What are the differences between OKRs vs KPIs? It is two topics that you often hear in a company, especially when it comes to performance management.
But these two concepts are a very different thing while the two of them can overlap sometimes. So, learn more about the differences below.
Key differences between OKRs and KPIs
Objectives and Key Results (OKRs) and Key Performance Indicators (KPIs) are both performance management frameworks, but they serve different purposes and have distinct characteristics.
But let’s talk about OKRs first.
What is an OKRs?
OKRs stands for objectives and key results, and it focuses on setting objectives and measurable key results, emphasizing aspirational goals and outcomes.
OKRs represents a straightforward method that employs precise metrics to monitor goal achievement.
Typically, a company will define several higher objectives, then each of them accompanied by three to five key results.
Key results are assigned numerical values to facilitate a precise performance assessment for the objective. In other words, OKRs:
- Can always be measured
- Can be objectively scored on a scale of 0-1 or 0-100
- Include timeline
- Ambitious and challenging
The OKRs framework gained prominence through its adoption by companies like Google, Spotify, Amazon, and Intel for managing goals.
In a general comparison of OKRs and KPIs, OKRs are well-suited for organizations heavily oriented toward growth.
It’s worth noting that, at times, an organization’s KPIs align with the key results utilized in an OKR framework.
What is KPIs?
KPIs is a short form for key performance indicators and a specific, quantifiable metrics used to evaluate ongoing performance and success.
Although there may be occasional exceptions, these indicators typically should:
- Align with strategic objectives
- Guide resource allocation priorities
- Be measured against predetermined targets
It is strongly advised to ensure the measurability of your KPIs. Incorporating quantitative values facilitates the contextualization and comparison of performance across various metrics.
While crafting qualitative KPIs is an option, it is generally not recommended as such a format can lead to ambiguity and subjective interpretations of data.
Examples of OKRs
OKRs should be built with big-picture goals in mind. Those goals should push employees to move forward and feel challenged.
Here are some of the examples:
Objective: Become industry’s market leader
- Achieve USD100 million in revenue
- Increase number of employees by 45%
- Increase number of customers by 50%
Objective: Boost revenue by 35%
- Acquire 70 new customers
- Increase number of leads by 25%
- Increase customer retention by 75%
Examples of KPIs
There are a lot of KPIs examples that span a vast range of industries. KPI can essentially be any quantitative measure, although in rare cases also qualitative. It is used by a company to assess its performance and reach its goals.
It is also important to break down KPIs by department.
Here are some typical KPIs examples for various industries and divisions:
Retail industry: Metrics such as revenue per square foot, same-store sales, and sales per employee.
HR department: Key indicators including attrition rate, employee performance, and average recruitment time.
Sales department: Metrics like customer lifetime value, sales revenue, and calls made.
Technology industry: Key indicators encompassing monthly recurring revenue, customer retention or churn, and ticket resolution time.
Healthcare industry: Metrics like patient wait time, average treatment charge, and the number of educational programs.
Complementary roles of OKRs and KPIs
KPIs and OKRs can complement each other effectively in an organization. While they serve distinct purposes, their integration can contribute to a more comprehensive performance management strategy. Here’s how they can work together:
Alignment of goals
OKRs: Provide a framework for setting ambitious, qualitative objectives and measurable key results that are aligned with the organization’s strategic goals.
KPIs: Focus on specific, quantifiable metrics that reflect the ongoing performance of processes or departments.
Strategic objectives vs. ongoing operations
OKRs: Emphasize aspirational, strategic objectives that push the organization to achieve significant outcomes within a specific time frame.
KPIs: Concentrate on operational metrics that help maintain and optimize day-to-day activities.
Setting and monitoring
OKRs: Primarily used for setting and monitoring progress toward strategic, high-level goals. They encourage innovation, risk-taking, and adaptability.
KPIs: Used for continuous monitoring of key performance metrics, ensuring that ongoing processes are efficient and effective.
Flexibility and adaptability
OKRs: Allow for flexibility and adaptation as priorities change. OKRs are often revised and updated regularly to reflect evolving organizational needs.
KPIs: Tend to be more stable and are monitored consistently over time to ensure steady operational performance.
OKRs: Success is typically assessed subjectively based on the achievement of qualitative objectives and measurable key results.
KPIs: Success is quantitatively measured against predefined targets, providing a clear indication of ongoing performance.
Utilizing OKRs and KPIs together
Technically, OKRs and KPIs are two different measurements, but you can use them together in your strategic plan. One of the simplest things to do is using a KPI within one of your OKR.
For example, you have an objective to boost your revenue up to 30%. Your key result can be some of these:
- Increase number of leads by 50% (this can be your KPI)
- Implement new strategy through social media channel
- Acquire 20 new customers (this can be your KPI)
- Improve UI/UX on website by the end of Q2
Some tips for you, if you include KPIs as an outcome measure in your objectives, it’s better if you stick to it in your OKR structure consistently throughout a certain period, for example through the year. This is because you want your performance target to actually remain steady.
By that example, you can probably guess OKRs that can be KPIs are determined by something that have a clear measurement, for example:
- Increase retention rate by x %
- Increase revenue by x %
Those are measurable outputs that are important for your company’s success.
On the other hand, effort-based key results that aren’t quantifiable measures can’t be KPIs. Some of the examples listed down below:
- Design new website by the end of Q3
- Implement new strategy for social media channel
- Implement automated recruitment process
It’s good that you have a number of important plans and strategies to fulfill OKRs, but you need to keep in mind that it’s not eligible as a KPI.
As for carrying forward, OKRs are things that need to be reviewed and changed quarterly. But if there are KPIs within or key results, keep in mind not to change them every so often.
So that’s the key differences between OKRs vs KPIs. By integrating OKRs and KPIs, you can create a balanced approach that combines the pursuit of strategic objectives with the need for operational excellence.
OKRs set the direction and inspire innovation, while KPIs ensure the ongoing health and efficiency of the organization’s day-to-day activities.
To ensure you can manage OKRs and KPIs effectively, Mekari Talenta has Performance Management feature that allows you to manage employee performance efficiently and automatically.
With this feature, you can track every employees’ KPI, making sure that they stay on track and be able to achieve their goals according to the designated timeline.
Learn more about Performance Management by Mekari Talenta by discussing it with our team and try the app demo for free.