Business leaders use objectives and key results to set goals and identify the necessary measures to realize these goals. Key performance indicators are better suited for identifying specific targets. Find out how an OKR differs from a KPI and learn about the pros and cons of each methodology to help you determine the right approach to keep you on track toward achieving any goal.
What Are OKRs?
OKRs are a goal-setting methodology centered around an objective supported by several key results. The goal is an action-oriented and concrete statement of your goal.
Key results for OKRs are benchmarks that help you progress toward realizing an objective. Each key result should be measurable and verifiable. You should regularly reassess key results, which can evolve. Virtual meetings can be a convenient way to check in on the progress of OKRs.
OKRs are time-bound. Objectives tend to be long-term goals and can span a year or longer. Key results function on a shorter scale, such as quarterly. According to the original methodology developed by Andy Grove at Intel, key results are either fulfilled or unfulfilled during a set time window.
What Are KPIs?
KPIs are metrics for evaluating success. There are two approaches to KPIs: leading and lagging; leading KPI meaning future goals, and lagging referencing past performance.
This methodology typically consists of numerical expressions of measures and targets. Each indicator should account for the source of data and frequency of reporting. A best practice for KPIs is identifying the stakeholders responsible for setting, reporting, and refining indicators.
KPIs differ from OKRs because these indicators are not directly associated with broader goals or objectives. Indicators also tend to be continuous rather than time-bound, although you should update metrics and targets regularly.
Pros & Cons of OKRs
The main advantage of OKRs is that this methodology extends from overarching long-term objectives down to short-term key results. OKRs encourage you to identify specific steps to take toward any objective. At the same time, OKRs are flexible enough to focus on aspirational, committed, or learning objectives.
Aspirational objectives encourage stakeholders to stretch towards lofty achievements and may take longer than a year. Committed objectives are goals within close reach. Learning OKRs can lay preliminary groundwork for future committed or aspirational objectives.
When using OKRs, aligning key results with a clear objective is essential. If you do not have a clear objective in mind or want to improve the performance of an ongoing project that does not require a new objective, KPIs could be a better approach.
Pros & Cons of KPIs
The main advantage of KPIs is that standalone metrics can apply to any goal, process, or project. You can use this methodology to monitor the status of plans, processes, or projects independently of overarching objectives.
There are three main types of KPIs: functional, specific to a process or department; operational, for monitoring overall performance; and strategic, which refers to high-level assessments.
A significant shortcoming of KPIs is that it is harder to orient indicators toward large-scale goals. This methodology targets specific metrics, whether taking a lagging or leading approach or simultaneously looking backward and forward.
When To Use OKRs and KPIs
OKRs identify long-term objectives and short-term key results, whereas KPIs set specific standalone targets. Many businesses combine these methodologies by using KPIs to inform OKRs. You can bring stakeholders together in a virtual meeting and use custom virtual office backgrounds to encourage participants to focus on setting overarching OKRs or specific KPIs.