OKR vs KPI: What Sets Them Apart?
83% of business strategies fail because of faulty assumptions and unclear objectives (Gartner).
Setting clear goals is challenging enough for leaders. There are a lot of frameworks to guide your goal-setting process and some of them are easily mistaken for another - as is the case with KPIs (Key Performance Indicators) and ORKs (Objective and Key Results).
Most leaders are well familiar with KPIs and use them to keep track of their company’s growth and success. Some have heard about OKRs – the framework created by Andrew Grove at Intel and largely adopted by big companies like Google and Spotify.
The problem is that most leaders who try the OKR approach, end up setting the goals as if they were KPIs. Although both approaches are meant to be used for performance management, they have different purposes:
-
KPI is meant to be used for tracking performance
-
OKR is a goal-setting framework, meant to be used for growing a company
In this article, we will dive into these two approaches and their differences to help you further understand how to set great OKRs (and KPIs but those you have probably already mastered).
What are KPIs
KPIs are quantitative goals used to track performance. Typically, companies use them to measure their continuous operations – sales, marketing, customer experience, human resources, operations, etc.
KPIs help you analyse projects that are already taking place. They are always based on past results and current projects.
Examples of great KPIs
Here are examples of KPIs for different departments:
-
Sales: Increase sales by 5% until the end of June.
-
Marketing: Convert 100 online store visitors to new customers for the next quarter.
-
HR: reduce the cost per hire by 15% within the next fiscal year.
What are OKRs
OKRs are goals used to develop new capabilities in a team. In other words, they guide company growth.
An OKR is made of two components:
-
The Objective is your WHAT, the goal you want to achieve over a defined period. It should be specific enough to give you a clear sense of direction.
-
The Key Results are your MILESTONES. They are the measures that guide you in the journey and help you assess whether you are on track or not. They should also tell you how you should achieve a certain goal.
OKRs help you achieve goals that are not yet at play and typically they are framed within a quarterly or yearly basis. They are always aligned with the company mission.
Examples of great OKRs
For each Objective, you should choose 3-5 Key Results. Here are a couple of examples:
Objective: Increase brand awareness in a new channel this quarter
Key result 1: Achieve an average of 200 visitors/month through 3 influencer marketing campaigns
Key result 2: Create a free eBook and promote it through the other company channels
Key result 3: Increase conversion rate by 3% through an effortless checkout experience
Objective: Rebrand our image to prospective customers this quarter
Key result 1: Increase booked follow-up meetings from 5 to 10 per week through a new calendar system
Key result 2: Decrease call-back times to 2 days, by creating new workflows
Key result 3: Increase the open rate of demo products by 30% through a new SEO strategy
If you are new to the framework, setting OKRs can be a bit challenging at first, so we wrote an article to guide you through the process.
How to write OKRs that don’t look like KPIs
The most challenging part of OKRs is setting the Key Results. Typically people do one of two things:
For instance, in the example where the Objective is to Increase brand awareness in a new channel this quarter, they may set a Key Result that says Increase channel visitors by 10%. The problem with this Key Result is that it is only helpful as a performance tracker, as it does not include HOW you will achieve that milestone.
OKRs are supposed to support your company’s growth, so the Key Results should help you achieve new capabilities and track the progress toward the Objective. Hence, they should not be tied to existing KPIs.
In the previous example, a good Key Result is to Achieve an average of 200 visitors/month through 3 influencer marketing campaigns.
-
It is specific enough so you understand when you have achieved it (Achieve an average of 200 visitors/month).
-
It clearly states how you are supposed to achieve it (through 3 influencer marketing campaigns).
Summary
Knowing how to set KPIs and OKRs is crucial to achieving great results and clearly gives a sense of direction to your teams.
KPIs are a quantifiable measure used to track performance and support decision-making. OKRs are used to achieve new capabilities that will bring you closer to your mission and help you grow your company. Hence, the Objective should clearly state the direction and goal you want to achieve, and the Key Results should tell you how you can achieve - meaning Key Results tell you more than simply a quantitative measure, like KPIs.