OKR Vs KPI: Everything You Need To Know About Them

The comparison of OKR and KPI has been a hot topic for quite some time now. No performance management meeting seems to be complete without having a discussion about them. However, comparing OKRs and KPIs is exactly like comparing apples and oranges as even though there can be a bit of overlap, these two topics are quite distinct. Read on further to know a bit more about OKRs and KPIs and how they differ. 

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What are OKRs?

One of the most widely used goals establishing and management approaches, OKR stands for Objectives and Key Results. This methodology is known to bring success to organizations of all sizes and industries. No wonder the OKR program and OKR software have been highly in demand, more so after the businesses were disrupted by the global pandemic. It’s used by organizations to collaborate and attain their stretch objectives through a framework that facilitates consistent check-ins, continuous development, feedback, and problem-solving. This approach has been so effective that having OKR software has become a necessity for organizations that are looking to sustain and grow in the era of cut-throat competition. 

Objectives have to be quantitative, inspirational, and time-bound. While the Key results are used to quantify the established objectives and segregate them into certain metrics that can be used to gauge the progress of the respective objectives. Generally, an organization operates with three to five objectives with each of these objectives tied to three to five key results. The key results are numerically graded to get a clear and exact performance evaluation for the objectives. 

What is KPI?

KPI is an acronym for key performance indicators that are used to evaluate the performance of an organization, employee, team, or project over a period of time. Even though you may have a few outliers, these indicators should generally be linked to strategic objectives, direct where the resources should be focused, and be gauged against the targets. It is highly advisable to make the KPIs measurable as adding the quantitative value will make it more manageable to give context and compare the performance of whatever is being measured. 

However, establishing qualitative KPI is feasible but not appropriate as such a structure will result in causing confusion and subjective understanding of the data. However, KPI is only as priceless as the action it is inspiring. Generally, organizations try to embrace the KPI used by the organizations to use them as their own and then end up wondering why their objectives were never attained. Just like every other employee is different, every organization is different as well. KPI have to be well-suited to the specific objectives of your organization, how you strategize to attain them, and who can operate on the information. 

While contemplating whether to go for KPI or OKR for your organization, it is completely up to your organizational priorities as the choice is dependent on what you are trying to measure. For instance, if you are trying to scale or improve upon a plan that has already been done before, KPIs can come out to be a better choice. As they are quite straightforward, they allow you to add measurement systems to your ongoing procedures and projects. On the other hand, if you have a bigger vision and are looking to bring a change to your organization’s overall direction, OKRs are likely to be the better choice. As they have far greater depth, they will enable your organization to stretch the objectives even further and provide the room to be more creative on how to attain the established objectives. Getting your organization an OKR software can bring you both short-term and long-term success. 

The best practice for KPI and OKR

When it comes to KPI:

1. Keep them to a minimum

Having specific data is the actual key. It is recommended to determine one to two KPIs for each objective – the measurements that will really assist you in determining whether you are progressing or not. Having 15 to 25 KPIs on one scorecard is the ideal way to go. 

2. Attainable but challenging

You need to provide your employees with a target that boosts their motivation and makes them stretch. However, you have to ensure that they are attainable too as having the ones that are going to be too far out to reach will only end up frustrating your employees and teams. 

3. Frequently review and update when necessary

Strategy meetings are a great window for reassessing your performance measures. When a KPI fails to be a good indicator of the respective performance, or if the linked objectives have undergone a change, then it is about time for you to adjust or even retire it altogether. 

When it comes to OKR:

1. Start with a few objectives

It is advisable for you to be as simple as possible while initiating the process of the OKR program. One way to keep it simple is by starting with just enterprise-level OKRs and then add more levels of the department as your organization gains experience and gives you the buy-in. 

2. Short-term vision

OKR cycles tend to run smoothly when they are used on the basis of monthly or quarterly. So, when you are making them, make sure to think about the objectives that are attainable within that time frame and will cause a meaningful impact on your organization. 

3. Ensure the OKRs are supported by the executives

OKRs end up outlining the route your organization is planning to take for accomplishing its objectives. This is why when your leadership team doesn’t give the buy-in, they choose to walk a different path than you which will ultimately hamper the progress and success of the organization. 

Now that you are familiar with both concepts, you can choose to take the right approach for your organization. For more assistance regarding the goal establishing process and guiding your organization towards success, contact us today.