OKR vs KPI: Key Differences Explained

OKR vs KPI: an OKR is a goal-setting framework built around objectives and key results, while a KPI is a metric used to measure ongoing performance.

Measuring your company's performance is crucial to its expansion. Any firm must understand its current state of progress, along with what works and what doesn't. But with so many performance indicators available, it can be challenging to determine which ones truly drive change.

What's more difficult is figuring out how to implement these measurements and who should own them. To measure the right things and move the needle, selecting your KPIs (Key Performance Indicators) is just as critical as setting your OKRs (Objectives and Key Results). But what are the differences? Is one better than the other?

The debate over OKR vs KPI is a common topic in performance management meetings, but it's an apples-to-oranges comparison. While there are similarities, these two concepts are fundamentally different.

What is a KPI?

KPIs, or key performance indicators, assess an organization's, individual's, program's, project's, or action's performance over time. These indicators should typically:

Relate to strategic goals.

Determine where resources should be concentrated.

Be held accountable for achieving goals.

We strongly recommend making your KPIs measurable. Adding numeric value to whatever you're measuring makes it easier to provide context and compare results. Qualitative KPIs are possible but not recommended, since this structure can lead to subjective data interpretation.

What is an OKR?

OKR stands for Objectives and Key Results, where an objective is linked to key results. KPIs are metrics that exist within a framework, whereas OKRs are the strategic framework itself.

OKR is a straightforward approach to goal achievement that uses precise criteria. An organization's high-level objectives typically include three to five key results per target, scored numerically to provide a clear performance evaluation. OKRs are:

Always measurable.

Scored objectively on a 0-1 or 0-100 scale.

Time-bound and ambitious (if you reach your goal too easily, it wasn't aggressive enough).

Google and Intel popularized the OKR framework, and it's also used by Amazon, LinkedIn, Spotify, and other highly successful organizations. In general, OKRs suit growth-focused firms better than KPIs alone. An organization's KPIs sometimes overlap with the key results used in an OKR framework.

Differences and similarities between OKR and KPI

OKR is a goal-setting process that helps enhance performance and drive change, whereas KPIs are business metrics that reflect performance. KPIs tell you what data to examine to establish the foundation for your OKRs.

Both OKRs and KPIs are measurable and reflect team success. When comparing OKR vs KPI, the difference lies in what you measure and how you obtain those measurements.

KPIs track performance but don't tell you what needs to change or improve for those numbers to keep rising. OKRs determine what has to be altered or improved. Once you've identified the area needing improvement, you write an Objective focused on it, along with Key Results to track progress toward that goal.

Examples of KPI

There are near-infinite examples of KPIs across virtually every industry. A KPI can be any quantitative (and occasionally qualitative) metric a business uses to track its progress toward its objectives. Unless your business is very small, KPIs should be broken down by department and industry.

Common KPI examples across sectors include:

• Retail: Revenue per square foot, same-store sales, and revenue per employee.
• Human resources: Attrition rate, staff performance, and average time to hire.
• Sales: Customer lifetime value, sales revenue, and calls made.
• Technology: Monthly recurring revenue, customer retention or churn, and ticket response time.
• Healthcare: Patient wait times, average treatment costs, and number of instructional programs.

Examples of OKR

OKRs are based on big-picture goals meant to motivate individuals and businesses, and should err on the side of "nearly impossible." The OKR framework is defined by an ongoing cycle of rapid, dynamic growth.

Here are examples of how OKR components come together:

• 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 a 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.

KPI Do's and Don'ts

Avoid being ambiguous when developing your KPIs. Each KPI must be contextualized and meaningful — link it to an objective and compare it to a target, such as industry average or year-over-year growth.

Because KPIs are often reviewed at the executive level, avoid tracking every possible indicator in one place. The word "key" is used with purpose: at the strategic level, monitor only the indicators with the greatest influence and value for your business.

OKR Do's and Don'ts

OKRs should not be developed in a vacuum without considering what's happening elsewhere in the organization. They should cascade from the top down: start with organizational objectives and key results, then break them down to department, team, and even individual levels.

If your firm is mainly focused on maintaining current products or growing slowly, the OKR framework may not be the best fit — OKRs work best for organizations pursuing rapid growth.

Conclusion

These examples show how OKRs and KPIs differ, though a change in terminology can turn a key result into a KPI, and vice versa. In the earlier OKR example, "increase staff by 45%" was a key result, but "number of employees" could also serve as a KPI. An OKR framework focuses on driving change, while a KPI is usually a single data point for tracking — this is where the overlap between the two occurs.

It's fine if your key results and KPIs start to sound similar. Just remember: one is an outcome, the other is a measurement — don't confuse the terms or their purpose.

Now that you understand the difference between OKR and KPI, you're ready to choose the best approach to reach your company's goals.

Frequently Asked Questions

What is the main difference between OKR and KPI?

A KPI is a metric that measures ongoing performance, while an OKR is a goal-setting framework that defines an objective and the key results needed to achieve it.

Can OKRs and KPIs be used together?

Yes. KPIs often provide the data used to build OKRs, and key results within an OKR framework can sometimes double as KPIs.

Which companies use OKRs?

Google, Intel, Amazon, LinkedIn, and Spotify are well-known examples of companies that use the OKR framework for goal management.

Is OKR better than KPI?

Neither is inherently better; OKRs suit fast-growing, ambitious organizations, while KPIs are ideal for tracking steady, ongoing performance.

Should KPIs be qualitative or quantitative?

KPIs should generally be quantitative, since numeric data makes it easier to provide context and compare results objectively.