Rather watch a video? Click here!
Every organization needs goals to achieve its strategy and ambitions, and there are different types of targets and frameworks they can use to measure their progress along the way. For example, you may have heard about OKRs and KPIs, and perhaps you’re already working with one or both of these goal-setting methods. And, depending on which metric you’re more familiar with, you might be feeling a bit unsure about how one differs from the other–if at all.
Don’t worry, you’re not alone. A common misconception is that OKRs and KPIs are the same things or that they’re interchangeable in some way. But this is incorrect — they are in fact two completely different types of goals. In this article we’ll clarify a few of the most commonly asked questions:
- What are OKRs and KPIs?
- What’s the difference between OKRs and KPIs?
- How do OKRs and KPIs work together?
- What’s the value of tracking OKRs and KPIs alongside each other?
First, let’s give you an overview of the difference between OKRs and KPIs.
OKR stands for Objectives and Key Results, and KPI stands for Key Performance Indicator. OKRs help define the key, temporary advancements an organization needs to make within a given period of time to push the organization or team toward a desired outcome. KPIs, on the other hand, help you define and measure your business-as-usual or ongoing processes.
Now that we’ve defined the difference on a macro level, let’s get into the specifics of what OKRs and KPIs really are and how they work together.
The definition of OKRs and KPIs
An OKR is made up of 3 separate components — an Objective, Key Results, and Initiatives.
An Objective tells you where to go; Key Results help you measure progress toward your Objective; and Initiatives will tell you what you need to do to get to your destination. Initiatives are often confused with Key Results, so it’s important to note that they’re not the same thing. In case you were confused, here’s the difference between Initiatives and Key Results.
Here are two examples of how all the components of an OKR come together:
O: Our trial experience is so good that people want to marry us
KR: Increase Trial-to-Customer conversion rate from X% – Y%
KR: Increase trial satisfaction score from X to Y
Customer Success OKR
O: Empower our support team to be more self-sufficient
KR: Reduce ticket response time by X%
KR: Reduce ticket escalation by X%
KPIs are among the most commonly used goals within organizations worldwide. They’re a type of performance measurement aimed at evaluating the success of an ongoing process or activity. KPIs can use factors such as output, quantity, or quality to measure success.
There are many different types of KPIs, and choosing the right ones depends on factors like which industry you’re in and the maturity of your organization. Each department or team will use different KPIs to measure success. KPIs are sometimes also called health metrics.
Let’s look at a few popular KPI metric examples.
- Sales Revenue
- Average Time to Close
- Average Resolution Time
- Customer Satisfaction Score
- Web traffic
- Cost per lead
Key differences between KPIs and OKRs
OKRs and KPIs are different types of goals that serve different purposes. OKRs provide the missing link between ambition and reality. They help you break out of the status quo and take you into new, often unknown territory. If you have a big dream – an Ultimate Goal – for your company, you need OKRs that will take you there.
A KPI, on the other hand, measures the success, output, quantity, or quality of an ongoing process or activity, also known as your business as usual. They essentially measure processes or activities already in place
Why your company needs both OKRs and KPIs
The two metrics naturally complement one another and work synergistically to help an organization execute its strategy. Therefore, there’s great value in tracking them simultaneously.
Let’s imagine your organization is a car and you’re driving that car toward your destination. Your KPIs are what you’ll find on your car’s dashboard, along with the fuel gauge and engine temperature gauge. These are the things you’ll need to constantly watch to ensure your engine isn’t overheating and that you aren’t running out of gas. On the other hand, your OKRs are like your roadmap that guides you toward your destination. These are all temporary goals that will change from time to time. So, once you’ve passed a landmark (toward your destination), you’ll then focus on the next one.
An organization needs both KPIs and OKRs. If you were only watching KPIs, you’d have no clue how you were advancing toward your destination. Had you only been watching OKRs, you wouldn’t see that you’re running out of gas.
Execute strategy and propel your growth with OKRs & KPIsGet your FREE Perdoo account
One can be used to improve the other
An OKR can also be used to improve a KPI, and the best way to illustrate how this works is through an example.
Let’s say that critical business as usual for your support team is to answer incoming support tickets as soon as possible. You agree that, on average, tickets should be answered within 30 minutes. You create a KPI in Perdoo that measures the average reply time for incoming support tickets. Example KPI: Average response time ≤ 30mins.
As long as the KPI indicates an average reply time of 30 minutes or less, you know you’re on track. But what if the KPI indicates the average reply time currently is 52 minutes? You probably want to create an Objective to fix this.
In order to create the right Key Results for this Objective, you’ll need to investigate what exactly caused the average reply time to rise. Perhaps you’ve onboarded a lot more customers recently but don’t have enough support agents. Or perhaps you released new features without creating support articles for them in your Knowledge Base.
If the reasoning is the latter, you could create the following OKR:
Objective: Empower customers to help themselves by building the best help resources
Key Result: Reduce the number of support tickets by X%
Key Result: Increase Knowledge Base traffic to X unique visitors
What’s the difference between an activity-driven vs. results-driven organization?
All organizations have business-as-usual processes which are executed on an ongoing basis in order to maintain the core business functions. At the same time, they typically have ambitions in the form of a strategy — their Ultimate Goal and Strategic Pillars. Driven by an innate desire to realize those ambitions, they’re constantly working on temporary projects and tasks that will get them closer to their Ultimate Goal.
Activity-driven organizations focus on processes and Initiatives, which are both output- or activity-driven goals. On a daily basis, their employees execute the tasks that the organization deems necessary to maintain the performance of key business areas and to advance toward their Ultimate Goal.
While completing tasks and activities is a great feeling, it’s often a wasted effort if you don’t know the outcome you’re trying to achieve and how it affects the bigger picture.
Results-driven organizations take a different approach. Firstly, they consider their activities (i.e. processes and Initiatives) to be a means to an end. They instead focus on the results that these activities are supposed to deliver.
Secondly, they regularly look at the bigger picture and review what their business-as-usual should be and what advancements they need to make in order to realize their Ultimate Goal.
They use KPIs to define what business-as-usual is critical, as well as to measure how that business-as-usual is performing.
They use OKRs to define what key advancements they need to make within a particular quarter or year, and they use these same OKRs to measure whether these advancements are actually being made.
KPIs and OKRs are both outcome- or value-driven goals.
In other words, they create an extra layer where they define and measure the outcomes that their Processes and Initiatives are supposed to deliver — and it allows them to see if their work is actually moving them in the right direction.
To be a result-driven organization, you need both OKRs and KPIs to provide you with the complete picture. KPIs help monitor performance and identify problems and areas for improvement; OKRs help solve problems, improve processes, and drive innovation. You’ll need both, and tracking them alongside each other not only provides the bigger picture you need at all times, but it also keeps the functioning parts that your organization, teams, and people need to deliver strategy at the forefront.
What differentiates activity-driven from results-driven organizations is that the latter treats activities (processes and Initiatives) as a means to an end. To them, activities are output goals that will help them achieve certain desired outcomes. Results-driven organizations also have these output goals, but they work with an extra layer of outcome goals — KPIs and OKRs — to define what these desired outcomes are and to monitor whether these desired outcomes are actually being achieved.
OKR stands for Objectives and Key Results. It’s a goal-setting framework that helps organizations set challenging, ambitious goals with measurable results. Objectives are what you want to achieve, and Key Results are how you measure progress towards these objectives.
While both OKRs and KPIs are tools used to measure performance and achieve goals, they serve different purposes. An OKR is used to set, track, and achieve goals, whereas a KPI is a metric that measures the ongoing performance of business operations.
es, KPIs can indeed be used as Key Results in OKRs. In fact, it’s common for businesses to use their KPIs as the basis for their Key Results, as both are measurable and quantifiable.
While KPIs measure ongoing performance and operational efficiency, OKRs set strategic goals for the future. KPIs can feed into OKRs, providing measurable results for objective progress. Together, they can give a complete picture of the company’s health and future direction.
A KPI can form part of an OKR but it cannot become an OKR on its own. This is because an OKR comprises an objective (a clearly defined goal) and key results (specific measures used to track the achievement of that goal). A KPI could potentially be used as a key result.
KPIs are generally reviewed on a continual basis to monitor ongoing performance, whereas OKRs are typically set and reviewed quarterly to keep pace with the strategic direction of the company. However, the frequency may vary based on the nature of the business and its goals.
OKRs are generally aligned with the company’s vision and strategic goals, whereas KPIs are often determined by the operational needs of the business. Both should be realistic, measurable, and directly connected to the organization’s success.
Using both OKRs and KPIs provides a balanced view of organizational performance. While KPIs are great for measuring ongoing performance and operational efficiency, OKRs allow organizations to set, track, and achieve ambitious goals. This combination allows for both short-term and long-term planning and assessment.
While it’s technically possible to use OKRs without KPIs or vice versa, they work best when used together. KPIs give a day-to-day operational performance measure while OKRs help to aim for long-term strategic goals. Therefore, having both gives a fuller picture of an organization’s performance.