Two concepts stand out when it comes to managing goals and performance. These are OKRs and KPIs. Comparing them is a hot topic that comes up in most performance management meetings, but the biggest challenge is how to clearly delineate the difference between these two acronyms which is why in this article, we will focus on the similarities and dissimilarities between OKRs and KPI as well as concrete examples of OKRs and KPI.
KPI: Key performance indicators are a tool for evaluating the performance of an organization, an individual, a program, a project, an action, etc. They are used to measure the success of everything within a team, such as sales goals or search engine flows. KPIs are generally quantitative, using simple numbers, ratios, or percentages depending on their usage, indicators can serve as a compass, progress bar, radar, tunnel, histogram, and curves.
There are different examples of KPIs in all companies. Your KPIs should be spread across all parts of the company. Here are a few examples:
- Sales revenue: the total amount of sales you make – from an accounting point of view, it is only business transactions with customers. Revenue should be tracked monthly, quarterly, and annually.
- Number of sales: number of transactions concluded based on signed official contracts. We strongly advise you to follow the number of sales by the accounting period and by category, such as the number of sales by region, by type of organization, by product, etc. This will help you determine which sales channels are your strongest and weakest.
The term OKRs consists of two words, “Objectives” and “Key Results,” and describes a method for determining and managing objectives. It is a goal management framework increasingly popular that can be deployed across an organization to drive performance improvement. Its effectiveness in all aspects is indisputable. It can be adjusted over time thanks to regular check-ins, preferably weekly. Objectives must be defined in a qualitative, ambitious, inspiring manner, and key results must above all be measurable. One recommendation is that an organization can have three to five high-level objectives and three to five key results at most per goal.
OKRs are a continuous cycle that accelerates the growth of your organization and makes it more effective. Here are some cases of OKRs:
Objective: Grow our global corporate business
- Hit company global sales goal of $100 Million in Sales
- Achieve 100% year-to-year sales growth in the EMEA geography
Objective: Build a high corporate culture
- Launch an ongoing 2-way closed-loop feedback process
- Celebrate “small wins” and any progress every single week
OKR vs. KPI: what are the similarities?
Both OKRs and KPI are used as management tools and as goal setting methods. They help achieve goals measurable in organizations and can be defined for different levels of a company. OKRs serve as a framework for improving KPIs and allowing people to focus on priority KPIs at all levels and across all functions of the company. They both enable growth to be measurable.
OKR vs. KPI: what are the differences?
OKRs are not equivalent to KPIs. KPIs are a vital element in measuring the success of a business. KPIs are carried out downstream and aim to describe and verify the expected measurable result. The KPIs are filled in most of the time with a certain lag.
On the other hand, OKRs make it possible to define quarterly strategic objectives and the corresponding key results. They are the main objectives that drive the company’s vision and mission in a bottom-up approach keeping everyone aligned and focused on the company’s top priorities.
Furthermore, OKRs are a strategic management framework while KPIs are measures that exist within a framework. In this way, KPIs are an essential component of OKRs. Your OKRs will populate the KPIs you select to track progress and performance. One gives life to the other.
It is, therefore, essential that each organization understands the two tools and puts them into practice more precisely.
OKR vs. KPI: which is better?
KPIs help monitors performance and identifies problems and areas for improvement, while OKRs help solves issues, improve processes, and drive innovation. Due to their complementarity, OKRs and KPIs are natural companions. Any business looking for success should be able to adopt these two tools. So this is not about creating a duel between OKRs and KPIs. For more growth, it is necessary to favor a correlation between these two management tools, which have already proven themselves in several large successful companies.
You are now aware of how OKRs and KPIs work together to help organizations grow with innovative, measurable, and ambitious goals. If you have not yet defined your objectives for this quarter, you can do so directly with Happierco.