Posted by Rachel Ho Feb 28, 2022 10:00:00 AM

Performance means little without accurate measurement: If you don't take the time to quantify your progress, you can't demonstrably prove you've made any. Unfortunately, it's not always easy to track achievement or choose the best-suited measurement rubric for a task. Objectives and key results (OKR) and key performance indicators (KPI) may have similarities, but they aren't entirely interchangeable.

Should you rely on KPI, or do OKR fit the bill for a given project? Who should you assign to be responsible for tracking these metrics – and explaining what went wrong should you underperform? Here's when to depend on each option, why the decision isn't always so clear-cut, and how the right software makes it easier to leverage both as needed.

What is OKR and KPI?

OKR

The main thing to understand about OKR is that they're two-part performance measurement tools. Each one includes a qualitative objective and critical results by which you'll gauge your progress.

OKR relates a goal you want to achieve to evaluate your steps to accomplish it. These metrics serve as critical communicative tools that help you disseminate leadership plans and share big-picture objectives. For instance, you might set an OKR to track diverse efforts such as

  • Whether your reputation benefited from a renewed approach to clearing customer support tickets,
  • How well your branding overhaul increased consumer engagement and decreased website usage confusion,
  • What kind of growth does your business exhibit following the implementation of a different accounting system,
  • If your new lead management software improved the quality of the leads you receive, or
  • Whether employees reported high satisfaction after you switched to new business management software.

In each of these examples, you can see how a specific change or project relates to a given type of feedback. By breaking down goals associatively, OKR can help you improve cost-benefit analysis practices and raise awareness of how core business elements impact each other. A more detailed exploration of the first example might take the form of something like:

 

Objective: Explore the new customer support management approach's impact on cleared tickets.

Key Result 1: Survey users whether they prefer our new help desk experience to the old.

Key Result 2: Conduct A/B testing to determine where we improve and refine the system design.

Key Result 3: Resolve 100 per cent of existing backlogged support tickets in one week.

Key Result 4: Earn 100 5-star staff ratings in one month.

 

For each key result, it's obvious how the stated sub-goal serves the greater whole. But what about an OKR that isn't so easy to define? Here's another excellent example for a hypothetical commercial transit company that wants to understand and refine its fleet management practices:

 

Objective: Build a software system that tracks vehicle fleet operations across the company's geographic service areas.

Key Result 1: Reduce the incidence rate of surprise breakdowns by tracking typical vehicle maintenance histories.

Key Result 2: Reduce energy costs by 10 per cent by provisioning fueling stations along our most-often used transit routes.

Key Result 3: Consolidate cross-border shipments and lading to reduce time-consuming customs interactions and idling at checkpoints by 20 per cent. 

 

This example demonstrates how key results may be entirely involved themselves. Even if they blossom into broader plans, starting with straightforward OKR is a good strategy for defining goals and fixing the more significant problem.

KPI

A KPI is a qualitative or quantitative measure that you use to evaluate your success. Think of it as being similar to the key results part of an OKR – but instead of applying to a specific project or task, it pertains to your enterprise in general.

Businesses tend to depend on KPI to help them track ongoing progress and anticipate how they'll perform in the days to come. For instance, a qualitative KPI, such as the feedback ratings that clients leave for your customer support team, might be an ongoing measure that evolves as you experiment with new support desk software. A quantitative KPI, such as how much average revenue your sales floor staff generate at various times of the year, could serve as a significant predictor of earnings during future holidays, market swings, or other changing conditions.

KPI measurement also tends to happen in a time-sensitive fashion. For instance, you might measure your website visitors every month, assess sales on a biweekly period, or even use a software dashboard that delivers up-to-the-minute insights into how much time your staff members spent on specific task categories.

Here's another example. Suppose you wanted to increase the percentage of contracts your sales team successfully closed each month. A preliminary KPI-driven-plan might look like:

 

What: Raise contract closings by 20 per cent in a month.

Why: Achieving this target will reduce pending payments, driving revenue.

How: We might use a new software tool to manage invoices or send more follow-up emails.

Who: Each contract project leader will be responsible for trying a new strategy.

When: We'll reevaluate and review in one month.

 

The Relationship Between OKR and KPI

Businesses commonly use OKR in tandem with KPI targets. For instance, your company might apply a broader KPI, such as sustaining digital engagement on social media, to a more specific OKR task, like tracking engagement after deploying a new marketing campaign. 

Standard KPI can also result in developing a new OKR and vice versa. For example, an industrial facility that implements an OKR tracking power consumption after installing a new onsite server system might discover insights that make it wise to institute power consumption KPI across the board.

What Makes KPI and OKR Distinct?

The difference is in the intent. Most KPI goals reflect processes and projects you've already implemented, making them immediately obtainable allowing for organisational capacity. OKR, on the other hand, often represent exploratory goals that you haven't yet attempted – but you know you want to keep your organisation honest about.

Aggressive OKR selection might also be a significant motivator. By promoting the notion that your teams should venture out on new undertakings in a controlled, almost-scientific manner, OKR can help you discover novel depths of organisational capacity and keep innovation going strong under fire.

When Should You Pick OKR or KPI?

As a rule, go by what you're trying to measure. If you want to feel how an existing technique does and doesn't work, use a KPI to understand the nuances, mainly if your strategy involves scaling up or modifying the process. When you need to devise a novel solution to a new or ongoing problem – and you know it'll demand a shift in how you operate – then building a strategic framework around an OKR is your best bet.

These guidelines leave ample room for flexibility. You can always switch tactics to suit the situation, although OKRs offer more flexibility and space for error.  

Performance Measurement Is the Foundation for Growth

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OKR and KPI fit different circumstances, but they share a need for measurement consistency. If you fail to set clear goals and quantify or qualify your attempts at achieving them, you'll never improve. It's just as harmful to define metrics yet forget to apply them regularly – periodic check-ins, reviews, and post-mortem meetings broaden your perspective so that you can draw accurate conclusions about the way you work.

Remember that performance metrics should never be a source of stress. Instead, they ought to give you the leeway to make smarter decisions that reflect more accurate observations. The key lies in establishing a framework that makes measurement routine. You shouldn't have to stop what you're doing to record KPI or OKR data points: Your business management system ought to automate work processes so that you can keep moving forward and benefit from untainted, realistic results.

One nice thing about the OKR vs KPI debate is that you don't have to fall cleanly on either side. These frameworks work together nicely, so you should have no qualms about using both. Of course, it's easier to do so when you've got the prerequisite support. In addition to having your leadership and stakeholders on board with your chosen measurement methodology, you need the tools required to make data gathering and feedback practices as low-key as possible.

Reach your OKR and KPI goals with Tessaract

Tessaract makes it possible to enact OKR and KPI that go the distance by translating to valuable insights. This innovative business management tool lets you define custom objectives and propagate them across the organisation, ensuring everyone stays on the same page even if your enterprise is in the middle of shifting gears. It automates everyday performance measurement tasks so that you can build a genuine representation of your progress no matter how fine-grained you'd prefer the data to be. When it's time to learn from your mistakes and successes, Tessaract makes it simple by offering uniform access to all of your invoices, communications, governance documents, financial statements, and other business documentation in one place.

KPI and OKR bear fantastic potential – but only when you can leverage them seamlessly. With Tessaract, you can choose whichever methodology matches your needs and not have to worry about the details because the software is intelligent enough to tie off the loose ends, organise the data, and automatically keep you informed. Do more with your metrics by trying a demo.

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Rachel Ho

Written by Rachel Ho