OKRs have rapidly grown in popularity over the last five years. Yet, many still have questions about their true purpose is, especially when you compare them to other metric-based tools like KPIs.
In this post, we will define what KPIs and OKRs are, and then look at the differences between them.
A KPI is an acronym that stands for Key Performance Indicator. It is a metric that helps evaluate the success of an org, team, or project for a particular activity. There's an unlimited amount of KPIs available, and they will highly depend on the context in which they are used.
KPIs should be limited by definition. You need to focus on the 5-10 key metrics that best represent success for the activity that is monitored. KPIs do not have targets, but there should be thresholds that trigger alerts. For instance, a sudden drop in the volume of leads should probably trigger a meeting to address that issue, and redirect resources if needed.
KPIs do not have target associated, but if they do, they'll often be referred as success metrics: the combination of a KPIs + the target that defines success.
Most companies will have a set of KPIs at the top that reflects their growth funnel. Here are some classic examples of KPIs in business.
But, you can also be more specific at a team or project level. For instance, a team in charge of application performance might have the following set of KPIs:
KPIs are created by starting with a project, team or business, and then levelling up to identify metrics that are best correlated to performance. A simple test for whether or not a KPI is effective is to ask yourself this question:
Would we change what we're doing if <metric> goes down?
If the answer is no, then you are probably not looking at a critical metric for that system. But if the answer is a resounding "yes", then you're most certainly looking at a KPI.
KPIs should also stay fairly stable over time, and it's quite common to keep the same KPIs around for years.
OKRs is an acronym that stands for Objectives and Key Results. It is a complete goal-setting framework that helps organizations set clear goals to achieve annually or quarterly. It was introduced in the 70s at Intel by Andy Grove, and then got popular after Google adopted it to drive their effort.
What used to be a goal-setting framework for Enterprise is now being used by teams of all sizes.
OKRs are divided into 2 components:
OKRs can be seen as a quarterly North Star that defines a specific set of outcomes to achieve. They will change from one quarter to another, but they have a huge impact on the roadmap during the quarter.
OKRs can be applied to any kind of theme that a team wants to focus on. They may use the same metrics as your KPIs, but they provide context around it.
Here's an example of OKRs for SEO
Here's an example of OKRs for Content Marketing
OKRs start with a vision. You often start by deciding on specific themes that you want to address. A simple approach is to look at the AARRR funnel, and pick one or two parts of the funnel that you want to improve.
Once you have a general idea of your desired outcomes (customer retention, leads conversion, attack a new market...), you can turn them into an inspiring Objective and list the associated Key Results.
You'll repeat that process at the end of every quarter to start a new OKRs cycle.
KPIs are mainly used as a monitoring tool to ensure that operations are working smoothly. They help you understand the current state of the business and can be referred to during planning sessions to identify areas of improvement.
KPIs aren't used to drive the roadmap, but they can cause a team to change their plans if there's a sudden negative change in performance. Teams will generally use a spreadsheet to track KPIs as they just need to keep track of the evolution of the metrics.
OKRs, on the other hand, will have a significant impact on the roadmap. They can be seen as the North Star that will align and guide everyone for a set number of months. OKRs are much more collaborative, and there should be a weekly discussion on progress – as such, it is best to use a proper OKRs-tracking solution to keep track of the conversations around the goals.
Key differences between OKRs and KPIs:
The core meaning of OKRs is alignment, while the core meaning of KPIs is monitoring.
Yes, you can absolutely use OKRs and KPIs together as they have different roles. Your KPIs should be used to monitor the ongoing stability of your business, and trigger alerts whenever you see an unexpected dip in performance.
Your OKRs will align teams toward a specific set of outcomes, which will generally result in improving a certain number of KPIs.