KPIs vs OKRs: What Are They and How to Use Them

Every goal-oriented organisation should have KPIs and OKRs in place.

KPIs (Key Performance Indicators) and OKRs (Objectives and Key Results) are popular goal-setting terms in the business world. When used correctly, KPIs and OKRs help organisations perform efficiently.

We’ll examine KPIs and OKRs, how to establish them, and how to use them for your organisation’s success.  

What are KPIs?

KPIs are key performance indicators. They are quantifiable measures used to evaluate performance within a specific period—and for a particular objective. KPIs measure how effectively (or not) an organisation achieves set goals and objectives.

Most organisations adopt KPIs to follow through with monthly, quarterly, or yearly targets that they’ve set. 

How to Set Effective KPIs 

With KPIs in place, goals will be visible to everyone, and team members can efficiently work toward such goals. You can set KPIs to boost your organisation’s overall performance or have specific KPIs across different departments like Marketing, Sales, Finance and HR. 

Here’s a 5-step process for creating KPIs that work: 

• Evaluate Existing Goals and Objectives: Review the existing company objectives before creating KPIs. This review will guide you in making the most functional KPIs.
• Review Present Performance: The next step is to conduct a round-up review of your company. This will show you what you need to fix.
  
  
• What’s the current state of your company?
• What areas are performing well?
• What areas are lacking? 
  
  
• Set Short Term and Long Term Goals: Categorising goals into long and short-term will make the journey less intimidating and more feasible. Also, ensure that you set SMART goals, as shown here:
  
  
• Are the goals specific?
• Can the progress of the goals be measured? 
• Are the goals realistic enough to be achievable?
• Are the goals relevant to the organisation?
• Is there a realistic timeframe for achieving the goals?

• Establish KPIs: Next, you can develop KPIs that align with the established short and long-term goals. This makes it easy to monitor the achievement of milestones. 

Always ensure that your KPIs are:

• Quantitative
• Directional
• Actionable
• Practical

• Review KPIs With the Team: Now that you’ve set KPIs, you should review them with the team to identify any existing loopholes. This stage also allows the team to become familiar with the KPIs. 

Examples of KPIs Across Different Departments

There isn’t a one-size-fits-all KPI. There are different KPIs for short-term and long-term goals. 

Here are some common examples:

• Financial KPIs: Net Profit, Debt Ratio, Working Capital, Net Revenue, Operating Cash Flow Ratio, Revenue Growth Rate, Gross Profit Margin.
• Marketing KPIs: Lead Conversion Rate, Lifetime Value of a Customer, Customer Attrition Rates, Customer Acquisition Cost, Sales Growth, Online Marketing ROI. 
• Sales KPIs: Customer Retention, Sales Qualified Leads, Sales Revenue, Customer Purchase Frequency, Sales Per Department.
• Human Resources (HR) KPIs: Average Interviewing Costs, Average Retirement Age, Average Salary, Average Cost of Hire, Average Length of Service.

What are OKRs?

Objective and Key Results (OKRs) help organisations achieve certain milestones.

Objectives = the “what”

Key Results = the “how”

Objectives point you in the direction to go, while key results show your progress. Every objective should have about three to five key results that are attainable and measurable.

How to Set Effective OKRs for Your Organisation

Here’s a 3-step process to setting OKRs that work:

• Establish your goals: Set SMART goals that are Specific, Measurable, Achievable, Realistic, and Time-bound.
• Define your OKRs: To establish your OKRs, ask yourself these guiding questions:
• What do you need to do?

This is the objective. It sets a visible direction for you to head towards (e.g., increase the company’s brand awareness).

• How will you know you’re doing it?

This is the key result. It’s like a tracker that shows your movement towards the objective (e.g., gain 500 new followers per month).

• What will you do to get there?

You’ll take these actions to achieve key results (e.g., publish three blog posts and upload two YouTube videos weekly).

• Set a timeline: You also need to develop a reasonable timeline to achieve the objectives you’ve put in place.

Major Differences Between KPIs and OKRs 

While KPIs and OKRs are similar, they have some significant differences. To understand this difference, consider the following scenario. 

Let’s assume that your organisation is a plane, and you’re flying towards London. London is the organisation’s goal and mission. OKRs give you the map towards the goal—London. 

As you fly the plane, you must keep tabs on the control panel to ensure everything is functioning well. For example, you must constantly check if the altitude or fuel is at the right level. These are your KPIs. They ‘indicate’ your progress and require regular attention as you journey to London—the ultimate objective.

Wrapping Up

Adopting KPIs and OKRs will help your organisation achieve goals faster. They complement each other perfectly. While KPIs measure performance, OKRs will show you the exact things to do to achieve your goals. 

Ready to adopt KPIs and OKRs for your organisation? Consult MetaPM today. We can help you establish effective KPIs and OKRs tailored to your organisation’s needs. Book your discovery call to get started.