At the risk of scoring a full house in corporate terms bingo before I’ve even finished the first paragraph, allow me to explain what I’m talking about here. OKRs (Objectives & Key Results) are an agile approach to motivating and managing performance in line with the business strategy. KPIs (Key Performance Indicators) are measures the business uses to make sure they know they are in a healthy position.
When introducing the concept of OKRs, I’ve sometimes found myself greeted with “oh we’ve got those, only we call them KPIs.” Let me be clear: they are not the same. However, I believe they are two sides to the same coin.
OKRs are there to help you get the priorities from your vision and strategy into play so they guide all day-to-day activity. They should be designed to drive growth (this is what I believe makes a great OKR) so think of them as the sat-nav to your business – i.e. guiding the way.
KPIs are there to help you understand how well the really important things in the business are going. This could be something like average aged debtor days (which is a good measure of how quickly you’re getting paid). Think of a KPI as the oil gage on your car dashboard. You don’t need to fill up with oil each time you stop for fuel (or gas) but if the warning light comes on you sure don’t want to ignore it or you’ll end up with a seized engine! KPIs don’t need constant action, but they do need regular monitoring.
I often find that a clients first set of OKRs will include something about setting up a set of KPIs as they might not have any yet. This passes the “great OKR test” as it’s driving the creation of something new which will then lead to an easier way of setting targets in the future. The O might be “Improved management of business performance” and the KRs might be “Establish a set of KPIs, along with their data feed” and “baseline current performance and set target performance levels.” While these KRs are binary in the sense that you either achieve them or you don’t, they will help you set up a the means by which you can then measure growth and that is progress.
So should a KPI always be part of an OKR? Not necessarily. If a KPI is consistently hitting its target then just keeping a watchful eye on it is enough. If it falls behind, or you need to see further growth in it, then bring it into an OKR. Remember: OKRs are there to shine a spotlight on the priorities because resources are scarce. If everything is made to be a priority, then nothing is a priority.
So, my view is that OKRs and KPIs make great bedfellows, and any business serious about being high-performing needs to be making use of both make sure it’s healthy and growing.
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