KPIs and OKRs are sometimes seen as alternative concepts, from which companies need to choose one. In fact, both provide different perspectives on a company’s performance and success. Therefore, connecting their individual metrics creates a holistic picture of a company’s performance and allows for effective improvement. That’s why you should not choose between KPIs and OKRs, but find a way to integrate them and leverage both.
Navigating the future and controlling the past
KPIs have long been serving as an organizational health check by measuring vital aspects of success. They enable companies to translate their business into quantifiable results, such as revenue growth or customer satisfaction. These are cascaded down to KPIs for departments, teams and employees to determine their influence on the overall performance.
The company KPI of revenue growth, for example, can be broken down into various subordinate KPIs. These may include the number of leads from the marketing team and the conversion rate of the sales team. Customer satisfaction, on the other hand, rather depends on quick turnaround times from the service team and product usability.
However, KPIs only provide a look at the results of the past and fall short in providing actionable insights and strategic guidance to steer these results proactively and on the go. If your goal is to increase revenue by 20 per cent within a year, you will only know if you have reached this goal, but gain little knowledge as to why you did.
OKRs are metrics that help you to course-correct in real-time. They focus on the value a company/team/employee wants to provide, such as facilitating the usage of an app for customers. With short cycles, they have become increasingly popular to focus on customer needs and adapt to quickly changing market environments in the digital age. They rather focus on qualitative objectives which they want to achieve with quantifiable Key Results and provide an idea of the direction you want to take to reach a destination.
For a detailed comparison read our article OKR vs KPI – a delineation.
KPIs and OKRs provide a more comprehensive picture
So, KPIs allow you to look back and measure the success of what you have done before. OKRs, on the other hand, set a strategic direction of what you want to achieve. Therefore, it makes sense to use them together in order to improve organizational aspects that benefit certain performance indicators.
Let’s assume you notice that customer satisfaction has stagnated over the past six months. Analyzing the relevant KPIs feeding into customer satisfaction gives you an idea of where to put your focus. If your customer service KPIs are high as ever, but the engagement of your users is decreasing, it gives you an idea of where to focus over the next OKR cycle. You can draft a joint OKR for your product and IT team to activate your users and facilitate the usage of your product.
If you want to find out how to make the best of your OKR cycle click here: How to create an effective OKR cycle
Keep in mind, though, that the results might not immediately show after one cycle. Depending on the value you want to create you should rather check on long-term development of the KPI that you want to create new value for. Also, be careful to not formulate your Objective to generic or broad. “Increase customer satisfaction” might be a desirable goal state but does not focus on a specific value. Rather pick one aspect for one cycle at a time.
The resulting OKRs should reflect the value you want to create for the customer with Key Results that indicate progress. As an intermediate step, it is worthwhile to outline a problem that stands between the status quo and the KPI. This problem can serve as inspiration for the OKRs that address this problem over a longer period of time.
KPIs and OKRs can work well with each other if you know how to use their individual characteristics to the benefit of the organization. However, it should always be borne in mind that OKRs might have a delayed effect on some metrics. Don’t expect your customer satisfaction to jump through the roof once the cycle is finished. Since OKRs describe a qualitative goal, KPIs are only to a certain extent influenced by OKRs. They put the spotlight on one or several aspects with implications to the higher KPI. Nevertheless, it should not be a question which one to dismiss, but how to combine both for successfully steering an organization in the long run.
If you want to hit the ground running with OKRs, don’t miss our article “These are the 8 most common pitfalls with Objectives and Key Results”
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