OKRs vs. KPIs: which one is better for business strategy?

OKRs and KPIs are very important tools for analyzing data and defining and achieving objectives within a company, as they allow you to measure progress and identify opportunities or problems.

Both methodologies help organizations, but serve different functions. While OKRs foster ambition and strategic alignment, KPIs focus on tracking key metrics for performance optimization.

With this in mind, which approach is better for a business strategy? Let's explore what OKRs and KPIs are, their differences, when to employ each and how they can be implemented.

What is an OKR?

OKR stands for Objectives and Keys Results. It is a management framework that helps establish and track objectives within an organization.

They comprise two elements: a specific objective or goal and results, which are used to evaluate progress towards the objective.

There are 4 types of OKRs:

• Aspirational: they are established to challenge or motivate teams towards ambitious or difficult-to-achieve goals.

• Committed: these are those that are expected to be definitively achieved.

• Strategic: these OKRs focus on long-term objectives and usually contribute to the company's mission and vision.

• Tactical: these are lower level, ideal for teams working on different products.

Benefits of using OKRs

Implementing OKRs brings many advantages to organizations, from strengthening the overall structure to a greater commitment of the different teams to achieve goals.

Let's take a look at some of the main ones:

1. Goal establishment

The goal-setting process starts with the creation of agile, realistic and ambitious goals.

This agility makes it possible to adapt to shorter cycles, such as bimonthly, avoiding dispersion and allowing everyone to really focus on achieving what has been set out.

2. Prioritization of results

When goals are understood and the value of achieving them is known, it is easier to focus on them in a more precise and committed way.

Goals help increase focus, and OKRs help prioritize results to achieve them, avoiding getting sidetracked along the way.

3. Clear strategies

By working in a culture of results within companies, there is greater participation in each goal or strategy.

Everyone has to know their function or role in the organizational chart to achieve results and OKRs help to establish this connection.

4. Process simplification

The OKR methodology requires the creation of objectives from practical and simple processes, which helps to optimize time and resources to achieve the expected results.

This happens because there is clarity about the processes that must be carried out, from the smallest to the most significant, to achieve what is sought.

5. Transparency

OKRs need to be aligned with the teams and be available at any time, to know in detail what needs to be done.

In addition, it is easier to identify contradictions or drawbacks, allowing a quick solution to be found and keeping the teams in participative roles.

What is a KPI?

KPI refers to Key Performance Indicator. It is an indicator used to evaluate the performance and success of programs, projects, products, collaborators, etc., in a given time, and is made up of four elements:

• Measurement: establishes the elements to be monitored.

• Objective: is the desired value of the measure or metric.

• Data source: indicates where the necessary data for the KPIs are obtained.

• Frequency: regularity with which data are extracted from the source and the KPIs are reviewed. It can be bimonthly, monthly, weekly or daily.

Benefits of using KPIs in your company

KPIs offer multiple advantages for companies, beyond generating and interpreting data. Let's take a look at the main ones:

1. Clear measurement of objectives

KPIs help evaluate an organization's performance through quantifiable and verifiable data.

This makes it easier to track progress and identify areas for improvement or opportunity.

Data-driven decision making

They provide accurate information to create strategies and make decisions based on data and not assumptions.

This allows for optimizing processes and improving results, enabling to achievement of better results in the achievement of goals.

3. Alignment of teams and objectives

KPIs help all teams to align and dedicate their efforts and time to achieve the same goal, improving processes and collaboration.

This creates a common focus and increases operational efficiency.

4. Identification of areas for improvement

It is possible to detect weak points within processes or activities and make adjustments in time to increase productivity.

This makes it easier to drive continuous improvement in companies.

Difference between OKRs and KPIs

Now that you know the definition of each, it is important to establish the key differences between these two terms.

Both are methods for managing performance within a company and can help you achieve objectives in different ways.

While OKRs are a framework for defining objectives, KPIs allow you to track the performance of objectives.

While OKRs can be used to set any goal, companies often use them to define objectives that are more aggressive or ambitious. In contrast, KPIs are used for more quantifiable goals.

Differences:

OKRs or KPIs: Which is better for a company's strategy?

OKRs and KPIs are important tools for business strategy, but their approach and application do vary.

Choosing between one or the other will depend on the strategic objectives you have within the company and the way you want to evaluate progress.

When to use OKRs

OKRs are the best option when you want to drive organizational growth, innovation or change. They are ideal in situations where you are looking to

• Establish ambitious goals.
• Align the different areas towards the same strategic objectives.
• Encourage experimentation and innovation.
• Evaluate progress in a shorter time.

When to use KPIs

KPIs are most effective when the company wants to measure and optimize performance in certain processes. For example, to:

• Monitor performance on an ongoing basis with accurate metrics.
• Identify problems in operations in areas such as sales or marketing.
• Measure the effectiveness of a strategy with accurate and up-to-date data.
• Establish comparisons and benchmarks internally or against competitors.

You do not have to choose one methodology or the other. They are perfectly combinable to define and measure objectives, which allows you to further improve your company's performance.

Advantages of combining OKRs and KPIs

OKRs and KPIs can be used together in a business strategy to achieve much greater results more effectively.

For example, OKRs can be used to set measurable objectives that drive specific improvements and then bring KPIs into play, providing concrete metrics that must be achieved to realize those improvements.

Let's look at the main benefits of putting them together:

Balance between vision and measurement

OKRs help to define ambitious objectives, while KPIs allow progress to be measured accurately.

This combination ensures the company maintains a clear vision without losing focus during execution.

Better organizational alignment

By employing both methodologies, teams can work with a clear purpose (OKRs) and evaluate daily performance (KPIs).

Through this, better coordination between areas or departments is fostered and efficiency is improved.

Flexibility and adaptation to change

OKRS help to adjust objectives according to the company's context, while KPIs are essential to detect problems or deviations.

Thanks to this, the decision-making process is more effective and agile, optimizing strategies and improving results.

Examples of OKR in organizations

Let's look at some of the most common examples of OKR within companies so you know what to consider:

Sales

• Increase sales in the second half of the year.
• Increase lead conversion rate by 10%.
• Generate 100k in new revenue.
• Capture 10 new customers.

Marketing

• Increase organic traffic to the website.
• Publish 10 new articles monthly on the blog.
• Improve the positioning of 5 keywords within the top 5 of Google.
• Increase SEO traffic by 15%.

Human Resources

• Improve retention of key talent in the organization.
• Implement wellness programs.
• Reduce voluntary personnel turnover by 10%.
• Conduct job satisfaction surveys with 80% participation.

Examples of KPIs in companies

Digital marketing

Sales

Implement OKRs and KPIs in your company with the help of London Consulting Group

To make the most of OKRs and KPIs, is to have a business solution focused on data analysis to boost results and facilitate processes.

At London Consulting Group, we implement Analytics, Data and BI, which focuses on this objective and is ideal for any industry, as its main purpose is to carry out exhaustive analysis, helping collaborators to manage tools and improve efficiency.

Through customized reports, it is easier to measure the data obtained and for everyone to have access to it in real time.

With London Consulting Group, you can implement OKRs and KPIs in a simple way, giving your organization the possibility to boost its results and productivity.

Contact us to learn more about the process and all the benefits you can achieve in your company!