The Basics of OKRs and KPIs
An OKR is a realistic, clearly defined goal that is important to you and where you’re willing to invest time and effort. Often an OKR will be linked to a specific project or activity and will be specified in writing (for example: create more products). It can be either time-bound (a set time remaining), challenging (you must produce something by a specified date), or measurable (I’m going to see that number go down). Objectives help a team define what’s important and determine what success looks like, increasing the likelihood of achieving shared goals.
KPI stands for Key Performance Metric. As the name gives it away, they are metrics that help organizations evaluate “success” of their activities. For a SaaS product, “Number of customers signed up” can be a KPI. It clearly captures how success is measured. Providing a value (ex: 50 customers) sets a goal for the executor. KPIs help evaluate the health of an organization’s processes (ex: Sales team Prospecting process) in a simple and effective way.
KPIs can also show up as metrics that are used to measure Key Results in the OKR framework as the Key Results need to be measurable. While OKRs are primarily used to set the direction of the company by clearly defining goals and breaking them down, KPIs help measure the most important performance metrics to capture progress.
Difference between Key Results(KRs) and KPIs
These two concepts seem very similar at first sight but the major difference between them lies in the way we think of them. Key Results are desired outcomes that are measurable over a period of time. They tell how one is “inching” towards their goal/outcome.
KPIs are not necessarily outcome metrics but are performance indicators of a process in action. They might capture the outcome or they might be revealing a key aspect of a process that has no strong relevance to an outcome.
Examples of Key Results:
– Improve customer satisfaction by 10%
– Increase revenue by 20%
– Improve online conversion by 5%
Examples of KPIs:
– Average number of orders per day
– Number of online conversions
Understanding the difference is the key to knowing when to use OKRs and KPIs.
How do companies use OKRs and KPIs?
OKRs help companies chart out their Future while KPIs make them aware of the Present and help them stay vigilant about the Future. Realistically when formulating OKRs, a good number of KPIs get embedded as metrics for monitoring Key Results. The OKR approach encompasses the benefits provided by KPIs and delivers more value as a strategic goal planning and execution framework.
Different people measure progress differently. As a leader, you should learn how each person on your team thinks about progress.
Setting and tracking goals is an important part of any business. However, it can be difficult to choose the best way to measure success. There are two main types of goals: objectives and key performance indicators (KPIs).
Objectives are a higher-level goal that a company would like to achieve in the future, for example, doubling revenues in the next year. KPIs are metrics that you measure with data points in order to quantify your progress towards achieving your objectives. For example, if doubling revenues is your objective then a KPI might be revenue for this month compared with last month.
OKRs vs. KPIs – which to choose for your business?
Setting and tracking goals is an important part of any business. However, it can be difficult to choose the best way to measure success. There are two main types of goals: objectives and key performance indicators (KPIs).
Objectives are higher-level goals that a company would like to achieve in the future, for example, doubling revenues in the next year. KPIs are metrics that you measure with data points in order to quantify your progress towards achieving your objectives. For example, if doubling revenues is your objective then a KPI might be revenue for this month compared with last month.
OKR vs KPI? You Decide!
OKRs have been used successfully in both individual and team settings. One of the most popular scenarios for using OKRs is to set company-wide goals, such as revenue, employee retention rates, and customer satisfaction. The OKR system is most effective when it’s the organization’s top management defining the goals.
Key Performance Indicators (KPIs) are measurements that can help monitor the progress of a business or an organization. They are useful for measuring how well a company is performing in relation to how it should be performing.
Irrespective of the type of goals you are trying to accomplish – personal, professional, or organizational, working on them within the perspective of Objectives and Key Results is going to make the process more practical and achievable because OKRs let you focus on what matters the most and pave the path for goal execution. In addition to this, organizational OKRs bring alignment between teams and the organization, laying the foundation for High-performance culture.
To learn more about how OKRs methodology can benefit your organization and how you can transition your team to OKR methodology seamlessly, schedule a call today.
