OKRs vs KPIs: How They Differ and When to Use Each
What’s more exciting — the Emerald City, or the Yellow Brick Road?
Well, it depends on who you ask.
Some days, you might need that glittering green city in the distance to stay motivated. But on others, it might be best to focus on the basics — putting one foot in front of the other!
That’s why when people ask “OKRs vs KPIs: which is better?” We say: companies should use both OKRs (objectives and key results) and KPIs (key performance indicators) to track their performance. Both metrics help you stay on track and realize desirable outcomes in very different, but equally valuable ways.
Today, we’re explaining the difference between an OKR and KPI, and when you should plan to use each. Whether you’re looking for courage, a heart, or just to find your way home to Kansas, OKRs and KPIs will help you along the way.
What are OKRs?
OKR stands for objectives and key results. OKRs can be summed up in a simple phrase:
“We will accomplish [objective], as measured by [key results].”
OKR is a goal-setting method that makes achieving big things much less intimidating, by outlining a clear path forward, towards defined goals.
That’s why OKRs are often used for high level, aspirational (or ‘stretch’) goals, based on company-wide strategic priorities. OKRs, and the goals they refer to, are usually set by senior leadership on an annual or quarterly basis.
To understand OKRs, you need to understand both objectives, and key results. It’s this combination of two parts — the goal, and how you’ll get there — that makes OKRs so powerful.
Objectives are big-picture, inspiring goals
Objectives are inspirational, inspiring goals. Qualitative rather than quantitative, they use descriptive language to paint a picture of what you hope to achieve.
For an objective to be useful, completing it needs to measurably move the needle towards this larger, strategic goal.
- Turn our customers into our best brand ambassadors
- Develop our company’s next generation of amazing leaders
Key results show how to get there
Think of key results as the Yellow Brick Road — the markers that show you’re going the right direction.
Key results are hyper-specific, and often phrased in quantitative, numeric terms. If you’ve completed a key result, you’ve made significant, tangible progress towards the objective.
Measurable key results remove guesswork and ambiguity. By making it through that field of poppies or finding that heart for the Tin Man, you’re that much closer to the Emerald City.
Great key results
- Decrease our Customer Acquisition Cost to 1/5 of Customer Lifetime Value
- Increase customer retention from 40% to 80% for first time users
What are KPIs?
KPI stands for key performance indicator. It’s any metric that shows whether a business is meeting its targets. If you summed up KPIs in one sentence, it might sound like this:
“Achieving this [key indicator] shows that our business is performing well.”
In the Land of Oz, KPIs could be things like “avoid the Wicked Witch of the West,” or “walk 5,000 steps along the Yellow Brick Road.”
That might sound a lot like an OKR, or at least a key result. And there is some overlap between OKRs and KPIs. But there are also significant differences!
Business as usual
Like OKRs, KPIs measure progress. But instead of keeping people on track to achieving a goal, KPIs track any kind of performance, even day-to-day “business as usual.”
KPIs might also be used on an ongoing basis, or stay the same year after year. That makes them different from OKRs, which are time-sensitive, and change regularly with an organization’s goals and priorities.
Just like key results, KPIs are quantitative, specific, and often numeric. But because there’s no objective, they don’t tell us why that metric matters.
When you share KPIs, you’re not talking about the Emerald City. You’re only directing people down the Yellow Brick Road.
- Maintain 99% website uptime
- Generate $5,000 annual revenue per client
Cheat sheet: OKRs vs. KPIs
- A goal-setting method
- Metrics with context
- Time-bound and updated regularly
- Better for achieving big goals
- A method for tracking performance
- Outcome-focused Metrics only
- May be tracked on an ongoing basis
- Better for ‘business as usual’
OKR and KPI Best Practices
Both OKRs and KPIs include specific, measurable values. But only OKRs come with context — telling the reader what, exactly, is the big-picture outcome they’re striving towards.
OKRs tell us why we need to deliver a certain result, instead of just setting the goalposts and walking away. That’s why Measure What Matters, who helped popularize this goal-setting method, describes OKRs as “KPIs with soul.”
Both KPIs and OKRs have their place in modern organizations. They just have very different use cases, and it’s critical to understand what sets them apart.
Use OKRs for ambitious goals
To achieve something bold or new, people need a clear, shared vision to work towards. Otherwise, they might not understand where they’re going, and they won’t be able to do their best work.
That’s where OKRs come in. Because they contextualize key results with an objective, they’re best used for more ambitious goals that will connect to the mission and drive the business forward in a notable way.
Use OKRs for performance management
OKRs are about the process, not just your destination. That makes them a much better tool for leading and managing people as they work towards great things.
OKRs are meant to be used as part of your weekly check-in. Each time you connect with the members of your team, you’ll revisit your objective, and check in on how fast you’re getting there. If anything’s blocking your way or holding you back, you can brainstorm how to address it together.
While KPIs can be used for performance management, it’s much more participatory and inspiring to track progress towards a goal together, rather than just comparing people’s work to a target metric. KPIs might only need to be mentioned in a performance management context if reaching them seems like an issue.
Use KPIs to track baseline performance
KPIs are pure performance — unlike OKRs, they aren’t attached to an exciting, lofty goal. And that’s not a bad thing!
If you tried to make every important outcome an OKR, employees would get overwhelmed, and every individual objective would lose power. Instead, use KPIs to monitor your company’s baseline level of performance.
KPIs are especially good for simple, familiar outcomes that everyone already understands. You don’t need an inspiring vision when you’re working towards website uptime — everyone already knows what that is, and why it matters.
Managing people (and performance) with ease
OKRs help your company achieve your top goals, together. Think of it as a roadmap towards your most important objectives — the Yellow Brick Road, towards whatever success looks like for you.
While everyone is probably already comfortable reaching your KPIs, aspirational objectives take a little more coaching, coordination, and inspiration. That’s why we built OKR goal-tracking into our performance management system.
Within 15Five’s centralized platform, you’ll be able to set company OKRs, break them down for teams and individual employees, and easily track everyone’s progress.
But there’s no one size fits all formula to rolling out OKRs, and you shouldn’t have to figure out how to roll out OKRs organization-wide on your own. We also offer coaching to help you roll out OKRs in the way that works best for your organization.