On a recent webinar that I was giving about Objectives and Key Results (OKRs), one of our participants asked me to explain the difference between OKRs and Key Performance Indicators (KPIs) and if you had to choose one or the other to use in your company. It was a great question, and one that I was surprised to find is not easy to find a clear answer to, because I believe that using them together is key to unlocking new growth opportunities for your business.
My first instinct in explaining how OKRs and KPIs relate to each other was to recall the old-school Reese’s Peanut Butter Cups advertisement. Good on their own, but so much better together. There’s no reason to debate about which is better because they are perfectly complementary.
For those of you that did not live in the US in the 1980s, here is the original advert:
To better describe this relationship, I’ve found the simplest way to think about how KPIs and OKRs can work together is to use the metaphor of something we can all relate to — our health. I know I’m shifting from talking about candy to talking about health, but stick with me on it.
From a health perspective, KPIs would be the vital signs that a doctor takes whenever you have an appointment: blood pressure, pulse, temperature, respiratory rate. Depending upon your age or other conditions, other measurements taken may include height, weight, cholesterol levels, or whatever the doctor determines are the most important indicators to measure your ongoing health.
OKRs, on the other hand, would be the treatment plans the doctor would layout to improve the results of any of those KPIs that may be cause for concern.
Here is how it would work:
Say that after reviewing my health KPIs, the doctor finds that my LDL (“bad cholesterol”) is too high. We would then set a treatment plan with an Objective as well as Key Results, which are the handful of most important steps which, if I complete, should improve my results.
Objective: Reduce LDL cholesterol to 130 by November 1, 2020
- Key Result 1) Reduce red meat intake to one meal per week
- Key Result 2) Exercise for 30 minutes five times per week
- Key Result 3) Lose 5 lbs
- Key Result 4) Eat oatmeal for breakfast five times per week
- Key Result 5) Eat five servings of peanut butter per week (Yes, that’s a real thing)
If I diligently complete all of my Key Results over the course of the next six months, the next time we measure my KPIs, we should find that my LDL score has reduced significantly. Even if I don’t get to the objective of 130, I should be much better off than I was at the time of my initial test.
Bringing this back to your company, you can think of KPIs as the critical metrics to measure the state of your business’s health (revenue, website visits, MQLs, etc.). OKRs are the primary tool for declaring to your team where you want to focus your efforts to unlock new growth (e.g., Increase website visits by 10% in Q2; Reduce cost of acquisition by $0.50 by September 31; Increase market share by 5% in 2020). Once you make this shift in perspective and start working with KPIs and OKRs as a deeply integrated toolset, it becomes tough to imagine using them separately. In fact, if you are not using KPIs to manage your business, it’s unclear to me how exactly you would even know which objectives to focus your organization’s energy on in the first place.
While KPIs have been around for a long time, OKRs are relatively new on the scene. The concept of OKRs was originally created and refined by Andy Grove during his time as CEO at Intel and was an extension of the concept of Management by Objectives (MBOs). I think that John Doerr, a disciple of Grove’s, and his company What Matters are doing wonderful work right now in promoting the expansion of OKRs beyond Silicon Valley and into the broader business community. I highly recommend reading Measure What Matters as a first step.
If you have any questions about how to integrate OKRs and KPIs together you are welcome to connect with me on LinkedIn. Chocolate peanut butter cups gladly accepted as thanks, but let’s stick to the good stuff, ok?