It’s increasingly common to compare OKRs vs KPIs in the business world. Both acronyms relate to indicators that can help to guide the most varied of strategies. But do you know the difference between them, and how to use an OKR template for your own benefit?
Let’s start by saying that OKRs and KPIs are complementary concepts. Although they are often mistaken for one another – which is absolutely normal – each of these methodologies has its particularities that need to be taken into account.
What are OKRs?
OKR stands for “Objectives and Key Results”, and is nothing more than a way of internally aligning a company’s goals among executives, departments, teams, managers and individual employees.
This methodology has had a great track record of results, especially in the technology sector. The giants of Silicon Valley were the forerunners of OKRs, using them in their daily work. The positive consequences can be seen in the way these companies have grown and become a reference in their respective segments.
What makes OKR so effective is its simple, efficiency-focused approach. It is characterized by the establishment of short deadlines for each objective and key result, limiting them in a short list for each period and minimum value to be achieved.
The idea is to maintain focus on the company’s main goals, and put to one side other goals which are not so crucial.
What are KPIs?
Key Performance Indicators (KPIs) are a way of measuring what has been achieved, creating numbers that generate insights into the institution’s performance to date. Like OKRs, KPIs are punctual and succinct, delivering timely and relevant information.
KPIs are a management tool whose purpose is to let managers know how internal processes are performing. A company looking to establish its KPIs should perform an analysis of what it expects to deliver, and how this can be measured.
One way to do this is with the Balanced Scorecard (BSC) methodology, which helps you choose the right metrics for your business. Another way is using SMART methodology, which presents 5 points for the specification to be as good as possible:
– Is your objective specific?
– Is it possible to measure your progress towards the goal?
– Is your goal attainable?
– How relevant is the objective to the organization?
– What is the time limit to reach the goal?
In this way, it is possible to define each KPI and align them, not only with the expected objectives, but with results that are achievable.
Why are both of these methodologies important?
Being able to reliably and accurately measure the actions being implemented makes it easier to evaluate the results and understand how to respond to them.
OKRs can help you to decide what you need to pay attention to in order to get better results. A unified direction is important in marketing planning, and by implementing the OKR methodology, companies gain a lot of benefits, including increased performance and productivity.
KPIs serve to provide more accurate answers about the success – or otherwise – of your results. This information is essential to knowing whether or not your expectations are being met. Establishing efficient KPIs in your marketing strategy helps you understand the main points that need improvement, and make better decisions going forward.
The main differences between KPIs and OKRs
One of the main differences between OKRs and KPIs is the intent behind goal setting. KPI goals represent the performance of a process or project already in place, while OKR goals are a little more challenging and ambitious.
OKRs make a connection between ambition and reality. If you have a big dream – an inspiring end goal – for your business, you need OKRs to get you there. A KPI, on the other hand, measures the success, output, quantity or quality of an ongoing process or activity.
Let’s analyze this further. Both acronyms have one word in common: “key”. In Administration, the term “key” is conditioned to something important, unique and significant. Within the framework of these two methodologies, we are referring to key results and key indicators. Although they are not exactly the same thing, both go hand in hand.
Often, a KPI that needs improvement will be a starting point for creating an OKR and will become a key result of an objective.
Is it possible to work with both at the same time?
Strategically, it is possible to align both tools to work together – making KPIs act within an OKR strategy, for example.
Since OKRs define the macro criteria for the business to function and achieve its goals, KPIs can be a way of measuring what needs to be improved, seeking to maintain a level of effectiveness within each area. In other words, you can set goals for each objective and key result, and measure those goals with KPIs.
Another way they can work together is by measuring the success of processes with KPIs and later creating OKRs that improve those KPIs.
Which one is the best?
If you want to improve on a plan or project that has been done before, KPIs may be your best option. They are straightforward and allow you to add a measurement system to your ongoing projects and processes.
But if you have a bigger vision or are looking to change the overall direction of your company, OKRs are the best alternative. They have a greater depth that will allow you to expand your goals even further and allow you to be a little more creative when it comes to planning what to do to achieve your goals.
In other words, OKRs and KPIs can work in perfect harmony together. KPIs help you to monitor performance, while identifying issues and areas for improvement. OKRs help to solve problems, improve processes and drive innovation. You will definitely need both in any given project.
If you know how to use the data in your favor, it shouldn’t be a case of OKRs vs KPIs, as using both methodologies will give you an excellent advantage when carrying out your strategic planning.
