Speaker 1: Do you know what a KPI is? Do you know what an OKR is? Do you know what the difference is? This video is for you. In this video we will discuss the performance measurement techniques used at the operating plan level. These techniques are the fifth deliverable required from our operating plan. They detail how we will assign accountability for achieving our goals and objectives. In this way we will be able to measure our performance in relation to our operational goals and objectives and respond as required. With that let's dive into the presentation. Previously in video number one we were introduced to an overall strategic management framework and in the videos that followed we first took a deep dive into the first and second steps of that framework, namely developing and translating the strategy. In this video we continue our discussion around the third step, namely planning operations. Here we will assess the fifth and final technique in planning operations, namely preparing our KPIs and OKRs. Performance measurement can be considered with reference to two key areas, namely our strategic plan and our operating plan. In video number 15 we considered the strategic plan and how performance is measured using a balanced scorecard. In this video we will be more focused on the operating plan and measuring performance making use of key performance indicators or KPIs and objective key results or OKRs. In order to conduct these performance measurement techniques we need to consider four definitions that overlap but also have characteristics that make them unique. They are 1. Metrics 2. Key performance indicators 3. Objectives 4. Objective key results First we consider metrics. They are 1. A set of figures or statistics that measure results 2. They must have a current value 3. Examples include customer churn rate, earnings before interest and tax, cash flow 4. They need a formula, for example customers that renewed this month divided by total number of customers. Next we consider key performance indicators or KPIs. They 1. Focus on a key area of business 2. Must have a metric, a current value, a target value and a title. There is no start value considered. KPIs are not measuring the improvement over time of a metric. They are a relative value in that they are comparing a current metric against a target metric at a specific point in time. 3. KPIs must be smart, specific, measurable, achievable, relevant and time bound, that is to say the target should have a deadline. Next we must consider our objectives. These are a subset of our goals. We have previously established our goals as part of our strategic plan, the outcome of which will be measured at the strategic level with our balanced scorecard. However, those goals would need to be taken up by a relevant team or department in the organization. Each team needs to break down their goals into objectives. Some objectives could be cross-team or cross-department, where multiple teams shared a goal. Other objectives could be unique to a specific team or department. Next, we can establish the key results that we require in order to confirm that an objective has been achieved. In this way, Objective Key Results, or OKRs, measure performance at the objective level. OKRs have the following characteristics. 1. Typically there should be a list of 3 to 5 key results for each objective. 2. The target value should be different from the current value. In other words, we're always striving for improvement. 3. Key results have a metric, a current value, a start value, which implies timeframe, a target value, and a title. Note that the inclusion of a timeframe means OKRs establish trends as opposed to KPIs, which are a relative measure at a point in time. 4. The title should communicate all the relevant components. For example, increase earnings before interest and tax from 10% to 13%. It is worth noting that OKRs could contain characteristics that are consistent with KPIs and therefore make them similar or identical from most perspectives. The key lesson to draw is more that it is good to have a measurement technique that focuses on relative measurements. KPIs consider the current value versus a target value and tend to be more high-level. And measurement techniques that focus on measuring performance over a period. OKRs consider low-level specific objectives and over a time period as they consider start, current, and target values. In this video, we learnt about the performance measurement techniques used at the operating plan level. They are Key Performance Indicators, or KPIs, and Objective Key Results, or OKRs. We considered the definitions of Metrics, KPIs, Objectives, and OKRs. We learnt that KPIs are a relative performance measurement technique that consider the current value against a target value and often tend to be more high-level in nature. We also learnt that OKRs consider the key results that are required to meet a specific objective and measure performance over time with reference to a start value, a current value, and a target value. In the next video, we will consider Management Meetings. If you enjoyed this content, please like the video, subscribe to our channel, and click on the notification bell. It helps us grow the channel and bring more content to small and medium business owners and managers. Also, be sure to check the description below for any related product affiliate links. And finally, please comment on the video or click on our community tab to further interactions and updates.