What is the difference between KPIs vs OKRs vs Goals?
Every organization needs to connect strategy with execution more effectively.
How can this be done?
Organizations will use KPIs, OKRs or Goals to clarify business success and align teams to desired actions.
Which method should you use? Is it possible to use a mix? What should you do?
Execution is everything.
What are KPIs?
A Key Performance Indicator (KPI) is a measure of performance on a given metric.
A KPI will evaluate the success of an organization against a specific activity.
KPIs are commonly used with 20th century and corporate approaches like balanced scorecard, providing a mix of measures around finance, the customer, learning & growth and business process.
KPIs are linked to strategic pillars or goals an organization is working towards, they direct where focus should be and they measure against desired targets.
Are KPIs useful? Yes, any measure is useful if used in the right way.
What are the pros of KPIs?
- They provide a clear standard of overall performance.
- They are common and easily understood.
What are the cons of KPIs?
- They are static, being set annually.
- They are top down only.
- They are a lagging indicator as they only measure the past.
- They are untimely in that they are typically only assessed once a year.
- They are often overused with executives citing too many KPIs as the primary reason not having clear focus on strategy.
- They can create multiple different methods of progress reporting making it hard to have consistent clear picture.
What are OKRs?
Objectives and Key Results (OKRs) is a goal setting framework used to achieve ambitious goals.
OKRs have emerged in the 21st Century as an extremely effective framework to execute high growth in agile and adaptive environments. OKRs have been commonly used in technology companies and in the last 10 years have grown rapidly into other sectors.
OKRs are a goal setting framework to communicate, operationalise and align on company strategy in actionable and measure manners.
OKRs are made up of Objectives and Key Results.
The objective is “what” you want to achieve.
The key result is “how” you will achieve. They are not a task; they are the measures of the work to reach the goal.
What are the pros of OKRs?
- They are easy to track.
- They can be both top down and bottom up.
- They can be any length of time but ideally have a quarterly focus.
- They work from the C-Suite all the way to the frontline.
- They align everyone to strategic priorities.
- They achieve aspirational results.
- They are a wholistic framework of goal management.
- They focus on only that which matters most.
- They track progress to goals and provide both leading and lagging data.
What are the cons of OKRs?
- They are not widely known.
- The language of objective and key result can be confusing.
- They are often seen as complicated when not understood.
- They do not include tasks.
What are goals in Waymaker?
However, we use the plain language of goal, outcome, and task.
A goal (objective) is your aspirational target (where you want to be).
An outcome (key result) is the tangible measure/s of what you must deliver to achieve the goal represented by a number (#), percentage (%), or currency ($).
The tasks are the project plan to operationalise the outcomes and therefore your goal.
Simple is good.
The best way to make a vision a reality is to build it one goal at a time.
Goals in Waymaker are the building blocks of strategy and execution.
When you create an idea during a strategy workshop, it starts life as a backlog goal on the roadmap.
When that goal is prioritised and committed or in-progress, it automatically appears on the strategy roadmap owned by a user.
Goals in Waymaker are connected in your own strategy cloud.
No-one works in isolation and no goal is ever alone.
In Waymaker you can see how goals are connected to each other, easily seeing what is impacting success down the line or up the line.
Can an organization use KPIs and OKRs (Goals) together?
Technically, yes. But it is much simpler and more effective to set good goals.
KPIs and OKRs are different approaches to business performance management.
KPIs are not the same as goals.
The goal is what you hope to achieve; the KPI is a metric to let you know how well you’re doing working towards that goal. Metrics shouldn’t become the targets (a goal).
That’s why KPIs are a bad end game.
Goals are a great end game.
KPIs can be used as the markers of success on the strategic goals, while goals can be used to help leaders and teams plan a way to hit a strategic goal.
KPIs are the measure of strategic business success, OKRs or goals become the path to get there. KPIs should be woven in amongst the outcomes of goals.
In Question 4 of Waymaker’s 7 Questions you will ask of your team, “What is our business model, is it creating value, what metrics tell us this ….. “
The KPIs of the organization are the metrics that tell you if you are creating value through your business model. That value will be to customers, employees and stakeholders (inc investors).
A great goal is:
Build a world class customer experience.
The results or outcomes that tell us if we have a world class customer experience could be:
1 Achieve market leading NPS of +55 30 days after product purchase
2 Reach average CLV of $10,000
3 Increase revenue 30%
Here is a summary of KPIs vs goals (OKRs)
|Goals are how business leaders equip and empower others to meet and exceed a KPI (measure).||KPIs are how a business can set a standard of overall performance.|
|Goals will help improve performance and drive change.||KPIs are business metrics that reflect a desired performance.|
|Goals are a critical thinking tool that helps teams align their forward actions to an ideal state and have the measures in place to track performance to it, providing a leading indicator.||KPIs are a performance evaluation framework anchored on only lagging indicators (what happened in the past).|
|Goals are reviewed regularly during weekly or fortnightly check-in meetings allowing the team and individuals to ensure any new information, risks or roadblocks are evaluated and new tasks created to execute against.||KPIs are assessed on past performance once a year.|
|Goals follow a simple rule of 3 x 5. No more than 3 goals per person with no more than 5 outcomes per goal.||KPIs can be easily overdone causing undue stress or disengagement (as in too many per person to be effective).|
|A common goal framework creates a single source of truth where an individual and team report progress in the same format. Leaders can view their organization progress in seconds, at any time and find gaps for support in minutes.||KPIs used alone create multiple different methods of reporting across the business.|
Build for the 21st century – a shift in thinking
There is a shift in thinking we need to make to move from traditional 20th century corporate mindset to the 21st century adaptive & high-performance organization.
This is the shift we describe the military (British) making when they established a new way of leading on the battlefield. Read more about that here.
The shift requires embedding a continuous improvement framework in to the organization to align teams to meet and exceed KPIs.
As part of the embedded framework, you will need.
1. Quarterly health check – diagnose the business to identify gaps and improvement opportunities.
2. Quarterly strategic priorities – ask an answer the 7 Questions, determine the highest value actions to deliver on the vision.
3. Quarterly goal planning which would include a retrospective on past quarters performance.
4. Weekly/fortnightly goal review sessions which are designed to keep teams working together to identify risks and roadblocks to their goals and help remove them.
5. A culture of leadership development and continuous improvement.
Then practice the Waymaker way; “Show the way, build the system, train the leader, hold them accountable, help the win.”
If you do this, get used to winning, because it is what you will do naturally.
FAQs on KPIs vs OKRs vs Goals
Are OKRs the same as KPIs?
No, OKRs are a goal setting methodology. KPIs are measures against an organization’s objective.
Are KPIs part of OKRs?
No, although an OKR or Goal will have measure, a metric, that is either a currency, value, or percentage.
What matters OKR vs KPI?
Goals matter more than KPIs. Goals stretch people towards a better future, KPIs tell you what happened in the past.
Is a KPI the same as a SMART goal?
No, a smart goal is another goal setting method that stands for Specific, Measurable, Achievable, Realistic, and Timely.
Is an OKR just a SMART Goal?
No, OKRs are generally set 30% above achievable and realistic. OKRs lift outcomes beyond the expected.