February 25, 2022
OKR vs. KPI: How They Compare and Complement Each Other
Contrary to the general notion that OKRs and KPIs can’t go hand-in-hand, there are clear benefits of having both. While KPIs and OKRs are different, both are instrumental in performance management and goal setting. You don’t need to choose between KPI and OKR, as they complement one another. Leveraging their power to improve your business performance, you can become a results-driven organization.
Before we learn how to use KPIs and OKRs together, let us look at how both contrast each other.
OKR vs. KPI
To clearly understand the differences between OKR and KPI, let us take an interesting example of a road trip. To start with a road trip, you first need to figure out where you are going. This is your strategy. After you decide on the destination, you should be directed to get there. OKRs act as your directions to reach the destination. Finally, you must know if the car has fuel and tires have enough air to get to the planned place, here implement the strategy. These are the KPIs that keep an eye on the business’s overall health.
KPIs: Stepping Stones to Reach Your OKRs
Experts believe that KPI and OKR should be worked together. While OKRs define your organization’s vision and company’s overall growth strategy, KPIs act as metrics that show your business is on the right path to reach your OKRs. As you focus on improving your KPIs, you get closer to accomplishing your OKRs.
OKRs and KPIs work together so that KPIs are the propellers behind the key results for the primary objectives in your OKRs. Ideally, therefore, if you are hitting your KPIs, it implies you are accomplishing the key results (KRs) that ultimately help you fulfill your objectives.
Make Your KPIs Your Key Results
KPI = The KR Component in OKR
A KPI is nothing more than a key result (KR). Your key result(s) help you ascertain if you meet your objective. Rather than planning for a set of objectives and simply measuring metrics, give your teams a sense of purpose behind taking a particular direction. Imagine OKRs to be like an umbrella. At the top of the umbrella are objectives, and below that, there are key results synonymous with KPIs.
Align Individual, Team, and Company with KPI and OKR
Your KPIs and OKRs should align and connect to the same bigger goal. Talking about aligning KPIs and objectives, the secret is to find a key performance indicator that best correlates with achieving or failing to achieve the set goal and then tracking the progress. When your KPIs act as contributing factors, they lead to attained OKRs.
Most importantly, you should align the entire organization to the company’s top goals to ensure that everyone is rowing in the same and right direction. For instance, if one of the objectives for your product team is to improve the overall quality of the product, related KPIs can be the number of breaking changes released, the limit set to 4 in the quarter in this case.
KPIs for Performance in the Past and OKRs to Track Progress
Key performance indicators are an ideal means to track your performance in the past, while objectives and key results are more forward-looking to positive change and outcomes. You can create OKRs to bring about a positive change in your organization as you comprehend historical trends from KPIs. In the absence of KPIs, you can’t find out what you should improve, and without OKRs, you can’t focus on your business objectives. OKRs and KPIs thus work alongside each other, helping you evaluate your business performance with a razor focus on targets.
Deciding on KPIs and OKRs
Now that we have learned how KPI and OKR complement each other, it is critical to have measurable OKRs that directly affect the KPI. Remember, OKR and KPI stats work pretty well together. Once you gain a good understanding of your quarterly or monthly goals, intensify those to set your annual goals and outlook.
OKRs Cascade from Top-Bottom and KPIs Bottom-up
Typically, OKRs cascade from the C-Suite to managers and individuals. Then, it depends on Directors and Managers to build relevant KPIs with executives reporting to them and show them a roadmap to answer OKRs.
If OKRs are Your Future, KPIs are Your Roadmap to that Future
Objectives and key results help individuals and teams get out of their comfort zones, prioritize work, and learn from successes and failures. Key performance indicators are crucial for strategy. They play a vital role in determining and communicating your strategic goals for the organization. While OKRs are tactical, helping you recognize particular efforts you wish your team to work on and then ensure they act in that direction.
In a Nutshell
Your OKRs should always include your KPIs, with those KPIs helping you attain your OKRs. The best way to assure your key performance indicators align with your objectives and key results, set your OKRs first and then decide on the metrics that will be the most useful for constant tracking and review.
Think of OKRs as big picture goals and then reverse engineer your success path with KPIs.
To see how KPIs and OKRs work together, get in touch with one of our OKR experts today.