OKR vs KPI
The argument between OKRs and KPIs has been a recurring topic amongst performance management coaches for a long time. However, as much as it might sound like much fun to pit these two techniques against each other, this should not be the case. While there might be points of intersection between their methodologies, they are still very different and should be approached in that manner. However, we will break down both strategies and see just how different and similar these two are and how they can be applied.
What KPI is
KPI, also known as Key performance indicator, is used to determine the achievement of a company, project, individual, or organization over a period of time. The performance indicators can sometimes vary but mostly they:
- Give accurate proof of improvement towards attaining a set goal
- inform better decision making by assessing what is being measured
- Present comparisons that deduce the level of change in accomplishment over a period of time.
- Measure cogency, effectiveness, excellence, promptness, administration, adherence, modes & methods, economics, programs, execution, staff performance, etc.
Let’s use an example to illustrate better how KPIs are implemented. You have an organization, and you intend to improve the marketing department. If your key performance indicator was to boost your Marketing Qualified Leads by 25 percent. This is how it would go;
MQL Growth KPI
- The what: In a year, Boost MQL by 25%
- The why: The completion of this goal will help the organization generate more revenue.
- The How: employing extra staff in sales, creating a new system for content creation, and developing more advanced marketing strategies.
- The Who: the Vice President of the Marketing department will be in charge of this
- The When: The Key Performance Indicator will be evaluated quarterly.
What OKR is
OKR is a framework that aligns top-level strategic objectives to the work of departments, teams, and individuals. While OKRs are predetermined frameworks used strategically, KPIs are often measurements that are used within that framework. OKR requires a Strategic Planning period, a series of meetings at the beginning of the quarter, to set up objectives, align individuals, and create accountability. OKRs have to be
- Ambitious and inspirational
- Provides organizational clarity on the direction of the company
- Creates alignment and accountability throughout an organization
- Requires a sophisticated level of planning and dedication to incorporating OKRs into one-on-ones and team reviews
- A Quarterly Retrospective to celebrate wins and reflect on losses and how to accomplish our goals for next quarter
An Example of KPI
There are numerous applications of KPI used and still being used by companies, industries, and organizations worldwide. They are utilized on all levels; organization, team, and individual.
Primary Objective: Top Grossing Android fitness App on the Google play store for Q4.
KR1: Launch 5 new in-demand features by November 15th
KR2: 20% increase in app revenue
KR3: Get 1000 5 star ratings from new customers by the 15 of November.
The major thing that sets KPI and OKR apart is the thought process behind setting objectives. The KPI goals can often be achieved and reflect what a project or process has been able to produce so far, while OKR objectives tend to be more ambitious and aggressive in its stride, require more planning and organization, and set the direction of the company.
This doesn’t mean that OKR goals should be unrealistic. They can be bold, but they should not be completely out of the scope of what the company or individual can achieve within the given time or with the given resources. The major intention of the strategy of OKRs is that the ambitious goals that have been methodically planned and have a clear path towards achievement are very likely to boost your team’s morale and help both them and yourself achieve better results.
Is there a better one?
After all this, you might be asking yourself what really is the difference between OKR and KPI?. The truth is that you won’t be the first or last person to ask. The major confusion often lies in which one to use and for what?
There is no need for confusion. Take this simple approach to determine your choices. If you plan to make improvements on an existing project or ongoing process, then KPI will be your best path to take because they are not complex and will let you easily create a system of measurement with which you can accurately gauge all your recurring projects.
On the other hand, if your plan is a much larger picture that seeks to change your project’s overall direction, then it is best to opt for OKR. The simple reason for this is it will give you a more thorough strategy to push your objectives past present limits while also giving you room for creative expression with how you choose to achieve it.
Irrespective of what strategy you decide to use for your company or yourself, the goal is to ensure growth and forward motion in the right direction. The only way you can be sure that this happens is if you measure your progress and performance.
The truth is if you spend all your time setting goals, but you don’t eventually measure them at the end if either the quarter or year, then it would be hard, if not impossible, to accurately know whether you or your company is growing.
Failures and successes are part of the journey forward and also an opportunity to learn. Your priority should be on making sure you are learning from the progress you measure.
With these two techniques clearly outlined, you might be thinking about implementing them in your project and might be wondering how to make either of them work within the unique framework of Business objectives. In that case, you should contact People Stretch. People Stretch will help you determine the accurate approach that your business will need to achieve its goals.
Want to learn more about implementing an OKR framework? Check out The Executive’s Guide to OKR here.