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.
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:
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:
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.
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.
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.
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.
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.
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:
KPIs offer multiple advantages for companies, beyond generating and interpreting data. Let's take a look at the main ones:
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.
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.
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.
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.
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:
Feature |
OKR |
KPI |
Purpose |
Motivational tool |
Performance evaluation tool |
Nature |
Ambitious and aspirational |
Measurable and realistic |
Use |
Define direction and growth |
Evaluate and optimize processes |
Basis |
Corporate missions and aspirations |
Past results and current projects |
Duration |
Short- and medium-term (quarterly or annual) |
Variable |
Flexibility |
Change every cycle |
Metrics that remain unchanged for months or years |
Orientation and scope |
Horizontal: they can cover different areas or teams. |
Vertical: starts at the macro level and goes down to the other areas |
Transparency |
Are accessible to the entire organization |
It may not be visible in all areas |
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.
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
KPIs are most effective when the company wants to measure and optimize performance in certain processes. For example, to:
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.
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:
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.
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.
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.
Let's look at some of the most common examples of OKR within companies so you know what to consider:
KPI |
Description |
Formula |
Conversion rate |
Percentage of visitors who carry out a desired action within a website, such as filling out a form or making a purchase. |
Number of conversions ______________________ x100 Number of visitors |
Acquisition cost |
This is the average cost of acquiring a new customer through advertising campaigns. |
Total campaign cost _________________________ Number of new customers acquired |
Organic traffic |
Number of visitors arriving at a website through organic search results. |
KPI |
Description |
Formula |
Average ticket value |
This is the average amount a customer spends in your company or business. |
Total revenue ______________________ Total number of transactions |
Customer retention rate |
Percentage of customers who continue to purchase products/services from a business during a specific period. |
((Customers at the end of the period - New customers acquired) / Customers at the beginning of the period) x 100. |
Gross profit margin |
Percentage of gross profit to total revenues. |
((Revenue - Cost of goods sold) / revenue) x 100. |
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!