OKRs (Objectives and Key Results) have gained significant popularity, particularly due to their successful implementation by companies like Google (How Google set goals: OKRs), which used them to scale from 40 to over 100,000 employees. Today, tech giants like Spotify and Netflix, as well as corporations like Samsung and Volkswagen, also rely on OKRs. This article clarifies the differences between OKRs and KPIs (Key Performance Indicators) and explores how to use them together effectively.

What are OKRs?

OKRs are a goal-setting framework used by organizations to define and track objectives and their outcomes. The essence of OKRs lies in setting an objective - what you want to achieve - and determining the key results - how you will measure progress toward that objective. Typically, several objectives are set for a specific period, with each objective broken down into 2-5 key results. Objectives are usually qualitative and ambitious, while key results are quantitative, providing clear metrics for success.

Using OKRs has many benefits:

• Provide clarity and focus by linking objectives directly to measurable outcomes.
• Promote alignment across different levels of an organization, and encourage a results-oriented culture.
• Because OKRs are typically set for shorter time frames, they allow for agility, enabling businesses to pivot and adjust their strategies as needed to meet their goals.

Examples of OKRs for different departments

Sales

• ‍‍Objective: Increase customer acquisition by 25%.
• Key Results:
  • Generate 600 new leads
  • Improve conversion rate by 18%
  • Close 200 new deals

Marketing

• ‍‍Objective: Boost brand awareness.
• Key Results:
  • Achieve 15,000 social media followers
  • Publish 20 high-quality blog posts
  • Secure 8 media mentions

What are KPIs?

KPIs are critical metrics that businesses use to measure and evaluate the success of various processes, projects, or departments. KPIs are typically quantitative and focus on specific areas such as revenue growth, customer satisfaction, or operational efficiency. They provide a consistent measure of performance over time, ensuring that the business remains on track toward its goals.

An effective KPI must be measurable, actionable, and relevant to the objectives it is designed to support. A good KPI should be able to answer key questions such as: Is our marketing strategy driving the desired results? Are our sales processes efficient and effective? Are we meeting our operational targets?

Examples of KPIs in different functions

• Marketing: Conversion Rate (percentage of website visitors who take a desired action)
• Sales: Monthly Recurring Revenue (MRR), Average Deal Size
• Operations: Order Fulfillment Time, Production Efficiency

Key differences between OKRs and KPIs

Focus:
OKRs emphasize outcomes - the change or impact the organization wants to achieve. They are designed to be aspirational, pushing teams to stretch beyond their comfort zones. KPIs, on the other hand, focus on outputs - the results of day-to-day operations. 

Flexibility and adaptability:
OKRs are more dynamic and adaptable, aligning closely with the broader company vision. They can be adjusted as the business environment changes or as new opportunities arise. In contrast, KPIs are generally more static, providing consistency in measuring performance over time.

Timeframe and usage:
OKRs are typically set for shorter periods, such as a quarter, allowing teams to focus on achieving specific goals within a limited timeframe. KPIs, however, are used to track performance over longer periods, often aligning with the company’s annual goals. 

Impact on team collaboration:
OKRs foster cross-functional collaboration because achieving an objective typically requires contributions from multiple departments (see our article on Sharing OKRs with other teams). On the other hand, KPIs can sometimes lead to a more siloed approach, as different departments focus on their specific metrics without necessarily connecting them to broader organizational objectives.

Measurability:
Both OKRs and KPIs are measurable, but the way they are measured differs. OKRs require setting qualitative objectives and quantitative key results, which are tracked to determine whether the objectives have been met. KPIs are purely quantitative, providing clear, specific metrics that are monitored over time. 

Implementing OKRs and KPIs together

By combining OKRs and KPIs, organizations can set strategic goals for the future while tracking the ongoing performance of key business processes. OKRs drive the organization toward ambitious outcomes, while KPIs ensure that operations remain efficient. Together, they offer a holistic view of both current business health and future direction.

The car analogy

Think of KPIs as your car’s dashboard, providing critical information about the vehicle’s condition e.g., how much fuel is left, whether the engine is too hot, and if there’s enough oil. OKRs, on the other hand, are like your navigation system, guiding you toward your destination by setting and tracking progress toward specific goals.

In practice

A KPI may tell you that you have a problem, and that you will need an OKR to fix it. For instance, if a KPI indicates a lag in customer satisfaction, an OKR might be set to "Improve customer support," with key results targeting a reduction in average response time. This alignment ensures that the objectives are not only aspirational but also grounded in measurable realities.

Examples

Scenario 1: Support team response time

• ‍Objective: Reduce average response time to 30 minutes.
• Key Results:
  • Implement a new ticket prioritization system to handle urgent cases within 10 minutes.
  • Train support staff to improve efficiency, aiming for a 20% increase in resolved tickets per hour.
  • Integrate a real-time chat feature to reduce initial response time by 50%.‍
• KPI: Average response time (minutes), # resolved tickets / hour.‍

‍Scenario 2: Sales revenue growth

• ‍Objective: Increase quarterly revenue.‍
• Key Results:
  • Increase lead conversion rate from 10% to 15%.
  • Expand market reach by entering two new regions within the quarter.
  • Launch a targeted marketing campaign to generate 1,000 new qualified leads.‍
• KPI: Quarterly revenue, lead conversion rate (%), # new qualified leads.

Conclusion

In summary, OKRs and KPIs are powerful tools that, when used together, provide a balanced approach to performance management. While KPIs track ongoing business health, OKRs drive the specific initiatives needed to improve those metrics. By integrating both frameworks, businesses can ensure they are not only measuring success but also actively working towards it. OKRs should be used for short-term projects that aim to improve a business's performance concerning a top-level KPI, creating a dynamic yet stable path toward growth and success.