KPIs vs. OKRs - What is the Difference and How Can They Help My Organization
OKRs provide the missing link between ambition and reality. They help you break out of the status quo and take you into new, often unknown, territory. If you have a big dream—an inspiring Ultimate Goal—for your company, you need OKRs that take you there.
A KPI, on the other hand, measures the success, the output, quantity, or quality of an ongoing process or activity. They measure processes or activities already in place.
Henrik-Jan van der Pol, CEO, Perdoo
Key Performance Indicators (KPIs) are a commonly used measure within organizations. They are defined as a quantifiable measure used to evaluate the success of an ongoing process or particular activity. They can be used to focus on more task-oriented processes, such as those found in sales, marketing, manufacturing and support services or they can be more focused on higher-level performance indicators for the organization as a whole.
KPIs are useful as your monitoring system – they are a tool used to track and evaluate agreed-upon performance indicators. An important word in the KPI acronym that is often forgotten is “Key” – tracking all of your performance indicators is not the same as tracking key performance indicators. Tracking everything and calling it a KPI leads to conflicting priorities and a lack of clarity around what is truly important. In short, if everything is a priority, nothing is. KPIs should force you to separate what really matters from the rest. You should be able to look at the indicator and have a good answer to the question “why do we care about this?” If you don’t have a good answer, it is not a KPI – scrap it.
Objectives and Key Results (OKRs) ask you to focus on outcomes and results – what you would expect to see as the outcome if a certain objective is reached. OKRs are more closely aligned with the overall organizational strategy and objectives. It provides a format for your organization and teams to break down your overall strategy in a digestible way and help your employees envision how their contributions align with the big picture. The more clearly you can state your objectives, the easier it will be for your employees to figure out what needs to happen to get there. Three helpful questions to ask when developing OKRs are:
1) Where do you need to go? (Objective)
2) How will you know you’re there? (Key Results)
Following from this comes the all-important question:
3) What will you do to get there? These are your initiatives.
How do KPIs and OKRs work together?
KPIs can often be the building blocks of your OKRs – they can tip you off when something isn’t going quite right and lead to a strategic discussion resulting in the setting of a new objective. For example, you are a manufacturing facility that makes gloves. You might have a KPI of 30 pairs of gloves inspected and sorted by each quality control specialist per hour. In reviewing your metrics, you realize the team is not hitting this goal 50% of the time. Upon further investigation it