Why OKRs are the New KPIs: A Comparative Study

Do you find yourself caught up in the discussions between OKRs and KPIs, feeling like you don’t have a clear understanding of why you should consider adopting the new tool for business success (OKRs)? Buckle up as we unravel the mystery and compare OKRs vs. KPIs. In this comparative discussion, we’ll explore these terms, how they impact business outcomes, and why OKRs are outshining KPIs.

Understanding the Basics

Before we dive headfirst into the comparison, let’s revisit some lessons from our business school days or the school of experience. Remember KPIs (Key Performance Indicators)? They’ve been our loyal companions, tracking performance and measuring success since the early 90s. Peter Drucker came up with the concept of key performance indicators to give organizations a better way to understand the progress teams make on key business goals on a regular cadence instead of waiting until the end of a period and hoping the team achieved their goal. OKR’s were first developed in the 1970’s but did not become popular until John Doerr introduced OKRs to Google in 1999.

OKRs (Objectives and Key Results) combine ambitious objectives with measurable results. The Key Results in OKRs are measurable and verifiable indicators of how an organization will achieve their ambitious objectives. They’re essentially your business dreams equipped with a dashboard showing you how you are doing.

Breaking Down KPIs

KPIs are often thought of as the traditional performance gauges in business. They’re like that ever-reliable grandparent – set in their ways yet consistently dependable. From sales growth to customer retention, KPIs monitor how well various aspects of your business are doing. The downside? They can often lead to a narrow focus, potentially creating silos in your team.

Dissecting OKRs

OKRs are the “game-changer.” They are to your business what a personal trainer is to you. A personal trainer always pushes you beyond your comfort zone. OKRs with their ambitious objectives and dynamic nature stretches the entire organization past basic strategic objectives. OKRs also clearly align your team towards common goals and maintain a rhythm of accountability for achieving key results. Yes, they are ambitious and may sometimes seem a bit daunting, but greatness was never achieved without a little challenge.

The Great Showdown, OKRs vs. KPIs

Now, it’s time for the great showdown! KPIs are steady, reliable, and straightforward. Most business leaders know how to use KPIs – or at least know how to spell K-P-I-s so they can do a search on how to use them when they are forced into measuring their outcomes. OKRs, on the other hand, bring innovation and agility to the table. While KPIs can make you complacent, OKRs keep you on your toes, pushing you towards continuous growth. It’s like choosing between a comfortable jog on a treadmill versus an exciting trail run. One is safe, the other adventurous yet rewarding.

Why Do We Prefer OKRs Over KPIs?

OKRs are increasingly being recognized as the strategic tool for business growth, and business growth is one of the outcomes we provide to our customers. OKRs align people at all levels of the organization toward the successful completion of ambitious objectives. They also foster innovation, encourage teamwork, and bring adaptability (business agility) into the culture of a business, making the business ready for whatever the future brings. Although transitioning from KPIs to OKRs might seem like a challenge, it’s a leap worth taking for the long-term benefit of your business.

Now, Let’s Apply OKRs to Your Business or Team

Let’s put all this talk into action with a practical exercise. Consider a specific goal for your business, team, or even for yourself. Now, formulate an Objective and couple it with 3 Key Results that are measurable, achievable, and directly influence your objective. Remember, it’s all about pushing boundaries and fostering team alignment. This exercise should give you a first-hand experience of how OKRs work.