OKRs vs KPIs – A question we get asked a hell of a lot! Objectives & Key Results (OKRs) are an agile approach to motivating and driving focused performance in line with the broader business strategy. Key Performance Indicators (KPIs) are measures that businesses use to make sure they are in a healthy position. When introducing the concept of OKRs, we often found ourselves greeted with, “oh we’ve got those, only we call them KPIs.”
Let us be clear: they’re not the same. However, we believe they are two sides to the same coin and both are equally necessary for optimal business performance. Having a clear goal setting and tracking methodology encourages accountability, ownership, and transparency, while also supporting the organisation’s overall strategy. Whilst development, change and innovation projects are exciting and lead to growth – it’s important not to take your eye off the ball when it comes to business-as-usual activity. It’s your business-as-usual activities that form the solid foundation for OKR success. So without further ado, let’s explore OKRs vs KPIs below.
What do OKRs stand for?
Put simply, it stands for Objectives and Key Results. OKRs are all about business growth, change and innovation, but what does OKR actually mean? When we break it down, the objective part is the organisational goal or objective you want to achieve. The key results, on the other hand, are the markers of success which are attributed to said objective. OKRs can either be aspirational or committed. Committed OKRs are goals that the team has agreed will be achieved no matter what. On the other hand, aspirational OKRs are less fixed and describe desirable objectives rather than committed ones. The OKR goal setting process is all about fueling organisational growth. By setting OKRs, you are able to identify the priorities and activities that will help your business grow. There’s an important distinction to be made here, as many organisations strive to set too many OKRs for each team member. OKRs work best when used to “spotlight” priority activities; allocating them across a whole organisation dilutes focus, messaging and understanding, this means not everyone should have them. Once you’ve set your OKRs, you can then create strategies (also known as initiatives) that will help you to achieve your objectives and key results.
12 Month OKR Example:
Objective: We have grown our business and delighted our customers by diversifying our portfolio with a range of fresh and innovative products KR1.1: Revenue from new markets increases from $0m – $3m KR1.2: Achieve a minimum of 5% market share in each new market KR1.3: Achieve an average NPS of >40
What do KPIs stand for?
KPI stands for Key Performance Indicator. This term refers to the measurable value that shows how effectively an organisation is achieving its overall company objectives. KPI’s are generally used for business measurement activities, things like revenue, active users, or uptime of a service. Depending on past experience, the term ‘KPI’ can infuse a sense of motivation or dread into businesses and their employees. Commonly used in sales settings, KPIs actually have multiple benefits when used effectively in all areas of a business, and can shine a light on areas of your company that require attention and support. KPI Example: X Organic web visits to the website each month
What is the difference between OKR and KPI?
OKRs vs KPIs is an aged old debate, but let us be clear, we recommend using both! KPIs are used to track business as usual metrics, while OKRs are used for growth initiatives or for areas of the business that need particular focus. Your key results are similar to KPIs, as they also provide a quantifiable value to indicate whether you’re meeting your objectives, but they’re only a small piece of a puzzle. A well-designed OKR presents a complete picture, including a key result on how you will accomplish the strategic objective. A KPI is typically more rigid and used to track metrics as an individual tactic. While KPIs focus on individual aspects of a team’s duties, OKRs allow for teams to solve bigger issues, advance more readily, and take on more ambitious goals without losing sight of the minutiae. For example, if one of your KPIs is organic visits to your website per month, but you see a significant and sustained dip in the performance of this KPI it might be time to give it some more dedicated focus in the form of an OKR. In short, think of OKRs as the sat-nav to your business, guiding the way. Think of a KPI as the oil gauge on your car dashboard. You don’t need to fill up with oil each time you stop for fuel, 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. Instead of thinking it’s OKRs vs KPIs and one is superior to the other, think about how they compliment one another.
What is the difference between OKR and SMART goals?
The SMART framework is a well-established tool that can be used to plan and achieve your organisation’s goals. While there are a number of different interpretations when it comes to what the acronym stands for, the most common definition is that goals should be Specific, Measurable, Achievable, Relevant, and Time-bound. Although OKRs and SMART goals look similar on the surface, they actually have some key differences. Whereas SMART views goals in isolation and only focuses on the core objective, OKRs are usually connected to the larger organisational strategy, drawing connections between the objective and progress towards it by using key results. Traditionally, OKRs are suitable for developing longer-term goals, whereas SMART goals are better suited for short-team goals. With OKRs you connect the objectives to key results and with SMART, you solely define the objective. Generally speaking, SMART goals are not a framework, they are a set of guidelines. Although they offer a structure of criteria which is used to inform goal processes, it is not a goal process in and of itself, but rather a guiding set of principles for setting goals.
Are OKRs better than KPIs?
Although historically we’ve been OKR specialists, we know the value of KPIs cannot be understated. After all, fueling organisational growth is what the OKR goal setting process is all about. When it comes to OKRs and KPIs, it’s not necessarily about one being superior to the other. One is about growth, the other is about your capacity for fueling that growth. So, whilst goals are an essential part of any growth plan, OKRs offer alignment, clarity and focus to help you keep on the straight and narrow towards your priority goals. OKRs are the satnav, KPIs are the fuel. Listen to our insightful podcast with both an OKR and KPI guru!
Can OKRs replace KPIs?
So should an OKR replace a KPI? Not at all. However, to ensure a KPI is consistently hitting its target, or you need to see further growth in it, it can be beneficial to then bring it into an OKR. We often find that a client’s first set of OKRs will include something about implementing 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. Remember: OKRs are there to shine a spotlight on the priorities because resources are scarce. If everything’s made to be a priority, then nothing is a priority.
Can I do OKRs and KPIs myself?
Absolutely. However, the purpose of OKRs is to focus and stretch your teams to reach high goals and achieve fantastic growth outcomes – asking your teams to go above and beyond requires careful consideration of a number of factors beforehand. A collaborative, positive work culture is essential for OKR and goal setting success.
Without this foundation, your team will not feel comfortable enough to step outside their comfort zone and strive for growth. KPIs can feel equally daunting, especially when you have multiple areas you want to employ them.
It’s best to approach the KPI development and OKR implementation process with prior knowledge and support. Fortunately, there are plenty of tools out there to support the successful creation and implementation of KPIs and OKRs for businesses. It’s not enough to set OKRs, sit back and wait for your business to magically grow overnight. You’ll need to carry out regular check-ins as part of the OKR goal setting process to ensure that your business stays on track to achieving its goals.
Fortunately, OKR reviews can help you to do just that. Like any skill or new software though, reading and learning the ins and outs of KPI development and OKR implementation takes time – time that could potentially be better spent on business-critical activities. So it’s worth considering whether your resources are better spent elsewhere.
If so, outsourcing to experts in their field is an option. Some of the world’s leading organisations are using OKRs to help them achieve consistent growth. This includes the likes of Google, Spotify, Amazon, Slack and many more successful global brands. What’s stopping you from joining them? Implementing any new methodology can provide some challenges, so looking at your current team culture and processes may help to determine which structure fits best. Successful OKRs balance ambition with realism, march to the drumbeat of your organisation, and hit priorities. At TBG we live and breathe OKRs and KPIs – because we know how influential and beneficial they can be for businesses of all shapes and sizes. Our passion is enabling the businesses we work with to efficiently implement OKRs that offer real results whilst also enhancing efficiency, helping steer your company in the desired direction. Transfer of competence is key to our proprietary methodology.
For tailored, friendly support and expert guidance on OKR and KPI development, speak with one of our Giants today.