Since 2013, with a video onYouTubewhere the CEO ofGoogle Venturesexplains how Google used OKRs back then and later in 2018 with John Doerr's book, 'Measure What Matters', OKRs became popular around the world and what we have seen since then is a confusion with the alphabet soup of management tools, after all: what is the difference between KPIs – Key Performance Indicators and OKRs – Objectives and Key Results?
Let's go, KPIs are key metrics that indicate the past; they are rearview mirror indicators that show how the progress, situation, and health of processes and daily activities have been. Based on this historical data, it is possible to make decisions about what to do next. In general, they are indicators of revenue, customer satisfaction, quantities sold, costs, among others, and do not have a defined deadline.
OKRs areframeworkSetting ambitious goals with a dedicated framework of Objectives and Key Results is a forward-looking approach. They have a deadline, usually quarterly, in addition to being recommended to use the other SMART goal characteristics. And instead of using mirror indicators, it is more appropriate to use trend indicators in these KRs. Therefore, clearly, the two tools have different purposes.
Back in 2017, when I found myself in the middle of the largest OKR implementation in the Americas, the following analogy helped us better understand each one's role: KPIs are the indicators on a car's dashboard: fuel, oil, among others. While OKRs are the Waze. You need to know if you have enough gasoline to reach your destination, and you may make a wrong turn along the way and recalculate it to reach your goal.
On the other hand, if the purposes are different, why do people get confused? The point is that, within the management process, at various moments, the application of the tools' concepts becomes intertwined. KPIs exist by the nature of the operation, what the company does, and the current processes. Both have metrics, and we see a KPI as a KR, as well as improving a KPI as an objective. They are metrics, and people want to improve the metric.
Basically, the confusion happens even when we don't identify the best moment to use one concept or another. For this reason, it is essential to know and be able to apply both tools simultaneously, as they complement each other and will improve your management as a whole. It's like art; there are different ways to apply a brush and paint, and both are means to create the final product.
In this sense, you need to pay close attention to the reality of your company in general and how management is being conducted, because from an existing indicator (a KPI), a business goal (an OKR) can emerge, but not all KPIs will need to be improved, in fact, many times we will not have the financial, material and even human resources to improve several at the same time.
In this scenario, it is necessary to learn to prioritize, to choose where to bet the chips at that particular moment: these chips are OKRs. In other words, you need to analyze the KPIs, which are the indicators that have already occurred, in order to outline the OKRs, which are yet to happen. And so, everything will be interconnected and make sense, so that you can meet your goals, achieve your objectives, and attain the best results at the end of the cycle.
You can't solve multiple problems at the same time; you need to understand which problems you're facing in order to eventually increase your revenue. Only from this point on is it possible to define your OKRs, prioritize the problems, and as you progress towards solving them properly, then you choose another, adjusting your course and moving closer and closer to your goal.
