KPIs (Key Performance Indicators) and OKRs (Objectives and Key Results) are different types of goals. If you’re already familiar with our content, you’re probably also familiar with the following analogy that we use to explain the difference between KPIs and OKRs.
KPIs vs OKRs: an analogy
Imagine your organization is a car, and you’re driving your car toward a destination. That destination is your organization’s ultimate goal (the mission & vision), and your OKRs build your roadmap toward it. But, as you’re driving your car toward your destination, you also need to keep an eye on your car’s dashboard to make sure, for example, that the engine is functioning well and that you’re not running out of gas.
The things you’ll find on your car’s dashboard are the things that you always need to watch — regardless where you are travelling on your roadmap. Hence, the things that you’ll find on your car’s dashboard translate to business as usual for your business. Business as usual is best measured through KPIs: simple indicators that immediately tell you if something is performing well or not — just like the indicators on a car’s dashboard.
Why you need to get your KPIs in place first
There are 3 reasons why you should get your KPIs in place before implementing OKR.
1. You can’t drive without a dashboard
The analogy above also helps us explain why you need to get your KPIs in place first, before implementing OKR.
Would you feel comfortable driving a car without a dashboard? You wouldn’t be able to see the oil pressure and risk breaking your engine. You wouldn’t be able to see the fuel level and risk running out of gas.
Your KPIs help you keep the engine running. Without having them in place first, you’ll almost certainly get stranded somewhere on your journey toward your ultimate goal.
2. KPIs provide important input when setting OKRs
Once you have your KPIs in place, and once you have set the desired target values for your KPIs, you can then see which KPIs are healthy and which aren’t. This is important input when setting OKRs. When a KPI is unhealthy, you should make it a priority to fix it: you should create an OKR to fix your KPI.
3. It helps everyone understand what OKRs are for
Lots of teams that are new to OKR struggle to understand what OKRs are for. We’ve developed a simple model to address this: build, improve, or innovate. In short, that model explains that OKRs are designed to help you break out of the status quo and realize your ambitions.
Yet teams that are new to OKR are often working on OKRs that reflect their business as usual. You’ll quickly notice that is the case when your OKRs are pretty much the same each quarter. When your OKRs are reflecting your business as usual, your OKRs won’t help you see what deserves priority right now, and they won’t help you understand how particular problems are being addressed.
When introducing KPIs and OKRs at the same time, you tackle this problem from the start. As you identify what’s most important to work on, you can naturally designate whether the goal is best represented as a KPI or as an OKR. Ask yourself, are we doing anything differently (OKR), or is this already an established process (KPI)? Are we building, improving or innovating (OKR), or will we continue to do what we already do (KPI)?
I guarantee that you will end up with much better goals this way.
Good news: you already have KPIs!
Nicole, Customer Success Manager at Perdoo, sometimes faces resistance when she suggests that clients set up their KPIs in Perdoo. The thought process is that they want to take it one step at a time and start with OKR first. Once they master OKR, they’ll introduce KPIs. However, most organizations don’t realize they already have KPIs.
Marketing teams already look at KPIs such as website traffic and visitor-to-lead conversion rate. Sales teams already track targets and things like average deal size or time-to-close. Product teams look at NPS, and Customer Success teams at cancellations and CSAT. These could all be KPIs!
Check out our library full of example KPIs (and OKRs) for different teams.
Watch out for fake KPIs
A KPI is a well-established tool with a clear definition, whose origins go back almost a hundred years. It even has its own Wikipedia page. Yet, some OKR tools come up with their own definition of KPIs: some say a KPI is a “featured” Key Result, others substitute Key Results with KPIs (so that it’s ‘Objectives and KPIs’ instead of ‘Objectives and Key Results’).
Now, if we all came up with our own definition of words, it would make it pretty tricky to communicate with each other. When evaluating the KPI functionality in OKR tools, make sure to investigate their interpretation of KPIs.