03. KPI vs OKRs vs SMART vs FAST Goals

A common question we get asked is what is the difference between OKRs and KPIs, and SMART goals. When and how you should use them, and what are the common mistakes you will want to avoid are? So this resource has been written to help explain the distinction between these different goal setting methodogies, and their relative advantages and disadvantages. The spoiler alert is there are similarities between all of them and you don’t really need to choose. You can and should use the best bits of all of them and we will show you how easy that is.

What are KPIs or Key Performance Indicators?

KPI stands for Key Performance Indicator. KPIs are the key metrics that correlate strongly with performance. You use them to define what success looks like and set goals, monitor performance levels, set thresholds or targets for acceptable performance levels, and define targets in goals when change needs to happen.

KPIs are used extensively by all types of organisations to track whether a mission, strategy, company and team objectives or initiatives are successful.  They can also be used as a diagnostics tool and way of spotting issues.

Some of the KPIs you you will use are ‘leading indicators,’ some ‘lagging’ indicators, and some can be argued to be both.

Leading indicators – these are the metrics that look forward and can predict future performance, whether that’s an up or a down -m quotes sent 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.

Leading & Lagging KPI Examples

In Marketing, Leading Indicators might include:

• Channel visitors
• Conversion rates
• Downloads
• Webinar attendees

These will predict KPIs further down the KPI hierarchy like MQL, sales appointments and ultimately Revenue.

In Sales, Leading Indicators might include:

• SQLs
• Meetings Attended By Decision Maker
• Quotes

The Lagging Indicator being Closed Won Deals.

In Customer Service is Leading Indicators might include:

• Calls received
• Live chats
• Problems received and resolved
• Time-to-resolution
• Product usage

The Lagging Indicator being Retention and Upgrades.

KPIs As Health Metrics

KPI planning and selection is a key process for every organization and team. You need to measure what is important – ‘measuring what matters’. Sometimes you’ll find that you have the KPIs you need already, and others times you will need to start tracking them, starting with getting a baseline.

In the context of goal setting, the sub-set of the most important KPIs are sometimes called Health Metrics. Having them ensures teams don’t lose sight of the bigger picture whilst you are focusing the the current quarters improvements via goals.

KPIs also provide a mechanism to recognise the everyday day business-as-usual activities that contribute to KPI performance and are a key part of a Performance Management process.

KPIs & Goals

Once you have your KPIs you need to think carefully about whether the KPI being monitored or is a target for change. KPI targets and monitoring is typically expressed like:

• Increase to X
• Reduce to Y
• Keep between X and Y

If you’re looking for change, the level of ambition of any target is the subject of some of the best debates you will have.  

Here are 3 questions to ask to help you get clarity on the KPIs that matter and the target.

• Which KPIs should be monitored as they show us how we are doing and would highlight issues?
• Which KPIs are our biggest priorities to improve right now?
• How ambitious should we be?

KPI ownership, collaboration and reporting is another area to get clarity on. 

• Who owns and who is collaborating on this KPI?
• How is this KPI calculated?
• Where does the data come from and who is responsible for maintaining it?
• Who needs to be informed about the performance of this KPI?

OKRs vs KPIs

OKR stands for Objectives and Key Results. OKRs are 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 have been around longer and are more widely understood.

Good OKR planning involves taking a company strategy and creating company objectives from the strategy. Your company objectives are set for the year or quarter. 

The Key Results are how success is going to be measured, which in most instances are via specific and important KPIs – the ones that would describe how your Objective could be achieved.

This means that the key differences between OKRs and KPIs are:

• OKRs often contain a small sub-set of KPIs that describe how an Objective will be achieved.
• You typically group 1 – 4 Key Results together to create a balanced view of how your Objectives success will be achieved measured.
• Targets are deliberately set to be hard and a stretch, with achieving less that 100% being a success where a genuine stretch target has been set.

This is very different to dashboards of KPIs or singular KPIs with no guide, score or label indicating how hard the target is, and flexibility over what success looks like.

• Not all KPIs are a target for improvement – some are being maintained.

This means that OKRs are used to target and inspire change, while KPIs monitor the status of metrics that matter.

OKRs & KPIs Working Together

We are big cycling fans at ZOKRI to we are going to illustrate how KPIs and OKRs work together using an example of a someone wanting to complete a cycling event – let choose the Martona which is an event in Italy that takes cyclists across the Dolomites for 138km with a total climb of 4,230m.

The high level ‘mission like’ Objective has four Key Results that will support and measure success:

Complete the Martona with a smile on your face

• Complete the course in under 8 hours
• Refuel with water and food at 10 feed stations
• Maintain an average speed of 19 KPH
• Keep heart rate under 170 BPM

Naturally, training will be required to achieve this goal, so a supporting child OKR is created.

Success won’t be lucky, you need to train for it

• Train 5 days week
• Complete 2,000 KM of training miles
• Train at an average speed of 19 KPH
• Reduce weight from 85kg to 80kg

During training and during the event the most important KPIs to help achieve the Objective will be used. You can see some of them in the OKRs above

• Body Weight
• Average Speed
• Training Miles
• Training Frequency
• Heart Rate

Other KPIs are being monitored and unless they become and issue will not need to become a target for change. These include:

• Bike & Kit Health
• General Medical Health e.g. blood pressure, BMI
• Travel Arrangements
• Flight Times

The belief is that if you work towards these goals and monitor those KPIs as you go, and respond to any issues, you will achieve your Objective.

So in summary:

• KPI planning and measurement are a key part of how you run your company and teams and form part of the OKR planning and management process.
• OKRs provide a narrow focus and guide teams to being bold and ambitious with target setting.
• OKR will have more of an impact on your company and team performance than KPIs as they provide focus and inspiration.
• OKR group measurements together and allow for a more balanced goal to be set e.g. including quantity and quality KPIs together.
• Tracking more KPIs than are used in your OKRs is important.
• Knowing which KPIs are being maintained as part of business-as-usual activities, and which are opportunities for improvement and would lead to the achievement of specific and related objectives is the skill of OKR and Performance Management.

You can read more about OKRs and writing OKRs here.

SMART vs OKR

SMART is a simple and popular goal setting framework. SMART stands for Specific, Measurable, Achievable, Relevant, and Time-bound, and most people have used SMART goals at some point in their careers.

S is for Specific

Think of this as your Mission Statement for the goal with added details. It’s the ‘what’ and ‘why’ of your goal. It’s not how you are going to achieve your goal. You should also be thinking about who would be working towards the goal. If you’re using Objectives and Key Results or  OKRs, this is the Objective.

M is for Measurable

A good goal is not just measurable, you measure what matters. The question you need to answer is: what metrics would represent goal success? With OKRs this part is where Key Results come in.

The importance of this step alone should not be underestimated. The conversations around what success looks like and how it can be measured are hugely valuable. Even if it turns out that the ‘right’ metrics are not available now, the conversation that allowed you to know that and then the intent to measure it are a big step forward.

A is for Achievable

This is a check-sum moment. Do you have the necessary skills and resources to work on this. When you agree on a goal it needs to become a commitment, and something you are prepared to stop other things in order to progress it. If you can’t commit there is an obvious issue somewhere that needs to be addressed.

This is different to the idea of goals being hard. OKRs have the concept of difficulty as a core part of the framework with OKR scoring being used to calibrate both difficulty and what success looks like. The benefit of this is backed by scientific evidence. Only hard goals are proven to improve and prolong focus and stimulate learning, collaboration and innovation.

R is for Relevance 

This is a requirement to have considered how the goal aligns with broader goals? With OKRs the idea of showing alignment with either another OKR or single Key Result is baked into the framework and there are mechanisms for showing how goals align in OKR Software like ZOKRI.

T is for Time-Bound

The cadence at which goals are set is an interesting area. Too long and you can run the risk of goals becoming irrelevant. Too short and you can find that you might not have allowed enough time to set an ambitious outcome that would require sustained and prolonged focus. The balance that most companies have adopted in quarters, especially when using OKRs.

Every quarter the task is to define the most important goals that need to be committed to, set the bar high enough to access the benefits of the stretch, and then work in an agile way to achieve it. If a goal takes more than a quarter you can role it over where required.

The BONUS Parts Of OKR vs SMART

OKRs have SMART goal characteristics at their core. In many ways using OKRs makes following and managing SMART goals much easier as there is more structure. 

For example, with platformed OKRs you have assigned owners and collaborators as part of the definition process and the cadence is already optimized around quarters.

The bonus features OKRs bring is they have a mechanism for having multiple ways of expressing success via small group of Key Results. They also allow you to share ‘how’ you’re going to achieve your goals via Initiatives, which could be considered Projects or Tasks as well. 

OKR workflows and processes also have check-ins and agility operationalised as part of the framework, so goals are not set and forgotten. The most typical check-in cadence is weekly. During a check-in plans for the week ahead are shared, progress, confidence levels and issues or blockers are also shared.

F is for Frequently Discussed

A is for Ambitious

S is for Specific

T is for Transparent

OKRs Are FAST Goals + SMART

SMART goals are accused of undervaluing ambition, are often guilty of focusing too much on individual performance, and don’t encourage the ongoing discussion that are needed to maintain focus, improve collaboration and be agile.

You will see why OKRs are therefore more aligned with FAST goals than SMART goals, and more the best of both, not because they are trying to be different, OKRs are doing what has proven to be highly effective. 

You Might Not Need To Choose

Good goal setting actually doesn’t choose. KPIs are need universally. OKRs are a form of SMART, just extended with a few more best-practices that matter.

As such, OKRs are probably the best goal setting frameworks to use if you want a more agile, aligned and ambitious way to set goals.

Platforming OKRs or if you’d prefer SMART goals or FAST goals, is easy to do, easy to manage and more likely to be of benefit in ZOKRI vs spreadsheets. This is because setting goals is only part of the opportunity. Focusing and collaborating effectively on goals in teams and across teams, tracking and sharing progress, resolving challenges and systemising best-practice performance management is the bigger picture.

So in summary, if you make the leap to OKR, you’re going to be using KPIs and SMART. The difference being that who sets the goals, how often you set goals, how hard you make the targets, and how often you share and discuss goals, progress, problems and wins is likely to increase, along with engagement and performance. As