Activity 3 – Define Success: Outcomes and Indicators

Defining success for each challenge your company faces in achieving the long-term vision is critical for maintaining direction and motivation. Measurable outcomes provide clear targets and enable your team to gauge progress and adjust strategies as necessary. Here’s how to define success and identify other measures that indicate you’re on the right track.

Set Clear, Measurable Outcomes

Define success in quantifiable terms for every challenge – the “are we there yet metric.” 

The format for outcome and success metrics is as follows:

Success is when we see [measurable outcome metric] move from [initial value] to [target value] by [date].

A well-defined metric for success might look like this: “Success is when we see our customer satisfaction score move from 75% to 90% by the end of Q4 2024.”

The success outcome metric should be customer-facing. It is a pure measure of whether the challenge faced caused a change in the customer. Internally, other metrics might increase the confidence that an outcome is coming true, but that comes next. Keep the outcome metric customer-facing.

Setting Initial and Target Values

Clearly outline where you currently stand with each metric (initial value) and where you aim to be (target value). This gap between the initial and target values represents the tangible outcome your team needs to achieve. These values must be grounded in reality, based on your company’s capabilities and industry benchmarks.  You may not be presently measuring the outcome metric. Resist changing the outcome metric to a measure you currently track because it’s easier. Doing this dilutes the success metric and might make it appear progress towards a vision is made when it hasn’t.

Set Believable Timeframes

Associate each measurable outcome with a specific deadline. Timeframes create a sense of urgency and help prioritize efforts. They also facilitate tracking progress over time, enabling your team to stay aligned with the overarching timeline for achieving the long-term vision. Ask people if the timeframe is realistic. If people don’t believe it’s achievable by the given date, the motivator becomes a detractor (why try?). 

Establish Leading Indicators

In addition to the primary metric for success, identify a few faster-moving measures that can indicate early progress or predict future success. These leading indicators might include increased website traffic, higher engagement rates on social media, or an uptick in product demo requests. Although they may not directly measure the outcome, leading indicators provide early feedback on whether your strategies are moving in the right direction.

The outcome measure must directly correlate to the challenge’s success. Leading indicators must be believable in their causative and correlated effect on that outcome metric. They can be internal or technical measures. They aim to say, “What we are doing increases the odds we are moving towards success on this challenge.”

Without these indicators, the slow-moving outcome success metric doesn’t help see early movement to tell if work is moving the needle. These indicators are important for decision-making and adapting the ideas chosen to invest in, but they also somewhat accurately show progress for the ideas we have delivered so far.

A simple  challenge, outcome, and leading indicator example is:

Challenge: Increasing Market Share

Outcome Success Metric: “Success is when we see our market share in the renewable energy sector move from 10% to 20% by Q2 2025.“

Leading Indicator: An increase in inquiries about our renewable energy products, aiming for a 50% increase in inquiries by Q4 2024 as an early sign of growing market interest.

In this example, there is speculation that an increase in inquiries will indicate a higher probability that this company’s market share will grow. The difference between outcome and leading indicators is exactly that speculation that the leading indicator at all correlates to the outcome. The outcome measure should be the ” MOST” correlated metric to the challenge.

Example Outcome and Leading Indicator Metrics

When dealing with customer-facing outcome measurements for a business challenge, defining the outcome measurements (what you ultimately want to achieve) and the leading indicators (early signs that you’re on the right track) is essential. Here are some examples based on a hypothetical challenge of improving customer satisfaction in a service-oriented business:

Outcome Metric: Increase in Customer Satisfaction Scores

Leading Indicators:

1. Average Response Time to Customer Inquiries: Shorter response times often correlate with higher satisfaction, as customers appreciate quick support.
2. First Contact Resolution Rate: The percentage of customer issues resolved on the first interaction, indicating efficient and effective customer service.

Outcome Metric: Growth in Customer Retention Rates

Leading Indicators:

1. Repeat Purchase Rate: The frequency at which customers return to make additional purchases can indicate growing loyalty.
2. Engagement with Email Campaigns: Increased open and click-through rates in emails can demonstrate heightened interest and engagement, often preceding retention.

Outcome Metric: Improvement in Net Promoter Score (NPS)

Leading Indicators:

1. Customer Effort Score (CES): A lower effort score (i.e., easier experiences) can precede higher NPS, as easier experiences will likely lead to higher recommendation rates.
2. Social Media Positive Feedback: Increased positive mentions and recommendations on social platforms can signal that more customers are becoming promoters.

Outcome Metric: Increase in Average Order Value (AOV)

Leading Indicators:

1. Upsell/Cross-sell Success Rate: Higher rates of successful upsells or cross-sells can lead to increases in AOV.
2. Customer Browsing Time on Site: Longer browsing sessions may indicate increased interest in products, which can correlate with higher spending per order.

Outcome Metric: Reduction in Customer Churn Rate

Leading Indicators:

1. Customer Service Interaction Satisfaction: Positive feedback from service interactions can indicate fewer reasons for customers to leave.
2. Usage Frequency of the Product/Service: Increased frequency in usage can be a good sign that customers find value in the offering, potentially reducing churn.

These leading indicators provide actionable data points businesses can monitor to assess whether their strategies to improve the specified outcome metrics are effective. Companies can make proactive adjustments to enhance customer experiences and achieve better results by focusing on these indicators.

This approach clarifies expectations and provides a roadmap for achieving meaningful, measurable outcomes. By clearly defining success for each challenge and identifying early indicators of progress, your company can ensure that it remains focused and adaptable in its journey toward its long-term vision. 

Traditional Annual OKR and KPI Perils

There are two traditional ways companies try to put a quantitative tool in place to track progress and performance across organizations: OKRs and KPIs. 

The biggest problem with company-wide annual OKR and KPI setting is the competitive landscape it causes within the organization. When individual groups or product teams become driven by OKRs and KPIs that conflict with each other, it fosters an environment of competition rather than collaboration. Teams may pursue their targets in ways that conflict with or hinder other parts of the organization, leading to inefficiencies and a dilution of collective effort. The desire to meet department-specific targets can lead to resource hoarding, where teams prioritize their own needs over the company’s greater good, creating bottlenecks, slowing innovation, and sowing discord among teams.

When companies roll out OKR (Objectives and Key Results) and KPI (Key Performance Indicators), several other things can go wrong, including:

OKRs:

1. Overly ambitious objectives: Setting unrealistic goals that teams cannot achieve, leading to discouragement.
2. Too many objectives: Spreading focus too thin, causing confusion and prioritization challenges.
3. Poorly defined objectives: Unclear or vague goals that are difficult to measure or achieve.
4. Lack of alignment: Objectives that do not align with company strategy or goals.
5. Inadequate training and support: Insufficient guidance and resources for teams to successfully implement OKR.
6. Overemphasis on output over outcome: Focusing too much on tasks rather than actual results.
7. Unrealistic timelines: Setting deadlines that are too aggressive or unachievable.

KPIs:

1. Measuring the wrong things: Tracking metrics that do not accurately reflect progress or success.
2. Too many KPIs: Overwhelming teams with too many metrics to track, leading to confusion and focus issues.
3. Unrealistic targets: Setting KPI targets that are too high or unachievable.
4. Lack of context: Company’s don’t consider any external factors and their impact on KPI performance
5. Inconsistent measurement: Using different methods to track KPIs leads to inaccurate comparisons.
6. Focusing on vanity metrics: Tracking metrics that look good but do not drive meaningful business outcomes.
7. Not adjusting KPIs as needed: Failing to update or remove KPIs as business goals and strategies change.

We can categorize these common mistakes:

1. Not aligning OKR and KPI: Failing to connect objectives with key performance indicators.
2. Not involving teams: Not engaging teams in the OKR and KPI setting process, leading to a lack of ownership.
3. Not regularly reviewing and adjusting: Not assessing progress and making adjustments as needed.
4. Not communicating effectively: Not communicating OKR and KPI goals, progress, and changes to all stakeholders.

CASe addresses these common mistakes in the following ways:

1. OKRs and KPIs are always attached to the challenge they are measuring. The OKR or KPI needs to be visually near the challenge and outcome it is measuring. If OKRs and KPIs are shown without the context of “why” people will have a hard time understanding the urgency of moving those metrics.
2. Long-term outcome metrics and leading indicators are specifically separated, and wider team members use the outcome metric as a challenge to find faster-moving measures. If leadership passes down all metrics to the team members, then longer-term measures predominate, giving teams no way to adapt strategy and ideas if (when) they don’t move in any direction.
3. Outcome measures and Leading Indicators are visually shown with challenges, and alerts are shown when the measured current value becomes stale to indicate “you are running blind.” This visual representation of the outcome, right next to the challenge and vision it is monitoring, makes it clear why that measure is important and why there is value in keeping it updated.

Aligning OKRs and KPIs with the company’s long-term vision and immediate strategic challenges is critical for maintaining focus, fostering collaboration, and ensuring strategic coherence. By doing so, organizations can avoid the pitfalls of misalignment and create a more agile, unified, and motivated workforce committed to achieving shared success.