In any organisation, it is imperative to set goals or targets to drive growth and performance. When you use an effective goal management methodology, your strategy gets legs. Within a business, it is the missing link between high-level strategic maps and detailed implementation plans. Objectives and Key Results (OKRs) as a goal management framework have increased in popularity over the last few years. This increase has been met with a commensurate increase in “OKR vs. KPI” enquiries – what is the difference between Objectives and Key Results and Key Performance Indicators (KPIs)?
Both methodologies offer a way to measure and review performance, and they both stress the need to focus on relevant metrics. Where KPIs and OKRs differ, however, is in the metrics they measure and in the goals behind those metrics. The question at hand is not “Should we use OKRs instead of KPIs?”, but rather “how do we combine OKRs and KPIs to drive long-term consistent performance and growth in our business?”.
OKRs (Objectives and Key Results)
OKRs is a goal management framework used to define, track and execute on a company’s most important strategic goals. The Objective in OKR is the goal that the organisation, department or team wants to achieve. The Key Results are the metrics used to gauge whether that goal is achieved.
One defining feature of the OKR methodology is setting bold objectives that will stretch the organisation and drive strategic growth. Because they’re bold, they create focus – it’s not a full list of metrics, it’s the absolute “must-dos”. And because they drive the company strategy forward, they are specific to each organisation and will change over time.
OKRs help teams work together. Therefore, transparency is required. Transparency drives increased communication, engagement and alignment in teams and, in turn, it allows for opportunities to celebrate the wins and learn from the challenges.
KPIs (Key Performance Indicators)
In its simplest form, a KPI is a quantifiable measurement to evaluate how effectively an organisation, department, or individual is performing. KPIs allow organisations to break their business into measurable targets that can then be cascaded down through the levels of the organisation to achieve the desired performance.
The targets that KPIs measure are often those for the steady-state of business. KPIs aim to maintain positive and constant growth, and not to achieve elaborate goals.
KPIs are seldom time-bound and are strategy-agnostic. They are set up to measure business health and are therefore mostly mandated by the organisation. More often than not, they are used to track the performance of individuals and not set up through discussions with the team.
A difference in the methodologies lies in the types of goals being set. For KPIs, the focus lies in achieving a steady state of growth (health metrics), whereas OKRs require bold objectives and are often used to drive growth or a change in the business (change metrics). One way in which these methodologies can work together is if health metrics are out of range, KPIs could be converted into OKRs for a specific timeframe to create the necessary focus and bring them back into range.
Both OKRs and KPIs can be a valuable contributor in a toolbox of tools used to keep individuals and businesses at peak performance – whether they are used separately or combined. There are major differences in the two methodologies and these differences have to be appreciated, but there is no doubt that they could complement each other if used correctly.