OKRs vs. KPIs: What we'll explore
Establishing business goals is essential for continuous organizational growth. The main challenge, however, lies in choosing the most suitable goal-setting method for your business — enter OKRs vs. KPIs.
In this article, we'll compare objectives and key results (OKRs) and key performance indicators (KPIs). OKRs and KPIs are both popular goal-setting methodologies recognized for the visibility, productivity, and profitability they provide to businesses.
Beyond looking into the differences between OKRs vs. KPIs, we’ll uncover:
- Benefits of combining OKRs and KPIs — how and why
- Why a KPI-only focus isn't optimal
- Use cases and best practices to push theory into action
The difference between OKRs and KPIs
OKRs and KPIs are frameworks that businesses can use to set goals, measure performance, and determine success.
Quick OKR vs. KPI definition
OKRs, comprised of objectives and key results, help you set, track, and update ambitious, measurable, and time-bound goals.
Objectives are short, qualitative descriptions of what you’re trying to achieve, while the 3-5 key results accompanying each objective are quantitative metrics measuring OKR progress.
KPIs, on the other hand, are specific, quantifiable measures of success that allow you to track organizational performance.
The main differences in OKRs vs. KPIs lie in their:
The key differences in OKRs vs. KPIs
While OKRs facilitate ambitious goal setting, engagement, transparency, and alignment for your organization, the main aim of KPIs is to evaluate the success of your overarching business or its activities (e.g., projects, programs, products).
As OKRs take a multifaceted approach to goal-setting — serving as a fully-fledged management methodology — its scope is wider than that of KPIs. As such, KPIs are often used as a funnel into broader methodologies, such as OKRs.
There are different timeframes in OKRs vs. KPIs: OKRs typically have quarterly cycles (depending on the cadence of your business, teams, and employees), while KPIs are high-level, tracking larger business areas for extended periods of time.
Compared to KPIs, OKRs are buildable, linking collaborative and supportive OKRs together. Conversely, KPIs tend to be established at the same level, where they’re all viewed with equal priority.
Unlike KPIs, which are static performance indicators, OKRs are meant to be malleable — scrap them, update them, and renew them in line with real-time findings. As such, they’re continuously reviewed to ensure they’re aligned with organizational priorities.
OKRs vs. KPIs examples
To exemplify these differences between OKRs vs. KPIs, let’s apply these two goal-setting frameworks with the same customer success-related situation.
Imagine you’re running a customer support team who's seeing a larger volume of support requests. As you want to decrease customers' waiting time (keeping satisfaction and retention rates high), adequate goals will keep your customer support team responsive.
Scenario #1: The KPI approach
In the first scenario, you combat the higher customer support tickets with the following KPI: Complete 200 ticket responses per hour.
By the end of the quarter, you reach your KPI, consistently hitting a response rate of 200 tickets per hour. However, your volume may still be increasing, resulting in slow response times — your KPI isn't dynamic.
Consequently, the core problem persists, with longer customer wait times driving down customer satisfaction.
Scenario #2: The OKR approach
Let's focus on OKRs vs. KPIs in an approach to the same situation. In this scenario, you tackle the customer support crisis using the following OKR:
- Objective: Solve the support ticket crisis.
- Key result 1: Reduce response times by 10%
- Key result 2: Improve customer satisfaction score by 5%
- Key result 3: Increase tickets handled from 180 to 200
In this situation, you attain the following results:
- Reduced response times by 7%
- Improved customer satisfaction score by 4%
- Increased the number of tickets handled from 180 to 190
While you may not have met all key results, the OKR's multifaceted approach allowed you to improve the support ticket crisis significantly.
Comparing the OKR vs. KPI approach
In this OKRs vs. KPIs scenario, you can observe distinctly different outcomes.
With KPIs, you handle a larger volume of requests while still facing significant issues — the symptom was treated rather than the problem. Even if you chose additional KPIs (response time, customer satisfaction rate, retention), these disparate metrics would convey a disjointed, incomplete story.
Conversely, in the OKR example, you can see how each key result contributes to the overall objective, enabling individuals to understand their impact. OKRs allow you to update and renew goals after receiving new information.
Example: you see a continuous increase in customer support requests. In this case, you can add key results (e.g., increase visits to help center material by 15%) or adjust existing key results as you see fit.
This will paint a clear picture of the situation.
The pitfalls of only using KPIs
As shown in the scenario above, several issues may arise if you rely only on KPIs vs. OKRs as a goal-management tool. Here are the three main pitfalls you can expect:
Pitfall #1: Uncertainty in KPI quantity
When it comes to KPIs vs OKRs, the right number of KPI metrics is too subjective:
- Too few KPIs: the picture of performance can be biased, misleading, or confusing
- Too many KPIs: overload your teams or employees, leading to mediocre performance
Therefore, you must find the sweet spot without creating a shortage or overflow of data, which is often difficult.
Pitfall #2: Lack of clarity on improvements
KPIs don't overtly reveal what needs adjustments or improvements. KPIs are indicators, rather than proper tools that can diagnose specific problems or help guide you toward the next steps.
Pitfall #3: Ambiguous KPI ownership
Finally, ownership of KPIs is blurry, which creates a lack of accountability and awareness surrounding contributors. For example, while an employee might be responsible for updating a KPI, their initiatives may not directly impact the KPI.
Thankfully, OKRs can help diminish the impact of these pitfalls.
Using OKRs and KPIs together
OKRs define the who, what, and how of a project, revealing what contributed to its success. When combined with KPIs, OKRs are a succinct yet powerful tool, painting a complete picture of your performance.
Moreover, OKRs can help identify which areas require additional resources by warning you about lagging results. Combining KPIs into the OKR framework can benefit your business.
Below are four use cases for OKRs with KPIs, not OKRs vs. KPIs.
Set OKRs for ambitious KPIs
You can use OKRs can establish and enable ambitious KPIs.
For example, imagine your marketing team has an extremely high KPI — generate 40,000 leads for sales (when they only delivered 10,000 last year). OKRs are meant to be aspirational and aggressive, so you can use them to stretch the creativity and ingenuity of your teams.
In this situation, the related OKR could be:
- Objective: Get website-driven sales leads with quality traffic
- Key result 1: Increase website visitors to 300k
- Key result 2: Keep the bounce rate below 52%
- Key result 3: Generate 80,000 leads for sales
Look at key result #3 — the target number of leads is double that of the KPI. The rationale for such an aggressive key result? Even if employees attain 70%, it will produce better results than a 100%-attained, less ambitious KPI.
Aiming high also motivates your teams to take risks and try new methods.
Use OKRs to test KPIs
Getting your KPIs right the first time is tough and comes with many questions and caveats:
- Do we need fewer or more KPIs?
- Are there better insights that should be included?
- Did we strike the right balance with the volume of data included?
Careful KPIs are crucial. Once you've set these, you can't retrieve additional data from metrics you haven't tracked, but setting too many KPIs can lead to an exhaustive amount of data.
So how can you test what to track before setting your KPIs in stone?
OKRs, by nature, have multiple key results. With 3-5 key results per objective, you can efficiently test potential KPIs. OKRs help you assess the validity and relevancy of KPIs before they’re permanently fixed in your reporting.
Use OKRs to flag KPIs
If you see your KPIs' health metrics turn red, OKRs can help you find and fix the causes.
Let's say a KPI "hit $500k MRR by the end of the quarter" is failing. With OKRs, you can connect this target to every sales team member:
- Objective: Finish the year with convincing sales figures.
- Key result 1: Hit $600k MRR
- Key result 2: Close 100 new deals
- Key result 3: Hit an average deal size of $100k
This sales OKR clearly highlights what sales personnel need to do to boost the KPI's health. By closing more deals at larger deal sizes, they can meaningfully contribute to the overall success of the KPI.
With OKRs, they can measure what was done and whether it worked, then create a list of best practices based on historical successes. This facilitates traceability, transparency, and confidence monitoring at any given time.
Say goodbye to flagging KPIs with these sales OKR examples.
Use OKRs and KPIs to inform decision-making
By using complementary data to inform organizational action OKRs and KPIs enhance decision-making. Let's use this OKR for example:
- Objective: Increase sales by 25% over the next quarter
- Key result 1: Generate 100 sales-qualified leads
- Key result 2: Increase upsell revenue by 30%
- Key result 3: Implement an improved sales program
Accompanying KPIs may include conversion rate, upsell revenue, and program profit margin. By tracking these alongside your OKRs, you can get a complete, overarching understanding of OKR progress at the macro and micro levels.
This can accurately inform decision-making, ensuring weak points are addressed and successes are maintained.
OKRs vs. KPIs best practices
To help you get the most out of your OKRs and KPIs, here are five tips you can use when integrating OKRs and KPIs into your organization.
1. Align your OKRs and KPIs to organizational goals
OKRs and KPIs connected to your broader company strategy ensure employees are working toward the organization's priorities, facilitating steady, ongoing progress toward short and long-term goals.
2. Limit the number of OKRs and KPIs
Limiting OKRs and KPIs simplifies their management by making them less time-consuming, erasing any confusion on company priorities, and ensuring adequate resource use.
3. Review your OKRs and KPIs regularly
A regular review schedule for OKRs and KPIs ensures they’re continuously relevant — these frameworks become integral to operations, with employees using them as North Stars.
4. Keep teams updated on OKR and KPI progress
OKRs and KPIs should be top-of-mind and relevant contributors should be held accountable — this motivates teams and departments to stay productive, actively pushing to attain these goals.
5. Use goal-setting software
Manually setting, tracking, and updating OKRs and KPIs can be tasking and error-prone — goal-setting software keeps your OKRs and KPIs accurate, robust, and efficient.
Check out the benefits of OKR software
Next steps in OKRs vs. KPIs
When comparing OKRs vs. KPIs, it may be easy to disregard their compatibility given their differences in purpose, scope, duration, buildability, and flexibility. However, these differences are what make them so compatible.
By combining OKRs and KPIs, you can better address operational issues, attain ambitious goals, and drive decision-making. Using the best practices highlighted above, effectively manage your OKRs and KPIs to drive alignment, focus, and strategic success.
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