When moving out of the ‘existence’ mode and into the competitive mode, companies are often faced with the dilemma of choosing a management strategy. There are almost too many options out there - KPIs, MBOs, 4DX and so many more. This article will explore the differences between KPIs and OKRs, and provide you with enough information to decide which framework (or maybe a blend of both) might be most suitable for your company.
Let’s take a quick look at the differences between the two frameworks:
Both frameworks measure performance and the aim of both approaches is to focus on company growth. However, KPIs allow for getting details at an individual level, whereas OKRs are usually set for teams and for the organization as a whole and shift the focus from ‘me’ to ‘we’.
KPIs focus more on input vs. output. But, sometimes output and input might not lead to the intended outcomes. In contrast, OKRs align teams to company-level metrics, encourage collaboration to achieve common outcomes, and remove unhealthy competition from within the company. Individual OKRs are not recommended simply because they tend to become too task-y.
Another thing to consider is the transparency and alignment between the two frameworks. KPIs are usually focused on individual roles and work and might not be always shared or transparent between teams. However, OKRs are visible to all members of the company. It’s highly possible that even when all your employees achieve their KPIs, the company’s metrics do not grow. However, successful OKR implementation will connect employee activities to company metrics on a weekly basis with check-in meetings.
There is no limit to the number of KPIs that can be assigned to one person, but OKRs follow a 3x5 framework: No more than 3 objectives for each team, and no more than 5 key results per objective. The importance of this can be illustrated with fishing.
Let’s say that you’re out fishing, KPIs are like casting out a net and hoping to catch all fish of all values. You might not catch them all but you will (most likely) catch enough to keep you going for that quarter. OKRs is more like spearfishing - you aim specifically for 3-5 high-value fish, even though catching 2 would be more than enough. Hence, OKRs rely quite heavily on focus and reaching for aspirational goals. As a result, teams end up achieving more than what they thought was possible, and this builds the confidence to set even more aspirational goals.
KPIs are normally evaluated once a quarter during performance reviews and they are linked to reviews, performance metrics, and bonuses. But OKRs are completely different - while they are normally set at the beginning of the quarter, teams meet every week during check-ins to update their progress against the desired outcomes and plan their activities accordingly.
One of the key differences here is that KPIs are more or less set in stone. Individuals get similar KPIs each quarter and fall into a pattern for their tasks and activities. But OKRs reflect the progress of ‘here and now’ and activities are never set in stone. When teams meet each week to update progress, they discuss what needs to be done in the coming weeks to stay on track, especially what they need to do differently from last week to keep progressing. Teams that use OKRs are more likely to adapt quickly to changing business priorities, and can actively engage with the company-level goals. This is how OKRs fight the inertia that can often set in with KPIs and are great for unpredictable business climates.
“While responsibility refers to someone's duty to carry out a task to completion, accountability generally refers to what happens after something has happened. Accountability is therefore concerned with the consequences of someone's actions, rather than their initial duty to carry these actions out.” — Indeed Editorial Team
This is one of my favorite differences between OKRs and KPIs. KPIs are usually handed down by managers. An individual usually has very little say in the KPIs assigned to them - however, they will still be held responsible for the achievement of those KPIs. Hence, all employees focus only on their KPIs. This can create friction between employees especially when it comes to dependencies, leading to the workplace blame game that we’re all too familiar with!
OKRs, however, are set by teams themselves. Since teams get to decide how they will contribute to the company-level OKRs, this builds a sense of accountability. Teams also connect with each other to create vertical and horizontal alignment (this activity is called ‘Connect and Align’ where teams map out how they will contribute directly or indirectly to moving the company’s metrics). Having a say in how you contribute builds a sense of belonging as well, and since teams often commit to shared goals, they don’t need to play the blame game.
However, this doesn’t mean that nobody has responsibilities in OKRs! Each key result is assigned an owner who is responsible for driving progress on that metric. That includes getting updates from all relevant stakeholders and updating the leadership teams on this progress as well. If a KR starts blinking red, the KR owner must identify the blockers and bring it up in the next weekly check-in so that teams can work on unblocking it together.
Yes, there definitely is a dance between OKRs and KPIs. You can use them together.
Many high-growth companies use OKRs to drive the amazing strategic advantage it helps them gain while driving business at a 10X growth rate. However, one of the most spoken about, but least addressed dilemmas that many organizations face is ‘Can we use OKRs for deciding compensation reviews?’
Well, we are one of the leading integrated OKR platforms in the APAC with both coaching and platform expertise in-house, and our work with more than 5000+ teams has given us a solid background to support our approach that OKRs should not be mixed with compensation reviews. Why? Simply because not meeting the expected outcome is also a part of the OKR culture. Failure is welcomed as an opportunity to grow, especially if your aspirational or moonshot KRs are not met. One should not be so afraid to fail that they do not attempt to reach their stretch goals!
But to answer your question, YES - there are companies that use both KPIs and OKRs. Read more here to learn how 6 High growth companies are using the bright side of OKRs and managing their way through compensation increases in their own creative ways.
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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