When managing a business, there are several tools that optimize work and drive results. Among them, are you familiar with OKRs and KPIs? Businesses of all sizes and in a variety of industries can use these tools.
Therefore, it’s worth understanding how these tools work and how to apply them to assess whether they make sense for your company . After all, these tools allow you to monitor performance to identify potential flaws, optimize processes, and improve business results.
Learn more about OKRs and KPIs in this article, along with how to use them in your company. Have fun!
What is OKR and how does it work?
The objectives and key results approach are referred to by the term OKR. It’s used to define goals based on a qualitative description. This implies that, as the name implies, you establish the goals and intended outcomes while establishing an OKR.
Thus, it consists of a performance management model that establishes the company’s focus and priorities. As a result, management has direction to achieve its objectives and address market changes.
Large companies, like Google, use the tool to improve their results. Note that the tech giant implemented OKRs while still a small business and maintained the approach after its growth.
Therefore, it adapts well to companies of any size and segment. Its operation is based on two essential aspects: objectives and key results. Objectives are what the company wants to achieve, guiding the planning and actions to be taken by the business.
To do this, specify the timeframe for their completion. Furthermore, it’s important to have goals that are measurable, achievable, and relevant. Keep in mind that they tend to be fragmented—helping to determine the necessary practices and make the objectives more tangible.
Key results, on the other hand, consist of the breakdown of actions taken to achieve the goals. Therefore, they are proportional to each of the smaller objectives, which together contribute to achieving the company’s goals.
How does it work?
Now that you know what OKR is, it’s time to learn about KPI. The acronym stands for key performance indicator. It’s a tool that allows you to measure a company’s results.
In this sense, management can use different types of KPIs , depending on their needs and performance. There are more general indicators and more specific ones, which can be adjusted to different business stages.
KPIs are classified into categories, such as:
- strategic indicators: measure business performance, for example, in relation to strategic planning;
- quality indicators: measure production processes, improving the quality of products or services, as well as customer satisfaction;
- capacity indicators: demonstrate the company’s production potential.
What are the differences between OKR and KPI?
After understanding what OKRs and KPIs are and how they work, it’s time to understand the differences between the tools. They are similar and can work in a complementary way, but remember that they are distinct instruments.
OKRs focus on the process of enabling change. They then go over the procedures required to get the intended outcomes. Furthermore, objectives and key results are applied over specific periods, projecting performance.
KPIs, in turn , measure past and present performance. Therefore, they are tied to past or ongoing performance. Furthermore , KPIs tend to be an ongoing part of management routines as a way to monitor results.
How to use these tools in business?
By reading this far, you ‘ve already understood the differences and importance of OKRs and KPIs for businesses . Now see how they can be used in practice !
Establish business objectives
Above all, the business must be clear about its medium- and long-term goals, as they determine the direction of the enterprise. When establishing these goals, it’s important to consider the company’s values and culture, as well as the results it hopes to achieve in the future.
Set goals
The second step in applying the tools is to clearly define the business’s goals. Keep in mind that this will serve as a guide for strategies and actions, so they must be clearly defined and meet the specified objectives.
Assign key results to each goal
Keep your objectives in mind and provide each person a vital result. For example, if your business aims to increase revenue by 10% within six months, you need to know what the results will be along the way.
These could include increasing sales of a specific product, strengthening marketing strategies , and reducing operating costs, among other actions that make sense.
Develop the action plan
Once the objectives and goals have been determined, the company must develop an action plan, determining how they will be achieved. To this end, management must consider the necessary adjustments and practices to achieve the defined key results.
Choose the indicators
Finally, the company must choose indicators to measure the performance of its actions. They can demonstrate which practices are yielding positive results and which need to be revised. As you’ve seen, there are different categories of KPIs, so see which ones best suit your needs.
By reading this content, you’ve understood what OKRs and KPIs are, and how they can be applied to a business. As you’ve seen, they work in a complementary manner, helping the business achieve its goals and, consequently, improve results.
