Summary
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KPIs (Key Performance Indicators) are performance metrics that assess and measure the success of certain activities.
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OKR (Objectives and Key Results) is a goal-setting framework that breaks down several larger goals into smaller, shorter-term goals and measurables.
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Put simply, OKRs are a framework that KPIs can sit within as a way to measure success.
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Without OKRs, your goals can lack specificity, accountability, cross-functional collaboration, and importantly, employee engagement.
Without a solid goal-setting framework and aligned metrics, growing your firm will simply be much harder than it needs to be. That’s where OKRs and KPIs come into play.
You may have heard the term OKRs, and you’ve certainly heard about KPIs before. But what are they really? Are they the same thing? And which is better to use at your accounting firm?
What are KPIs?
Key Performance Indicators (KPIs) are performance metrics that assess and measure the success of certain activities.
A basic example of a KPI for an accounting firm
Average revenue per client (ARPC)
How much, on average, each client is contributing to your top line
Recommended reading: 5 revenue KPIs every firm must track
What are OKRs?
Objectives and Key Results (OKRs) is a goal-setting framework that breaks down several larger goals into smaller, shorter-term goals and measurables.
OKRs have two key components:
Objectives
Think of these like an archery target. They represent measurable, relevant, ambitious, and time-bound goals. Often, these are used to break down larger annual goals into smaller, shorter-term objectives.
Key results
Think of these like your bow and arrows—these help you hit your target. They represent specific metrics and activities that directly align with your objectives. Often, there are a few key results per objective.
A basic example of OKRs for an accounting firm
Yearly objective
Increase YoY profits by 100%.
Quarterly objective
Double revenue MoM, 3 months in a row.
Key results
What’s the real difference between OKRs and KPIs?
Simply, OKRs are a framework that KPIs can sit within as a way to measure success.
Let’s take the examples listed above:
An accounting firm wants to increase revenue MoM for 3 consecutive months (quarterly objective).
They’ll achieve that in part by increasing the value of their current clients (key result).
They’ll measure the success of their efforts to increase the value of their current clients by measuring the average revenue per client (KPI).
If your objectives are your targets and your key results are your arrows, then your KPIs tell you how quickly your arrows are traveling and how much tension you have in your bow.
How OKRs and KPIs can transform your accounting firm
Everyone knows that without goals, you don’t know where you’re going. But not everyone knows that without OKRs, your goals can lack specificity, accountability, cross-functional collaboration, and importantly, employee engagement.
Increase employee engagement with OKRs
When using the OKR framework, you can layer objectives and key results, which enables each team member to participate in, or own, specific objectives and/ or key results that are aligned to your firm’s overall goals.
Karbon’s CEO, Stuart McLeod, recently shared Karbon’s yearly objectives:
Build the world's leading practice management platform for accountants
Become one of the industry’s greatest employers
Build and implement the Karbon Operating System (KOS)
Each of these yearly objectives are broken down into quarterly objectives. And these quarterly objectives each have key results that are owned by different departments and people across the company.
As a simple example, let’s take the first Karbon objective and hypothetically break it down at a basic level:
Yearly objective: Build the world's leading practice management platform for accountants
Accountable: Company-wide
Quarterly objective: Make more accountants aware of Karbon
Accountable: Marketing
Key result: Increase website traffic to karbonhq.com by 20% QoQ
Accountable: VP of Marketing, Marketing Web Developer
Key result: Increase new webinar registrations by 10% QoQ
Accountable: Content Marketing Specialist, Social Media Specialist
In reality, these objectives and key results are more specific and involve deeper layers that spread across more members of the team. But in essence, this example demonstrates how using the OKR framework engages multiple people across multiple specializations and focuses their efforts to an ultimate goal.
Boost cross-functional collaboration with OKRs
As well as encouraging employee engagement, OKRs also facilitate cross-functional collaboration. Cross-functional collaboration is key in facilitating alignment and culture building.
Let’s use the earlier example of a hypothetical accounting firm’s OKRs:
Yearly objective: Increase YoY profits by 100%
Accountable: Company-wide
Quarterly objective: Double revenue MoM, 3 months in a row
Accountable: Managing Director
Key result: Increase headcount by 25 new clients
Accountable: Head of Sales
Key result: Increase the value of current clients by 18%
Accountable: Customer Success Manager
This OKR scenario already involves two departments and the executive level.
Gain team-wide alignment with OKRs
When each team member is actively involved in key results that are aligned with your firm’s objectives, those objectives are front of mind. There’s no confusion, forgetfulness or apathy, because everyone’s key results are directly tied to the company’s performance, and vice versa.
Recommended reading: Why you need an aligned team before scaling your accounting firm
Strive for tangible results by being specific with OKRs
When you need to travel somewhere new, do you put a specific address into your GPS? Or do you type in the suburb and hope for the best?
The chances are that whenever you can enter the actual destination, you do. It’s quicker, more efficient, and less stressful.
So why would you handle your accounting firm’s objectives any differently?
The success of reaching your firm’s objectives relies on the specificity of your key results.
Let’s use the hypothetical accounting firm once more:
Quarterly objective: Double revenue MoM, 3 months in a row
Which key result is more likely to achieve this objective?
Key result: Increase client headcount
Key result: Increase headcount by 25 new clients
Let’s say at the end of the quarter, the accounting firm increased their client headcount by 10. Technically, they did achieve key result 1. But because that key result isn’t specific, they would have achieved it even if they increased headcount by 3.
But with key result 2, the headcount increase of 25 clients is directly tied to its objective, and in reality, this would represent the actual number needed to achieve that objective.
So not only is key result 2 more tangible, but it has been specifically calculated as the number needed for success.
Don’t forget to stretch
It might seem like a strange concept, but a fully-achieved quarterly OKR isn’t necessarily a successful one. Ideally, your OKRs are stretch goals—aspirational yet something you can still make decent headway on.
If they’re too easy to achieve, they’re not challenging enough. If they’re too difficult, they’re not realistic enough.
Generally, completing 80% of your OKR is considered a success.
Don’t overcomplicate it
It can be easy to become overwhelmed by the complexity of setting OKRs for your firm. One of the best ways to ease into setting OKRs is to keep it simple when getting started.
Begin with setting your company’s annual objectives and layering down once more to your quarterly objectives. From there, select only one or two key results per quarterly objective.
At the end of the quarter, assess how your team performed as well as how realistic the OKRs were.
You can then iterate, get more complex with your OKRs, and interweave your KPIs. From there, you’re better-placed to take your firm, team and clients to the next level of operational success (and growth).
