OKR vs KPI: What Are They and Why Do You Need Both? (With Examples)

By Jessica Wishart

OKR vs KPI: What Are They and Why Do You Need Both? (With Examples)

As a training and on-boarding expert OKRs vs KPIsat Rhythm Systems, I know a lot about KPIs. Recently, I’ve also learned a lot about OKRs. Many of my newer clients have come to us for a systematic way to implement their OKRs. As I help these clients map their goals into our Rhythm strategy execution software, I’ve been thinking a lot about whether the KPIs I know and love have a place in this world of Objectives and Key Results. I’ve come to the conclusion that while KPIs and OKRs are different, there’s a clear benefit to having both.  They are both instrumental in goal setting and performance management.

There is no need to choose between KPIs and OKRs.  They complement each other and both are well-needed tools in your performance management system and can be part of your balanced scorecard.  

 

OKRs vs KPIs

What's the difference?

OKRs KPIs
Stands for Objectives and Key Results Stands for Key Performance Indicator
Action-oriented goals (objectives) and measures (key results) Number (metrics) that measure the health of your business
Future focused and directional, trying to get from point A to point B Could be a result or leading indicator (Looking at past results or future goals/targets)
Should be aggressive and bold, help move the needle on something strategically important to your organization Monitors the "steady-state" and provides benchmarks; Should prompt actions when the numbers are off track
Have a set time period (quarter, year, etc.), and changes from quarter to quarter or year to year as you progress Usually measured on an on-going basis, may have many of the same KPIs from quarter to quarter and year to year, but the targets might change

 

Feel free to download our OKR vs KPI infographic 
OKR vs KPI Infographic

To paint a clear picture of the difference, Felipe Castro uses an analogy of a road trip in his Medium post on this topic. For a road trip, first, you need to know where you are going (this is your Strategy), then you need the directions to get there (these are your OKRs) and finally, you need to know if your car has fuel and tires have air to get there (these are the KPIs that monitor the overall health of the business.)  Before you create an OKR make sure that you have clearly defined your objective and how you are going to measure how successfully it was accomplished.

 

How to Use KPIs and OKRs Together:

This helps to see how you can use KPIs and OKRs together. You may have a set of monitoring KPIs that you will always track just to know how healthy your business is, whether or not they are tied to any specific goals or OKRs for the year or the quarter. For example, you’ll always want to keep a finger on the pulse of financial indicators like revenue or profitability. You may also have key metrics around employee health or customer retention that are always going to be on your dashboard.

Some of your KPIs may also naturally become Key Results for your OKRs. If you have an objective around improving your website’s performance to generate X more qualified leads, and you are already tracking the number of qualified leads as a KPI in your marketing team, this KPI becomes a Key Result for the objective for the quarter.  Just remember that OKR stands for Objectives and Key Results, while KPI stands for Key Performance Indicator, and this should help you sort them out.  Keep in mind that the best practice is to use both OKRS and KPIs in your goal setting.  Read this blog post on how to write goals or check out the manager's guide to goal setting.

 

What KPIs and OKRs have in Common:

  • Both should be specific, clear, and measurable. We recommend using Red-Yellow-Green success criteria for every key result and performance indicator.
  • You should focus on a few of each that are truly key. Both acronyms contain the letter K for key - which means both require you to make choices to focus on a few things that are most important.  You should have 3-5 key results at a given time and no more than 8-12 KPIs.
  • You can have OKRs and KPIs for the company, for departments or teams, or for specific roles, individuals, or projects.
  • Both can help you run your business by aligning everyone around well-defined goals and clear measures of success.
  • They can be set for an individual or a team, but even the team ones need an owner that is accountable for the results.

What goals are you using to run your business? Do you have an effective way to maintain your company’s health while also stimulating growth and progress?  If you'd like more information on how to use metrics to drive accountable team performance check out MBOs, KPIs, OKRs and What the Best Goals Have in Common.

Download our Free KPI Guide to Stay Focused, Aligned and Accountable

Looking for some additional OKR examples to help get you started? 

OKR Spreadsheets: Why You Should Upgrade Your OKR Software Game

OKR vs KPI vs MBO: What the Best Goal Types Have in Common

Using OKRs for Your Weekly Team Meeting

OKR Video: How to Get Started with OKRs and the Best OKR Software

OKR Examples for Manufacturing: Measure What Matters for the Quarter

Using Red Yellow Green Performance Indicators Examples That Are SMART

OKR Goal Setting Steps: 5 Keys to Drive Better Results

SMART Goal Setting Theory: To Create SMART Goals, Start With “Why”

Photo Credit: iStock by Getty Images

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