What's a use case where a company uses both OKR and KPI?-business kpi

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There are lots of systems that tend to fit into a grandfather umbrella of "management by objective".  They are all various flavors of making sure to understand how to metric success or failure against an "aspiration".

I use the word aspiration as a generic term to cover what can otherwise be variously called goals, objectives, milestones, strategies, tactics or any number of other words that mean something people want done.

Because these systems have a similar purpose, they tend to have grey area overlaps. The differences between aren't about the core idea of an aspiration and a measurement, the differences are about the nuance of how they are applied.

In the case of the two systems you asked about, here's how I view them:

KPIs are Dashboards on Consistent Areas of Production

KPIs are generally talked about in relation to a more static set of needs than OKRs. They tend to be a set of measurements on an operational area of a business that seeks to produce a similar result consistently over time. As such, they are often rolled up into dashboard views that hang around and turn attractive shades of red, yellow and green.

Their use is to highlight danger areas in a consistent process in a way that encourages analysis and reaction to the negative metrics early in the trends. The biggest example of this is their use in a "balanced score card" model.

Because, in the end, this is just a way to think about measuring progress towards an aspiration you can apply KPIs to more fluid things, like a new company initiative to change XXX. But still, there's a sense that a mission is determined at the outset, KPIs are identified, a dashboard is set up.

So the activity loop on a KPIs runs something like this:

1. People do things in the organization
2. Results happen that affect KPIs
3. KPIs are monitored and noted when they turn bad
4. Actions are determined to correct the situation

Sometime long before this loop starts executing over and over again, an aspiration was defined and KPIs were determined. Now you just watch them.

You often see people asking questions like "what are good KPIs for sales follow up" or "What best practice KPIs exist for warehouse logistics". The perception is that it's about monitoring something that should be consistently productive. The emphasis is on the measurement while the aspiration is kind of assumed to be understood.

OKRs are Alignment and Accountability of Innovation Efforts

OKRs seem to be more about the importance of good qualitative aspirations being set, then re-evaluated and set again. The measurements are critical too, of course, but they derive from the objectives in a more fluid fashion than KPIs. The objective in an OKR is meant to be set, killed and reset. The key results, therefore, will be re-imagined as the objective changes.

So the activity loop for OKRs is more like this:

1. Objectives are determined
2. Key results are defined and committed to
3. Work happens to hit the numbers
4. Progress is evaluated

The objective definition is constantly being re-thought in the loop itself, as are the key results. As such, they work better for empirical work - i.e. work where you do some things, see what you have learned and then make new plans that could pivot the whole effort.

How Organizations Would Use Both

Say you are Google and you have two different areas that you want make sure have strong direction and are accountable to performance: Data center operations and the new and secret Android team.

Data center operations might be a good place to define some KPIs around energy usage per square foot, hardware failure, data throughput, etc.. They have a set of parameters that have to be good all of the time, year in and year out. A scorecard on how they are doing might be good to have.

The Android team isn't even sure what they are building yet. What do you measure and green/red light? They are designing something new, and while they have a big picture idea of the objectives, all of the objectives a step down from that may change over time.

You could try to come up with KPIs  that are more generic to the project specifics (as people have attempted in the past) like lines of code per developer per week, but programmer productivity defies measurement that way. The guy who writes 3 lines of code that do the same thing faster than the other guy who wrote 200 lines of code to do it is a keeper not a problem, even if he had to work on it for the same amount of time as the 200 line person.

So basically, what you do is have people set new objectives and new key results on an ongoing basis until you have something cool.

Where It Gets Messy

If the same employees tend to be responsible for maintaining KPI health and innovating and moving things forward, combining the approaches gets difficult. It becomes difficult to define extraordinary initiatives as OKRs with a real sense of how much time and effort can reliably put towards them if any decline in the KPIs take priority.

That all leads to the common frustration of slow or absent progress towards changes in the state of the art. It's common to plan OKR-like initiatives too optimistically and then have them fall prey to KPI priorities inside of consistent operational areas. That conflict isn't so much inherent to the systems of KPIs or OKRs, but more to the general nature of balancing priorities and resources.

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