OKR vs. KPI is one of the popular comparisons as people often see them as a substitute for one another. However, both tools differ and offer different perspectives that can influence performance and business outcomes. When we connect the individual metrics of each framework, it gives a better overview of how an organization is performing.
It then becomes possible for businesses to take corrective measures for improvement. It is thus not the question of whether you should choose between OKRs and KPIs. You can instead choose both by finding a way to integrate them. This OKR vs. KPI guide explores how you can integrate OKRs and KPIs.
What are OKRs?
Objectives and Key Results (OKRs) is a goal-setting framework that companies can use to define what they wish to achieve. Objectives are one of the components ably supported by key results that show how you will accomplish the former. When combined, OKRs give you a clear picture of company goals your employees will achieve through measurable steps.
Businesses usually have quarterly OKRs and annual OKRs. Industry giants like Google and Intel are behind the growing popularity of OKRs. They have successfully used the OKR framework to get the desired business results. You can set OKRs for individuals, teams, and companies. Let’s take a look at some examples.
- Individual OKR
Objective: Improve English speaking skills to become a confident public speaker
- Have practice sessions with a native English teacher three times a week
- Learn ten new words each week to improve the vocabulary
- Give one presentation in front of the team once every two weeks
2. Team OKR
Objective: Increase the engagement on the company’s Instagram account by 25%
- Create an engagement strategy by identifying the target audience in the next two weeks
- Respond to comments posted by followers within two hours
- Increase the follower count by 20% during the quarter
3. Company OKR
Objective: Improve the overall customer success
- Achieve a net promoter score of 50 or more.
- Create an easy and self-onboarding process
- Get at least 30 referrals from existing customers
- Get an overall product rating of 4.5 and above across review sites
What are KPIs (Key Performance Indicators)?
Key Performance Indicators (KPIs) are performance metrics that businesses use to measure the success of an activity. KPIs have a wide-ranging use and remain applicable for initiatives like projects and programs. Whether you want to measure the success of your social media efforts or sales targets, KPIs come in handy in both scenarios.
KPIs have always found widespread adoption across organizations of all sizes and geographies. They have helped teams effectively assess and forecast success. However, framing KPIs the right way is critical because KPIs will only be valuable if they are inspiring enough. Many businesses make the mistake of copying the KPIs of other organizations. They won’t get results unless there is customization according to individual business needs.
💡Each business is different, just like every individual differs from others. You can tailor the KPIs based on the specific organizational goals. What also matters is how you plan to achieve them and the key players involved in the process. Let us look at an example of a KPI here.
Your marketing team may have a KPI to grow your social media handles.
What: Increase the followers count on each handle by 30% during the year
How: By creating an engagement strategy that lists the frequency of posts per week and how the brand replies to user comments on posts
When: The team will measure their KPI quarterly.
What is the difference between OKRs & KPIs?
KPIs and OKRs are the two different types of goal tracking frameworks. The former is a tool to measure the success and outcomes of specific business activities. It evaluates tasks that your teams have already put to work.
On the other hand, OKRs offer a link between what you wish to achieve and the current position of your business. You can go beyond the current state and achieve results that you would have always imagined. OKRs are especially ideal for ambitious teams that want to accomplish new heights of success.
The two ideas may also appear to be practically the same. KPIs and OKRs get utilized for managing goals and adding that element of measurability to objectives. You can use them across organizations to make things uniform. But there exist some differences between the two.
Let us look at them from the perspective of lag and lead goals.
- Lag Goals
Lag goals are metrics that you can use to measure the success of what your teams have achieved. These help you clearly understand what outcomes got achieved and how do they correspond to KPIs. A lag goal can be to grow the follower count of the company’s Instagram by 20% in three months. You will be able to understand the progress only in the hindsight.
2. Lead Goals
It is possible to influence lead goals as they remain driven by metrics. Lead goals measure the target values that achieved the lag goals. An example of a lead goal could be about increasing product sales by 5% during the month. You can accomplish it through the objective of successfully executing a referral program.
One of the corresponding key results could be to ensure 25 successful product referrals from existing customers.
💡 KPIs thus help you measure the success of goals you have achieved. Meanwhile, OKRs help you get a clear picture of what you want to achieve.
It, therefore, makes sense to use them collectively. You can have critical company metrics by linking them with relevant OKRs.
Furthermore, let us consider the example of an organization trying to achieve its sales targets for the year. The KPIs will be about the team’s health and whether you have enough resources to accomplish the objectives. OKRs are a guide that shows how you can achieve the target. These remain temporary and will change with each quarter except for some that you can carry forward to the next OKR cycle.
KPIs and OKRs are both necessary for any modern-day business. When you only have the roadmap, you won’t figure out if enough resources are available. Similarly, concentrating only on KPIs will not give you an idea of how to achieve the goal realistically.
Can both OKRs and KPIs work together?
OKRs and KPIs can complement each other where you can use an OKR to give a better shape to your KPIs. Let us consider an example here that shows you how KPIs and OKRs planning works.
Your IT support team may have the usual task of addressing employee queries as soon as possible. So, your IT team may commit to answering tickets within 60 minutes. When you create a related KPI, you will get the average time for the support team to address queries. There will be no issues if the KPI shows that the average reply time is under 60 minutes.
However, if you find that the average response time has increased to 75 minutes, you would want to create an objective to fix the issue. And writing a successful goal involves having apt-key results. Before moving ahead, you will have to check what has led to an increase in the response time.
There can be a scenario where the support team is short on a few resources. There can also be a case of increased employee count in the previous quarter due to new hires. You will accordingly have to hire a few employees in the support staff to address this issue.
Why is it necessary to track KPIs and OKRs together?
OKRs and KPIs work well when used together. The former helps you bring innovation, solve problems, and improve processes. When it comes to KPIs, you can use them to assess the performance and identify areas of improvement. It is advisable to have both of them work in unison for your business.
Tracking them together will allow you to look at the bigger picture. You will also have a well-aligned business whose teams and employees work collectively to achieve organizational goals.
OKRs and KPIs offer immense benefits when implemented well by an organization. You need to understand their characteristics that are beneficial for your business. But be mindful of the fact that OKRs might take time to influence some metrics. OKRs are all about quality and influence KPIs as well. Combine effectively and make them a powerful tool to achieve the desired results for your company.
huminos is a comprehensive performance conversations platform that helps your employees to achieve impactful outcomes, even if they are working remotely. Features like OKRs, 1:1 conversations, feedbacks, reflections, and pulse allow you to plan and measure work that matters to your company.