Comparing OKRs vs. KPIs is a hot topic you’ll hear in performance management meetings, but it’s an apples and oranges discussion. While there can be overlap (more on that later), these two concepts are really very different. Keep reading to learn how.
What is a KPI?
An acronym for key performance indicator, KPIs are used to evaluate performance over time for an organization, individual, program, project, action, etc. While you may have some outliers, these indicators should usually:
Link to strategic objectives
Direct where to focus resources
Be measured against targets
We highly recommend you make your KPIs measurable. Adding quantitative value makes it easier to provide context and compare performance for whatever you’re measuring. Creating qualitative KPIs is possible, but not advisable because this structure can lead to confusion and subjective interpretations of data.
There are near unlimited examples of KPIs across all industries. A KPI could truly be any quantitative (and in rare cases, qualitative) measure a company uses to evaluate its progress and successfully reach its goals. It’s important to note that, unless you have a very small company, your KPIs can and should be broken down by department (and by industry if you are a conglomerate). Here are some common KPI examples for a variety of industries and divisions:
Retail Industry: revenue per square foot, same-store sales, sales per employee
HR Department: attrition rate, employee performance, average recruitment time
OKR is the acronym for objective and key results—more specifically, an objective is tied to key results. OKR is a strategic framework, whereas KPIs are measurements that exist within a framework.
OKR is a simplistic, black-and-white approach that uses specific metrics to track the achievement of a goal. Typically, an organization will have three to five high-level objectives and three to five key results per objective. Key results are numerically graded to obtain a clear performance evaluation for the objective. OKRs are:
Able to be objectively scored on a 0-1 or 0-100 scale
Ambitious (if you easily achieve your objective, it wasn’t aggressive enough)
The OKR framework was popularized by Google and Intel, but it has also been used by Amazon, LinkedIn, Spotify, and other hugely successful companies for goal management. Generally speaking about OKRs vs. KPIs, the former are a good fit for organizations heavily focused on growth. Not to create confusion, but sometimes an organization’s KPIs are the same as the key results used in an OKR framework. Keep reading and this will become clearer.
OKRs are built on big-picture goals and targets that are designed to push employees and companies forward, so they should toe the line of “almost impossible.” The OKR framework is a continual cycle of fast, dynamic growth. Some general OKR examples include:
Objective: Become the market leader in our industry.
• Key Result #1: Record $100 million in revenue.
• Key Result #2: Increase staff by 45 percent.
• Key Result #3: Increase market cap sufficiently to enter S&P 500.
Objective: Develop autonomous vehicles.
• Key Result #1: Hire 10 artificial intelligence subject matter experts.
• Key Result #2: Invest an additional $500 million in research and development.
• Key Result #3: Roll out prototype by fiscal year-end.
Objective: Increase revenue by 30 percent.
• Key Result #1: Acquire 50 new customers.
• Key Result #2: Increase marketing leads by 20 percent.
• Key Result #3: Increase customer retention to 85 percent.
Keep your KPIs to a minimum. Only certain data is actually key. We recommend identifying one to two KPIs per objective—measurements that will truly help you determine whether you are making progress. Ideally you will have 15 to 25 KPIs on one scorecard.
Make sure KPIs are attainable yet challenging. Your employees need a target that’s motivational and makes them stretch, but one that’s too far out of reach will only serve to frustrate people.
Be clear. Provide context for each KPI by tying it to an objective and comparing it to a target (for example, an industry average, year-over-year growth, etc.).
Frequently review KPIs and update as necessary. Strategy meetings are a great time to reassess your performance measures. If a KPI doesn’t seem to be a good indicator of performance, or if the linked objective has changed, then you may need to adjust or retire it altogether.
Use a software reporting tool to simplify tracking. ClearPoint produces a single, clean, and cohesive monthly KPI report that saves time for everyone and aids in decision-making. Here’s an example of what a KPI report looks like in ClearPoint:
Track every single performance indicator in your organization in the same place. At the executive level, only track and report on the indicators that have the biggest impact and value for your company. You can create additional KPI reports and dashboards for department-level goals.
Use spreadsheets to track KPIs. Unless you’re just trying out KPIs for the first time or on a trial basis, spreadsheet tracking will only make the process harder to manage.
When it comes to OKRs, we recommend you do:
Start with a few specific objectives so OKRs are easier to implement. You can also keep it simple by starting with enterprise-level OKRs only, and then add levels for departments (and even individuals) as you gain experience and buy-in.
Think in the short term. OKR cycles run on a monthly or quarterly basis. So when you’re creating them, think about the goals you can reach within that time frame that will make a meaningful difference to your company.
Make sure that executives support your OKRs. OKRs essentially outline the path your company will take to accomplish its goals. If your leadership team isn’t bought in, they won’t be walking the same path as you, which will inevitably lead to failure.
Use strategy reporting software to simplify OKR metric tracking and reporting. Below are two views of OKR reporting in ClearPoint. We make it simple to gather data and be transparent about progress, both of which are necessary ingredients for the OKR framework to succeed.
We also recommend you don’t:
Build OKRs in a vacuum without visibility into what other parts of the business are doing. OKRs should be created from the top down. Start by defining your OKRs for your organization overall, and then roll them down to the department level, team level, and maybe even the individual level.
Use the OKR framework if your organization is focused on maintaining its offerings or growing slowly. OKRs are better for fast growth. You will lose steam with OKRs if you are tracking the same element with regularity each quarter (100% trash pickup for a city, for example).
A Final Word
When comparing OKRs vs. KPIs, we’ve used some clear-cut examples. In the real world, you will have some gray areas—a twist in nomenclature can turn a key result into a KPI (or vice versa). In the first OKR example above, a key result was to “Increase staff by 45 percent.” Counting the number of employees could also be a KPI. The OKR framework is simplistic and based on tracking data, and a KPI is usually a single data point, so you will find cases where there’s overlap.
If your key results and key performance indicators start to sound similar, that’s ok. Just remember that one’s an outcome and the other a measurement—overlap the wording but not the usage of each.
Now that you know the difference between these two concepts, you can choose the right approach for goal achievement in your organization. Whatever framework you decide on, ClearPoint can help you drive it all with our comprehensive system for strategy management.
Product Manager & Former Synchronized Swimmer
Angel works alongside the product team to help build new features and improve customer experience.