Since 2013, with a video on YouTube where the CEO of Google Ventures explains how Google used OKRs at that time and later, in 2018, with John Doerr’s book, ‘Measure What Matters,’ OKRs have become popular worldwide. 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 indicators showing how the progress, situation, health of processes, and daily activities were. Based on this historical data, decisions can be made about what to do next. Generally, they are indicators of revenue, customer satisfaction, quantities sold, costs, among others, and they do not have a defined deadline.
On the other hand, OKRs are a framework for setting ambitious goals with a proper structure of Objectives and Key Results, they look forward. They have a deadline, usually quarterly, and it is recommended to use the other SMART goal characteristics. Instead of using rearview indicators, it is more appropriate to use trend indicators in these KRs. Therefore, clearly, these two tools have different purposes.
Back in 2017, when I found myself in the middle of the largest OKRs implementation in the Americas, the following analogy helped us better understand the role of each: KPIs are like the indicators on a car dashboard: fuel, oil, among others. Meanwhile, OKRs are like Waze. You need to know if you have gas to reach your destination, and you can make mistakes along the way and recalculate your route 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 times, the application of the tools’ concepts gets mixed up. KPIs exist due to the nature of operations, what the company does, and the current processes. Both have metrics, and we see a KPI turning into a KR, as well as improving a KPI becoming an objective. They are metrics, and people want to improve the metric.
In essence, confusion arises when we fail to identify the best time to use one concept over another. For this reason, it is essential to know and be able to apply both tools simultaneously, as they complement each other and will enhance your overall management. It’s like an art; there are different ways to use a brush, paint, and both are means to create the final product.
In this sense, it is crucial to pay close attention to the reality of your company as a whole and how management is being conducted because from an existing indicator (a KPI), a business goal (an OKR) may emerge, but not all KPIs need improvement, and often we may lack financial, material, and even human resources to improve several at the same time.
Faced with this scenario, it is necessary to learn to prioritize, choose where to place your bets at that particular moment: these bets are OKRs. In other words, you need to analyze the KPIs, which are the indicators that have already occurred, to be able to set the OKRs, which are yet to happen. And so, everything will be interconnected and make sense, for you to meet your goals, achieve your objectives, and obtain the best results at the end of the cycle.
You cannot solve multiple problems simultaneously; you need to understand which problems you face to eventually increase your revenue. Only then is it possible to define your OKRs, prioritize the issues, and as you progress towards resolving them properly, then you choose another, adjusting your course and moving closer to your goal.
