As mentioned earlier in this series, OKR’s are Objectives and Key Results. The key results are the steps you take to achieve your objective. Below is an example of an OKR for ACME Automobiles:
Introduce the ACME Sport Utility Electric Vehicle (SUEV) to the North American market in 2021.
The Key Results
- Market Research to determine the design, features and price that meet the needs of SUEV customers.
- Design and Engineer the SUEV that complies with the market research
- Set up procurement and production for the SUEV.
- Design and execute a marketing, sales and dealer education program
- Produce and deliver the SUEVs to customers and dealers
The key difference between OKRs and KPIs is that OKRs expire after the objective has been met. KPIs stay in place until a change occurs in a company’s situation and circumstances, relative to that KPI.
After the first year of ACME SUEV sales, ACME Automobiles can refer to the J.D. Power Auto Avoider Study to determine how their new SUEV ranks in the marketplace. J.D Power conducts an annual Auto Avoider Study to examine the reasons consumers purchase, reject and avoid models in the market when shopping for a new vehicle.
If the ACME SUEV is successful, ACME Automobiles will set KPIs to maintain the position of the ACME SUEV in the marketplace, in areas such as sales levels, production levels and customer satisfaction factors.
If the ACME SUEV does not perform as well as expected in the marketplace, management can refer to the Auto Avoider Study to determine the categories where the ACME SUEV missed the mark.
Once these areas for improvement are identified, ACME Automobiles would set new OKRs to address these issues. Once these OKRs are achieved, ACME Automobiles can reset their KPIs for sales levels, production levels and customer satisfaction.
The OKR to KPI cycle is iterative. When KPI targets are not being met, new OKRs may be required to correct the situation. When OKRs are achieved, related KPIs are established to ensure the objective stays in place.
At Rise Advisors, we serve owner-managed companies and draw on our 40 years of experience to design the High Leverage OKR and KPI programs that you need to achieve your absolute best financial performance. Call or email us for a review of your OKR and KPI programs.
Next in the Rise Advisors Master Series on KPIs: Adapting KPIs for Changes in Situations & Circumstances