Objectives and Key Results (OKRs) is one of the most talked-about goal-setting methodology out there. From John Doerr’s “Measure what matters” book to numerous podcasts, articles and case studies, OKRs have conquered the world since Google first implemented them almost 10 years ago.
So, it makes sense many companies and teams are trying to implement the system themselves and reap the benefits it offers. In Weekdone, we often see that people are trying to use OKRs in sales, in marketing, in product development and every other team they can think of. And there are two problems with that.
‘First of all, for a lot of teams, using OKRs just doesn’t make sense. If your only goal is to measure metrics and hit targets, or track day to day activities, you should use weekly planning or Key Performance Indicators (KPIs) instead. The second problem is that many teams actually use KPIs, but they are trying to pass them off as OKRs.
So, in this article, we’ll take a longer look at what is the difference between OKRs and KPIs and how to actually use OKRs in teams that traditionally need to measure numeric targets like sales results.
What are OKRs?
OKRs are a goal-setting methodology. With OKRs you'll set quarterly and annual inspirational Objectives and track and measure movement towards them with numeric Key Results. When you accomplish your Key Results, you get closer to completing your Objectives.
OKRs are more about measuring development and improvement than measuring random numeric metrics. When it comes to sales, for example, you don’t measure “client meetings held” or “sales revenue generated” with OKRs. Instead, your Objectives are something like “Double our speed of customer outreach by improving internal processes.”
What are KPIs?
Key Performance Indicators reflect the results of your actions. They are quantifiable criteria for success. Examples of KPI based metrics include revenue, customer meetings, sales calls, etc. KPIs help you track work and show you how close you are to meeting your targets when you work the way you work. For instance, if your target is to get $100 000 in sales revenue, your KPI will show how much revenue you have already generated.
What is the Difference?
KPIs measure the effectiveness of existing processes and initiatives, but they don't tell you how you are going to grow your business or improve performance. For example, you may be determining sales performance with the following KPIs:
- Cost of goods sold;
- Profit margin;
- Close rate.
When you measure your company’s success, there are a few terms that many people mix up. You set Targets to see what you need to achieve. And metrics on what you need to measure to see how far away you are from your targets. KPIs are that metric with a 100 percent result being the target.
Using OKRs in Sales
When you want to use OKRs, you can not set Objectives as targets as they are not ever numeric. Objectives are inspirational goals like “Improve our internal sales process”. Then you can set Key Results that show you how you will achieve your Objective.
Good Key Results dig deep. For example, a common KPI in sales can be an amount of sales meetings. Now, if your end goal is to have more sales and sales revenue, then having more meetings as a KR will not really work. Because more meetings doesn’t mean more revenue.
In Sales, we often see that people want Key Results to focus on money or revenue. But this, by definition, is a very clear KPI.
OKRs are not about representing numbers or showing cash value. They are about learning and development. The question is not how much cash we generate but how can we generate more money. It is not about the revenue but how you’ll get to that revenue. How is your sales team improving their day to day processes and themselves to be able to increase the month to month sales numbers?
Goal Setting System Needs to Work for Your Team
When you start using a new goal-setting methodology in your team, you need to make sure that this method works for both you and your employees. And while OKRs can be fit to be used in any team, often they shouldn’t. If you are still sure, you want to give it a try, you can set your OKRs in Weekdone now.