The Difference Between OKR and KPIs

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The Difference Between OKRs and KPIs

OKR and KPIs are often confused with each other. In this article, we will clear up common misunderstandings between OKRs and KPIs and shed light on how you can make the most out of each.

First, let’s understand what each of these terms means.

Today’s CEO must lead by example, communicate with their employees, and set a pattern for them to follow.   Doing so can leave a profound impact on the productivity of the company. Employees feel engaged, contribute to better planning and production, and ensure the organization’s Objectives are accomplished.

What is OKR?

OKR stands for Objectives and Key Results. An Objective helps define your ideal end state, and a Key Result signals when you have reached it.

The OKR Cycle

OKR is a structured goal framework that help organizations translate their strategic plan into commitments that align teams and drive execution.  The OKR cycle consists of three phases over a 13-week period:

OKR Strategic Planning

Strategic Planning is the first phase of a quarterly OKR framework. In this phase, the entire company, from stakeholders and top-level business executives to team heads and employees, work together to identify a set of common goals and align on how-to achieve them.

OKR Execution

Once the goals are set, the next step is to execute the work to accomplish them. This stage focuses on conducting weekly check-ins, team reviews, and other meetings to ensure that the entire company is progressing in the right direction.

OKR Retrospective

At the end of the quarter, a retrospection session is held. In this stage, you celebrate the wins and acknowledge the failures of the past quarter. This phase sets the foundation for the next quarter’s Objectives and helps you work on the areas where you have been lagging.

What are KPIs?

KPIs (Key Performance Indicators) are indicators that measure performance and evaluate success for a specific activity. There are various KPIs, depending on factors such as the industry type, department, or the maturity of your organization.

KPIs as decision making tools

Influential decision-makers rely on data to make educated decisions. They do so with the help of KPIs. KPIs provide an accurate picture of a situation – whether it be a new marketing campaign, your goals strategy, or something else.

KPIs that are effectively tied to strategic objectives help you find answers to critical business questions. If you intend to use KPIs to fuel your decisions, a good starting point will be to identify the questions that managers and decision-makers will need the answers to. Based on these inputs, KPIs should be identified for each strategic objective.

What Makes A Good KPI?

Let’s face it: not all KPIs are good. A suitable KPI is based on your end-goals and provides you with evidence of your progress so far based on the results garnered. The best KPIs help you measure all that can be measured to aid in effortless decision-making.

Additionally, the best KPIs help you gauge the degree of change in performance over time. They track effectiveness, timeliness, efficiency, compliance, performance, and other vital aspects.

OKR vs KPIs

Whats the difference?

To explain in simple words, KPIs could be a part of your OKR framework. An OKR consists of Objectives and Key Results. A KPI is used to measure and track how effectively an initative, team, or department in performing. Since KPIs are measures that help you track results, they are sometimes used as Key Results of an OKR.

How do I use OKR and KPI together?

OKRs and KPIs complement each other. Essentially, a KPI can help you highlight a problem. An OKR helps you fix it. Let’s understand this better with the help of an example:

Let’s say you want to measure the success of your content marketing team. You could create a KPI that measures the email click-throug-rate to your blog in a given month.  If you agree with the social media marketing team that their conversion rate should be continually improving, you will be instantly able to track their performance on a monthly basis.

So long as their performance continues to improve, all is good. But what if your CTR drops beow the previous averages? You (or your team) will create an Objective to improve content marketing conversions in your upcoming quarterly Strategic Planning session. You will monitor if the number of results has been restored or not. How do you do that? By implementing higher quality standards, improving messaging, leveraging marketing analytics, and so on.

Thus, this way, KPIs help you figure out what’s working and what’s not working with respect to your goals, and OKRs can help correct problem areas and keep your organization on track.

Conclusion

Both KPIs and OKRs are important and help organizations achieve their set goals. It is essential to make the most out of them by identifying the pain points and setting up a framework to address them.

If you are not sure how to incorporate KPIs and OKRs best into your workflow, People Stretch Solutions can help.

Having helped an array of organizations and enterprises run successful OKR frameworks, we know what all it takes to maintain the right balance between KPIs and OKRs.

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