It’s the start of the new quarter and your company is already struggling to gain momentum.
Product launches are chaotic and disorganized. Departments are constantly starting new projects and dropping them mid-way.
The execs are tired. Your team is tired. You aretired.
Is there any way to get your organization pulling in the same direction?
According to research, people who write down their goals and engage in weekly progress updates have a much higher success rate than people who don’t. While the same process can be applied to a company, OKRs vs KPIs is an ongoing debate in a lot of departments.
How do these measures work? Which metric should your company be using? Keep reading to find out.
What Is an OKR?
OKR stands for the words “Objectives and Key Results”. What this means for your company is that a fully realized OKR will be split into two parts — the description of what you’re trying to achieve and the business metrics you’ll use to measure your success.
On paper, this might look simple enough. But in practice, creating high-quality company OKRs can be complicated.
According to Google, a well-constructed OKR should be:
- Public
- Measurable and capable of being graded on a scale
- Ambitious enough that the end-of-quarter outcome may be in doubt
This has the end result of spurring progress while setting the agenda for your company. And once the framework is up and running, annual and quarterly OKRs can quickly become an effective means of achieving organization-wide productivity.
What Is a KPI?
KPIs, or key performance indicators, are what organizations use to measure their successes. Here’s an example of what this might look like:
Let’s say that you’re a B2B SaaS company that relies on a traditional sales team to generate leads. Revenue lift, new sign-ups, and email subject line open rates are just a few of the numbers, or KPIs, that your sales leads would likely be interested in.
It’s easy to think that because KPIs are often number-based, they’re always a qualitative measure. But a KPI can be expressed in more general and descriptive forms. To summarize Investopedia, the purpose of a KPI is to keep track of how well the company is reaching its goals.
In most cases, an excellent KPI will be:
- Tracked along with your OKRs
- Designed to measure the information you need
- Specific
- Owned by identifiable parties
For this reason, regular KPI management is a necessity for organizations that want to make data-informed decisions.
Common OKR and KPI Mistakes to Avoid
A lot of companies discover OKRs and KPIs and go all in. But when these measurements are approached the wrong way, businesses can quickly find themselves becoming less productive over time. Here are three mistakes you’ll want to avoid at all costs when you embed OKRs and KPIs into your business:
1. Making Metrics Too Easy
Whether you’re creating a new OKR or thinking over your KPIs, it’s important to make sure that you’re not setting the bar too low. If your team looks at its goals and says, “Yeah. We can sleepwalk our way through this.”, you’re not challenging them enough.
2. Failing to Centralize the Numbers
There’s nothing worse than looking for a report and finding out that the documents just aren’t where you thought they were. Many organizations are good at keeping their mission statements and codes of conduct in the same place. The same care should be taken to ensure that your OKRs and KPIs aren’t scattered across a dozen different documents.
Fortunately, there are tools out there that make it easier to track and visualize a company OKR’s key milestones.
3. Not Taking the Results Seriously
If your OKRs have been set up correctly, your team shouldn’t have a perfect completion rate. But if your organization is struggling to meet its targets or grossly underperforming on its KPIs, there’s likely a problem with either your expectations or your internal productivity. These business metrics could be the canary in your coal mine — don’t ignore these early warning signs that something is amiss.
OKRs vs KPIs: Which One Does Your Organization Need?
Think fast.
Your company’s decided that it wants to increase its revenues this quarter. Are you using an OKR or a KPI? On a day-to-day basis, the answer here is that “It depends.”.
KPIs are business metrics. Meanwhile, OKRs are designed to help businesses plan and execute their larger general strategies. This means that OKRs and KPIs may have substantial overlap, but they aren’t exactly interchangeable.
If you’re coming up with an action plan or setting a general goal that will, if successful, help you increase your market share, OKRs are probably your best bet. The framework allows you to set your goals and create a framework that will let you know if and when you’ve met your objectives.
That being said, if you’ve already got a project underway — let’s say you’re validating a new marketing strategy or you’re rolling out a new feature — you don’t need to set the table or create an agenda. You just need an understanding of whether the project has been successful. For this sort of task, you need a KPI.
So going back to our earlier example, raising revenue within the next quarter is a strategic goal. As such, you would probably be creating a new OKR.
Using OKRs and KPIs to Measure Business Performance
If it hasn’t happened to your company yet, at some point it will. You’ll be trucking along from quarter to quarter, and in some cases, you’ll even be successful. But even as you’re hiring more staff and rapidly expanding your client list, it’ll still feel like your organization just isn’t achieving as much as it should be.
OKRs and KPIs are a useful means of making sure that everyone in the company stays on the same page. When push comes to shove, the question for your company likely shouldn’t boil down to OKRs vs KPIs. Your department and your company will likely benefit more from making OKRs and KPIs a part of its goal-setting process.
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