OKRs and KPIs are popular goal-setting frameworks used by businesses of all shapes and sizes. Both frameworks can be used to provide shared goals for your organisation and achieve growth, but which one is best?
In this guide, we’re taking a closer look at OKRs vs KPIs, their differences and whether they can be used in tandem with one another to boost your business growth!
What is an OKR?
Firstly, what is an OKR? In summary, OKR stands for Objectives and Key Results.
With the OKR method, you’ll work closely with your team to set measurable objectives for your business. Then, you’ll need to define the key results that indicate whether you’ve successfully met these goals.
An example OKR for a football team could be:
- (Objective) – Win the Premier League
- (Key Result 1) – Score an average of 2 goals per game
- (Key Result 2) – Maintain a ball possession rate of 75%
In general, 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.
Once you’ve set your OKRs, you can then create strategies (also known as initiatives) that will help you to achieve your goals and key results.
How to measure OKR progress
Conducting regular OKR reviews are essential for keeping track of your progress on your OKRs. You can do this with dedicated OKR management software, or you could carry out this process manually.
In general, tracking OKR progress involves the following steps…
Confidence ratings are one of the most commonly used methods for assessing OKR progress.
When you outline your OKRs, you’ll assign a corresponding confidence rating that shows how confident you are that your team will achieve your goal. For example, a 5/10 confidence rating indicates you feel you have a 50% chance of achieving your target.
Regularly reviewing your confidence ratings will help you to see how your OKR progress is faring.
Save and connect the data
It’s important to keep your objectives, key results and initiatives in the same place so you can clearly see the steps that need to be taken to achieve your goals.
OKR tools and software can help you to do this easily. However, an excel sheet with tick boxes can also be an effective means of tracking your OKR progress.
Use timelines, progress charts and other visuals
Progress charts can help you to clearly see exactly how close or far away you are from achieving your goals.
No matter whether this is a GANTT chart or doughnut chart, a quick look at your diagram will help you to keep track of your OKR progress.
You should review and change OKRs on a quarterly basis if needed. However, in between OKR reviews, progress reports can help you to outline how close or far away you are from achieving your goals.
What does KPI mean?
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.
Some common KPI examples include:
- Gross profit
- Cost of goods sold
- Net sales
- Real working hours
- Sales per customer
What’s the difference between KPIs and OKRs
In summary, a KPI is not an objective. KPIs offer a measurable value to help you see whether your objectives are being met. Generally, KPIs are for business as usual and OKRs are used for growth initiatives or for areas of the business that need particular focus.
For example, if your overall company goal is to make more sales, one of your KPIs could be sales per customer. This means that if your sales per customer increases, this indicates that your company is making more sales, and you’re meeting your objective.
On the other hand, OKRs are your objectives. Your key results are similar to KPIs as they also provide a quantifiable value to indicate whether you’re meeting your objectives.
OKR vs KPI: Can they be used together?
Yes! OKRs and KPIs work well together, and they can both be used to help you supercharge your business growth in 2021.
Your KPIs can inform your OKR goal-setting process and vice versa. For example, if your KPIs show that your sales are suffering, you may create a new OKR that aims to boost overall profits. On the other hand, if you’ve set a new, ambitious OKR for your business, you’ll need to update your KPIs so you can measure your progress effectively.
The OKR framework is great when used on its own, but it can also be combined with other goal-setting theories and tools to help your business excel.