When it comes to OKR and KPI, you want to think of them as goals and achievements. Ask yourself what it’s going to take to reach those goals and achievements in the grand scheme of things. Think in terms of structure and framework. Essentially, OKRs and KPIs are a way to structure your goals to see the bigger picture and lay out a framework that will help you paint that picture.
OKRs and KPIs can differ from company to company, team to team, and they can change depending on what the company’s goals are. One can think of OKR and KPIs as milestones and stepping stones, respectively.
OKRs and KPIs can be used in all types of settings, not limited to your work environment. You might not realize it, but you could be setting OKRs for yourself on a daily, monthly, or yearly basis already. A lot of people make “OKRs” come the New Year — New Year Resolutions are a kind of OKR in a broader sense. You can apply OKRs to your personal life just as much as you apply them in your work life.
Let’s dive a little deeper into just exactly what OKR and KPI are, the differences between the two, why they’re important, and how you can use them to your advantage.
What Are OKR and KPI?
So what exactly are OKRs and KPIs?
OKRs and KPIs are management metrics used to measure performance and results that ultimately help define what success looks like for a company. They are strategic execution tools to help define the company’s strategy and plan of execution. OKR stands for ‘Objective and Key Results.’ KPI stands for ‘Key Performance Indicators.’
What Is OKR?
OKR can be broken down as such:
- “Objective” can be described as an accomplishment that you want to achieve.
- “Key Results” are the desired outcome that you would like to see upon meeting your objective, in other words, it defines what success looks like to you.
For example, an Objective you could set if you were trying to make exercising a daily habit might be: “I would like to get into better shape by losing weight and building muscle.”
Your Key Results then define your objective into what you want to see accomplished specifically:
- “I want to go from being 200 pounds to being 180 pounds in 3 months.”
- “I want to achieve 15% body fat by the end of the third month.”
- “I want to increase my muscle mass by 5%.”
The Objective provides a sense of direction, while the Key Results focus on the area of work by specifying quantitative values to be measured for you to hit your target goal.
To apply this to a work environment, one Objective you could make if you were in the retail world might be: “I would like to increase revenue by 15% by the end of this financial year.”
Your Key Results, or how you would define success for this objective, might be the following:
- “Reach monthly revenue goal of $150,000.”
- “Increase online sales by 20% by the end of each quarter.”
- “Open up 2 new storefronts.”
After you’ve figured out your OKRs, you want to proceed to create your KPIs, as they go hand in hand. If OKRs are used to define your goals and results, then KPIs are used to define the steps in how you’re going to achieve those goals and results. KPIs help monitor the progress towards the goals that you’ve already set.
What Is KPI?
Let’s go back to the two examples that we cited earlier. For the exercise example, given the Key Results that were set, you’re going to have to ask yourself how you are going to achieve the results of 180 lbs within 3 months. How are you going to obtain 15% body fat? How are you going to increase muscle mass?
For the retail example, how are you going to reach the monthly revenue goal of $150,000? Increase online sales by 20% by the end of each quarter? Open up 2 new storefronts?
KPIs in a nutshell will help you answer the “how” in the framework. It will help you compartmentalize the body of work and track its progress. You can then make sure the project is making headway, or point out areas that need more work.
KPIs for the exercise example might look like this:
- Complete 1 hour of cardio training 3 times a week.
- Complete 1 hour of weight lifting exercises 3 times a week.
- Eat no more than 2000 calories per day.
You can go further and plan out KPIs on what types of cardio training exercises you want to complete during that hour for how many minutes or sets, or what types of weight lifting exercises, or what meals you’re going to have that will help reach your calorie intake.
KPIs for the retail examples might be:
- Sell 100 units per day
- Upload 2 social media posts per day to drive exposure and lead.
- Send 100 marketing emails per day
The objective when it comes to creating KPIs is to be as quantitative as possible so that you’re able to measure what gets accomplished.
“What gets measured gets accomplished”
– Dan Pena
What’s the Difference Between OKR and KPI?
KPI vs OKR in simple terms: one provides the holistic view from a concord level, where the other one is more on the micro-level, focusing on the breakdown of the process and procedure. By now you can probably guess which one is which. OKR provides the overarching structure while KPI lays out the groundwork. Another way of explaining OKR vs KPI would be that OKRs define the “what” while KPIs define the “how”. All of which are measurable metrics to define growth and success.
How to Manage OKR and KPI
Over the years, incorporating OKRs and KPIs has become an integral part of a company’s strategic planning and operations. OKRs and KPIs are critical when running businesses as they help build structure and integrity in the company.
It is best to set OKRs and KPIs on a monthly or quarterly basis depending on the initial performance review and evaluation. When using OKRs and KPIs as intended, they bring about clarity, direction, and focus to the company and teams using them.
Having specific OKRs and KPIs in place provides working guidelines so the company doesn’t lose sight of its goals. Overall, they help everyone stay focused and on track.
OKRs and KPIs can be used at any level of an organization. The CEO or leadership team can define OKRs at the top of the organization to point out their main goals and strategies, acting as North Star. Then the rest of the organization can build their own OKRs and KPIs around it.
OKRs and KPIs are to be bi-directional. They shouldn’t become evaluation tools, causing teams to feel they will be penalized if they don’t meet the goals set. Rather, your team should feel safe to set ambitious goals that will help motivate and drive focus to success.
It is completely fine if your team only achieves 60% of the goals set. The beauty of OKRs and KPIs is that they’re dynamic. They can change whenever needed. With KPIs, as we had stated before, you can pinpoint gaps or areas that need improvement. From there you can form new OKRs and KPI to fill that gap. They are meant to be flexible so there can be room to improve without feeling constrained. OKRs and KPIs are tools used to guide discussions and drive organization.