OKRs vs. KPIs: Breaking Down The Difference

Comparing KPIs vs. OKRs is a hot topic you’ll hear in performance management meetings, but I think it’s an apples and oranges discussion. While there can be overlap (more on that later), these two concepts are really very different.

In this article, I break down the key differences between OKRs and KPIs with examples for each. I’ll start by defining these terms.

Defining OKR vs. KPI

OKRs (Objectives and Key Results) and KPIs (Key Performance Indicators) are both used to measure performance but serve different purposes and operate in distinct ways. An OKR is a strategic framework whereas a KPI is a metric that exists within a framework. If you're looking to execute a broad, high-level strategic plan, then you might use a Balanced Scorecard or OKR framework. Both have measures or KPIs within them. If you're looking to measure the success of a goal or project, however, you'd use a KPI. OKRs were originally designed to help manage and motivate individuals across organizations. John Doerr’s book, “Measure What Matters,” popularized the use of OKRs, and several uses beyond individual performance have taken hold.

To get more specific about the characteristics of each, OKRs are:

• Always quantifiable
• Able to be objectively scored on a 0-1 or 0-100 scale
• Bound to a specific deadline
• Ambitious (if you easily achieve your objective, it wasn’t aggressive enough)

Typically, an individual will have up to three high-level objectives and three to five key results per objective (no more than 10 overall per person). Key results are numerically graded to obtain a clear performance evaluation for the objective. Based on my experience, OKRs are a good fit for organizations heavily focused on growth. They should toe the line of “almost impossible.”

In contrast, KPIs are:

• Linked to strategic objectives
• Able to direct where to focus resources
• Measurable against targets

Something I’ll note is that creating qualitative KPIs is possible, but not advisable because this structure can lead to confusion and subjective interpretations of data.

OKR vs. KPI Examples

There are a multitude of OKR vs. KPI examples out there. The OKR framework was popularized by Google and Intel, and has also been used by Amazon, LinkedIn, Spotify, and other hugely successful companies for goal management. And companies in all industries use KPIs to assess operations.

Here are some head-to-head OKR vs. KPI examples to help you understand the difference:

Sales

• OKR:
  • Objective: Increase market share in the Southeast region by Q4
  • Key Results:
    • Acquire 100 new clients in the Southeast
    • Increase sales volume by 15%
    • Launch 3 major marketing campaigns in the region
• KPI:
  • Quarterly sales growth percentage in the Southeast region
  • Target 20% (both OKRs and KPIs should have targets)

Customer Service

• OKR:
  • Objective: Improve customer satisfaction scores
  • Key Results:
    • Reduce average response time to under 2 hours
    • Achieve a customer satisfaction score of 90%
    • Decrease complaint resolution time by 50%
• KPI:
  • Average customer satisfaction score
  • Target 8 out of 10

Human Resources

• OKR:
  • Objective: Improve employee engagement and retention
  • Key Results:
    • Increase department engagement score by 20%
    • Improve benefit adoption across the department by 17%
    • Implement 3 new team-building programs
• KPI:
  • Reduce employee turnover rate by 10%

Finance

• OKR:
  • Objective: Optimize operating costs
  • Key Results:
    • Reduce product A supply chain expenses by 15%
    • Lower department overhead costs by 10%
    • Automate 30% of manual finance processes
• KPI:
  • Reduce operating cost ratio by 10%

Compliance

• OKR:
  • Objective: Ensure 100% compliance with new regulations
  • Key Results:
    • Update all operational processes in compliance with the new regulations by Q2
    • Train all managers on new compliance standards by Q3
    • Pass all external compliance audits with no major findings
• KPI:
  • Reduce overall compliance citations by 20%

These examples illustrate how OKRs are more goal-oriented and project-driven, focusing on achieving specific future states, whereas KPIs tend to be more about measuring ongoing performance against existing standards or targets. OKRs are usually within the purview of one individual and KPIs require a team or organization effort to achieve.

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KPI & OKR Best Practices

KPIs

With KPIs, I recommend you do:

• Keep your KPIs to a minimum. Only certain data is actually key. I advise 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 Strategy 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:

Can’t decide if the KPIs you’re considering will be effective? Use the seven questions in this article for guidance.

I also recommend you don’t:

• 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.

OKRs

With OKRs, I 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. I’ll tell you this now—if your leadership team isn’t bought in, it 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.

I 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. I advise that you 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).

How to Avoid Confusing OKRs and KPIs

When comparing OKRs vs. KPIs, I’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).

For example, in the Sales OKR example above, a key result was to “Increase sales volume by 15%.” Increasing sales could also be a KPI. In can get confusing if you start using OKRs to manage teams or departments because then it starts looking much more like a scorecard with KPIs.

When managers use OKRs for divisions and departments, it’s easy to get confused. Remember, the objective is what you’re trying to accomplish and the key result is how you measure it. You cannot roll up a key result to an objective at the department level, and then turn the objective into a key result at the executive level. An objective is not a key result (it’s not even a measure).

Are KPIs or OKRs better to use? It depends on your organization. If your organization has a lot of individual contributors, then OKRs could be a great fit because there aren’t a lot of interdependencies with the work. But if your organization has connected layers of teams working collaboratively and creatively, KPIs are better.

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.

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Streamline Your OKR and KPI Management with ClearPoint Strategy

That’s the best overview I can give you of OKR vs. KPI examples and differences.

Are you now ready to optimize your goal-setting and performance tracking processes? ClearPoint Strategy offers a robust platform that seamlessly integrates OKRs and KPIs, providing real-time data visualization, automated reporting, and comprehensive strategic management.

Book a demo today and see how ClearPoint Strategy can revolutionize your approach to OKRs and KPIs.

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FAQ:

What is an OKR?

OKR has two components, the objective and the key result: Objectives are memorable qualitative descriptions of what you want to achieve, and key results are a set of metrics that measure your progress towards the objective. Doerr, who introduced Google to OKRs, has a formula for setting goals: I will (objective) as measured by ___(key result)___.

What are key performance indicators (KPIs)?

KPIs are measures used to evaluate the success of an organization. KPIs can be quantitative or qualitative in nature. Quantitative KPIs include metrics such as sales revenue per employee, number of customers served by each call center agent, or revenue. Qualitative KPIs, on the other hand, may include customer satisfaction scores, quality ratings, or product reliability rates.

What's the difference between OKRs and KPIs?

A KPI is a metric and an OKR is a strategic framework. A metric, like a KPI, could be in your OKR framework. If you're looking to create a broad, high-level strategic plan, then you would use the OKR framework. If you're looking to measure the success of a project, however, you'd use a KPI.

What are some common mistakes to avoid with OKRs?

When using the OKR framework, you need to be ambitious and aspirational. Dream big with your OKRs! You should also ensure your key results are tied to your objectives well. It's how you'll measure success, so be smart about the measures you pick.

What are some common mistakes to avoid with KPIs?

Similar to the OKR framework, you want to make sure your KPIs are important and relevant to your strategic objectives. Pick KPIs that truly showcase the success of your strategy. Don't just pick KPIs that you think look good either –while it's great to know how many people are downloading your app, for example, it's even better to know how engaged they are with it by looking ar bounce rate and retention.

What are the different types of OKRs and KPIs

Types of OKRs (Objectives and Key Results):

- Committed OKRs: Objectives that the organization commits to achieving within a specific timeframe.
-Aspirational OKRs: Stretch goals that are more ambitious and may not be fully achievable but aim to push the organization further.

Types of KPIs (Key Performance Indicators):

-Lagging KPIs: Measure the outcomes and results of past activities (e.g., revenue, profit).
- Leading KPIs: Predict future performance and outcomes based on current activities (e.g., sales pipeline growth, customer acquisition rate).

How can OKRs and KPIs be used together to improve business performance?

OKRs and KPIs can be used together to improve business performance by:

- Aligning Objectives and Measures: Use OKRs to set clear, strategic objectives and KPIs to measure progress towards these objectives.
- Driving Focus: OKRs provide a focus on key strategic priorities, while KPIs track the performance of critical metrics.
- Enhancing Accountability: OKRs create accountability for achieving specific goals, and KPIs provide measurable benchmarks to monitor progress.
- Promoting Agility: Regularly review and adjust OKRs and KPIs to respond to changing business environments and ensure continuous improvement.
- Supporting Decision-Making: Data from KPIs inform whether the strategic objectives (OKRs) are on track, enabling timely decision-making and corrective actions.

What are some challenges of using OKRs and KPIs?

Some challenges of using OKRs and KPIs include:

- Setting Relevant Metrics: Identifying the right OKRs and KPIs that align with strategic goals can be challenging.
- Balancing Ambition and Realism: Ensuring OKRs are ambitious yet achievable, while KPIs are realistic and relevant.
- Data Accuracy: Ensuring the accuracy and reliability of the data used to track KPIs.
- Overcomplication: Avoiding the creation of too many OKRs and KPIs, which can dilute focus and overwhelm employees.
- Consistency and Follow-Through: Maintaining consistency in tracking and reviewing OKRs and KPIs regularly to ensure they drive performance.

How can OKRs and KPIs be used to track progress on strategic goals?

OKRs and KPIs can be used to track progress on strategic goals by:

- Defining Clear Objectives: Setting clear and specific OKRs that align with the organization’s strategic goals.
- Selecting Relevant KPIs: Identifying KPIs that directly measure the progress towards achieving the OKRs.
- Regular Monitoring: Continuously tracking KPIs to monitor performance and progress towards the OKRs.
- Reporting and Review: Regularly reviewing and reporting on the status of OKRs and KPIs to ensure alignment with strategic goals.
- Adjusting Strategies: Using insights from KPI data to make informed decisions and adjust strategies to stay on track with strategic goals.