How to Measure Business Success: OKRs and KPIs

Measuring success doesn't mean calculating profit margins or sales numbers only.

It's about having the right systems in place to track performance across different departments.

Key Performance Indicators (KPIs) and Objectives and Key Results (OKRs) are two of the most powerful tools that businesses use to assess and improve efficiency, guide decision-making, and drive results. But what exactly are KPIs and OKRs, how are they different, and how can they work together to help your business thrive?

In this article, we’ll explore the differences between KPIs and OKRs, how they complement each other, and how you can use them to measure and track success in sales, marketing, and beyond. By the end, you’ll understand how to use these metrics effectively in your business to achieve better outcomes and sustainable growth.

What Are KPIs?

Key performance indicators (KPIs) are measurable metrics used to evaluate the long-term performance of an individual, a team, a business, or an organization. For example, many organizations use these metrics to track significant business objectives and their progress. There are various types of KPIs, including financial, customer-focused, and process-focused.

The key is that KPIs measure performance against benchmarks based on specific, measurable goals. For example, this can include predetermined benchmarks, comparisons with competitors, or evaluations of their business over time. KPIs differ based on the specific performance criteria that organizations prioritize. For instance, a software company aiming for fast growth might focus on year-over-year (YOY) revenue growth as its key metric.

Alternatively, a retail business might consider same-store sales as the most effective KPI to measure growth. Overall, the goal of KPIs is to articulate results, enabling business owners to make more informed and data-driven decisions.

What Are OKRs?

Objectives and key results (OKRs) are another key management method, helping teams and organisations meet their goals with the help of measurable actions.

This method is widely used among the largest companies worldwide, including Google, Adobe, and others.

The two components of OKR are:

Objective: what you aim to reach.

Key results: how to measure whether you have reached the goal.

Here, objectives should be inspiring and set for the long term. They can be established for the next year, next quarter, or next month.

Key results are quantitative metrics that track progress toward the goal. They help ground the goals in reality by breaking them down into milestones. Additionally, key results provide a great way to ensure accountability for long-term goals.

How To Use KPIs In Sales And Marketing?

KPI’s can be quite effective in sales and marketing. Once you define KPIs for the sales funnel, you outline the customer journey from awareness to the purchase decision.

A sales funnel is the journey potential customers go through from awareness of the product or services to becoming a customer.

The concept of the sales funnel was first used in 1898, when E.S. Lewis first coined the term "consumer funnel."

Businesses worldwide use the sales funnel to track the overall sales process.

Let’s see how you can use KPIs at each stage of the sales funnel:

Lead Generation: The first stage of the sales funnel is to identify and attract potential customers. Your first KPI here might be the number of leads generated, which measures how effectively you’re attracting potential buyers.
Lead Conversion: Once you’ve attracted leads, the next KPI should measure how many of them you’re able to contact or engage with. For example, what percentage of leads did your sales team reach out to? You may aim for a higher contact rate for calls (70%) and emails or other channels (30-40%).
Meetings and Proposals: After contacting leads, the next key action is to schedule meetings or presentations. In B2B sales, this may involve generating proposals. A KPI for this stage might be the number of meetings or proposals generated.
Closing Deals: Finally, the goal is to close deals. KPIs at this stage could include the conversion rate of proposals to closed deals, the average sales cycle, and the total sales revenue.

This sales funnel logic is incorporated into CRM systems like Pipedrive, HubSpot, and Zoho, which make it easier to track each step of the process and optimize for better results.

KPIs in CRM Systems: Tracking Performance

CRM systems play a crucial role in tracking KPIs across the sales and marketing funnels. These systems enable businesses to monitor performance metrics such as the number of calls made, emails sent, meetings held, and deals closed, essentially measuring how effectively the sales team is operating.

For instance, a CRM system can establish KPIs for individual salespeople, such as the number of calls or meetings to complete each day, week, or month. It allows for the comparison of performance over time and helps identify areas for improvement. Additionally, it can visualize the sales funnel, indicating where leads drop off and assisting in optimizing strategies for improved conversion rates.

What Are OKRs and How Do They Work?

While KPIs help measure performance and optimize processes, OKRs are focused on setting and achieving specific goals. An OKR typically consists of:

Objective: A clear, qualitative goal that defines what you want to achieve.
Key Results: Measurable outcomes that indicate whether the objective has been met.

For example, a sales team might set an OKR to increase revenue by 30% in a quarter. The Key Results could include specific metrics like increasing the number of proposals sent by 25% or closing 100 deals by the end of the quarter.

Unlike KPIs, OKRs are typically set for short- and long-term objectives and focus on outcomes rather than ongoing processes. They help you stay aligned with your overall business goals and ensure that your team is working toward the most important results.

How to Set and Measure OKRs

Setting OKRs begins with identifying key business goals that drive success. These objectives could relate to increasing sales, improving customer retention, or launching a new product. For instance, a sales OKR might focus on hitting a specific sales target, such as closing 1,000 deals in a quarter.

Once the objectives are set, you define the key results that will indicate progress toward achieving them. These key results could include specific actions or milestones, such as the number of meetings held with potential customers or the amount of revenue generated from new customers.

In CRM systems, OKRs can be tracked alongside KPIs, making it easy to monitor progress and adjust strategies when necessary.

KPI vs. OKR: Which Comes First?

A common question is whether to set KPIs or OKRs first. The truth is, these two frameworks are interconnected. OKRs should be set before KPIs, as they define the overarching goals of the business. However, without KPIs, it can be difficult to measure the progress of OKRs. KPIs serve as the actionable steps that drive the results defined in OKRs.

The key is to integrate OKRs and KPIs in your CRM system to ensure that your processes are aligned with your strategic goals. By doing so, you can effectively track performance, drive results, and continuously improve your business operations.

Closing Notes

Incorporating KPIs and OKRs into your business operations is essential for measuring success and optimizing performance. KPIs provide insight into your processes, while OKRs help you stay focused on your long-term goals and desired outcomes. By using these two frameworks in tandem, you can drive growth, boost productivity, and achieve your business objectives more effectively.

Want to improve your CRM capabilities and track your KPIs and OKRs more effectively? Consider exploring popular CRM tools like Pipedrive, HubSpot, or Zoho, which offer free trials to help you get started.

By measuring both performance and outcomes, you’re setting your business up for sustained success in the competitive marketplace.