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.
Some KPIs are relatively universal like Revenue, others can be specific to an sector or industry. For example, in a Technology / SaaS company, typical SaaS KPIs (Key Performance Indicators) are:
If you were to then set 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
Goal transparency is a big deal and underpins some of the performance improvements OKRs bring. If you’re telling your team and other teams this is what we’re trying to achieve, you’re more likely to rise the the challenge of achieving it, and other teams know how to help you.
The same principles apply to making your KPIs visible as widely as possible. Exposing that you’ve decided to call a KPI, the current value and direction of travel is part of being part of an open, collaborative and high-performing data driven culture.
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. Its effectiveness in all verticals is unquestionable.
OKR stands for Objectives and Key Results. It’s an increasingly popular goal framework that can be rolled out across an organisation, providing control and the performance improvements management want, and the direction and framework to thrive and employee wants.
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 Key results that contain an ‘as measured by’ element that would allow you judge the success or failure of your goal. You can see more OKR examples here.
KPIs do not have a target value, hierarchy, end-dates, and teamwork as part of their DNA.
OKRs can combine KPIs and Operation Goals when writing Key Results. This means that not every Key Result needs to have a KPI in. You can use % Complete or Milestones for example. Your final OKRs frequently have a blend of both KPI and Operational Key Results in.
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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