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A common question we get asked is what is the difference between OKRs (Objectives and Key Results) and KPIs (Key Performance Indicators).
We’ve created this page to explore each and in doing so highlighting the differences between KPI and OKRs. We will also discuss their relative advantages and disadvantages of both, looking specifically and when to use OKRs vs KPIs, and why often you might want to use both.
What you will learn is KPIs and OKRs have a synergy that can and should be unlocked and trying to replace one with the other is a mistake that you won’t want to make.
This synergy is why ZOKRI allows you to set, track, check-in and report using both.
KPIs are a metric that are considered a Key Performance Indicators of organization, team and individual performance, in addition to also being key performance indicators of internal systems and processes, like marketing automations, and external factors like market position.
There are opportunities to track metrics everywhere in business. Deciding which metrics are Key Performance Indicators (KPIs) and acquiring the ability to track the metrics is one of the capabilities mature and highly competitive businesses acquire.
When you have this capability you can see how a company, team, individual, or, an internal system or process is fairing and trending.
KPIs are also a good comparison tool. You can compare different parts of an organization, for example regions. Or different people do the same job, like sales representatives.
You can also benchmark some KPIs against external factors like competitors, with KPIs like revenue, product ratings, or search engine rankings.
You can even use multiple KPIs to calculate new ones, for example, revenue divided by the number of employees gives you your Revenue Per Employee.
If you’re serious about executing strategy, managing team and individual performance, you will be serious about discovering and tracking the right KPIs.
Understanding the relationships KPIs have with each other, the sequence and the degree to which one KPI influences another is another competency businesses need to acquire.
For example, in a sales pipeline, leads are generated by marketing and go through a series of deal stages before a deal is closed.
The KPIs that are early in a sequence the greater their influence on other KPIs, the more likely they are to be called leading indicators.
Software engineering teams have a ‘Code Coverage’ KPI that tells them how much of the code base is being executed with about 80% often being seen as a good amount.
The Code Coverage KPI usually correlates with the amount of dead code and number of bugs found in live software.
Marketing teams have KPIs like the number, length and quality of pages of content on a website. With the more high quality pages of content you have on a topic, the more likely you are to rank highly in search engines, which in turn will increase the number of sign-ups or purchases.
Acting on known leading indicators is much better than trying to act on the slower moving lagging indicators most KPIs are trying to influence, KPIs like revenue, market share and customer satisfaction.
Planning KPIs on whiteboards with connector lines will help you consider how relationships between KPIs work, in and across teams, in your business.
Knowing the relationship between KPIs will help you set better OKRs?
How and where would you choose to use OKR? OKRs are best used as a framework for ensuring the whole organization has a way of considering which goals should be prioritized above everything else, and a mechanism to track progress, and communicate and remove any blockers to progress as quickly as possible.
To understand the difference between OKRs and KPIs you need to understand the process for considering. discussing and proposing OKRs.
When you are setting drafting your OKRs the types of questions being asked and considered are:
When the most important things you need to make progress on right now are KPIs you can use a KPI as part of your Key Result, and set a moving from X to Y format. In doing so you are putting the spotlight on these KPIs, improving them will be resourced, they will be more visible, be more frequently discussed and progress will be shared more widely across the organization.
Because OKRs provide the opportunity to have more than one Key Result, you can use multiple KPIs to make the measurement of the Objectives achievement better, often using quantity and quality KPIs together.
Multiple Key Results containing KPIs can make amazing OKRs.
By creating an OKR with carefully chosen KPIs you would be saying that making improvements to these KPIs matters most. You’re also likely yo be dialling-in ambition via the crating of both achievable and stretch targets. Plus you’d be inviting others to support and align with your KPIs via the alignment mechanisms OKR have built-in.
If we use the software engineering example from earlier, you might have an Objective Statement like:
Reduce the number of bugs in our live code base post release
The success of this Objective uses Key Results. For example:
When an OKR like this is agreed and committed to using an OKR app, teams can then plan initiatives or activities that will achieve this. For example, you might create an Initiative to implement a new code coverage reporting tool.
Other OKRs might also be created to support the achievement of this OKR. For example, you might need to hire 2 new developers to take responsibility for this area long-term and enlist HR to support you via an aligned OKR.
When you run OKR workshops you will realize that the answers to those big OKR questions mentioned earlier are often not KPIs.
For example, you will find that the proposed OKR will include:
Both of which are fine, should these be priorities that need to be resourced, committed to and the primary focus of lots of energy and effort.
If you’ve got KPIs or even KPIs with targets and stretch targets do you really need OKRs? The answer is yes because tables or dashboards of KPIs are not going to do the same hugely valuable jobs OKR achieves. These jobs being:
Our advice is the same you’ll get by reading every OKR book, and talking to every leadership team using OKRs to deliver their business strategy and lead their markets. Use both for what they were intended to do. Leverage the synergies, and don’t replace one with the other.
Read more about writing and planning OKRs and discover the reasons why OKRs fail.
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Work out exactly what to measure – set KPIs that get the results you’re looking for by using our KPI examples as inspiration.
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