OKRs Vs. KPIs: Breaking Down The Difference - ClearPoint ...

OKR is the acronym for objective and key results—more specifically, an objective is tied to key results. OKR is a strategic framework, whereas KPIs are ... Skiptocontent 4MINWATCHOKRsVs.KPIs:BreakingDownTheDifferenceComparingOKRsvs.KPIsisanapplesandorangesdiscussion.Learnabouttheusages,similarities,anddifferencesofthesetwoacronyms. AndrewFoley Andy,SeniorProductManager,leverageshis7+yearsofperformancemanagementexperiencetoensurethatClearPointcustomershavethefeaturestheyneedinClearPoint'sstrategicplanningsoftware. FILEDUNDER BalancedScorecardStrategyReporting ComparingOKRsvs.KPIsisahottopicyou’llhearinperformancemanagementmeetings,butit’sanapplesandorangesdiscussion.Whiletherecanbeoverlap(moreonthatlater),thesetwoconceptsarereallyverydifferent.Keepreadingtolearnhow. InThisArticle WhatisaKPI? WhatisanOKR? KPI&OKRBestPractices KPIs OKRs AFinalWord WhatisaKPI? Anacronymforkeyperformanceindicator,KPIsareusedtoevaluateperformanceovertimeforanorganization,individual,program,project,action,etc.Whileyoumayhavesomeoutliers,theseindicatorsshouldusually: Linktostrategicobjectives Directwheretofocusresources Bemeasuredagainsttargets WehighlyrecommendyoumakeyourKPIsmeasurable.Addingquantitativevaluemakesiteasiertoprovidecontextandcompareperformanceforwhateveryou’remeasuring.CreatingqualitativeKPIsispossible,butnotadvisablebecausethisstructurecanleadtoconfusionandsubjectiveinterpretationsofdata. KPIExamples TherearenearunlimitedexamplesofKPIsacrossallindustries.AKPIcouldtrulybeanyquantitative(andinrarecases,qualitative)measureacompanyusestoevaluateitsprogressandsuccessfullyreachitsgoals.It’simportanttonotethat,unlessyouhaveaverysmallcompany,yourKPIscanandshouldbebrokendownbydepartment(andbyindustryifyouareaconglomerate). HerearesomecommonKPIexamplesforavarietyofindustriesanddivisions: RetailIndustry:revenuepersquarefoot,same-storesales,salesperemployee HRDepartment:attritionrate,employeeperformance,averagerecruitmenttime SalesDepartment:customerlifetimevalue,salesrevenue,callsmade TechnologyIndustry:monthlyrecurringrevenue,customerretentionorchurn,ticketresolutiontime HealthcareIndustry:patientwaittime,averagetreatmentcharge,numberofeducationalprograms WhatisanOKR? OKRistheacronymforobjectiveandkeyresults—morespecifically,anobjectiveistiedtokeyresults.OKRisastrategicframework,whereasKPIsaremeasurementsthatexistwithinaframework. OKRisastrategicframework,whereasKPIsaremeasurementsthatexistwithinaframework.ClickToTweet OKRisasimplistic,black-and-whiteapproachthatusesspecificmetricstotracktheachievementofagoal.Typically,anorganizationwillhavethreetofivehigh-levelobjectivesandthreetofivekeyresultsperobjective.Keyresultsarenumericallygradedtoobtainaclearperformanceevaluationfortheobjective.OKRsare: Alwaysquantifiable Abletobeobjectivelyscoredona0-1or0-100scale Timelined Ambitious(ifyoueasilyachieveyourobjective,itwasn’taggressiveenough) TheOKRframeworkwaspopularizedbyGoogleandIntel,butithasalsobeenusedbyAmazon,LinkedIn,Spotify,andotherhugelysuccessfulcompaniesforgoalmanagement.GenerallyspeakingaboutOKRsvs.KPIs,theformerareagoodfitfororganizationsheavilyfocusedongrowth.Nottocreateconfusion,butsometimesanorganization’sKPIsarethesameasthekeyresultsusedinanOKRframework.Keepreadingandthiswillbecomeclearer. DidyouknowfinancialKPIsarethemost-usedmetrics?Evaluateperformanceatyourcompanywithanyofthese68financialKPIs. OKRExamples OKRsarebuiltonbig-picturegoalsandtargetsthataredesignedtopushemployeesandcompaniesforward,sotheyshouldtoethelineof“almostimpossible.”TheOKRframeworkisacontinualcycleoffast,dynamicgrowth. SomegeneralOKRexamplesinclude: Objective:Becomethemarketleaderinourindustry. KeyResult#1:Record$100millioninrevenue. KeyResult#2:Increasestaffby45percent. KeyResult#3:IncreasemarketcapsufficientlytoenterS&P500. Objective:Developautonomousvehicles. KeyResult#1:Hire10artificialintelligencesubjectmatterexperts. KeyResult#2:Investanadditional$500millioninresearchanddevelopment. KeyResult#3:Rolloutprototypebyfiscalyear-end. Objective:Increaserevenueby30percent. KeyResult#1:Acquire50newcustomers. KeyResult#2:Increasemarketingleadsby20percent. KeyResult#3:Increasecustomerretentionto85percent. KPI&OKRBestPractices KPIs WhenitcomestoKPIs,do: KeepyourKPIstoaminimum.Onlycertaindataisactuallykey.WerecommendidentifyingonetotwoKPIsperobjective—measurementsthatwilltrulyhelpyoudeterminewhetheryouaremakingprogress.Ideallyyouwillhave15to25KPIsononescorecard. MakesureKPIsareattainableyetchallenging.Youremployeesneedatargetthat’smotivationalandmakesthemstretch,butonethat’stoofaroutofreachwillonlyservetofrustratepeople. Beclear.ProvidecontextforeachKPIbytyingittoanobjectiveandcomparingittoatarget(forexample,anindustryaverage,year-over-yeargrowth,etc.). FrequentlyreviewKPIsandupdateasnecessary.Strategymeetingsareagreattimetoreassessyourperformancemeasures.IfaKPIdoesn’tseemtobeagoodindicatorofperformance,orifthelinkedobjectivehaschanged,thenyoumayneedtoadjustorretireitaltogether. Useasoftwarereportingtooltosimplifytracking.ClearPointproducesasingle,clean,andcohesivemonthlyKPIreportthatsavestimeforeveryoneandaidsindecision-making.Here’sanexampleofwhataKPIreportlookslikeinClearPoint: Can’tdecideiftheKPIsyou’reconsideringwillbeeffective?Usethesevenquestionsinthisarticleforguidance. Wealsorecommendthatyoudon’t: Trackeverysingleperformanceindicatorinyourorganizationinthesameplace.Attheexecutivelevel,onlytrackandreportontheindicatorsthathavethebiggestimpactandvalueforyourcompany.YoucancreateadditionalKPIreportsanddashboardsfordepartment-levelgoals. UsespreadsheetstotrackKPIs.Unlessyou’rejusttryingoutKPIsforthefirsttimeoronatrialbasis,spreadsheettrackingwillonlymaketheprocesshardertomanage. OKRs WhenitcomestoOKRs,werecommendyoudo: StartwithafewspecificobjectivessoOKRsareeasiertoimplement.Youcanalsokeepitsimplebystartingwithenterprise-levelOKRsonly,andthenaddlevelsfordepartments(andevenindividuals)asyougainexperienceandbuy-in. Thinkintheshortterm.OKRcyclesrunonamonthlyorquarterlybasis.Sowhenyou’recreatingthem,thinkaboutthegoalsyoucanreachwithinthattimeframethatwillmakeameaningfuldifferencetoyourcompany. MakesurethatexecutivessupportyourOKRs.OKRsessentiallyoutlinethepathyourcompanywilltaketoaccomplishitsgoals.Ifyourleadershipteamisn’tboughtin,theywon’tbewalkingthesamepathasyou,whichwillinevitablyleadtofailure. UsestrategyreportingsoftwaretosimplifyOKRmetrictrackingandreporting.BelowaretwoviewsofOKRreportinginClearPoint.Wemakeitsimpletogatherdataandbetransparentaboutprogress,bothofwhicharenecessaryingredientsfortheOKRframeworktosucceed. Wealsorecommendyoudon’t: BuildOKRsinavacuumwithoutvisibilityintowhatotherpartsofthebusinessaredoing.OKRsshouldbecreatedfromthetopdown.StartbydefiningyourOKRsforyourorganizationoverall,andthenrollthemdowntothedepartmentlevel,teamlevel,andmaybeeventheindividuallevel. UsetheOKRframeworkifyourorganizationisfocusedonmaintainingitsofferingsorgrowingslowly.OKRsarebetterforfastgrowth.YouwilllosesteamwithOKRsifyouaretrackingthesameelementwithregularityeachquarter(100%trashpickupforacity,forexample). AFinalWord WhencomparingOKRsvs.KPIs,we’veusedsomeclear-cutexamples.Intherealworld,youwillhavesomegrayareas—atwistinnomenclaturecanturnakeyresultintoaKPI(orviceversa).InthefirstOKRexampleabove,akeyresultwasto“Increasestaffby45percent.”CountingthenumberofemployeescouldalsobeaKPI.TheOKRframeworkissimplisticandbasedontrackingdata,andaKPIisusuallyasingledatapoint,soyouwillfindcaseswherethere’soverlap. Ifyourkeyresultsandkeyperformanceindicatorsstarttosoundsimilar,that’sok.Justrememberthatone’sanoutcomeandtheotherameasurement—overlapthewordingbutnottheusageofeach. Nowthatyouknowthedifferencebetweenthesetwoconcepts,youcanchoosetherightapproachforgoalachievementinyourorganization.Whateverframeworkyoudecideon,ClearPointcanhelpyoudriveitallwithourcomprehensivesystemforstrategymanagement. a WhatisanOKR? OKRhastwocomponents,theObjectiveandtheKeyResults:Objectivesarememorablequalitativedescriptionsofwhatyouwanttoachieve,andKeyResultsareasetofmetricsthatmeasureyourprogresstowardstheObjective. Doerr,whointroducedGoogletoOKR,hasaformulaforsettinggoals:Iwill_(objective)_asmeasuredby_(keyresult)_. a WhatAreKeyPerformanceIndicators(KPIs)? KPIsaremeasuresusedtoevaluatethesuccessofanorganization.KPIscanbequantitativeorqualitativeinnature.QuantitativeKPIsincludemetricssuchassalesrevenueperemployee,numberofcustomersservedbyeachcallcenteragent,orrevenue.QualitativeKPIs,ontheotherhand,mayincludecustomersatisfactionscores,qualityratings,orproductreliabilityrates. a What’sthedifferencebetweenOKRsandKPIs? KPIsareametricandOKRisastrategicframework.Ametric,likeaKPI,couldbeinyourOKRframework.Ifyou’relookingtocreateabroad,high-levelstrategicplan,thenyouwouldusetheOKRframework.Ifyou’relookingtomeasurethesuccessofaproject,however,you’duseaKPI. a WhataresomecommonmistakestoavoidwithOKRs? WhenusingtheOKRframework,youneedtobeambitiousandaspirational.DreambigwithyourOKRs!Youshouldalsoensureyourkeyresultsaretiedtoyourobjectiveswell.It’showyou’llmeasuresuccess,sobesmartaboutthemeasuresyoupick. a WhataresomecommonmistakestoavoidwithKPIs? SimilartotheOKRframework,youwanttomakesureyourKPIsareimportantandrelevanttoyourstrategicobjectives.PickKPIsthattrulyshowcasethesuccessofyourstrategy.Don’tjustpickKPIsthatyouthinklookgoodeither–whileit’sgreattoknowhowmanypeoplearedownloadingyourapp,forexample,it’sevenbettertoknowhowengagedtheyarewithitbylookingatbouncerateandretention. 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