The key priority of every organization is to improve its performance consistently. The strategic framework of OKR and KPI helps in measuring the daily tasks and tracking them, thereby helping the organizations to keep an eye on their periodic performance and enhance them accordingly.
Some organizations believe that OKR and KPI clash with each other and can be replaced by one another. However, after a detailed evaluation, it makes an impression that despite being different from each other, OKR and KPI are the frameworks that work in the best interest of any organization simultaneously.
Let’s dive deeper.
Different organizations are comprised of different teams and every individual in those teams needs to work towards the same goal to fulfill the requirements of the organization. So, a framework is required that aligns all the teams and makes them work towards the common goal. An OKR framework makes this possible for success.
OKR represents Objectives and Key Results. It’s a strategic framework that is used by organizations to set measurable goals and track success. Objectives are often aspirational goals limited by the time that drives your company forward.
The Objectives are measured by Key Results.
Usually, the objective is set every quarter and measured by a set of key results. As the key results improve with time, the objective is measured and tracked with weekly tasks and plans. This process of measuring and tracking keeps all the teams aligned and makes sure to work collaboratively.
Let’s look at some examples to get a better understanding.
1. Let’s assume that your company is trying to create a new feature for your product to provide better services to your customers. You are aware of the services provided by your competitors and want to have better functionality for your product to surpass them. Now you need an OKR for those requirements.
Objective:
Create a new feature with an improved design
Key Results:
Now you have the goal for the quarter where you can work and measure the progress on weekly tasks. You can set another OKR in the next quarter for the success of your product with new features and better functionalities.
Let’s take a look at another example.
2. Let’s assume you want to bring more leads to your company. After analyzing the data, you realized that some changes need to be made with current marketing plans while adopting new ideas and making new strategies with different channels.
Objective:
To carry out a new email campaign.
Key Results:
The objectives in both examples are aspirational and time-bound and the key results are measurable and value-based. These will help in making the plans which will be strategic and based on prioritizing weekly tasks.
There are majorly two types of OKRs- Committed OKR and Aspirational OKR. Understanding them separately helps in setting the OKR for the requirements.
Committed OKRs are the objectives that are decided by the whole team and are achieved 100%. They can be achieved in a set interval of time and are more prone to success with less room for failure. For instance, 80% of the people replied positively to the survey conducted. Once these OKRs are achieved, then new OKRs are set for the next quarter.
Aspirational OKRs are more about taking bigger risks to reach the goal. But failing in between is somewhat expected when these aspirational objectives are set. Despite the situation, these shortcomings are recognized for the audacious attempt to think out of the box and get closer to the main goal. For instance, to get 10 big customers and to improve our product to the competitors.
OKR is a goal-setting framework that helps every organization aim high, enhance their performance, and achieve challenging goals. Following are some of the benefits an organization receives by using the OKR framework.
With continuous change in the business scenario, it’s important to be on the track to success. Setting the goals and tracking them with OKRs- helps you to focus on important tasks and provides you the flexibility to make the changes rapidly if necessary. OKRs make it easy for product managers to shift the time-bound targets if some blockers are noticed and provide freedom to the individual to try new tools and make the best out of the opportunities.
OKR set the priorities of the task straight. With the number of tasks for different teams, it is easy for the teams to deviate from the path and walk in different directions. But with OKR, all the teams work towards the same goal in the right direction for better organizational growth with a more innovative and efficient approach.
OKR is a performance management system that helps in setting specific objectives and key results for each team and department and helps businesses to better align their goals with their actions. By doing this, each team knows what they need to do to contribute to the overall goal of the organization. The OKR framework also encourages communication and collaboration between teams.
Transparency comes with effective communication that is directed by OKR. Discussing the quarterly company objectives with the problems that are faced, what are the best solutions, how to improve our current features, and what methods will help to achieve our goals, creates a productive environment among teams and individuals.
While working with OKR, all the teams are made to think about how can they come up with effective approaches to achieve the company objectives. Setting the company objectives with measurable outcomes leaves a lot of room for innovations in achieving the goals.
KPI represents the Key Performance Indicator. They are more specifically the numeric values that are set for individuals, different teams, and businesses to track their performance. These indicators help you observe and analyze how far you are from achieving your goals. KPIs are one of the ways for the stakeholders to keep track of the business performance and identify the areas where they need to improve.
KPIs should have a defined data source so that there is no uncertainty in measuring the goals and tracking them. There are many different KPIs that companies can track, and the specific KPIs that are used will vary depending on the industry and the goals of the company.
Let’s look at some examples.
KPI for marketing:
KPI for Sales:
Like marketing and sales, you can have the KPIs for customer service, finance, and IT, to track your business success. With the few starting points for KPIs, it is important to have detailed metrics so that you can evaluate if you are actually on the path to achieving the goals. KPIs give a clearer picture of your organization’s strategic performance and empower you to make agile decisions to impact your team’s success.
There are several benefits of KPIs. By setting and measuring KPIs, organizations can improve their performance in numerous ways. Take a look at some of the benefits below.
When KPIs are set for individuals, it boosts their morale and encourages them to work toward the goal more innovatively. Setting achievable KPIs increases the communication and collaboration between the team members. When it is known that they have met the goals, it increases the overall performance of the individuals and the teams.
One of the main reasons to have KPIs is that it helps in evaluating performance. A good KPI is measurable and trackable, whether it’s marketing, sales, or customer service, KPI allows you to evaluate how far you are from your goals. If any blockers are detected or things are not going according to the plan, KPI helps the teams to make decisions on different strategies.
KPI provides the data with which it’s easy to figure out the reasons for the decrement in the performance of individuals or teams or departments. It helps to keep everyone on their toes and ensure that everyone is working towards the same objectives. When used effectively, KPIs can be a powerful tool for driving better performance.
Sometimes, it is difficult for all teams or departments to be aligned when working towards the same goal. Once the objective has been set, KPI helps in breaking down the main objective into smaller and achievable tasks and helps you in making the strategies accordingly.
KPIs are developed according to different conditions. Some KPIs are used to measure the monthly improvement toward the goal while others are used for long-term goals.
Some of the most common types ok KPIs are stated below.
The strategic KPIs keep track of long-term organizational goals. When the KPIs are developed to track revenue, market share, and return on investment, they are considered strategic KPIs. They are usually supervised by the executives to find out how the organization is performing under any circumstances.
An operational KPI conveys the performance of the organization in the short term, either daily, weekly, or monthly. They are used in different industries to track organizational processes, improve efficiency and help businesses to understand them better and contemplate the outcomes.
The financial KPI conveys the financial performance of the organization and provides information on the operational expenses, total sales, profit gained, and working capital. The information on the numbers helps in optimizing the company’s financial goals and objectives.
Setting the KPIs and measuring them is a crucial part of every business but doesn’t have to be a time taking process. What’s more important is integrating the KPIs into your business either by using CRM or a spreadsheet. When you have an overview of the metrics that need immediate improvements and the ones that can save more time, it will help you to work more efficiently.
OKR and KPI both play an important but distinct role in accelerating the success of any organization to reach its goal. Let’s take look at two main reasons why they are apart from each other.
Firstly,
Secondly,
Briefly, OKR and KPI are set for different purposes. OKR helps organizations determine what they want to achieve and what their success will look like, while KPI highlights how well they are managing their success.
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