Objectives and Key Results (OKRs for short) are changing how companies define and communicate success. Why not have a read through our free beginners guide to OKRs to get more information on how you can align and grow your company.
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 mean when I talk about OKRs and KPIs.
Objectives & Key Results (OKRs) are an agile approach to motivating and managing 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, 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.
The difference between OKRs and KPIs
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). Think of them as the sat-nav to your business, 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 gauge 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. Otherwise, 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 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.” 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.” The KRs might be “Establish a set of KPIs, along with their data feed” and “baseline current performance and set target performance levels.” Yes, these KRs are binary in the sense that you either achieve them or you don’t. However, they will help set up the means by which you can then measure growth in the future.
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, 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. Any business serious about being high-performing needs to be making use of both, in order to ensure that it’s healthy and growing.
OKRs represent a performance management methodology which connects the work of individual employees to your company’s overall strategy. Looking to learn more? Read our blog ‘What are OKRS and how can they help my business?’