When we onboard new customers at Perdoo
there is one thing that every organization struggles with:
trading Key Results that measure outcomes instead of outputs.
So what is the difference between an outcome and an output?
Why is it difficult to differentiate between the two?
And why is it crucial that Key Results measure outcomes and not outputs?
An output is something you do.
An outcome is something that happens as a consequence of what you do.
"I've called a prospect" is an output.
"I've closed a customer" is an outcome.
Most people naturally focus on outputs.
It's relatively easy to come up with a list for what you need to do today, this week, and this month.
However, as Stephen Covey explains in his book, "The Seven Habits of Highly Effective People",
outputs always come last.
In order to be effective and successful, you need to start with the end in mind.
At Perdoo we've developed a simple process that you can follow
which ensures that you always start with the end in mind.
Simply ask yourself the following questions:
1. Where do I want to go?
This will be your Objective.
2. What are the results that I need to achieve in order to get there?
These will be your Key Results.
3. What do I need to do to achieve those results?
These will be your Initiatives.
An Initiative can be any output from a task, or to do, to a project, or a deliverable.
Starting with outputs or Initiatives is impossible unless you don't care what these outputs should accomplish.
When Alice asked the Cheshire Cat in Alice in Wonderland: which way do I ought to go from here?
The cat replies: that depends on where you want to get to.
Alice then says I don't much care.
Upon which the cat concludes that it then doesn't matter which way you go.
In order to start with the end in mind you need to start with the Objective first, then the Key Results, and then Initiatives.
First define the outcome you want to achieve before you define the outputs that will help you get there.
For many people, focusing on outcomes instead of outputs requires a significant shift in thinking.
Defining outputs is easy.
We're all focused on doing things.
Doing something releases dopamine in our brain and makes us feel good.
Doing things to achieve a certain outcome is a lot more complicated.
And now success is not measured anymore by the percentage of completion of your output.
This can be scary for some but will be thrilling for others.
Now you can see the consequences of your action and learn what you can do to achieve certain results.
The faster you learn, the better you get — as an individual, as a team, and as a company.
For executives and managers, the question is how do you want to measure performance within your business.
Are you activity or results-driven?
Are you happy when a thousand prospects have been called this week?
Or is what really matters to you how many customers you've closed?
I argue for the latter of course.
As long as OKRs are on track, as a CEO of Perdoo, I prefer to not get involved at the Initiative level.
However, if they're off track, I like to have a look at the Initiatives
to get a feeling for what's been done so far.
I'd like to help the team figure out why it's not working
and brainstorm what other Initiatives we could try to get things back on track again.
Creating Key Results that measure outcomes and not outputs can be quite a challenge.
Let's see what happens if you measure outputs as Key Results.
Imagine a marketing team has the following Objective: Fuel top of the funnel growth.
They create a Key Result to run a €200,000 AdWords campaign, which is an output and not an outcome.
They run the campaign and spend €200,000.
So they update progress on that Key Result to 100%.
This in turn increases progress on the Objective.
So people looking at the Objective would think oh wow the marketing team is really growing top of the funnel.
Is that really the case though?
All they did is spend €200,0000 on Adwords.
To know whether they had an impact on top of the funnel growth
you would need to look at Key Results that accurately measure your intended outcome: top of the funnel growth.
As you see adding outputs as Key Results gives a false impression of progress.
It also prevents the team from learning.
Had the Key Result been to generate a thousand leads,
and run a €200,000 AdWords campaign was added as an Initiative,
then as their Initiative progressed they would have been able to see whether or not the initiative was generating leads.
And if it wasn't, they could try something else.
To sum it all up: if you want to improve your organization, then focus the team on outcomes instead of outputs.
Focusing on outcomes puts the end in mind first, it tracks progress of what really matters,
and it enables you to learn.
Focusing on outcomes will not only boost performance, it also protects employees against micromanagers.
Don't tell sales reps how many outbound calls they need to make today.
Instead, make them responsible for closing a certain amount of customers each month.