How do OKRs and KPIs differ, can they be mixed?

There are some questions, the answers to which may vary depending on the experience. And each answer will be correct. You know, it’s like dividing by zero. At first, at school, they say that you can’t divide by zero. You go to college and find out what you can do. Then you get a job and you understand that you can and can, but there is no special point.

OKR is about the same story. The thing that Google uses, it seems, cannot be nonsense and therefore arouses genuine interest among many. But exactly what benefit is expected of it depends heavily on the level of maturity of your business.

OKRs and KPIs are different

At first glance, OKRs and KPIs look very similar. In both cases, we choose certain goals and regularly look at how close we are to them at the end of the reporting period or how close we are in the process. In general, this is what the company must achieve in a certain period.

OKR, aka Objectives and Key Results, consists, as the name implies, of two components. The first component is ambitious goals (objectives). They define business value. The second is the key indicators (key results), which can be used to judge whether we are approaching these very goals or not. Ambitious goals are goals that are fundamentally unattainable by 100%. If the goal is achieved, then it is not ambitious enough. The optimal performance is considered to be 60-70%.

KPIs (key performance indicators) are key performance indicators. If everything you need to know about OKRs can be gleaned from John Doerr’s Measure What Matters Most, then there is no such ledger for KPIs. Usually, when they talk about KPI, they mean either Peter Drucker’s MBO methodology or David Norton’s BSC system. However, in any case, KPI means tasks formulated according to SMART, as well as Key Results within OKR.

Both KPIs and OKRs can be formed for different levels of the company, and then combined into a common hierarchy of goals. The goals of the employees should follow from the goals of the departments, and the goals of the departments – from the goals of the company.

In general, if objectives are removed from OKRs, which for some reason are deliberately impracticable, then both approaches are indistinguishable. So OKRs are just a new kind of KPI? And if so, then the question “Is it possible to mix KPIs and OKRs?” disappears by itself. But really the answer depends on why your company needs a KPI or OKR.

OKRs and KPIs for Miscellaneous

So, KPI goals are specific and achievable, and therefore it is possible to judge the effectiveness of work by them. They completed the task by only 50% – badly, they completed it by 100% – it’s normal, and if more – well, that means well done. That is, it is no longer just a metric, not only a control tool, but also a way of motivation. The company makes it clear what it wants from employees.

OKRs are more difficult. You can’t walk up to a subordinate and ask why OKRs are only 50% done and not 70% as expected. After all, the goal was initially unattainable, and the results are poorly predictable. If you still insist on reaching 70% and, say, introduce a monetary reward for this, then next time employees will formulate OKRs in such a way that the coveted value of 70% is obtained. That is, you, without realizing it, turn OKRs into KPIs.

Thus, OKRs, unlike KPIs, cannot be used to motivate employees. If you look at OKRs as a way to convey to an employee what he should do, this is a very bad and non-obvious way. Instead, OKR proposes to focus on the question: why do we do what we do. In fact, OKRs are just a way to organize a conversation within the company about where we are going. And OKRs can only be implemented if top management knows where we are going and that means we have something to talk about, that is, when the company has a strategy. Otherwise, there will be no more business benefit from OKRs than from the Kama Sutra for a fifth grader. Very interesting, but nothing is clear.

From this point of view, KPI and OKR can coexist, as they perform different functions – motivation and goal setting. But it is important to spread them as much as possible so that they do not affect each other. First of all, of course, KPI on OKR. You can make KPI not depend directly on the tasks solved by the business, but tie it, say, to the outputs of one of the 360-degree methods. Or tie, but at a level much higher than the level of the employee and his team – they reached the goal, everyone did well, everyone receives payments. Well, the easiest option is KPI for some departments, OKR for others.

OKR and KPI for different

We continue to walk the slippery path of searching for deep meaning. So, OKRs and KPIs can coexist in the space of the same company. This is not easy, it will take time to eliminate the influence of KPIs on OKRs, but in principle it is possible. And now the favorite question of all product managers: why?

KPI is a way to motivate employees, a way to convey to them how they should work. That is, it is assumed that the company’s management knows how to work, what to do for employees, and you just need to be able to tell this to subordinates.

OKR assumes that we more or less understand where we are going, but how to get there is not completely clear. We want to find a solution together, with all employees, at all levels. This does not mean that now you need to throw out all dashboards, except for those where OKR tasks are displayed, they remain useful and necessary, but you no longer need to poke employees in them. Now these are just metrics, characteristics of the state, but not levers of influence and human resource management.

I do not want to contrast these two approaches, but it is important to understand that they are from different management paradigms. It’s like saying to your son: “You are already an adult, you can make decisions yourself now, I trust you … and by the way, just in case, I hung a hidden camera in the corner of your bedroom.” That doesn’t work.

It may sound a bit grandiloquent, OKRs can only be implemented if the company culture is open and mindful, and the majority of employees are highly professional, deeply ethical, and internally motivated. Is this how things work in your company? Your employees, having heard once that ambitious goals can be achieved by 60-70%, will they not decide what can be left unfinished, not squeezed? Ready to put your business on the line and check it out? If yes, implement OKRs. To the extent that you don’t live up to these high standards, to the same extent that you actually need KPIs, and to the same extent that you are too early to use OKRs.

If you want to mix OKRs and KPIs, then you probably don’t need OKRs.