OKR vs KPI. Can they work together?
The companies have been using OKRs and KPIs for several years now. These concepts are very clear but the reality is that when you start working with them you may not realize how they relate to each other. As you can see in other of my articles, I usually go deep with the separate concepts, and later do an explanation about how they relate. In this article I’m going to do it the other way around, I’m going to start addressing the elephant in the room and then I will go deeper with the concepts.
What is the relation between OKRs and KPIs?
OKR is a strategic framework, whereas KPIs are the measurements that exist within the framework.
What does it mean, OKR is a framework?
OKR stands for Objectives and Key Results, and it is a popular goal management framework that helps companies implement and execute strategies.
An Objective (The “What”) is the description of what you would like to achieve in the future. It is your big goal, the main thing you want to accomplish.
A Key Result (The “How”) is a measurable outcome required to achieve the Objective. It contains the metrics with a start and target value, the benchmarks you will track on the path to hit your main objectives. Typically, there are between 3 to 5 per goal.
The following article gives you more information about OKRs.
Remember that the ultimate goal of the OKR framework is, for every member of the company, to understand the objectives (goals) of the organization through a set of defined, specific and measurable actions.
What is a KPI?
KPI stands for Key Performance Indicator, a measurable value that demonstrates how effectively a company is achieving key business objectives. Organizations use KPIs at multiple levels to evaluate their success at reaching targets. High-level KPIs may focus on the overall performance of the business, while low-level KPIs may focus on processes in departments such as sales, marketing, product development, and others.
Defining key performance indicators is not an easy task. Every KPI should relate to a core specific business objective with a performance measure.
Follow these steps when defining a KPI:
What is your desired outcome?
Why does this outcome matter?
How are you going to measure progress?
How can you influence the outcome?
Who is responsible for the business outcome?
How will you know you’ve achieved your outcome?
How often will you review progress towards the outcome?
Can OKRs and KPIs work together?
Yes they can. OKRs and KPIs can work well together. If a KPI result indicates a need for improvement, it may become the “key result” of a new or existing OKR.
For instance, if KPI results indicate the subscriptions of your app are flagging, the product management team might develop an ambitious OKR focused on improving overall product development, marketing, or customer service, all of which could include key results based on meeting the existing KPI. Similarly, meeting an OKR objective may indicate a need to develop new KPIs to measure the company’s new reality.
The effective use of OKRs and KPIs is an influential tool for goal management. But it requires to keep an open and consistent line of communication between managers and employees to share feedback, discuss progress, and identify potential challenges and opportunities.