OKRs vs. KPIs: Similar, But Not the Same
Organizations have turned to OKRs — objectives and key results — to track and measure their progress towards goals. One of the key benefits of using the OKR framework is the ability to tie progress to real world numbers that demonstrate success. Does this mean it's a simple case of surfacing key performance indicators (KPIs) and setting targets for those?
If only life were that simple.
What Are OKRs?
At their simplest, OKRs are a methodology to define a goal in a short, simple statement that is both easy to understand and challenging to achieve. OKRs serve to align your organization on reaching that vision. Key results (notice the plural, we'll return to that), are measurements to track achievement of those objectives. They should be definitive, with no grey area.
The combination of definition of what you are looking to achieve plus specific measures of success provides a clear way to track progress and eventual achievement of goals. However, as is the case with agile, a culture has emerged around OKRs that adds a broader way to achieve success.
The Culture of OKRs
While OKRs on their own don’t sound like much, they are much like user stories in agile: these OKRs provide a framework to set the purpose across your organization that connects from top to bottom.
The Viva Goals team at Microsoft talks about the five superpowers of OKRs:
- Focus: Setting three to five OKRs at each level to ensure that things get done without too many distractions.
- Alignment: Bring objectives across different levels to the same top-level goal.
- Tracking: Observing success towards the goals over time.
- Transparency: Allowing all to see other’s goals so that greater alignment of related goals.
- Stretch: Pushing the organization to achieve more.
When the leadership team sets a top-level focus that cascades down to all departments and individuals, it creates awareness of what the organization is looking to achieve and how departments and individuals can contribute towards reaching that goal. The reporting around key results helps track success on a regular basis, and creates transparency around what caused that success. Designing each OKR to stretch individuals and departments to achieve more provides people with a more challenging and interesting goal than a simple, ongoing metric — and that's the first hint of what sets OKRs apart from KPIs.
Related Article: Don't Out-SMART Yourself. Focus Goals on Empowering People
Measuring Success: Sounds Easy, But Not So Fast
Tracking success sounds simple, but it can be difficult to define in a way that helps. OKRs includes the phrase 'key results' (again, note the plural). Objectives can therefore involve more than a single measure. For example, your objective could be:
Increase user engagement on company website.
In this case, one obvious key result could then be:
Number of users increases.
Having an increased number of users is a nice, simple way of demonstrating success. However, just having more people does not mean more success. You could have a single popular page while investing in a huge, dynamic, modern site that is going ignored outside of that single page. Rounding out the set of supporting key results can help focus what the objective is, for example:
Hits per user increases.
Breadth of page views increases.
It may be tempting to provide similar measures for each department at the top level and have those numbers roll up. Another temptation might be to establish a set number of hours for each team member to devote to the project to make sure people are working towards the goal.
Learning Opportunities
This, however, is where problems in treating KPIs — which tie quantifiable measures of performance to a singular objective — as OKRs really come in.
KPIs Do Not Tell a Story
When an organization becomes data-driven, employees often end up focusing too much on the numbers alone and not on what the numbers are looking to achieve. Using the example above, organizations that tie a specific number of working hours to every individual involved in a project without first making sure those people can actually influence the time they spend will inevitably cause stress. The leadership team's aim is to see employees fully occupied, but telling people to 'be more occupied' doesn't make that happen.
Individuals and smaller teams could instead potentially focus on increasing their breadth of skills so they can take on different types of work. In this case, there would be measures around what people are doing when they're not at work on a project to ensure either more work is made available or they're using the time to update their skills. An individual's goals in this case could include: building greater marketing materials, improving existing processes to be more efficient, and training into new skills.
When each layer of an organization has the same measures, they get a clear view of how things are performing but not what they can do to help influence that. A KPI of each person’s hours worked provides a useful level of insight but an OKR defining how they can improve that means that they can plan their month to achieve success, fill their time with the right focus of the organization and know that what they are doing aligns with the aims of the organization.
Related Article: How to Prioritize in the Workplace, From the Top Down
Breadth of Measures, Not Depth
With KPIs, it can take a lot of effort to get a set which work from top to bottom for an organization. This provides early insight into what is happening and what may be going right or wrong. Setting goals for these also helps to know how things are trending and areas for potential concern. However, they won’t change anything.
With OKRs, it is possible to align those success metrics at the top level with what people are doing to achieve success. Returning to the example of increasing user engagement on the website, several objectives could achieve an increase in that KPI:
- Understanding what customers are looking for.
- Aligning content to key customer goals.
- Improving usability of the site.
Each of these initiatives can deliver against improved user engagement but aren’t direct measures on the amount of engagement. A UX consultant building a smoother experience for customers should know that they are looking to achieve greater engagement, but they would not directly track that on a day to day basis. They would look at heat maps for changes they had made and performance on A/B testing but not necessarily the top-level metric.
A broader level of measurement can make it more complex to enable across your organization, but the rate of adoption as everyone is more engaged in how their own success plays into the department and organization’s success will make the effort worthwhile.
OKRs and KPIs, Not OKRs or KPIs
Organizations that adopt OKRs will not get far without those key results to track success. And organizations with only extensive KPIs will not get far without aligned objectives to achieve success in their metrics.
This article is not a plea to ditch your KPIs in favor of OKRs. An aligned organization can track overall performance with a set of automated KPIs that are easy to understand and drill into. However, a truly performant organization will succeed by aligning everyone on what matters. Each team will know what it is expected to achieve and each team leader will know how they can help their teams, all while understanding what success looks like for their colleagues. People will share honest updates on their performance and progress towards objectives. Employees will feel more connected to a sense of purpose, and everyone will achieve more.
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About the Author
Helping people to understand the why, the what and the how of collaboration technology has been Kevin McDonnell’s main aims for many years now and he is very excited to be able to do this on behalf of Reworked. After starting in the world of financial services for around 15 years, Kevin is now a consultant and currently a Group Manager at Avanade within the Value Realization team, helping organization’s to make the most of their investments in Microsoft Technology.
Connect with Kevin McDonnell:
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