Quite a common question out there is how to differentiate KPIs from OKRs. For some managers it seems to be the same. But it is not.
Tricky thing is, if this question comes up within management circles before or during implementing OKRs. It can be a signal of mistrust against the „new“ OKR methodology. Sometimes, the real question is: „appearantly we are doing quite well to run our business with KPIs, so why do we need OKRs?“
All companies working with OKRs, also monitor KPIs.
KPIs are great to handle and monitor mid- or long term effects. KPIs are mostly used within your annual OKRs or your yearly strategy targets, however you name it. It requires many initatives to stimulate a KPI in the long run. Take customer satisfaction rate for example. It´s a rather long term KPI and a single initative like embedding a new QuickStart Manual into a product might pay into it, but the measurement lags at least one or two quarters.
Here is an example:
A CMO and his team is about to launch a redesign next quarter in combination with a campaign. This will influence how customers experience the brand, the product or services and the website and will definitely influence both, brand perception and recognition. Its about standing out from the crowd and offering a better experience. Cool. But, what if these quarterly OKRs, to be precise the Key Results, would be around brand perception or recognition?
The team would probably recognise at the end of the quarter, that these results are actually lagging indicators and they are not able to measure success. Not cool. Brand perception or recognition is rather a longterm KPI. There should be other ways to measure success for the redesign and the campaign. Metrics which are accessible at the end of the quarter, for example:
OKRs help to focus and align on the right things in order to influence KPIs positively.
There is no doubt that KPIs are important to monitor, but they are more describing the big elephant for the year. With OKRs, we slice the big elephant into smaller digestable junks. OKRs help us to focus and align on the right things, in oder to influence KPIs positively.
Back to the initial question: appearantly we are doing quite well to run our business with KPIs, so why do we need OKRs?
Because KPIs are rarely engaging and often too far off for employees to draw the line on how and where they contribute to or what´s the purpose of their job. With OKRs you are able to connect individual or team contributions with longterm KPIs and use your available ressources on the right things.