Key Performance Indicators (KPIs) and Objective and Key Results (OKRs) are different ways of tracking and measuring your company’s performance and successes. While both are effective methods, many people don’t quite understand the difference between them and the most effective way that you can utilize them. For that reason, this article is going to outline what a KPI is, what an OKR is, the main difference between them, if they can work together, as well as some examples of each.
After you gain an understanding of KPIs and OKRs you can implement them consciously, to the appropriate areas of the business which require the planning and tracking of organizational success.
- What is a KPI?
- What is an OKR?
- The main difference
- KPI Examples
- OKR Examples
- Can KPIs and OKRs work together?
What is a KPI?
A Key Performance Indicator is a performance metric that is used to evaluate the success of certain business activities or the success of the company as a whole. While KPIs can be applied to the entire organization, often they are used on different initiatives such as projects or programs. Their main purpose is to measure the success of these initiatives, including specific goals and metrics set by you and your team.
KPIs forecast, evaluate and measure success, depending on the goals of your organization. They need to be specific to company needs, which is why it often isn’t effective to use the KPIs of another company to track the success of your own. When you create your organization’s KPIs, focus on specific company objectives, your plan to achieve them and who should be involved to act on this information.
What is an OKR?
Objectives and Key Results are metrics or measurements that not only outline the objectives but define the desired end result. They can be used at the individual, team and company level. The end result that is sought after is the achievement of each objective that has been set. OKRs are more competitive goals that define and measure the success of each objective that you and your team set. They’re most commonly used when it comes to setting quarterly goals or formal annual planning initiatives. Major corporations are now using OKRs to plan for their successes, such as Google and Intel who have adopted this method for planning.
So… what is the main difference?
The main difference between KPIs and OKRs is the intent behind the goal-setting that you engage with. The goals of KPIs are realistic, attainable and are set on the basis of a process or a project already in place. Alternatively, OKRs have more aggressive, competitive and ambitious goals. OKR goals are bold and not always initially achieved because they are so ambitious. This doesn’t mean that they are unattainable though, it only means that sometimes they require more time and some adjustments as you work towards them. The purpose of your OKRs is to push you and your team to perform as best as you can, whereas KPIs are already existing, realistic and achievable goals.
Another difference between KPIs and OKRs is that where KPIs are tracked and measurable, you don’t necessarily specify the exact output that you hope for or expect. When you plan your OKRs on the other hand, you’re explicitly outlining the results that you and your team are aiming to achieve. The bottom line is that KPIs are measurements, while OKRs are outputs.
Use a meeting management tool like Fellow to document OKRs and KPIs to ensure all your action items are moving you towards your organization’s goals.
KPIs measure the success of the organization by looking at measurements of achievement for the organization, employees, specific projects and different departments. This kind of metric is used to measure the success of the company and it’s initiatives. As mentioned before, KPIs can be applied to the organization as a whole, to an individual, to specific projects or departments. Here are some examples of KPIs at each of these levels:
1 Organizational Level:
Performance, revenue, public opinion, employee satisfaction, competitive advantage, innovation.
2 Individual Employee:
Performance, attendance, punctuality, communication, commitment.
3 Specific Project- I.e., integration of new software tool:
Employees and management attitudes, impact on productivity and efficiency, ROI.
4 Technology Department:
Monthly recurring revenue, customer retention, customer churn, ticket resolution time, necessary escalations.
5 HR Department:
Attracting talent (i.e., responses to open positions), hiring rate, employee retention, employee satisfaction, incidents and issues raised, training and development uptake.
6 Finance Department:
Revenue, expenses, actual revenue versus projected revenue, cost of goods sold, forecasting accuracy, free cash flow, gross profit margin, net profit margin.
7 Marketing Department:
Traffic, cost per lead, conversion rate, content production, content quality, clicks, cost per phone call, time on site.
8 Customer Service Department:
Customer lifetime value, customer acquisition cost, abandonment rate, first contact resolution.
OKRs are a little more specific and ambitious than KPIs but can also be applied to the organization as a whole, to an individual employee or to specific projects. The end result that you are seeking is the attainment of each objective that you initially set. You will see through these examples that OKRs are more competitive goals that define and measure the success of each objective that you set out to achieve. Check them out below:
1 Individual OKR:
Objective: Increase online presence and following by 35%
Key Result 1: Increase posting frequency on Twitter to 5x daily, TiKTok to 5x daily, Instagram to 3x daily and Facebook to 3x daily.
Key Result 2: Establish a stronger social media presence by posting to all platforms at least 1-2 times per day.
Key Result 3: Follow influencers with at least a 5,000 person following each and leave comments on the 10 most popular posts on several different platforms.
Key Result 4: Gain 20 followers on Twitter by posting about trending topics and 20 followers on TikTok by using trending sounds and dances at least twice per week.
2 Sales Department OKR:
Objective: Increase revenue by 10%.
Key Result 1: Build out at least 60 new leads.
Key Result 2: Acquire 20 new customers.
Key Result 3: Increase marketing leads by 10 %.
Key Result 4: Increase customer retention to 80 %.
Key Result 5: Follow up after one week with each customer to increase customer satisfaction by 15%.
3 Marketing Department OKR:
Objective: Increase blog traffic by 25%
Key Result 1: Increase Twitter followers from 2,500 to 3,000 by December 1st, 2021.
Key Result 2: Be referenced in 3 content articles in the leading industry online publications.
Key Result 3: Increase blog subscribers to from 3,000 to 4,150.
Key Result 4: Publish 100 new blog posts in Q3.
Can KPIs and OKRs work together?
KPIs and OKRs can absolutely work together, and often, it’s quite successful. The reason why they can and should work together is because the KPI is a more general measure of performance that makes you really think about what kinds of tangible actions need to be made in order to achieve your goal and find success. This is where your OKR comes in, with a specific focus area and with results that are trackable and measurable. Think of a KPI as more of a planning and tracking procedure and an OKR as a measurable result.
There are actually certain cases where a KPI needs an OKR to address a particular problem in the business. This can take place when you notice you’re behind on a KPI metric and you need an OKR, with more specific details to put the project back on track. It can also take place when you have a KPI target that you’d like to make more specific and more measurable, such as attaining a certain revenue or return on an investment that was made. Your KPI is a great starting point but when you need something more actionable, specific and measurable, it’s time to draft an OKR as well.
If you’re looking to make improvements to your team and to your organization, it’s extremely important that you start measuring and reviewing your performance at an individual and project level. When you keep an eye on your performance in certain areas, you gain the opportunity to improve and make changes that will make a positive difference in the company that will be felt by everyone. It should be an absolute priority for you to implement performance metrics so that you can track your growth and identify areas for improvement. If performance metrics aren’t a priority for you, it will be very difficult to become more successful both individually and as a team (we want to avoid professional apologies where we can!).
Don’t be afraid for your KPIs and OKRs to sound similar or redundant. It’s essential to remember that a KPI is a measurement and an OKR is an outcome. It’s completely fine for them to overlap because they have different purposes and produce different results. We hope that this article has been helpful to you in differentiating these two types of performance metrics. Be sure to pass it along to a friend or a colleague if you enjoyed it! We look forward to seeing you on the blog soon.