Impact driven strategies: How incentivizing impact goals brings you great results?
How does a company:
- make the best decisions possible?
- connect those decisions to a high-level strategy?
- deliver tangible impact — link actions up to high-level business outcomes and impact?
- address uncertainty — are we fundamentally aiming for solutions to higher-level problems/goals?
- engage employees in converging their work to real and meaningful impact
Have you ever reached your goals just so you can realize that they don’t make an impact?
If so, you are not alone! As leaders, we tend to set ambitious goals that are measurable on the output but not the outcome, and sometimes even the outcome does not result in high impact!
Whether you are using OKRs, SMART goals or any other methodology measuring the impact can be tricky!
What’s the difference and why does it matter?
The terms ‘outcome’ and ‘impact’ are often used interchangeably — however, it is important to know that they are quite different from each other.
In terms of measure, outcomes are often forethought and can be measured objectively using quantitative measures. Impact, however, can be quantitative, qualitative, subjective, and based on individuals’ feelings or experiences, making it more difficult to quantify.
Let’s take the below OKR as an example:
OBJECTIVE: Successfully Launch the New Product
- KR1: Create 50 product pages for our visitors
- KR2: Conduct 50 customer interviews
- KR3: Research 100 keywords
The Objective looks good, we want to launch a new product successfully, however, the KR represents the output that doesn’t necessarily deliver the outcome of the objective. This makes it difficult to tell if there was an overall positive impact, whether the launch of the product was really successful or not.
We may tend to agree that defining “success” means reaching the Key Results, still, that doesn’t reflect the impact on overall company goals like bigger revenue, higher conversion, or more users.
Aligning your goals horizontally and vertically is a deal-breaker in these cases, you want to be able to measure the impact, not just the outcome.
Because impact is quite distinct, complex, inconsistent, and ultimately subjective to warrant a qualitative approach, our goals need an interlinking relationship between outcomes and impact. This can be done by adding the “quality” element to it.
To the example OKR from above, let’s look at the revised version of the objective:
OBJECTIVE: Successfully Launch the New Product
- KR: Get at least one sale from a registered customer
- KR: Generate 10 five star feedback from our visitors
- KR: Increase Conversion Rate to 10% on our top 5 conversion pages
The key results above are connected to high-level measures of the health of your business. They represent a long-term impact on sales, revenue, profit margin, customer satisfaction, churn, which are impactful for the business and productive for the employees.
How to measure impact?
It’s not always just a game of numbers, and it all comes back at what you incentivize. If you incentivize outputs, you will get a factory of features that misrepresents and clashes with your high-level business objectives. If you incentivize outcome-driven goals and you add the impact element that fits into the bigger picture, you will understand if your strategy is moving forward.
- The outcome-focus approach is about using your knowledge for understanding your customers’ needs, solving their problems, and creating new opportunities for them. You know that you’re succeeding when your customers have changed their behavior and adopted your product.
- The impact-focus approach is about maximizing the fundamentals for the organization in terms of revenues. It may be very valid to focus only on internal impact for a while, however, an organization that focuses on solving its problems doesn’t have time to solve its customers’.
Finding the right balance requires a combined method approach that focuses on outlining outcomes and exploring the impact.
What about KPI’s?
As a term, KPI’s is far more common than any other term used in this article. If you ever asked how outcomes, impacts, and OKR’s integrate with KPI’s if they do at all, Jeff Gothelf has a perfect explanation:
“My take is this: KPI’s are impact metrics. More often than not the metrics you’ll find on a “KPI dashboard” are the same metrics you would call impact metrics — high-level measures of the health of the business.”
Conclusion
Hitting the OKRs is not enough!
The ability to measure OKRs that drive a prospective outcome that has an impact on the business and is meaningful for employee productivity is fundamental.
There needs to be a systematic relationship with the impact that stretches across long-term goals. Without it, the OKRs are just a vicious cycle, where the true intent is lost and real growth doesn’t happen.
It takes more of:
- small experiments and quick feedback
- long term strategy execution plan
- accelerating and de-risking innovation
- embracing uncertainty while addressing the quality of decision making
- trust in expertise, and a readiness to take a leap of faith
- a willingness to reevaluate all decisions and impacts
My next article will be on how more employee engagement doesn’t mean better productivity.
