Don't Confuse KPIs and OKRs

Don’t Confuse KPIs and OKRs

It might give you peace of mind to know that Objectives don’t have to capture every single thing you’re trying to do. In fact, they shouldn’t even try. As John says, “If we try to focus on everything, we focus on nothing.”

OKRs are not “business as usual”

OKRs represent the most important outcomes you want to achieve. And your Objectives name and highlight them. In other words, OKRs are not “business as usual."

Business as usual – or “BAU” for short – are the essential activities to keep things running day to day. Take payroll, for example. Everybody wants that to be steady. But you don’t need OKRs for those activities. Use your OKRs for your transformational goals instead.

Every organization has initiatives to help them grow, transform, and achieve operating excellence. Those initiatives are vital to long-term success, yet they are vulnerable to getting lost in the day-to-day. OKRs remind us where we need to focus our time and our attention to grow and excel.

Think about a racing team. Their mission? To have the fastest car in the world. Their big Objective for the year? To “Win the Indy 500.”

The team already knows they’ve got great drivers. Their execution is consistently flawless. What’s holding them back are their pit stops – the time it takes for a crew to change a car’s tires and refuel. So the team’s “business as usual” is to stay fast and maintain driving excellence. That might be enough to compete at the highest level.

But if they want to win the Indy 500, they have to get better. And that improvement has to be significant. Something that would get them to the top one or two teams in the world. That narrows their focus to a few options that will make a big difference.

So in this example, the team sets an Objective to reduce their pitstop times, their biggest opportunity for improvement. You’ll notice that this Objective wasn’t framed as a task. We didn’t write, “Conduct an analysis of recent races” or “Hire a new pit leader.”

Either of these might be steps to achieve our Objective, “Reduce our pitstop times.” But by themselves, they won’t transform the team’s performance.

Here’s another example:
A person on a sales team starts with an Objective of “Implement Salesforce company-wide.” As we’ve learned, that’s a to-do item. A task, not a transformational goal.

When you suspect that a task is masquerading as an Objective, ask yourself, ‘If we achieve this, what would get better?” In this case, we’d soon see that a better Objective would be “Close sales faster.” Implementing Salesforce is an action that would help us achieving something significant.

It takes practice to craft OKRs that reflect significant goals. But here’s a general rule: Describe results, not actions.

Project plans and task lists describe and track the sequence of steps teams need to take and help you manage your time. They’re useful tools. But it’s better to defer work on them until after your OKRs are written. They should really come out of your Objectives, not the other way around.

Don’t confuse KPIs for OKRs

We should also make sure we’re not confusing Key Performance Indicators for OKRs.

Key Performance Indicators – or KPIs – are periodic measurements that track how your organization is doing. They are general metrics of organizational health, a broad dashboard that shows everything from revenue to customer satisfaction to email signups.

OKRs don’t replace KPIs. But they can help you change and improve them.

I like to say OKRs are KPIs with soul because they give direction and purpose. It may be that some of your existing KPIs are good ways to measure progress towards an Objective.

For example, if your Objective is “Reach a wider audience,” your team might prioritize increasing email signups as the best measure of positive momentum. You might already be tracking them. But in the coming cycle, you’re going to elevate email signups from a KPI to a Key Result – an essential component for achieving your Objective.

A good Key Result will make clear how many new signups meet the bar for an organization to “Reach a wider audience.” Is it a 50 percent – or is it 150 percent?

Another example:
Say you have a KPI for customer service response time, which has slipped. Your team is seeing a rise in complaints, and now is probably time to focus on reducing your response time for customer service requests – and elevating it to the level of a Key Result.

Remember, use OKRs to lead. There’s a lot of noise and competing priorities in our jobs. A well-written OKR will steer you to the goals that need to rise to the top.