Shopify does run many aspects of its business differently from most companies, but is also doesn’t seem to be believe in something that’s thought to a bedrock for the modern corporation — KPIs and OKRs.
Shopify doesn’t formally have KPIs or OKRs. KPIs (Key Performance Indicator) and OKRs (Objectives and Key Results) are frameworks which use metrics and numbers to determine the performance of employees and business functions. KPIs and OKRs are taken quite seriously, and can often determine things from employee bonuses and salaries and the overall direction of the company.
Shopify, though, doesn’t seem to believe in these metrics. “Goodhart’s law is real,” Shopify CEO Tobi Lutke said on a podcast. “The moment a metric becomes a goal, it’s no longer useful metric, right? Because no metric by itself is a complete heuristic for a complex business, because business is complex — there’s a million of different tensions in the company and you can’t all keep them in harmony by optimizing for one thing,” he added.
“So it’s true that we don’t have KPIs and we don’t have OKRs in the sort of Silicon Valley sense. But we are extremely data informed. We have invested enormous amounts of money and like money and time into systems that give us basically everything on our fingertips,” he added.
“What Shopify attempts to do is just not overfitting for the quantifiable, because everyone competes for everything that’s highly quantifiable because it’s it’s kind of fun. It’s like a game. It’s like you tweak a number and 0.1 more is better than 0.1 less. That’s a immediate gratification thing. But I think the overlap of most valuable things you can do with a product and the things that happen to be fully quantifiable, it’s like maybe 20%, which leaves 80 percent of a value space un-addressable by the people who only look at the quantifiable things,” he explained.
“So what actually happens is Shopify is comfortable with the unquantifiable things such as tastes, quality, passion, love and hate. These are the strong emotions that people have, the sort of deep satisfaction that a craftsperson feels when they’ve done a job well. It’s actually better proxy if you allow it to be than “do the unit test pass” — the unit tests might not pass and the unit tests will pass 15 minutes later because we fix them or adjust the one or two things,” he added.
“So (numbers and metrics) support us. Growth numbers we’re looking for, we have systems that tell us exactly if something goes the wrong way. There’s an extremely sophisticated rollout system in Shopify that forever holds holdouts and correlates everything with everything in every experiment and so on. But we think about it as a cockpit for a pilot and the decisions are still made by pilots, and we think this leads to better results,” he added.
It’s a pretty interesting approach, which uses numbers and metrics are merely supporting information that helps employees make better decisions, as opposed to being the end goal in themselves. But not having OKRs and KPIs isn’t the only way that Shopify operates differently from most companies. Shopify is also against big meetings with lots of people — it shows employees the dollar cost of each meeting to discourage useless meetings, and had once taken all meetings with more than two people off employees’ calendars in a company-wide meeting reset. Shopify is also big on remote work, and had announced that it was permanently turning into a remote company when the pandemic had hit. And with the company not having any OKRs and KPIs, it seems to be questioning many of the long-held beliefs of tech companies — and seems to be quite successful in doing so.