Understanding the Differences
We’ll look at the differences between OKRs and some other methodologies and terminologies which tend to confuse the landscape of management.
These two concepts appear very similar, but in reality, they accomplish different tasks. They are not mutually exclusive by any means – one may employ the use of OKR and a KPI toward accomplishing the same objective – but they perform different functions.
Metrics, or key performance indicators, serve to perform a health check as to the progress, effectiveness, and efficiency of your overall OKR. Your KPI serves as a reporting methodology, and less as a tool specifically designed to reach the goal. Obviously, you will need to have regular reports in order to reach your objectives, but the distinction is an important one all the same.
Metrics serve an essential role in reaching the overall goal in that they are more tailored to focus on the productivity of your staff, employees and individual teams. The reports metrics are intended to generate, providing both an overall and specific view to the productivity of the individuals working toward the overall goal. Conversely, OKR’s keep a finger on the pulse of the company’s objective, rather than an eye on the activity of its individual contributors.
Where the final objective is your destination, your OKR is the vehicle, and your KPI is the dashboard. Your OKR is what gets you there, but your KPI tells you how your car is doing as it makes its way toward the goal.
While OKR is a proven method of objective management for many global corporations, SMART goals are also a recognized method by which to create goals and reach success. The two methodologies are often debated as to which is the most effective implementation for a given company, but they are also wildly misunderstood as to how different the two approaches are. Here we will examine the differences between the OKR method and SMART goals.
We all know what a goal is: it’s simply something you want to accomplish. There are no real rules that apply to goals overall. They can be as abstract or concrete as you want them to be, as realistic or unattainable as the vision of the individual who sets them, as simple or complicated as you want, and as easy or ambitious as the person chooses.
Setting goals has long been a way for organizations and individuals alike to establish expectations and timeframes for themselves, and to have something to work toward as they push toward success.
So what’s the difference?
Well, very simply, goals and OKRs cannot be the same thing — because goals are part of OKRs.
The OKR method encourages its participants to break down goals into measurable, trackable and quantifiable parts of the overall objective. The closest thing to a goal within the OKR method is a key result. But key results bear a series of requirements that are not necessarily present within a simple goal.
The OKR method splits a goal in two between the abstract and the concrete in order to create an objective management framework that is conducive to real, actionable planning and implementation.
Say someone sets this goal: “Save some money.”
That is exactly as far as that goal must necessarily go in order to qualify as a goal.
But the OKR framework takes that goal and splits in two:
The objective: “Save money.”
And the key results: “Save $10 during week one. Save $20 during week two.” And so on.
The simple power of the OKR method is its application of a structure to the practice of setting goals, and the management of real and measured milestones toward achieving that objective. Organizations experience myriad benefits of splitting their goals up into objectives and key results, like streamlined communication, clarity among departments and teams, and enabling the entire organization to adapt and adjust when the objectives of the company change as a whole. This is a valuable tool that simply setting goals could not possibly accomplish by virtue of the lack of measurable success and realistic timelines.
OKRs emerged as a powerful and effective objective management tool for organization of all sizes and types back in the 1970s. As the popularity of OKRs increased and spread all around the globe, users of the older and also popular management method called MBO, or Management By Objectives, had to evaluate which method was right for their organizations — and whether it was worth it to switch to the OKR method.
But what’s the difference between the two? How does one determine which method is more effective for his company to reach its goals?