Key takeaway: OKRs fuel ambitious goal-setting, engagement, and alignment within your team, while KPIs provide the laser-focused metrics needed to monitor performance with precision. By integrating OKRs and KPIs, you can enhance your goal management practices, fostering collaboration, innovation, ownership, and data-driven decision-making based on complementary data.
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 difference between KPIs and OKRs, we’ll uncover:
- Benefits of combining OKRs and KPIs — how and why
- Why a KPI-only focus isn't optimal
- OKR and KPI use cases and best practices to push theory into action
What's the difference between KPIS and OKRs?
OKRs and KPIs are frameworks that businesses can use to set goals, measure performance, and determine success. For a quick recap, let's first take a look at these frameworks separately.
What are OKRs?
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
What are KPIs?
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:
- Purpose
- Scope
- Duration
- Buildability
- Flexibility
OKRs vs. KPIs: Key differences
Purpose
While OKRs facilitate alignment, ambitious goal setting, engagement, and transparency, the main aim of KPIs is to evaluate the success of your overarching business or its activities (e.g., projects, programs, products).
Scope
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.
Duration
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.
Buildability
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.
Flexibility
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.
OKR vs. KPI examples
To exemplify these differences between KPIs and OKRs, let’s see how 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.
KPI example
In the first scenario, you combat the higher customer support tickets with the following KPI: Complete 200 ticket responses per hour.
Results
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.
OKR example
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
Results
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 scenario, you can observe the difference between OKR and KPI in their distinct 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. This helps paint a clear picture of the situation.
OKRs vs. KPIs: Which one is better?
Deciding between OKRs and KPIs can be a tough call. When doing so, it's important to take into account your business model, requirements, and market dynamics.
OKRs offer a holistic approach to setting ambitious objectives and measurable key results in line with your organization's goals. By encouraging teams to think big and embrace innovation, they nurture a culture of growth and lateral thinking. With everyone aligned toward common goals, OKRs also foster collaboration and a sense of ownership among team members, giving you a competitive edge.
As such, if you're operating in a dynamic environment where flexibility and adaptability is a must (e.g., fast-paced industries, startups, agile teams), OKRs may be the better fit.
On the other hand, KPIs take a more targeted approach, focusing on specific metrics that directly tie into performance. These allow you to closely monitor and measure the performance of your core processes. This narrow focus relies on clarity and precision, making it easier to set benchmarks, establish targets, and track progress.
If your business relies on consistency and compliance, KPIs are the optimal choice. They work best with well-defined and stable processes that assess overall operational success.
The pitfalls of only using KPIs
Despite their advantages, KPIs' limited perspective entail several pitfalls. These include:
- Uncertainty in KPI quantity
- Lack of clarity on improvements
- Ambiguous KPI ownership
Pitfall #1: Uncertainty in KPI quantity
When trying to decide on the right number of KPI metrics, the answer is typically 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 clearly reveal what needs adjustments or improvements. They're indicators rather than proper tools that can diagnose specific problems or 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, using OKRs and KPIs together 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 OKRs and KPIs can 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
Its accompanying KPIs may include conversion rate, upsell revenue, and program profit margin. By tracking these KPIs 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.
Common OKR mistakes to avoid
When implementing OKRs alongside KPIs, make sure you avoid the following OKR mistakes:
- Quantity over quality: An excessive number of objectives and key results can dilute focus and resources, hindering overall progress and impeding meaningful outcomes
- Insufficient alignment and infrequent reviews: Failing to regularly review and adapt OKRs can lead to misalignment, as goals may be outdated or unsuitable to effectively respond to the evolving business environment
- Unengaged teams: Failing to engage employees in the OKR process can lead to resistance and a lack of ownership, hindering the effectiveness of your OKRs
Common KPI mistakes to avoid
Similarly, you should look out for the following KPI mistakes:
- Poorly defined KPIs: Vague or ambiguous KPIs makes it challenging to measure progress and identify areas for improvement
- A lack of communication and visibility: Not conveying the importance of KPIs and relevant progress updates can lead to a lack of commitment and understanding across the organization
- Irrelevant KPIs: Measuring KPIs for the sake of measuring something leads to wasted efforts — your KPIs must align with organizational objectives and strategic goals
OKRs and KPIs best practices
To help you get the most out of your OKRs and KPIs, here are five tips you can use when integrating these 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 your 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 ensures accuracy while keeping your OKRs and KPIs transparent, collaborative, and efficient.
Check out the benefits of OKR software
Next steps in using OKRs and 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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