Measuring progress on your activities is a critical part of Scaling Up.
The business world has popularized many ways to do this, which brings up a lot of questions.
One of the most common questions I get is, “What’s the difference between KPIs and OKRs, and which one should business leaders be using?”
In this piece, I’ll clear up the difference between these two methods and suggest a better way to use them.
Why do KPIs and OKRs matter?
Whether you’re a small business, a Fortune 500 company, or a non-profit, your organization has a strategic vision - a set of goals or benchmarks it hopes to succeed in.
The purpose of KPIs and OKRs is to help you define and track your progress in meeting those goals. Both methods essentially have the same purpose with just slight differences between the two.
In some ways, the terminology is interchangeable. Essentially, KPIs are a general acronym for Key Performance Indicators. OKRs are a specific methodology developed by Andy Grove during his time at Intel.
Let’s take a look at both.
What are KPIs?
In one corner, we have our Key Performance Indicators (or KPIs for short).
These are fairly self-explanatory.
Quantifiable measurement is critical to success as you scale up. Whether you’ve established your BHAG or set a performance plan for your employees, you need metrics that inform your progress on those visions.
KPIs are the names we’ve chosen for helping you measure progress while you implement the Scaling Up methodology. Your Function Accountability Chart (FACe tool), coaching style, 7 Strata, and OPSP are all tools that each use a version of a KPI.
We mention KPIs frequently throughout the Scaling Up framework because many of these tools and systems are interconnected. For example, the Profit per X is a KPI that you define in the 7 Strata tool. But it also plugs into your One-Page Strategic Plan. You’re also tasked to come up with KPIs to measure processes, functions, and more.
As a start, I recommend turning to KPIlibrary.com to help you discover the right KPIs for your team.
I also recommend the book Key Performance Indicators: The 75 Measures Every Manager Needs to Know by Bernard Marr.
What are OKRs?
In the other corner, we have our Objectives and key results (or OKRs).
Again, Andrew Grove developed OKRs during his time as CEO of Intel. He documented this method in his published work High Output Management.
The OKR framework quickly popularized from there. It wasn’t just Intel that found success with this method. Larry Page of Google credited OKRs to helping the company stay “on track when it mattered the most.” LinkedIn, Twitter, and Microsoft are part of that crowd as well.
The OKR framework is simple. You have:
A clearly defined goal.
And your 3-5 key results:
These are the specific actions or measures used to track your progress to the above goal.
The more specific they are, the better. Measure these from 0 to 100 of any numerical unit. You can use percentages, currency, or item units, etc.
If OKRs are what you’d embrace, you might start with John Doerr’s book Measure What Matters.
Why OKRs and KPIs can get so confusing
First, my apologies for the lack of professionalism in our industry – every guru thinks they have to create new terms (present company included!).
If you look at just about any other profession, they tend to share the same language. Even among fierce competitors in the healthcare world, a femur is still a femur.
The reason Scaling Up uses the KPI language is that the OKR language is reversed in my mind. Objectives are really Results. Key Results are really Objectives.
For example, Objectives (the O in OKR) are what most would call Results/Goals/Outcomes – what we want to achieve.
Key Results (KR in OKR) are what most call KPIs – the numbers that help us know we’re making progress.
And the OKR methodology adds Initiatives (or what we call Priorities/Rocks) – which are the tasks required to achieve Key Results.
How to approach OKRs vs. KPIs as you scale up
The best advice I have? Create your own language and brand inside your firm. Doing so will add to the cult-like aspect of your culture.
Whether you use KPIs, OKRs, Goals, or Priorities (different names for the same thing), tracking these cascading priorities and metrics is critical in driving performance throughout an organization – especially in our new remote paradigm.