In this article “OKR VS KPI” we will be talking about these two (2) important variables – OKR & KPI.
Lets us explain the two variables:
What Is An OKR?
OKR is an acronym which stand for “Objectives and Key Results.” It is a collaborative goal-setting methodology used by teams and individuals to set challenging, ambitious goals with measurable results. OKRs are how you track progress, create alignment, and encourage engagement around measurable goals.
It is expressed in terms of:
- OBJECTIVES – What you want to accomplish
- KEY RESULT – How you will accomplish the objective.
An Objective is simply what is to be achieved, no more and no less. By definition, Objectives are significant, concrete, action-oriented, and (ideally) inspirational. When properly designed and deployed, they’re a vaccine against fuzzy thinking and ineffective execution.
Key Results benchmark and monitor how we get to the Objective. Effective Key Results are specific and time-bound and aggressive yet realistic. Most of all, they are measurable and verifiable. You either meet a key result’s requirements or you don’t; there is no gray area, no room for doubt. At the end of the designated period, typically a quarter, we do a regular check and grade the key results as fulfilled or not.
Where an Objective can be long-lived, rolled over for a year or longer, Key Results evolve as the work progresses. Once they are all completed, the Objective is achieved.
OKRs are built on big-picture goals and targets that are designed to push employees and companies forward, so they should toe the line of “almost impossible.” The OKR framework is a continual cycle of fast, dynamic growth.
Some general OKR examples include:
- Objective: Become the market leader in our industry.
- Key Result #1: Record $100 million in revenue.
- Key Result #2: Increase staff by 45 percent.
- Key Result #3: Increase market cap sufficiently to enter S&P 500.
- Objective: Develop autonomous vehicles.
- Key Result #1: Hire 10 artificial intelligence subject matter experts.
- Key Result #2: Invest an additional $500 million in research and development.
- Key Result #3: Roll out prototype by fiscal year-end.
The Benefits of OKR
OKRs provide many benefits, including clarity, enhanced communication and a coherent, transparent organization-wide strategy. John Doerr always talks about the F.A.C.T.S. when describing the benefits of OKRs. F.A.C.T.S. stands for:
- Focus: OKRs allow a team to rally behind a small set of carefully chosen priorities.
- Alignment: OKRs provide a method for an entire organization to align its goals at every layer with its top-level priorities and with its ultimate purpose.
- Commitment: OKRs demand a level of collective commitment from the parties involved to choose and stick to agreed-upon priorities.
- Tracking: OKRs allow a team or organization to track their progress toward a goal and know earlier when to change tactics.
- Stretching: OKRs empower teams to set goals that stretch beyond BAU – or “business as usual” – and make significant, meaningful change.
What is KPI
KPI stands for – Key Performance Indicator. It is a measurable value that demonstrates how effectively an organization is achieving key objectives.
Organizations use KPI (Key Performance Indicators) to evaluate their success by comparing their results to the set objectives. Understanding what KPI stands for is very important, since it sets the basis for measuring performance.
KPI (Key Performance Indicators) could be either Leading or Lagging:
Examples of Leading Indicators
- The percentage of managers with adequate health and safety training;
- Percentage of HSE workers with adequate health and safety training;
- Percentage of management meetings wherein health and safety issues are addressed;
- Percentage of management-worker meetings wherein health and safety is addressed;
- Number of workplace inspections or scores of workplace inspection systems such as ELMERI or TR Observation;
- Frequency of site monitoring to observed unsafe behaviour;
- Number of OSH audits performed;
- Percentage of OSH suggestions or complaints where feedback is given to those reporting within two weeks;
- Level of HSE compliance
Examples of Lagging Indicators
- Injuries and work-related ill-health in terms of LTIs, Lost Time Incident Frequency (Rate) (= number of lost-time injuries x 1,000,000 divided by total hours worked in the accounting period);
- Production days lost through sickness absence (% of total work days lost by sickness absence; this can also be specified further, e.g. for short-term sickness and long-term sickness absence);
- Incidents or near misses (including those with the potential to cause injury, ill-health, or loss);
- Complaints about work that is carried out in unsafe or unhealthy conditions;
- Number of early retirements, etc.
OKR VS KPI (Differences and Relationship)
- KPIs are a metric and OKR is a strategic framework. A metric, like a KPI, could be in your OKR framework. If you’re looking to create a broad, high-level strategic plan, then you would use the OKR framework. If you’re looking to measure the success of a project, however, you’d use a KPI.
- Similar to the OKR framework, you want to make sure your KPIs are important and relevant to your strategic objectives. Pick KPIs that truly showcase the success of your strategy. Don’t just pick KPIs that you think look good either – while it’s great to know how many people are downloading your app, for example, it’s even better to know how engaged they are with it by looking at bounce rate and retention.
- In the real world, you will have some gray areas, a twist in nomenclature can turn a key result into a KPI (or vice versa). In one OKR example above, a key result was to “Increase staff by 45 percent.” Counting the number of employees could also be a KPI. The OKR framework is simplistic and based on tracking data, and a KPI is usually a single data point, so you will find cases where there’s overlap.
- If your key results and key performance indicators start to sound similar, that’s ok. Just remember that one’s an outcome and the other a measurement—overlap the wording but not the usage of each.
Succinct Difference Between KPI & OKR
What KPIs and OKRs have in Common:
- Both should be specific, clear and measurable. We recommend using Red-Yellow-Green success criteria for every key result and performance indicator.
- You should focus on a few of each that are truly key. Both acronyms contain the letter K for key – which means both require you to make choices to focus on a few things that are most important. You should have 3-5 key results at a given time and no more than 8-12 KPIs.
- You can have OKRs and KPIs for the company, for departments or teams, or for specific roles, individuals, or projects.
- Both can help you run your business by aligning everyone around well-defined goals and clear measures of success.
- They can be set for an individual or a team, but even the team ones need an owner that is accountable for the results.
You can watch a video on the subject matter “OKR VS KPI” here for more clarity