Measure What Matters
“Whenever you can, count.” – Sir Francis Bacon
My entire career I have had some form of KPI’s (Key Performance Indicators) or OKR (Objective and Key Result). Most of them have had numeric values like Revenue, Cost, Margin, Time, Failure on Installation, etc. I am conducting some research that will come out in the next couple of months that captures the input of CXO’s within Life Sciences and one of the key questions that I ask is if the leader and their team have KPI’s or OKR’s for their organization that are in support of the strategic vision for the company. In most of the organizations between $10-50MM, the leaders and their staff do not have individualized goals and objectives or KPI’s. I have also looked at the data above this level and overwhelmingly less than 50% of the organizations below $1B in annual revenue have individualized goals and objectives.
“What gets measured gets done, what gets measured and fed back gets done well, what gets rewarded gets repeated.” – John E Jones
Why doesn’t your organization have individual goals and objectives measured in OKR’s or KPI’s?
There are many reasons why an organization has not set up KPI’s or OKRs:
Speed at which the organization is moving
Comfort level in speaking with employees about rolling out a measurement system
A tool to track the target and performance
Leadership team alignment around what to measure
From my perspective the list above is simply a list of excuses that will continue to be a barrier for an organization to hold people accountable in doing their part to help an organization achieve its overall objectives. Time to stop making excuses.
Where would I start?
One place to start is with a list of questions about what you want to achieve.
Is there a revenue target for your organization this year?
Is the measurement for this year to complete a new product introduction (NPI)? What are the measurable components for the development (i.e. phase reviews)
If you look at each department from the bottom up, can you develop measurements that will contribute to the end goal?
Where are the biggest problems facing the organization and can you measure in any way the progress?
I personally like to measure dollars, time and headcount as a way to understand how something is done today versus a target of where we want to get to in the future. It is hard to debate the amount of money you spend on something, the amount of time spent or the resources assigned to complete a task.
In the end you want to have a maximum of 3 challenging targets to improve upon for any one individual in the organization and the improvements should all be in support of the overall organizational goals.
In organizations that use KPI’s progress is tracked quarterly with an overall annual target. OKR’s normally have a quarterly target with the idea that you set your sights on completing things rapidly.
The next question is what happens when the goal is not met?
In many organizations this is a critical question because it will set up how people create the metrics they want to be measured by. When I have joined organizations in the past I have been told “we are establishing a new way of measuring our metrics and we want 75% of the goals to be clearly achievable and then 25% of the goals are stretch goals that are meant to be tough to achieve.” My next question is what happens when a goal is not met?
At GE, although we were meant to stretch and achieve a high bar, you also entered the year pushing hard toward getting a clear path to success. If your goals were not achieved you could fall into the low performer category during that year’s review which could mean that you would be put on a performance improvement plan. At GE, I always felt as though I was enabled to achieve my goals and drive real results.
I would propose that for a new organization if you are new to setting KPI’s or OKR’s you need to understand why a goal was not achieved. Luckily, OKR’s are so frequently looked at it would be easy to set up frequent discussions to break down why a goal was not achieved. Regardless of whether you are measuring OKR’s or KPI’s putting in place, ways to reward those who truly stretch and achieve their goals is much more critical than having a pre-established way to punish those who have not achieved their goals.
At the end of the day, having clear goals for your people will help move your organization forward and you just might be surprised what your people can do when they have a clear goal.