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To most people they do the same job. But honestly, seeing them this way is a mistake. The key to understanding the difference between an OKR and a KPI is to look firstly at what they are.
For a SaaS company, typical SaaS KPIs (Key Performance Indicators) are:
If you were to then set SaaS KPIs for specific teams, these would be more specific to their area. For example, Sales KPIs are very Sales Pipeline centric and would include:
If you look at the above sets of metric that form the basis of the SaaS KPIs, you can immediately see how they’d be great at helping create better dashboard, do business diagnostics and strategy creation, as they would help direct areas of focus.
KPIs are metric that are statements of fact – for this metric you are here. This could be for a single point in time or through-time with change being highlighted.
Define a target metric with built in ambition – no low-balling, just the right amount of stretch
Define areas of focus – which metrics / KPIs are most critical and relevant right now
Create agendas for weekly check-ins and execution optimization
Develop and retain talent – your most valuable and mission critical assets
Create alignment and parent child relationships between Company, Team and Individual goals.
Encourage and develop inter-team transparency and dependencies – develop amazing team-working
Provide management toolkits where you are in control but don’t feel the need to micro-manage
Show investors that you’re managing the business like professionals so they can invest with confidence
Which means we need to select a Goal Setting Framework and roll it out. Which one? SMART, OKRs,
Balanced Scorecard, 4DX (The 4 Disciplines of Execution)?
The truth is all are better than not having Goals. But we see OKRs as a mature and proven goal setting framework, especially for SaaS, but its effectiveness is all verticals is unquestionable.
Here’s a quick reminder of how you construct and OKR. An OKR consist of a Goal Statement e.g. Become the Market Leader or Optimize your Sales Pipeline, and a set of 1 – 5 Goal Metrics that would allow you judge the success or failure of your goal. You can see more OKR examples here.
You can see from that how that means they are different to KPIs but often share the Metric component.
So the reality is that you don’t choose whether you use KPIs or OKRs. You use both.
You use KPIs for Dashboards, when doing diagnostics and strategy creation, and when telling the story of your company to 3rd Parties e.g. fund raising, and in internal meetings.
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