A common question we get asked is what is the difference between KPIs, SMART goals and OKRs When and how you should use them, and what are the common mistakes you will want to avoid are?
KPI stands for Key Performance Indicator. KPIs are the metrics that correlate strongly with performance. You use them to identify how to improve performance. They can be used to track whether a strategy, organization, team, individual or initiative is successful, and you can set targets for each KPI. They can also be used as a diagnostics tool and way of spotting issues.
A common mistake you need to avoid is using metrics that are accessible, as opposed to being the right metrics to track. Right and easily accessible are often not the same thing.
You also need to ensure that you do not have too many KPIs, as too many can result in a loss of focus.
What are the KPIs that really matter in your organization? Some of the KPIs you come up with will be ‘leading’ and ‘lagging’ indicators.
Leading indicators – these are the metrics that look forward and can predict future performance – Customer Satisfaction can predict Revenue for example.
Lagging indicators – these are the metrics that look back and tell you what has already happened like Revenue and Retention. To influence them you need to improve leading indicators and there’s a time lag before improvement happens.
Of course some KPIs can be both leading and lagging.
For example, being able to recruit the best talent could be considered a lagging indicator as the organization needs to be healthy to attract the best people. Hiring the best talent is also a predictor of future performance.
Measuring performance through KPIs and identifying ways to improve needs both types of indicators is important.
If you don’t currently have the KPIs you need, you’re going to need to work out how to get them, and keep them updated. Then you’re going to need to get a baseline in order to be able to set a target value. If you’re lacking inspiration, ZOKRI has a library of KPIs for use in KPI Dashboards and OKRs, or you can create your own.
OKR stands for Objectives and Key Results, and is the goal setting framework that was originally adopted by Intel and then Google when Google was small. The people behind the OKR back then were Andy Grove and John Doer. In fact. John Doer’s book ‘Measure What Matters’ is one of the most popular OKR books.
Fast forward 20 + years and OKRs are now one of the most popular ways to set goals for all sizes of organization, with their popularity growing every year. That said, for many they are a discovery where KPIs and SMART goals have been around longer and are more widely understood.
SMART is a simple and popular goal setting framework. SMART stands for Specific, Measurable, Achievable, Realistic, and Timely, and most people have used SMART goals at some point in their careers.
KPI target setting uses can use the idea of SMART as can Key Results within OKRs. The advantage OKR has is you can use multiple KPIs or SMART goals under the objective to create a narrative of how the Objective will be reached and success measured
Setting and forgetting KPIs or OKRs will result in average performance.
This is why checking-in OKRs with your KPIs embedded, and Initiative statuses, progress, and confidence, in addition to flagging what’s holding you back and what’s going well is so important.
Check-in and review meetings should happen weekly. This keeps everyone focused and connected, reduces friction and frustration, and keeps you agile. This requires you to schedule these activities and follow an agenda and workflow like the ones in ZOKRI.