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In the wild world of business, the rise of AI tools and technological advancements is a game-changing dynamic, enhancing operational effectiveness and organizational flexibility.
While AI tools undoubtedly elevate business prowess, the true realization of strategic goals relies on established frameworks like OKRs (Objectives and Key Results) and KPIs (Key Performance Indicators). They are the GPS for keeping the business strategy on course. No matter how advanced your AI toolkit is, these structured frameworks are essential for turning tech potential into strategic success.
In this article, we’ll uncover:
Though similar, OKRs and KPIs are not the same thing. Let’s take a look at how these two frameworks differ from each other and the benefits they provide.
KPIs stand for Key Performance Indicators. They concentrate on measuring and maintaining business health and are used to evaluate progress. The duration of measurement of KPIs can vary, as KPIs are often assigned to individuals and are commonly tied to performance evaluations and performance reviews.
In short, KPIs are used to measure performance accurately, by:
Let’s take the example of a Customer Success executive. Here are some KPIs they would measure:
Key Performance Indicator 1 - Customer Satisfaction Score (CSAT):
Maintain a CSAT score of 90% or above through regular customer feedback surveys.
Key Performance Indicator 2 - Net Promoter Score (NPS):
Achieve an NPS of 40 or higher as an indicator of customer loyalty and likelihood to recommend the product or service.
Key Performance Indicator 3 - Renewal Rate:
Ensure a customer renewal rate of 95% to demonstrate customer retention and satisfaction.
Key Performance Indicator 4 - Response Time to Support Tickets:
Maintain an average response time to customer support tickets below two hours to ensure timely issue resolution and customer support.
Objectives and Key Results, abbreviated as OKRs, are a method for setting and achieving strategic business goals and measuring business growth metrics. Shared commitments from teams are the backbone of OKRs. OKRs operate in quarterly cycles with weekly check-ins for identifying blockers, planning activities, and reviewing and reprioritizing actions for ambitious strategic growth.
In short, the OKRs are used to make strategy execution precise, by:
Here’s an illustrative example of an OKR for the Customer Success team.
Objective: Improve operational excellence to create customer delight
Key Result 1: Reduce customer onboarding time from Y to X days
Key Result 2: Reduce turnaround time to resolve customer queries from Y to X hours
Key Result 3: Re-establish Customer Success touchpoints for strategic accounts by <date>
Key Result 4: Increase positive monthly customer reviews from X/5 to Y/5
To learn about OKRs in detail, check out our Ultimate Guide to OKRs.
The greatest difference between the two frameworks is that KPIs are known as the maintain-the-business metrics, and OKRs are the grow-the-business metrics.
Yet, nuances exist between the two frameworks. Let’s understand how these differences can affect business performance.
Both OKRs and KPIs can help ensure that you are making progress toward your goals.
OKRs focus on achieving business objectives while KPIs focus on specific measures of performance. The scope of OKRs is to measure progress toward long-term goals from an overall company perspective, while KPIs have the scope to measure short-term performance.
Another noteworthy difference is that KPIs allow for getting details at an individual level, whereas OKRs are usually set for teams and the organization as shared commitments. Hence, KPIs are usually focused on individual roles and work and might not always be shared or transparent between teams. However, OKRs are visible to all members of the company. While KPIs are a great tool for individual performance, OKRs ensure that everyone is rowing in the same direction, and all members are aligned to company strategy.
KPIs are usually handed down by managers and assigned to individuals. In contrast, OKRs are set at two levels - the strategic company level and the tactical team level. Teams come together to set their OKRs and decide how they will contribute to the company-level OKRs. Teams also connect to create vertical and horizontal alignment and may form squads, or cross-functional teams, to tackle a specific business problem.
KPIs are normally evaluated once a quarter during performance reviews and are linked to performance metrics and bonuses. KPIs are normally tracked on a weekly or monthly basis as required. Individuals get similar KPIs each quarter and get into a pattern of tasks and activities required to maintain business health.
OKRs are heavily dependent on context and business value. While they are set at the beginning of the quarter, teams meet every week during check-ins to update their progress against Key Results and plan their activities accordingly. Team members reflect on the activities that helped them stay on track, and discuss what they need to do differently from the previous week to keep progressing towards business growth.
Teams use OKRs to adapt quickly to changing business priorities and actively engage with the company strategy. OKRs build agility within teams and are great for unpredictable business climates. However, KPIs are vital to ensuring that the business progresses smoothly.
Measuring progress towards goals is the largest common factor between the two frameworks.
However, OKRs are heavily focused and are set in alignment to the long-term company strategy. OKRs follow a 3x5 framework: No more than 3 Objectives for each team, and no more than 5 Key Results per Objective. In contrast, there is no limit to the number of KPIs that can be assigned to or measured by one person.
OKRs and KPIs are used to measure different things. Depending on the needs of your organization, you can use one or the other, but the ideal approach is to use both together.
Most companies want to build a culture where every employee can visualize how they contribute to the growth of the organization, but this is easier said than done. Companies typically begin by using KPIs to assess individual employee performance within their roles, crucial for day-to-day business operations.
Companies who want to manage by OKRs, first establish a clear narrative on ‘Why OKRs’ and ‘Why now?’ OKRs nomally are adopted by companies who want to scale fast with focus on business velocity or want OKRs to make the, agile by breaking organizational silos. Naturally, this affects KPIs, by connecting employees and teams to strategic levers that will help the company grow.
Organizations leverage OKRs for strategic growth and manage day-to-day metrics with KPIs. Combining both ensures a clear roadmap for ambitious objectives, with OKRs setting goals and KPIs tracking progress effectively. This dual approach facilitates regular tracking and timely adjustments, creating a robust strategy for achieving organizational objectives.
Using KPIs and OKRs together brings a host of benefits, such as
We know that the ideal approach is to use both together. Here’s a quick recap of what OKRs and KPIs are.
There are multiple ways to set up and track KPIs and OKRs. Normally, KPIs are tracked on spreadsheets and updated by the team members they are assigned to. Spreadsheets are well-known, universally used, accessible, and familiar tools. They are extremely versatile, especially if you’re using a ready-made spreadsheet template. All you need to do is customize your template to fit your needs.
Spreadsheets are convenient if you are a team of 10 or less. As your organization grows, OKR software can offer better functionality to track and spot strategic misalignments that can derail your business.
Check out our free template for tracking OKRs on spreadsheets.
The global best practice for teams of 10+ members is to use a software tool that offers this functionality. While there are many choices of OKRs and KPI management tools, very few of them can link KPIs to OKRs i.e. link tasks to company strategy.
With the failure rate of organizational strategies being as high as 80%, companies are placing a big impetus on execution and focus on metrics that matter to business success. Choosing the right tool to enable powerful strategy execution can be a challenge.
To counter this, we compiled a list of the best software tools to track OKRs and KPIs together.
Let’s dive into the top features that are used to evaluate OKRs and KPIs software.
1. Simplicity of use: A software tool that is intuitive and provides exceptional customer support gives teams a better chance to adapt to using new frameworks like OKRs or KPIs.
2. Inbuilt Generative AI and ready-to-use Templates: Top-notch software tools have inbuilt OKRs and KPIs templates with features that revolutionize strategy execution by providing organizations with intelligent tools that can predict outcomes, streamline processes, and drive better decision-making.
3. Connecting strategy to tasks: Rather than simply tracking metric progress, software tools that can drill down from OKRs or KPIs to activities or actions are considered superior.
4. Features for mapping and interconnections: The ideal software tool shows the interconnections between OKRs (Vertical and Horizontal Alignment) alongside the relationship between OKRs and KPIs.
5. Integrations: Most companies use a variety of tools to track business metrics. However, the best software tools have integrations to get all your important decision-making metrics on one platform.
6. Can support CFRs: The best tools in the market have the features to exchange conversations, feedback, and recognition.
7. Pricing and plans
Based on these evaluations, the Fitbots team created software that enables organizations to connect their mission to metrics, measure what truly matters, and offer AI-enabled tools to help companies realize and action their strategy.
Strategy and BAUs go hand-in-hand. Fitbots analyzed 100,000+ records over time and found that managing both in the same screen is vital to strengthen the relationship between OKRs and KPIs, and by extension, connecting everyday tasks to business outcomes.
This gave way to one of Fitbots’ unique differentiators: the ability to track both KPIs and OKRs, and seamlessly mark those KPIs that are strategically moving the business forward as part of OKRs, and become the single source of truth for all decision-making metrics.
Check out this short video featuring KPI boards on Fitbots.
Here are some other reasons why Fitbots stands out:
Click here to learn more about managing KPIs alongside OKRs on Fitbots.
It’s no surprise that Artificial Intelligence has taken the world by storm. ChatGPT had 1 million users within the first five days of being available, faster than any other internet application. Moreover, a significant 64% of businesses believe that artificial intelligence will help increase their overall productivity, as revealed in a Forbes Advisor survey. This demonstrates the growing confidence in AI’s potential to transform business operations.
According to MIT Sloan Management Review’s seventh annual global executive AI survey, 7 out of 10 respondents agree that enhancing KPIs — not just improving performance — is critical to their business success. AI can play a critical role in improving the efficacy of OKRs, KPIs, and business processes, by:
The revolution in strategy execution is underway with generative AI, offering organizations intelligent tools that predict outcomes, streamline processes, and enhance decision-making.
This is exemplified by software tools such as Fitbots, which actively contribute to this transformative trend by prioritizing investments in generative AI technologies.
Here’s a glimpse into how AI offers substantial benefits on enterprise-grade software tools like Fitbots:
Despite the numerous advantages AI provides, the current level of technology has not yet reached a point where guidance from experts is unnecessary. Most organizations onboarding either OKRs or KPIs for the very first time are likely to fall into traps that are well-established by OKR coaches and strategy execution experts.
Organizations have a variety of options to overcome this obstacle. With the rapidly evolving business climate, companies choose one or a mix of the following ways to ensure that their OKRs and KPIs onboarding is a smooth, guided process:
1. Experimenting with pilot teams: Companies may choose to roll out OKRs and KPIs to a small and agile team as a pilot. Learnings from the pilot team’s first cycle are used to create a better-established roll-out process for the rest of the company. This experimentation is not fail-safe, as teams are likely to fall into the set-and-forget trap, and not perform rituals in the quarter that are necessary to get the full benefit of the frameworks.
2. Certifying an internal member of the team: Normally, team leaders are upskilled to become certified internal OKR Champions using a variety of certification programs and guide the roll-out process within the company.
3. Seeking guidance from an external expert: Software tools like Fitbots offer on-demand coaching from certified OKR practitioners and strategy execution experts who have years of experience in rolling out OKRs effectively. These coaches can guide teams through a smooth roll-out by providing customized templates for outcome-focused meetings, helping teams adapt to the software quickly, and sitting in on important rituals throughout the process to ensure a risk-free transformation of the company.
OKRs are effectively written by using the OKR formula. A precursor to this is understanding exactly what OKRs are.
OKRs are typically written by attaching 1 Objective to 5 (or less) Key Results. The global best practice is to set a maximum of 3 OKRs, be it at the company or team level, with no more than 5 KRs for each Objective.
O - Objective: What is the desired state you want to be in? OR what is your goal?
Formula: Action word + what you would like to achieve + in order to/so that + business value/value
Examples of Objectives:
KRs - Key Results: How will you know you’re getting there? OR how will you know if you’re on the right path to achieve your goals?
Formula: Action word + metric to measure + from + X to Y
Examples of Key Results:
Tasks and Initiatives: What do you need to do to get there? OR what do you need to do to achieve your goal?
Examples:
To learn more on how to write OKRs, see our beginner’s guide.
Teams would normally spend anywhere from an hour to a few days crafting, iterating, and reviewing their OKRs, especially if they are new to the process. AI can improve and enhance OKRs by reducing the crafting time to a matter of seconds. An example of this is the AI Co-Author offered by Fitbots.
Similarly, open AI like ChatGPT can generate any number of related KPIs once the user feeds in their OKRs to the software.
While the AI landscape looks promising for enhancing KPIs and OKRs, the technology's current state still necessitates expert guidance for the successful rollout of the frameworks. In the swiftly changing business landscape, companies must carefully select a guided approach to ensure a smooth onboarding process for OKRs and KPIs, coupled with the adoption of AI-capable software.
Bani is an OKR enthusiast who anchors content and marketing at Fitbots OKRs. She loves spreading the love of OKRs to enrich workplaces and collaborating to create engaging content for her readers.
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