A common question people ask when they are new to using OKRs (Objectives and Key Results) is whether they can be used alongside KPIs. Not only can they be used with OKRs, but it will require no extra work to use them together, because KPIs are incorporated into OKRs and thus used with them by default.
Before we go any further, let’s take a moment to review the definitions of OKRs and KPIs:
- OKR is a framework used for setting, tracking and measuring goals. The goal of an OKR is to connect company, team and personal objectives in a hierarchical way to measurable result. Every Objective has its own Key Results, which are measurements used to gauge the achievement of the Objective.
- KPI stands for Key Performance Indicator. It is a measurement used to determine the factors needed to achieve success in an organization. KPI also works in relation to business intelligence, as it plays a part in the organisation and management of a business. If you are not too familiar with this term, a quick search into the definition of business intelligence will at least give you a basic understanding of its importance within any business.
So, how do they work together?
OKRs Incorporate KPIs
When you’re using OKRs, you’re also using KPIs by nature. Here’s how it works.
Assume your sales team has an Objective: Generate new bookings pipeline. One Key Result could be: Generate inflow of $10M in pipeline. As you can see, the KPI, “inflow,” is written in bold. It is automatically included in the Key Result.
Another Key Result might be to Ensure a 20% win rate by keeping the pipeline above 5x of quota. Again, you can see that “win rate,” the KPI, can be found right in the Key Result.
While KRs naturally encompass KPIs, there are a few general pointers you may want to be mindful of when using both OKRs and KPIs.
Some KRs May Not Have Numbers
While most of your Key Results will likely have numbers associated with them, some may not. For instance, you may have a milestone goal to “successfully launch the new product.” In this case, the milestone is still important and must be completed, and it will eventually help support your KPIs as well.
Use Target Metrics to Support Priorities
When you do have KRs with metrics, be sure to incorporate measurements that directly support your organization’s most important priorities right now. As a result, all of your company’s targeted outcomes will be linked and include specific metrics, so all teams can stay focused on the same common goals.
Achieve Two-Way, Ongoing Feedback
To be executed successfully, OKRs require ongoing feedback between managers and their employees. Managers should hold weekly one-on-one meetings to go over progress, clarify expectations, and discuss any potential obstacles. You can also use weekly pulse reports to support a continuous feedback loop.
Make Your KR Metrics SMART
When using KR metrics, make sure they’re specific, measurable, aligned, relevant, and time-bound (SMART).
There are three main types of metrics you should be using in your OKRs:
- Baseline Metrics: These identify the baseline acceptable figure; anything lower means the Objective has been missed.
- Positive or Negative Metrics: These take baseline metrics one step further. Say you want to improve your support response time, and you want to get it down from 8 hours to 4. This would be considered a negative metric. Metrics you want to improve, like employee retention or sales, are positive.
- Threshold Metrics: To use threshold metrics, designate an acceptable range for your results. For example, you might need to generate $220 in recurring revenue quarterly just to break even. But to stay positive, your endpoint for the range might be $240k. This gives your sales teams some leeway while still encouraging them to stay goal-driven.
After you develop a rhythm for using OKRs, you’ll see that it’s easy to also concurrently measure KPIs. By incorporating this powerful goal setting framework into your organization, you’ll actually be improving your existing KPI methodology and become more likely to accelerate results. Why not try and put together an information technology strategy example this will be a great way for you to practise creating KPIs for yourself, a skill you are sure to need in the future!
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