Business

Published: Sep 05, 2022 | Updated at: Sep 05, 2022

Only 29% of the US workforce is familiar with OKRs. This is likely due to a lack of communication from executive leaders about the company's OKRs. Many leaders don't communicate them accurately because they don't truly understand what an OKR is. 

If you are unclear on what OKRs, or even KPIs, are, then this article is for you. Not only will we outline what each means, but we'll also discuss the difference between the two. If you are ready to level up your organization with OKRs, you need this article. 

Keep reading to learn more about how to improve your organization's performance with objectives and goal-tracking. 

What Are OKRs? 

OKR stands for objective and key results. It is a tool business use to measure progress and productivity. It's used for planning, setting goals, tracking progress, and making adjustments when needed.

It helps companies understand how they are doing against their goals. This in turn helps them make better decisions about what to do next.

Types of OKRs:

There are several types of OKRs. They are: 

  • Individual 
  • Strategic
  • Tactical
  • Aspirational 
  • Committed 

Businesses must understand the type of result they want before defining the objective. 

How to Set OKRs

In the world of business, setting and achieving your company's OKRs is a key to success. The goal is to have a clear and concise set of goals that will lead your company toward its ultimate objective.

Businesses have to have a clear set of goals so that they can measure their progress. The goal should be measurable and achievable so that they can gauge their success over time.

Some important considerations when setting out an OKR for your company include:

  • What is the goal?
  • What is it that you want to achieve?
  • How will you know when you've achieved your goal?
  • What will be your indicators?

Setting and achieving objectives is one of the most important tasks in a company. Leaders must know how to set OKRs for a company.

Mistakes to Avoid When Setting OKRs

Making mistakes when setting OKRs is common. The following are the ones business leaders make the most often: 

Not Making OKRs Challenging Enough

To keep the team motivated and always striving to be better, leaders must set challenging OKRs. The whole point of objectives is to reach as high as the leader can imagine. Leaders can't hope their teams deliver great results without setting high expectations. 

Having Unclear Results to Achieve

When an OKR isn't clear, the team doesn't know what they are working toward. The objective and related key results should be as specific as possible, such as including measurables within the result. 

For example, let's say you set an objective to improve customer satisfaction. And the key results were to update the website, streamline the customer experience, and decrease support calls. These are all very vague and would leave teams unclear on what exactly to achieve. 

Now, let's update it to improve customer satisfaction by 10 NPS points. The key results are now to update the website with new tools and automation and make the customer experience easier with 5 more touchpoints. The goal is to decrease support calls by 50%. 

The updated OKR is much more focused, and the team knows exactly what leaders expect from them. 

Failing to Communicate OKRs Across the Company

How can the entire team be on the same page if they don't know what the OKRs are? Businesses must ensure the entire company understands OKRs. And consider what each department is working toward when setting the OKRs. 

This is the only way the team can truly be on the same page and understand the bigger picture. 

What Are KPIs? 

A key performance indicator is a metric that measures the success of an organization. It is a term business use to assess progress, performance, or efficiency. KPIs are the goals associated with objectives the company wants to meet. 

KPIs focus on the outcome of an activity, not how the team gets there. For example, a business wouldn't set a KPI to just create more touchpoints. It would need to be more focused, such as creating 5 more touchpoints so the customer experience is improved. 

Types of KPIs:

There are several different ways for businesses to set KPIs. The different types are: 

  • Quantitative
  • Qualitative
  • Lagging
  • Leading
  • Input

For a leader to accurately set KPIs, they must first understand the different types and how they align with overall objectives. 

How to Set KPIs

KPIs can be set by analyzing the company’s goals and measuring its progress towards meeting those goals. A good place to start is with the company’s mission statement, which should be measurable and specific enough for KPIs to be set.

When it comes to setting KPIs, businesses need to have a clear idea of what goals they want their company to achieve. They must also understand what metrics will help them in achieving them.

The KPIs should be measurable and realistic. Leaders should also set milestones for each KPI so that they can assess progress and take corrective actions if necessary.

Mistakes to Avoid When Setting KPIs

So, what are common mistakes companies have when setting KPIs? The two below are the ones companies have the most issues with: 

Not Having Specific KPIs

When setting a KPI, the team must understand the following: 

  • Who needs to achieve it
  • What they are expected to do 
  • What they need to do it
  • Why they are doing it (the bigger picture) 

Many KPIs fail due to not being specific enough. 

Not Setting Enough KPIs 

Leaders should have several KPIs for a goal. This shows measured progress through different phases, so teams understand where issues are. There should be a KPI for each milestone of a specific goal. 

Setting too few KPIs might lead to a lack of focus on what is important, and the organization might not be able to keep up with its competitors. This means the company may lose its competitive advantage. It can be detrimental to an organization as it leads to employees focusing on low-value activities that don't contribute much to the overall success of the company.

OKR vs. KPI: The Differences

OKRs and KPIs are both metrics that help in measuring the success of a company. But they differ in how companies define and use them.

In OKRs, the company defines its objectives and then sets out to achieve them through its strategies. KPIs, on the other hand, define what success looks like for a given company. They are also more flexible as companies can change them over time.

The main difference between these two metrics is that one is a long-term goal while the other is a short-term goal.

How to Align OKRs and KPIs to Maximize Results 

Aligning your company's OKRs and KPIs is a crucial step in achieving the best results. When done correctly, businesses will have a clear understanding of where their company should be headed and what to focus on for the year. The key to aligning these two is to have an objective that ties both together. 

Other ways to align OKRs and KPIs include: 

Use Goal setting and Tracking Tools

By getting OKR software, leaders can create KPIs related to the key results. Using software to do this makes the process must simpler. It's also easier to track individual and team progress when using an application. 

Many organizations are adopting goal-setting software to help them align their OKRs with KPIs. This is because it helps them understand where their efforts are going, and which areas need more attention.

Connect KPIs to OKRs 

Businesses must connect the KPIs to the OKRs. This is the only way to get true alignment. When you set the objective and related key results, you should then break it down further with KPIs for each result. 

Setting up KPIs for OKRs is not as easy as it sounds. Businesses need to consider how they want to measure their progress, what the metrics should be, and how the metrics will be used by their team members.

Better Manage Performance Metrics with Halsell Today 

This article compares OKRs and KPIs. We hope you have a better understanding of how they differ and the benefits your organization will see if you align them. 

At Halsell, we offer comprehensive software to help businesses manage a variety of business functions. We have a CRM system, VOIP, and project management software. Our products help companies to better achieve performance goals. 

Please contact us if you want to learn more.  Sign up today and get started with our platform. 

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