© ZOKRI 2022 All rights reserved | Privacy Policy | Terms & Conditions | GDPR
A common question we get asked is what is the difference between OKRs and KPIs (Key Performance Indicators).
Here we will explore each method and explain the differences between these different goal setting methodologies. We will also discuss their relative advantages and disadvantages, when to use which and why.
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 To-dos 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.
In Marketing, Leading Indicators might include:
These will predict KPIs further down the KPI hierarchy like MQL, sales appointments and ultimately Revenue.
In Sales, Leading Indicators might include:
The Lagging Indicator being Closed Won Deals.
In Customer Service is Leading Indicators might include:
The Lagging Indicator being Retention and Upgrades.
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 KPI health metrics 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 defined and visible ensures teams are KPI aware, are tracking the metrics that support goal achievement and also would alert to issues with business-as-usual activities.
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.
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:
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.
KPI ownership, collaboration and reporting is another area to get clarity on.
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:
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.
This means that OKRs are used to target and inspire change, while KPIs monitor the status of metrics that matter.
Some of the ZOKRI team are big cycling fans so 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
Naturally, training will be required to achieve this goal, so a supporting child OKR is created.
Train well and the event will be easy
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
Other KPIs are being monitored and unless they become and issue will not need to become a target for change. These include:
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:
You can read more about OKRs and writing OKRs here
Work out exactly what to measure – set KPIs that get the results you’re looking for by using our KPI examples as inspiration.
Company OKRs are top of the OKR hierarchy. They are often Annual or Quarterly and are an extension of your strategy.
Sales are one of the most Metric Driven team in any business. So what’s the difference between a Metric and a KPI?
Marketing is a department that has more metrics than most. This is due to the width of the complexity of the discipline.
The primary goal of SEO is to increase revenues from search engine results pages, without paying for the click.
SaaS, like most types of business, should involve a data lead Leadership Team. Consider using these KPI examples.
We’ve created OKR examples for common departments and teams within a company to help inspire your own.
Company OKRs are top of the OKR hierarchy. They are often Annual or Quarterly and are an extension of your strategy.
The finance team are often the custodians of a companies most important metrics and as such are usually aware of set targets.
Human Resources OKRs have a huge impact on a business – and OKRs can be used to measure HR effectiveness.
Marketing is one of the teams that sees significant performance increases from using Objectives and Key Results.
Sales teams are used to having goals, but setting OKRs are quite different. Sales have their tools but they lack transparency.
Whether you call your department Customer Service or Customer Success, it’s all about keeping them happy.
Engineering build the products that underpin competitive advantage. OKRs will really help to streamline this.
Product Marketing OKRs are really important to growth. Improvement ensures your product is understood and trialled.
Product Management OKRs are where you will express the biggest priorities you’re facing right now as a department.
CEOs must monitor whether they are delivering business results. Learn about the metrics to watch out for.
Nobody likes annual performance reviews. But what if you could find a way to flip them? Learn how to do this in 3 steps.
Rethinking how we manage performance is long overdue. Start with the concept of “managing performance.”
John Doerr talks about how the right goals can mean the difference between success and failure and how we can use OKRs.
Unclear Objectives don’t allow companies to track progress in an effective manner. Learn how to measure the right data.
Read the latest tips and examples to help you create and execute on SMART goals. Free downloadables and worksheets included.
Management teams often switch off when reviewing KPIs. Be reminded that KPIs are about stakeholder relationships.
KPIs sound good but it’s doubtful whether some really enhance performance. Learn why and what to do about it.
Thinking about using OKR?
This is what you and your colleagues need to know about succeeding with this goal setting framework.
© ZOKRI 2022 All rights reserved | Privacy Policy | Terms & Conditions | GDPR