Comparing OKR vs KPI helps organizations set goals and measure performance. Learn about the key differences between OKR andKPI and the importance of tracking both.
If measuring and improving performance is a key priority for an organization, comparing OKR vs KPI is a popular topic for discussion. Most organizations believe that one can be replaced with the other and the two are mutually exclusive. However, on a closer look it becomes clear that despite overlap, OKR and KPI are quite different in what they seek to achieve and how they seek to achieve it.
While the broad focus for both of them is setting goals and measuring results, the approach, outcomes, and applicability are quite different. Through the course of this blog, we will focus on comparing OKR vs KPI by understanding the difference, how they work together, best practices to set OKRs and KPIs as well as a few top examples.
As a first step, let’s deconstruct the terms and undertake a comparison of OKR vs KPI and then move on to understanding the difference between the two.
Wondering what is an OKR? Well, OKR is a popular acronym for Objectives and Key Results, that seeks to provide organizations with a strategic framework focused on goal-setting and achievement. Going by the term itself, the meaning of OKR consists of two major activities.
The first one entails setting objectives or what an organization seeks to achieve. The second one revolves around key results, which involves identifying key indicators that determine whether or not an organization has been able to achieve its objectives. OKRs are often accompanied by an approach or initiative which seeks to guide the journey from objectives to key results.
In our discussion of OKR vs KPI, like OKR, KPI is also an acronym, which when expanded corresponds to Key Performance Indicators focused on performance measurement. As the name suggests, KPIs seek to measure the success of a particular task or project.
KPIs generally fall within a framework of where an organization is going and helps gauge how effective and efficient it is in its journey. In short, KPIs focus on evaluating the performance of an organization towards its goals.
While OKRs and KPIs both seek to accelerate an organization’s journey towards success and growth, each one plays a distinct and important role. Let’s dive deep into comparing OKR vs KPI.
First, OKR is more of a goal-setting framework which helps organizations determine what needs to be done and how, while KPIs are focused on performance evaluation in the journey towards achievement of those goals. This suggests that KPIs enable organizations to measure their performance and identify gaps and challenges in the same. OKRs, on the other hand, empower organizations to set objectives to bridge those gaps and explore what needs to be changed, aligned, and altered to achieve the same.
Second, a comparison of OKR vs KPI indicates that by nature and scope, KPIs are sustainable over time and don’t change on a regular basis. Whereas, OKRs often have a short life and keep transforming regularly. This is majorly because KPIs are mostly standardized and relevant for almost all types of goals. However, objectives and related key results are constantly re-evaluated and adapted based on business priorities. Furthermore, as one objective is achieved, the existing OKRs reach their pinnacle and new OKRs are set.
Third, when comparing OKR vs KPI, a key difference appears in how they are seen by employees in the organization. For most employees, OKRs define what are the important company goals and what each one can do to achieve the same. On the other hand, KPIs help employees evaluate their productivity, enhance accountability and help create benchmarks for overall performance mapping. OKRs are generally aspirational and dynamic in nature, while KPIs are more achievable and closer to the ground.
In a nutshell, it is the intention behind the process that primarily sets OKRs and KPIs apart. OKRs help organizations determine what they seek to achieve and what success will look like, while KPIs highlight how well they are faring in their journey to success.
With a comprehensive understanding of the difference between OKR and KPI, we should now have a look at a few examples to comprehend how the two manifest in real-world situations.
Focused on identifying areas of improvement, setting goals against each, and defining expected results is what OKRs seek to determine. OKRs can be team specific or applicable to the organization as a whole. Some of the top OKP examples include:
Objective: Increase company’s bottom line
Key result 1: Increase revenue by 50%
Key result 2: Decrease cost/ expenditure by 20%
Initiative 1: Focus on marketing and outreach
Initiative 2: Create a healthy sales funnel
Objective: Increase customer engagement and satisfaction
Key result 1: Increase customer stickiness by 30%
Key result 2: Increase net promoter score from 80 to 90
Initiative 1: Create a seamless user experience
Initiative 2: Offer personalized service
As a metric to gauge the level of performance, KPIs will be distinct and personal for each team or department within an organization. Some of the most common KPIs include:
Human resources team
Focusing on just one of the two key performance management and enhancement approaches will seldom result in unparalleled growth and success. Therefore, organizations need to adopt a holistic view and leverage the complementary nature of OKR vs KPI. There are several ways in which OKRs and KPIs can work together to facilitate organizational success.
KPIs are a great starting point for organizations to understand where they are going wrong. It helps measure performance against a vetted benchmark and gauge if there is any gap. While organizations have this data and know what is going well and where improvement is needed, without OKRs, the improvements can seldom be achieved.
OKRs, thus, close the loop by taking the identified areas of improvement as base, creating an objective, key intended results, and initiatives to achieve the same. Therefore, KPIs help in identifying problem areas and OKRs enable organizations to create measurable outcomes to bridge the gaps.
Thus, there are two ways in which the comparison of OKR vs KPI transforms into a meaningful relationship.
Firstly, if an organization is unable to meet its KPI targets, it can set OKRs to work on specific areas of improvement.
Secondly, an organization seeking to achieve an ambitious target can fall back on OKRs to guide the way and unlock its potential.
Tracking and working on KPIs and OKRs together is integral for organizations to create a bigger picture and focus on optimizing performance at every level and improve on every step of the way.
When creating OKRs and KPIs, it is extremely important to follow some of the best practices to ensure maximum effectiveness.
When creating OKRs, there should be an alignment between the department, team, and organizational goals and objectives. While the specifics for each will be different, they must converge on a macro level.
Furthermore, it is important to have at least 2-5 key result areas and initiatives for each objective. Simply gauging the success of an objective with one result will seldom suffice. Organizations must strive to create aspirational OKRs, even if the path is unclear in the beginning.
On the KPIs front, it is important to be as specific as possible. The target KPIs must be backed by industry standards and evidence to generate confidence. This reflects the need to have KPIs that are attainable.
Finally, the KPIs should be actionable. The idea behind having KPIs is to measure and improve performance. However, if a KPI is unable to generate insights which can be the basis for action, their purpose is defeated.
What is common to the best practices in the OKR vs KPI debate is that both need to be communicated clearly and transparently to everyone. Unless employees understand what they seek to achieve, how they seek to achieve it, what success looks like, and how performance will be measured, even the best KPIs and OKRs will not bear fruit.
Setting the right OKRs and KPIs can help organizations ensure that everyone is working in the same direction. In a race between OKR vs KPI, collaboration with SuperBeings can help magnify the impact. While OKRs can help in aligning the team members to a shared goal, SuperBeings helps ensure that the OKR lifecycle is seamless. With SuperBeings, organizations can leverage the value of OKRs to anticipate impending risks, realign strategy, and measure indicators and metrics which matter the most.
With an understanding of the importance of OKRs and KPIs, we empower organizations to make their objectives the center of attention with efforts, directing efforts from all corners towards achieving the intended results. This results in frictionless team work, leading to greater levels of engagement, collaboration and satisfaction.
SuperBeings, thus, enables organizations to not only work towards a collective mission with streamlined tracking and achievement of goals, but also augments employee experience in the process. Make OKRs a force multiplier with SuperBeings, request early access today!
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The right compensation management practices and policies can make or break your employee experience. Of course, there is merit in linking compensation and performance to drive organizational success, it can lead to several questions and implementation problems as well.
Read on to get all your compensation management related questions answered.
Let’s start with the very basic question of why fair compensation is important and the merits it brings along. It is no surprise that if you are paid more and are compensated according to your efforts, you are likely to give in your 100% and stay with an organization longer. However, there are other factors that support fair compensation:
Thus, fair compensation as a part of compensation linked performance management has the potential to facilitate better employee outcomes such as engagement, experience and performance.
To make compensation fair and inclusive in all aspects, it needs to have a clear foundation. Most organizations have relied on performance reviews as a way of reflecting on performance as a means of compensation decisions. However, there are several competing views both for and against tying compensation to performance reviews.
Clearly, there are both sides to the story.
The most favorable outcome will be to keep performance as one of the parameters for compensation, but not the sole foundation.
Additionally, as one of the best practices, performance reviews can be conducted on a regular basis, where some are only developmental in nature and others can be tied to compensation management.
As discussed, focusing only on performance reviews for compensation management needs a relook. Working with growing organizations, we have curated a list of the top five performance and compensation management practices you can leverage:
Ensure that your compensation structure aligns with the market trends so your employees don’t feel underpaid and leave.
Provide complete transparency and clarity to your employees on what constitutes high levels of performance and what it will take to earn a raise or appraisal.
Have specific, well defined and measurable criteria for the compensation strategy to ensure that there is complete transparency.
Salary in hand or the pay check your employees receive is accompanied by a range of benefits that are a part of the compensation structure and cost to the company, but are often overlooked by employees. Make sure they are widely communicated.
Ensure that there is a base pay range for every role and profile with variable additions based on candidate competencies.
The idea of fair compensation and linking compensation and performance management, leads to a very interesting concept of distributive justice. On a broad level, distributive justice essentially focuses on ensuring that the compensation received by employees is fair and equitable and is based on objective and rational grounds which are uniform for all. Here are a few ways to ensure distributive justice:
Measure potential and market value of the employee in addition to experience and expertise to ensure distributive justice for high potential employees
Another interesting component of compensation and performance management that you must acquaint yourself with is pay transparency. Essentially pay transparency refers to how openly or freely employees within an organization can discuss their compensation with others.
This is not only limited to the check they take home but other perks and benefits they are entitled to. Invariably, many platforms today also enable individuals to anonymously share their salaries online and get insights from others doing the same. However, there are diverse views on when it comes to pay transparency for an organization.
Those who advocate for pay transparency believe that it can enable large scale impact for the organization across performance management.
However, there is a flip side to pay transparency too with some common pitfalls that need to be addressed proactively.
In the last section of this article, we will focus on how managers play an integral role in compensation and performance management and the best practices to guide managers to have effective compensation conversations with their team members.
Almost 58% organizations do not train managers on pay communications
This startling statistic clearly highlights how despite the apparent importance of compensation management, the focus on ensuring a seamless process is rather limited. However, organizations today can play a leading role in enabling their managers to have better pay communication and conversations by following these tips:
It is quite evident that compensation and performance management are intrinsically interlinked and if leveraged well, compensation has great potential to not only drive performance, but also facilitate engagement, retention and much more.
However, to ensure the same, you need to have a very structured, transparent and fair compensation strategy and policy. Furthermore, you must, don’t forget to invest in training your managers to bridge any gaps and constantly gauge and address employee pulse — to ensure fair compensation for all.
Talent development is critical for growing organizations which see the workforce as their biggest asset. Focus on developing their talent stack not only leads to a pleasant employee experience, it also augments the overall performance and productivity for an organization.
While you may come across many ways to facilitate talent development, leveraging the competency framework can help you move the needle very quickly.
Let's see how.
Before moving directly to how you can implement the competency framework, let’s quickly understand the 5 stages of talent development.
The first stage involves planning for your talent needs based on your organizational priorities and creating the position profile based on the skills, attitudes and other competencies.
Based on the position profile, you need to start attracting talent for the position. You can do so by spreading the word in the right networks, through job portal platforms, etc. The objective is to ensure that you are reaching out to the right network. You can also explore the right candidate for the position internally to considerably save hiring and training costs.
Once you have identified the right person, the next stage of talent development is extending the offer to the person after a thorough background check as well as a competency and expectation match. It also requires creating personalized onboarding plans for the first 30-60-90 days of the candidate’s journey within the organization. Read our guide to employee onboarding to learn more about onboarding do’s and don’ts.
The main focus of talent development starts with providing the right development and learning opportunities to your workforce. This can involve upskilling for both technical and soft skills, leadership building or any development intervention based on the need of the role and position.
Finally, talent development involves undertaking initiatives to retain your talent. While learning opportunities are important, facilitating engagement, wellness, motivation, etc. all contribute to employee retention.
If you are wondering how the competency framework aligns with talent development, you need to start by decoding what the framework actually stands for.
Put simply, a competency framework is a set of behaviors, skills, abilities and attributes that an organization considers imperative for creating a high performance culture.
The competency framework can be implemented at all stages of the talent development or the employee lifecycle within an organization. The idea is to ensure that certain core competencies are kept at the heart of the decision making that in any way impact the workforce.
Competency framework based talent development is very important for employee retention. Talent development practices when undertaken effectively have the potential to encourage team members to stay with the organization for long and at the same time become ambassadors to help attract high quality peers.
Here are the top reasons why competency framework based talent development matters:
Now that we have covered the basics of talent development and competency framework, let’s understand how leveraging the latter to advance the former can create a far reaching impact for organizations.
The first step is to create a competency framework which involves identifying the key competencies which will be instrumental in guiding all decisions around talent development. Depending on the nature of your organization, there can be categories within the competency framework that you seek to focus on. Your competency framework should focus on behaviors, skills and attributes which are critical for performance and overall success. The following steps can help you create a competency framework for talent development:
The responsibility of creating the competency framework is collective. It starts with involving the executive leadership to ensure alignment with the vision, people managers to ensure they are ideal for the culture you are trying to build and functional managers to ensure inclusion of right competencies for each role and position. Furthermore, involving those on the ground can be fruitful as they have the best idea of what competencies are critical and others which are good to have.
Once the competency framework for talent development is ready, the next step is to align it with your recruitment process to ensure precise and effective hiring. There are a few steps along the way:
The onus of implementing the competency framework during selection lies primarily with the HR team and recruiters who assess the candidates with different tests and assessments. Team managers and leaders also play a role in assessing functional competencies and fit.
Irrespective of whether an employee is onboarded before or after you have implemented the competency framework for recruitment, you need to ensure competency based performance management and development opportunities.
From a talent development perspective, the focus of the competency framework should equally be on developing employees for their next or subsequent role based on the specific competencies for the same.
The onus of aligning performance and development with the competency framework lies with team managers as they are best able to determine the performance gaps. Furthermore, employees with their managers can identify competency gaps for better performance and focus on the right learning and development interventions to bridge the same.
Finally, the competency framework must also impact the subsequent rungs of talent development where an employee moves up the ladder from one position to the next. Based on the organizational matrix and competencies for each level, you need to identify key attributes that differentiate one level from another and ensure the same is communicated to your employees.
In a nutshell, it is quite evident that the competency framework can inform and advance every stage of talent development for fast growing organizations. If you implement such a framework across the employee lifecycle, you will significantly reduce your chances of a wrong hire and will be able to nurture a workforce that aligns on the vision, goals and overall organizational culture.
A clear competency based talent development approach can help you achieve high levels of performance which is observable and measurable.
While most people managers are able to create a business case for setting OKRs as well as for the adoption of an OKR software by leveraging industry benchmarks and best practices, there is a need to explicitly decode the return on investment of using an OKR tool as well.
Unless they are able to clearly illustrate how the return achieved using a goal management software is greater than the investment, it becomes difficult to sustain the adoption and get long-term leadership buy-in.
Continue reading to strengthen your business case on the same.
Let’s quickly understand how the OKR framework is integral for an organization, especially high growth companies. Most fast growing organizations have competing priorities they need to focus on with limited resources at hand.
Therefore, simply setting goals by adopting a top-down approach without supporting parameters can lead to confusion and incompetence. OKRs help drive away this ambiguity by linking measurable key results for each objective and facilitating a collaborative approach to achieving goals.
Here are the top three benefits of implementing OKRs in an effective manner:
OKRs enable employees and leadership to have a very clear focus on what needs to be accomplished and what work is out of scope. The idea is to have complete clarity on —
The last part is extremely important as it helps create a sharp focus and set priorities straight.
93% of employees don’t really understand what their organization is trying to accomplish in order to align with their own work.
This illustrates that there is a big absence of clarity and focus amongst employees when it comes to what needs to be accomplished, which stands in the way of creating a high performance culture. Therefore, OKRs can help reduce such uncertainty and ambiguity, making it easy for the workforce to concentrate on what matters.
Taking cue from the first point, the second benefit or purpose of implementing OKRs foris a need for clarity of expectations and overall team and organizational alignment. In case of fast growing organizations, there is an overlapping of roles and responsibilities and a lack of clarity on expectations from each employee. This leads to lower than average outcomes, productivity and revenue growth and data backs the same.
97% of employees and executives believe lack of alignment within a team impacts the outcome of a task or project. Whereas, companies that regularly exceeded revenue goals were 2.3X more likely to report high levels of alignment.
By ensuring organization-wide goal visibility, OKRs help teams to decode what is expected out of each team member and their respective contribution towards achievement of the shared goals. Thus, increasing alignment and collaboration.
Finally, setting and implementing OKRs is often a collaborative process. Employees get involved in and participate during the entire OKR process and feel engaged in the same. This greater involvement and participation leads to deeper levels of engagement and ownership of key results which drive impact.
OKRs also enable employees to also gauge their performance and measure their progress in an effective manner. This motivates them to get more involved in achieving the common weekly, quarterly and annual goals. This higher level of engagement directly impacts key organizational parameters such as retention, productivity, profitability, etc.
The business case for OKRs is very clear. However, for companies that are scaling up, with limited bandwidth and competing priorities, often setting OKRs itself gets left behind due to other business priorities.
If an organization focuses on a manual approach to the OKR system, there are several steps which require a lot of time and effort including setting and writing, implementing, tracking, grading, evaluating and modifying OKRs.
Fortunately, today there are OKR tools in the market, which can help automate all of these aspects to help simplify the OKR journey. The right goal management software can help you maximize the realization of the return on investment for your OKRs. Following are the top five ways in which an OKR software makes a measurable difference on the bottomline —
First, an OKR tool can help organizations document or record the OKRs in a way that is visible and accessible to all. There is supporting evidence to show that what gets documented has a higher chance of being achieved, as what is out of sight is often out of mind.
Individuals are 42% more likely to achieve goals when they are physically recorded.
Therefore, the OKR tool can enable organizations to clearly define the business and team OKRs in a written manner which can be reflected on, seen again and again to create instant recall for employees.
OKR tools are great for creating alignment and accountability. On the alignment front, the OKR software can help achieve high levels of strategic alignment on what is the responsibility of each team member across organizations towards the key business goal achievement.
Highly aligned companies grow revenue 58% faster and are 72% more profitable than their misaligned counterparts.
The dashboard of a good OKR software can help you constantly gauge the level of goal achievement, ensure that team members are aligned on different phases as well as keep a track of when their responsibility is due. It creates high levels of transparency.
Moreover, greater alignment leads to high levels of accountability. Generally, since there is a lack of alignment on responsibilities, there is an accompanying lack of ownership and accountability, and most employees shirk away from taking accountability.
84% of the workforce describes itself as “trying but failing” or “avoiding” accountability, even when employees know what to fix.
A goal management software like SuperBeings allows you to integrate OKRs with regular meetings and check-ins to keep track of progress. Thus, driving a culture of accountability.
It is very common for companies to set OKRs and then evaluate them only at the end of the quarter/year. There is a lack of mid-term tracking which makes it difficult to gauge whether the progress is aligned with the key results or not.
40% of people that write down goals don’t check whether they’ve achieved them. Moreover, only 5.9% of companies communicate goals daily.
An OKR software can help you address this concern by facilitating day-to-day OKR progress tracking. A daily dashboard and history of 1:1 and team check-ins on OKRs, can help organizations track developments over time.
It can also help identify and resolve any performance issues that stand in the way of goal achievement preemptively. At the same time, even if organizations are tracking and monitoring OKR progress, doing so with a manual process is inefficient. An OKR tool can automate most of these processes to enable HR and people managers to spend more time on driving results.
Another major concern that organizations face when it comes to OKRs is being prepared and ready for the same. Many line managers and others struggle with writing effective OKRs. Many organizations believe setting OKRs once is enough. However, that is far from the truth.
Research says, companies that set performance goals quarterly can generate 31% more returns than those reassessing annually.
Using an OKR software can help eliminate all these challenges.
Finally, an OKR software can promote high levels of collaboration for goal achievement. For many organizations, the inability to collaborate leads to low levels of results, diminishing the ROI for OKRs.
86% of employees and executives cite lack of collaboration or ineffective communication for workplace failures.
Using a good OKR software makes collaboration seamless by aligning cross-functional projects and tracking cumulative progress. Invariably, an increase in degree of collaboration is a direct ROI of an OKR tool which can create far reaching impact.
In this final section of the article, we will talk about the key parameters that can help you gauge the ROI of an OKR software. While the above mentioned are primary impact areas, most of them have a qualitative aspect to them.
Gauging the ROI requires backing of data points from employee experience and business results, which the following parameters can help explain.
Organizations should start by gauging whether or not transparency and alignment on goals has increased. This can be measured using employee pulse surveys to understand their opinion on how well they have visibility of goals and clarity on what they need to work towards. Therefore, the first ROI parameter for an OKR software is to identify the increase in level of transparency to ensure everyone is working in the same direction and there are no gaps or overlap in efforts.
The main purpose of an OKR tool is to facilitate the effective and efficient achievement of the goals set by an organization. Thus, the next parameter to measure ROI should revolve around the degree and time period of goal achievement.
You can start by comparing the degree of goal achievement by leveraging OKR grading to see if there is a significant improvement in percentage terms as compared to pre-OKR tool period. Second, it is important to gauge whether or not the goals/key results have been achieved in a shorter period of time or not. Since the OKR platform facilitates better alignment, collaboration, tracking, etc., it can help organizations achieve or realize the goals faster.
Third, there are several administrative overheads that accompany the setting and implementation of goals/OKRs. These include tracking, grading, etc. for managers and providing inputs on the part of employees. The ROI of an OKR software can be gauged by mapping whether or not these overheads come down.
The next parameter for ROI calculation is to measure the change or increase in revenue after the adoption of an OKR software. Since an OKR tool seeks to enable organizations to achieve their goals faster, cost effectively and to a greater extent, there should be an increase in the revenue realized.
According to Larry Page, co-founder, Google claims that “OKRs have helped lead us to 10X growth, many times over.”
Finally, gauging the value of employee parameters like retention/turnover, productivity, engagement, etc, can cumulatively be leveraged to capture the ROI of an OKR tool. There are several ways to gauge these workforce parameters, along with factors like eNPS, etc. which have a direct business impact. Calculating them can help measure the ROI of the OKR tool for an organization.
It is evident that adoption of an intelligent OKR software is not only good to have, but integral for organizational success. Using the right tool has a direct business impact which can be measured in numbers using the ROI parameters mentioned in this article.
There are both qualitative and quantitative aspects to measuring the ROI and a balanced approach to both can empower organizations to align individual performance with business goals.
If you are considering implementing the right OKR software in your business, try out SuperBeings free 21 day trial. Book today. (No credit card or commitment required)