The growth (or success) of an organization can be measured by tracking its performance over time, and understanding growth is essential for any organization to succeed in its field. OKRs and KPIs help in this regard, even though they take different routes to do the same.
It is important to note that if measuring growth is all an organization wants to do, then there are other metrics that can provide desired results. OKRs can be a lot more than just an indicator of progress, as they can actually help organizations to embrace a growth mindset and get closer to their mission statement.
OKR vs KPI: What’s the difference?
OKR stands for Objectives and Key Results, and is made up of 3 separate components — Objectives, Key Results and Initiatives.
Objectives and Key results are related – Key results indicate if the objectives are close to being achieved. Initiatives are different methods that teams can use to achieve those key results, which then will indicate how far the objectives have progressed. These initiatives are often mistaken for Key Results, and establishing the difference between both is important for employees to align their work with the objectives set.
KPI stands for Key Performance Indicator, which is a class of performance measurement metrics. KPIs evaluate the success of ongoing processes or any activity of interest to the organization (or the teams working within one). KPIs come in all shapes and sizes, providing organizations and leadership teams all over with the option of choosing the right one (or constructing one). KPIs can differ from team to team but might indicate similar values.
What is the difference between a KPI and an objective?
The difference between KPIs and Objectives is nearly the same as the difference between Objectives and Key results: While Objectives are qualitative, KPIs and Key results are easily measurable. KPIs have a numerical value attached to them (like key results). Objectives, being abstract, point towards a lofty goal: KPIs for a process or task indicate how to identify if the goal or task has been carried out.
Which is better: KPI or OKR?
There are advantages to using both, but the final call should be taken by the leadership team of the organization based on what needs to be achieved.
KPIs are straightforward and allow managers to add a way of measurement to the ongoing project so that the progress can be monitored easily. If KPIs fall below a certain percentage, managers can step in and help the team in understanding the problem better – or find an alternative way that can achieve the same result.
OKRs, on the other hand, prove useful in achieving abstract goals – the key results form the basis of measurement, and add the quantitative angle to a lofty dream or vision. While KPIs just indicate how far away from the goal the team (or organization) is, OKRs allow team members to push themselves further and provide room for creative problem-solving. The results of such a process are measured by the key results tied to the objectives.
Can you have both KPIs and OKRs?
It is common for organizations to have both KPIs and OKRs to handle the performance management aspect of their employees. As their names suggest, KPIs indicate if performance of the team (or individual employees) is at par with the expectations. If KPI is less than what is expected, managers can start interacting with the employee or team to identify what is causing the disparity between the expected value and the current low score. This way, KPIs can be used to identify areas in need of improvements, and can also be used as a new key result of an OKR set for the organization or team.
As KPIs indicate the achievement of goals (or lack thereof), OKRs indicate why these achievements are necessary. The Objectives set during adoption of OKRs are usually shorter than KPI durations, but they help in creating an association with the ’Why’. An organization that sees lower KPIs in sales and marketing can review and change KPIs which are then cascaded down to individuals, or adopt OKRs specifically designed to bring up the that performance indicator. As OKRs are considered successful if they are achieved to a 60-70% rate, the chances of employees getting overwhelmed at the scale can also be avoided.
Consistent use of both OKRs and KPIs results in effective communication between managers and employees of an organization. The continuous feedback process championed by OKRs can result in the constant review of KPIs where progress is discussed. The identification of potential challenges and opportunities follows, and goals of individual employees can be managed efficiently.
How do KPIs and OKRs work together?
KPIs and OKRs work together rather well, as there are common factors that help both processes. The Objectives and Key Results defined can also be translated into few chosen KPIs, and managers can differentiate between them based on the completion rate. OKRs, with a 60 to 70% conversion rate are considered successful and KPIs need to be 100% completed. It is prudent to use OKRs for incremental goals that push employees to improve their knowledge and skill, while KPIs can be used to keep track of processes that are not only essential in the short run but are mission critical too.
No matter what technique is chosen for performance management, the effectiveness depends upon the involvement and inclination of the leaders and managers. As long as they take the time and help their team members to set objectives and review it on a regular basis, the foundation to learn and improve can be laid. Getting the culture of learning started is the most difficult part, and with the help of managers – organizations can instil this behaviour throughout the organization. Using add-ons like UpRaise for Employee Success also eliminates the learning curve as employees can see and update their OKRs from Jira, and managers can keep an eye on the same. The ease of access removes barriers to communication and coaching, and helps both organizations and its employees alike to make the most of their chosen performance management process.