For every organization, it is very important to monitor and measure the goals of the teams in order to achieve success and stay on the growth path. The organizations must know what did work out for them and what needs to be changed in the next quarter.
There are many evaluation parameters that help the companies to define, analyze, monitor and measure their goals and objectives. The two most popular terms used by a wide range of organizations across the globe are OKRs and KPIs.
Although both terms are meant to develop a yearly or quarterly business goal, they also have some differences. Before going to the differences and similarities, lets quickly have look over the meaning and significance of each term.
What is OKR?
OKR is the acronym for “Objectives and Key Results”. It is basically referred to as the modified version of “Management By Objectives”. It gained more popularity after Google started using it in the 1990s. OKR consists of two components, Objectives that define the goals and the direction to achieve those goals.
The other component is Key Results that are used to measure and check whether the set goals are achieved or not. These can be defined at multiple levels like organizational, departmental, team and individual.
Check out this article on Human resource OKR Examples for sample OKR with pre-defined objectives & key results for HR professionals.
What Is KPI?
KPI stands for “Key Performance Indicator”. It is often referred to as a performance indicator to evaluate and measure the success of the business. Whether its an individual, team, any project or organization, you can set KPIs for all of it. But it is suggested that the KPIs are measurable as qualitative KPIs can be ambiguous and lead to confusion amongst the employees.
OKR vs KPI
OKRs help you build a bridge between your goals and the outcomes you are expecting out of it. OKRs give direction to attain your goals and also define the way to assess those goals. OKRs are framed in such a way that it motivates your team to achieve those goals. Hence, it is important that the goals are not unreachable and ambiguous.
KPIs, on the other hand, refers to the outcome or result of an on-going product or process and are the means of measuring the quality, quantity or success.
When you notice that KPIs are not being met or need enhancement, this is where you need to start building an OKR. OKR will help you re-define the Objective hence, turning the KPI to a key result now. OKRs and KPI go hand-in-hand that help you define, achieve and monitor your goals better. Let’s see how this works with the help of an example:
Example: Improving TAT(Turn Around Time)
For instance, let’s say that you want to monitor & measure the total time taken by your employees to get back to the clients. You first need to set the KPI in such a way that it enables you to measure the average time taken to respond. After analysis, if suppose you set 30 minutes as the average turn-around time for the employees, you’ll quickly be able to identify whether your KPI is met or not. A performance management system will help you in organizing these KPIs or OKR’s in a systematic procedure, a payroll management system will also be a good addition, making it a complete HRMS package.
As far as it’s less than 30 minutes, you are attaining the KPI. But what if the employees are taking more than the set goal and the average time taken has increased to 40 minutes?
Here’s where you need OKR to ensure that you are still working towards improving the customer experience. The OKR will help you set the Objective of “Improving Customer Experience” and make sure that you are working on it.
The Key Result will be “Reduced Turn-Around Time from 40 to 30 minutes” which will help you measure the progress. This guides you in developing a clear plan to attain your goals.
Once you are successful in reducing the turn-around time, you can again monitor it as your KPI. Therefore, KPI helps you identify what your goals are not being met but you need an OKR to fix it.