. Self-assessment of an OKR's relevance and success is also a must. No secrets, no blame.
OKRs, when applied skillfully, are like lighting off a rocket on the launchpad. Stand back and let the fun begin.
KPIs and OKRs allow a business to ensure that core operations remain solid and reliable while aiming for effective, sustainable growth and technical and social innovation.
A dual approach can lead to a well-rounded and robust strategy for Responsible Business or any business's success.
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