OKRs vs. KPIs: Differences and Examples

It was time again for the quarterly performance review at ABC Inc. Employees prepared them to give their best in the meeting. Alex was up first. He sat down across from her boss, Mia feeling slightly nervous. 

“So, Alex, let's discuss this past quarter. What were your goals, and how do you feel you did in working towards them?”- Mia asked. 

Alex thought for a moment. “Well, to be honest, I didn't really set any specific goals at the start of the quarter. I just tried to get all of my everyday work done."

The next employee was Ethan. Right off the bat, he pulled out a sheet full of key goals and metrics. “As you can see, I met all of my targets, including increasing sales by 10%, streamlining process by 20%, and limiting bottlenecks by 5%.” 

Fantastic! Mia responded. “These are measurable goals, and your hard work this quarter paid off. With performance like this, I can easily justify recommending you for the promotion!” 

The importance of properly setting and measuring goals was evident in the above story!

With clear objectives, both employees and the organization can benchmark progress. For any business looking to optimize employee performance and outcomes, implementing processes for collaborative goal-setting and ongoing measurement of KPIs tied to OKRs is essential. 

But how do OKR and KPI differ from one another? How can you tie both frameworks to measure the progress of your organization? If you’re confused, here’s our guide on OKR vs. KPI. 

What are OKRs?

OKRs are a combination of two components– Objectives and Key Results. Objectives are goals that tell you where to go, your destination. The key results are how you’ll measure those goals. Technically speaking, OKRs are goal-setting frameworks that describe what the organization wants to achieve by the end of a quarter of a year. 

To measure the progress of these goals, each goal should have a few key results. These Key results are quantitative in metrics. The main purpose of key results is to ensure whether the team has been able to meet an objective. 

Key results are mostly scored on a scale of 0 to 1. Where scoring 1 means you’ve successfully achieved the goal. While scoring anything between 0 and 0.4 means you’ve failed to progress. A .7 score means that you’ve somewhat managed to make some progress.

OKRs are used by all the tech giants such as Google, Amazon, Spotify, Intel, and Linkedin. By connecting strategy with execution, OKRs help to give the organization direction. 

When to use?

OKRs are used to set quarterly and yearly goals. OKRs are typically set at company and team levels. 

An Example of OKR

Now, let’s take an example here to clarify how OKRs work.

Objective 1: Increase Customer lifetime value by 20%. 

Key Results: 

• Reduce customer churn rate to less than 2%

• Increase repeat purchase rate to 60%

• Launch a loyalty program and enroll 500,000 members

Objective 2: Expand market presence in South East Asia

Key Results: 

• Establish operations in 2 new Southeast Asian countries

• Achieve 30% sales growth in Asia region

• Hire a local sales team of 10 for Asian expansion

The first objective focuses on improving customer retention and loyalty. The key results provide measurable targets to increase lifetime value.

The second objective aims to expand geographically to a new market. The key results include actionable steps to achieve growth in Asia and establish operations there.

Together, these company-level OKRs help focus efforts on the strategic goals of improving customer value and geographic expansion. The measurable key results track progress towards those goals.

What are KPIs?

KPI is the acronym for Key Performance Indicators that are used in business to provide numerical targets for achieving specific goals. KPIs are for measuring how your business is moving toward set goals like targeted new customers per month, targeted lead conversions per month, etc.

KPIs are a core component of OKRs (Objectives and Key Results). OKRs set ambitious quarterly or yearly objectives, while KPIs are the quantifiable metrics used to track progress toward those objectives. 

KPIs serve to connect high-level strategy with tactical execution. They provide direction and assess if teams are successfully working towards the organization's top priorities. KPIs are typically set at both the company and team levels, reviewed and refreshed quarterly or yearly.

The main purpose of KPIs is to measure and monitor performance and progress towards pre-defined organizational goals and objectives. Well-designed KPIs should be specific, measurable, attainable, relevant, and time-bound.

For example, for a social media manager, a great KPI would be:

10% monthly LinkedIn follower/engagement growth for the company’s official account. 

With this KPI, you can measure the growth in LinkedIn’s followers or engagement, with a target of 10% within one month. 

When to use?

You can use KPIs to measure targets annually, monthly, quarterly, and even daily. 

An example of KPIs

Here are some more examples of Key Performance Indicators in an organization: 

Sales KPI

• Monthly recurring revenue (MRR) by $50,000

• Sales call made per month- 80

• Win rate for proposals- 70%

Marketing KPI

• Increased website visitors by 5,000 per month

• Generated 200 leads per month

• Email marketing reaches a open rate of 25%

The key is to have a mix of KPIs related to traffic, leads, engagement, content, and budget goals. The numerical KPI examples help quantify performance and give specific goals to aim for. Numbers may vary based on the organization, team, and individual goals. However, having measurable KPIs allows for easier tracking of progress.

OKR vs. KPI: What are the Differences? 

OKRs (Objectives and Key Results) are a collaborative goal-setting framework that establishes ambitious objectives and quantifiable key results to track progress. OKRs are forward-looking and meant to drive organizational change.

In contrast, KPIs (Key Performance Indicators) are standalone metrics that monitor the status quo and measure how well an organization meets its benchmarks. KPIs assess past performance rather than driving future strategy.

While OKRs are frequently re-evaluated and adapted, KPIs tend to remain consistent quarter-over-quarter. OKRs involve setting new objectives each cycle, whereas KPIs are ongoing benchmark targets.

OKRs are developed through a participative process with employee input. KPIs are often defined top-down by management, though agile organizations can collaborate on defining relevant KPIs.

OKRs show the direction an organization wants to go in and the measurable steps to get there. KPIs simply indicate whether predefined goals have been reached - they don't represent progress or purpose.

Best Practices for Creating OKRs

• 1Make sure OKRs are aligning with your organization’s business strategy.
• 2Start with 3- 5 objectives per cycle. Focuses on the most important goals to prioritize and avoid overload.
• 3Create OKRs that are ambitious, quantitative, and change-oriented in nature. For instance, rather than creating an OKR like “Improve followers,” set objectives like “Increase brand awareness.”
• 4Make key results quantitative and measurable - "Achieve 50% recall of our brand" rather than vague ones like "Improve brand recall."
• 5Assign each OKR an owner responsible for driving progress. This will help build ownership and accountability.
• 6Make OKRs visible across teams and organizations. Track progress transparently.
• 7Expect to refine OKRs as circumstances evolve rather than setting rigid goals upfront.
• 8Focus on outcomes, not tasks - Key results should measure end goals, not activities.
• 9Have a mix of challenging and realistic key results - 70% attainment of key results is ideal. 100% indicates they weren't ambitious enough.
• 10OKRs should be time-bound. Quarterly OKR cycles are the most common. Don't set objectives without an end date.

Best Practices for Creating KPIs

• 1KPIs should be aligned with your business’s objectives and strategy. It should track progress toward strategic goals.
• 2Establish targets or benchmarks for each KPI - This gives context for assessing performance for each metric.
• 3Connect KPIs across various teams to encourage collaboration and organizational alignment.
• 4Lagging KPIs measure past performance. Leading KPIs predict future performance. Use both.
• 5Set realistic but challenging KPI targets. Goals should motivate teams while also being reasonably achievable.
• 6Regularly review and update KPI. Re-evaluate their relevance and avoid keeping ineffective KPIs.
• 7Look at trends and root causes behind KPI performance, not just the numbers.

Common Mistakes to Avoid with OKRs

• 1Setting too many objectives and key results each cycle - focus on the vital few.
• 2Using objectives that are too vague or qualitative rather than specific and measurable.
• 3Not having team and indiviual OKRs align to organizational OKRs.
• 4Failing to make OKRs transparent and visible across the organization.
• 5Not reviewing and revising OKRs regularly as circumstances evolve.
• 6Setting OKRs without clear owners accountable for each objective and key result.

Common Mistakes to Avoid with KPIs

• 1Choosing too many KPIs leads to confusion rather than focus.
• 2Picking KPIs that don't align with business objectives and strategy.
• 3Having KPIs that are vague rather than quantifiable metrics.
• 4Failing to link KPIs across departments leads to silos.
• 5Measuring activities rather than outcomes and impact.
• 6Setting KPI targets that are either too easy or impossible to achieve.
• 7Keeping stale KPIs that no longer provide value or insight.

OKR vs. KPI: Which one is Better?

Deciding between OKRs and KPIs depends on your specific situation and goals. There is no universally "right" choice - each has advantages suited to particular needs.

KPIs shine when you want to measure and optimize existing processes. Their quantitative nature lends well to continuing initiatives where you have historical data and want to track incremental progress.

However, if seeking a fresh direction, OKRs may better serve. With their qualitative emphasis on ambition, OKRs allow teams to take a step back and set bold, creative goals for where they want to go next.

Rather than an either/or, often combining OKRs and KPIs yields the best outcome.  OKRs for vision and direction, KPIs to monitor tactical execution. As your needs evolve, reevaluating which tool fits best allows you to adjust your approach for maximum impact.

The key is aligning to your priorities. For breakthrough innovation, OKRs power the push. For optimizing operations, KPIs provide focus. Determining where you want to go is the first step to choosing how to get there.

Here are some tips on using OKRs and KPIs together effectively:

• Align KPIs to OKRs. Use KPIs as quantifiable measures of progress for the key results under your objectives. The KPIs provide the metrics to track achievement.
• Set KPI targets relative to OKR difficulty. Easy OKRs get easy KPIs, while stretch OKRs need aggressive KPIs. Targets align with the objective challenge.
• Review KPIs when refreshing OKRs. Adjust KPIs and targets each quarter/cycle to align with new business objectives and priorities.
• Connect individual OKRs to the team and company OKRs through shared KPIs. This creates a line of sight from each employee's work to overall organization goals.
• Use KPIs for ongoing tracking and OKRs for periodic check-ins. Monitor KPIs regularly and grade OKR achievement at quarter end.

Wrapping Up

Like a car, your organization needs both a steering wheel to set direction and a speedometer to monitor progress. Used in harmony, OKRs and KPIs provide the one-two punch to accelerate your team towards success.

OKRs without KPIs lack accountability. KPIs without OKRs lose sight of the big picture. But combined, they form a comprehensive goal-setting and performance management system.