OKRs vs. SMART goals

OKRs and SMART goals are both terms that exist within the world of goal-setting and are commonly used in many successful businesses worldwide. However, it’s essential to understand the difference between them so you know when to use OKRs and when the idea of SMART goals come into play.

Let’s look at all elements of this comparison in detail.

Firstly, both align with the idea of goal setting, which is a hugely important aspect of business planning. Goal setting provides a 12-15% performance advantage over businesses that do not set any goals.

Goals aren’t something to be created and then forgotten. Setting goals and putting these into action requires a strong commitment, achieved through combining the goal with a burning desire if the goals are to be completed. If someone aligns goals to their passion or vision, they are more likely to stick to them. You can achieve Goals in many different ways; the overall outcome is what’s most important. Goals can and should include some degree of stretch to ensure they are inspiring and designed to move a business, team or individual forward. However, finding the balance here and making stretch goals realistic can be challenging.

Setting and working towards specific goals may require a change in mindset for some and involves self-discipline as well as a deeper connection with the outcome. Are you learning to reach your goals?

For help and advice on setting goals, check out our blog offering 10 goal setting tips, including Warren Buffett’s key to success.

What are OKRs?

OKR stands for Objectives and Key Results. They can be set at a company, team and individual level. Most effective with full business buy-in, OKRs outline mission-critical objectives, which relate to the ‘what’ it is you’re trying to achieve, linking with Key Results which focus on the measurable steps required to show ‘how’ you are going to achieve those objectives.

OKRs help businesses centralise and streamline their focus on a specific vision and how they could achieve this over a certain period of time. They include critical elements of the overall business strategy that need to be accomplished to deliver results and achieve the vision consistent with the values. OKRs can be cascaded through an organisation, starting at the CEO level and filtering throughout various departments and teams with their own set of OKRs corresponding to the CEO. Having OKRs set and cascaded like this encourages team alignment and engagement within a business, and we all know engagement drives better performance!

For a more in-depth explanation of OKRs, visit our blog What are OKRs?

What are SMART goals?

SMART goals were initially developed by George Doran in 1981 and describe the characteristics that goals should have to make them most effective. SMART stands for Specific, Measurable, Achievable, Realistic and Timely. The idea is that if goals are made SMART, they will be a lot more robust and lead to much more solid outcomes.

How are OKRs and SMART goals similar?

Both OKRs and SMART goals have been created and refined over time through growing popularity and development within organisations through testing and learning what makes them work well. You could argue that Objectives and Key Results should themselves be SMART to ensure they are set for success.

Let’s take each characteristic and investigate further.

Specific - Whilst the Objective in an OKR can be slightly less specific, for example, ‘To improve customer service by year end’. The Key Results against which to measure and achieve this need to be very specific, for example, ‘Achieve a Net Promote Score of 60 or above’ and ‘Reduce customer complaints by 50% in Q4’.

Measurable - Key Results must be measurable as these are set to indicate a positive movement or milestone being achieved, which contributes to the Objective you are aiming for. All Key Results should include specific metrics that measure progress towards achieving the Objective.

Achievable - Whilst both OKRs and SMART goals should include some degree of stretch to inspire and motivate, it’s important they are both still considered achievable within the set time frame and with the resources available.

Relevant - OKRs provide a goal-setting framework that can, and should, be cascaded throughout an entire organisation. Therefore, OKRs at all levels are set in alignment with higher-level OKRs, ensuring all teams and individuals are applying their hard work and determination in the same direction to achieve the desired results and overall business vision.

Timely - Like SMART goals, OKRs have a defined time scale and are usually set over 12 months, with some minor adjustments at quarterly intervals.

How do OKRs and SMART goals differ?

Whilst there are many similarities between OKRs and SMART goals, there are three significant differences:

1. The acronym for OKRs is clear and always means the same thing - Objectives and Key Results, whilst the SMART acronym can sometimes be interpreted differently. Measurable can be replaced with Motivational, Achievable can be Assignable or Attainable, and finally Relevant can be replaced with Realistic. Some of these substitutions would not have too much impact, apart from the first one mentioned - instead of Measurable, they were made Motivational. This changes things significantly, as measuring the outcome of a goal is vital for success.
2. SMART goals focus only on the ‘what’ is to be achieved, whilst OKRs focus on the ‘what’ and the ‘how’ one will achieve it. Key Results add in a series of measurable milestones to be completed, signalling a movement towards achieving the Objective.
3. SMART goals are not actually a framework like OKRs are. Instead, they refer to a set of characteristics which goals should be set by to be effective. SMART is a set of criteria to define goals for success.

Key takeaways

The bottom line is that SMART goals are not considered a goal-setting framework but rather a criterion for setting effective goals, so OKRs themselves should be SMART.

When creating OKRs, ask yourself these questions:

1. Is my Objective relevant to the overall business vision and achievable with stretch?
2. Are my Key Results specific, measurable and timely?

If you are wondering whether OKRs could work as an effective goal-setting framework within your business, check out our blog OK R you ready to raise your game? or get in touch with us by emailing hello@reclaro.com, and we will be happy to help.

To understand more about OKRs and how they compare to KPIs, visit our blog OKRs vs KPIs - How to decide which is best for you and your business.