Creating KPIs - The Practice of Cloud System Administration - page 390

Intel's OKR System
Intel uses a related term called OKRs, which stands for “objectives and key res-
ults.” OKRs are often used to set goals at the personal, team, division, and com-
pany levels. The key results are often measured via KPIs. The acronym OKR was
popularized by venture capitalist John Doerr, who brought the concept to Google.
Rick Klau's video “How Google Sets Goals: OKRs” is an excellent explanation of
OKRsandservesasatutorialonhowtoadoptGoogle'sOKRsystemtoyourteam
or business ( Klau 2012 ).
19.2 Creating KPIs
Creating good KPIs requires serious time and effort. This process has many steps. First we
envision what the world would look like if the goal was met. Next we determine ways to
quantify how close we are to that ideal. This leads to one or more potential KPIs. Then we
consider all the ways that people could behave but still match the incentive. Based on that
information, we revise the potential KPIs. Now we repeat these steps until we have our fi-
nal KPI.
When defined correctly, KPIs can improve a team's performance by 10 to 30 percent.
The total cost of a typical engineer, including salary, benefits, and other expenses, can be
$200,000 or more per year. For an organization with 50 engineers, such an improvement is
worth $1 million to $3 million per year. Most managers facing a $3 million project would
dedicate days or weeks of planning to assure its proper execution. In terms of return on in-
vestment,spending10hourstocreatesuchanimprovementhasa1:1000or1:3000payoff.
Who would turn down such a return? Yet KPIs are often created with little forethought and
the unintended side effects negate any benefit.
Thesenumbersshouldbeyourpersonalincentivetodeveloptheskillsrequiredtocreate
effective KPIs. Better KPIs are, quite possibly, more important than anything else you say
or do.
19.2.1 Step 1: Envision the Ideal
Pause to imagine what the world would be like if this goal was met perfectly. How would
it be different from what it is today? Think in terms ofthe end result, not howwe get there.
Exercise your creativity. How would you describe the company, project, or service? How
would resources be used?
One place to look for inspiration is subteams that are doing well in this area. Generally
they won't have a KPI you can use, but they often have qualities you want to reproduce.
Sometimes the quality may be their culture, not a particular tangible outcome.