How do we set engineering KPIs and OKRs?

Setting measurable goals keeps engineering teams aligned in today’s fast-paced development world. Key performance indicators (KPIs) and objectives and key results (OKRs) are two widely used frameworks that assist teams in achieving this alignment. While both aim to improve results, they work differently and focus on different areas.

Engineering teams become more effective when they grasp the differences between KPIs and OKRs and know precisely when and how to use each one.

Understanding KPIs and OKRs

KPIs are quantifiable markers that track how well teams and procedures perform over time. It summarizes a team’s performance with predetermined standards. On the other hand, OKRs are frameworks for defining goals that encourage teams to push themselves beyond their comfort zones.

Comparison of KPIs and OKRs

Common Engineering KPIs for Engineering Teams

1. Code quality metrics
   • Code coverage: Shows the proportion of code run by automated testing. High code coverage indicates better test reliability and fewer undiscovered defects.
   • Code review efficiency: Indicates how quickly and effectively code reviews are completed, ensuring timely feedback and improving code standards.
2. Productive metrics
   • Velocity: Determines, typically in story points, how much work was done during a given period. Increased velocity denotes increased team productivity.
   • Cycle time: Measures how long it takes to complete a task. Reduced cycle times imply speedier feature delivery and change reaction.
   • Commit-to-deploy time: This measure indicates CI/CD pipeline bottlenecks by measuring the time between code merge and production deployments.
3. Customer-focused KPIs
   • Customer-reported bugs: Measures the number of defects discovered and flagged by users, reflecting product quality and overall user experience.
   • Support ticket resolution time: This monitors how rapidly customer problems are addressed, offering visibility into engineering and support team effectiveness.

Defining OKRs for Engineering Teams

Effective OKRs should be well-defined, measurable using appropriate KPIs, and idealistic. In contrast to KPIs, which monitor continuous performance, OKRs are designed to push teams to make significant progress.

Below is an example of OKRs for software development teams and how each OKR maps to relevant KPIs.

Objective: Deliver features more quickly without sacrificing quality.

• Key result 1: Reduce cycle time from 10 to 7 days.
• Key result 2: Achieve 90% on-time delivery for sprint commitments.
• Key result 3: Reduce the average PR open time from 12 to 9 hours.

These OKRs aim to increase engineering productivity and efficiency. By tracking KPIs like cycle time, on-time delivery, and PR open time, you can guarantee that your team is optimizing its workflows in the development process.

Steps for Defining Measurable KPIs and OKRs

1. Start with business objectives
   • Engineering teams need to establish their goals alongside overall business targets, which may include customer satisfaction level promotion or shorter product delivery times.
   • The business goal of improving user experience should have its KPI defined as page load time alongside an OKR of 30% load time reduction.
2. Identify key areas to measure
   • Pay attention to important factors such as customer impact, system dependability, delivery speed, and code quality.
   • For example, tracking defect density as a KPI can support an OKR like “reduce post-release bugs by 20%”.
3. Set SMART KPIs and OKRs
   • OKRs, together with KPIs, need to represent realistic targets.
   • A SMART KPI could be “maintain a 99.9% uptime rate,” while a corresponding OKR might be “reduce downtime incidents by 25% in the next quarter.”
4. Limit the number of KPIs and OKRs
   • Focus on a few high-impact metrics to prevent stressing teams. Ideally, each team should have 3–5 KPIs and 1–3 OKRs per quarter.

Challenges in Setting KPIs and OKRs

• Setting too many KPIs and OKRs: Excessive metrics can impede prioritization, potentially leading to decreased productivity and team fatigue.
• Lack of alignment with business objectives: Technical KPIs disconnected from business requirements create an imbalanced relationship between engineering efforts and organizational success.
• Infrequent reviews and modifications: Infrequent assessment can result in outdated measurements that fail to reflect current organizational priorities.

Conclusion

KPIs and OKRs are the best measurement tools for any engineering team that needs to optimize their workflows by increasing efficiency and productivity. To optimize KPIs and OKRs, teams should have an ongoing learning and adapting mindset.

Solid KPIs and OKRs give engineering teams the superpowers they need to innovate and crush it long-term! The right metrics create a clear path forward, spark creativity, and turn everyday coding into groundbreaking solutions that stand the test of time. When teams rally around smart goals, magic happens!