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Comparing OKR vs. KPI for Businesses with Key Considerations and Possible Strategies for Optimal Outcomes

OKRs and KPIs are two different approaches to measuring a company’s performance. Most organizations are familiar with both. And quite often, you will hear different opinions of the OKR vs. KPI debate. Some people believe that OKRs and KPIs are interchangeable; some think that you need only one of them incorporated within your organization. If you have your share of doubt, then, with this article, our job is to explain the differences and similarities between OKR and KPI. But first, let’s start by explaining what OKRs and KPIs are.

While KPIs, or Key Performance Indicators, are great for measurement, they're standalone metrics. They may tell you when a measure is good or bad, but they don't necessarily convey context or the direction your team should take.

OKRs stands for Objectives and Key Results and delivers that crucial context and direction missing from KPIs. Objectives describe what you want to achieve, while Key Results indicate how you know that you are progressing with your Objectives. The fact that KPIs are measurable makes them great Key Results. As a result, we prefer to think of OKRs and KPIs as complementary approaches to measuring business success.

What Is an Example of KPI?

We will use a co-working space as our example.

Two of their KPIs are the number of freelancers who use their space and the number of yearly subscriptions to their co-working desks. So, they gather data for two ongoing metrics—how many freelancers use their co-working space every day and how many of them will actually buy a yearly subscription to work from there.

What Is an Example of OKR?

Now, let’s continue using our example above. The co-working space has noticed that more and more freelancers are people working in the tech industry, and they have decided to increase their presence in the tech community. This is the Objective. In order to understand if they have succeeded, the co-working space can set two Key Results (KR) in order to achieve the Objective.

  • Increase the number of monthly visitors from the tech industry by 25% in the next three months.
  • Each week for the next three months, host events for the tech community focused on attracting new freelancers.

Metrics vs. KPIs

How are KPIs different from standard business metrics?

An organization has a myriad of metrics. From these metrics, there are a few key metrics (KPIs) that will help tell you if a business is doing good or not. While there are hundreds of metrics you can track, there is only a handful of guiding stars—KPIs. In this sense, KPIs differentiate from the standard business metrics in the way they give you an idea of your business performance and how to improve it.

What Is the Difference Between KPIs and OKRs?

Use OKRs to lead as they clearly show what you want to accomplish and how you will achieve it. Objectives, which are change-oriented goals, are paired with Key Results, which are measures. 

KPIs, however, are standalone numbers; they are metrics. They don’t represent path, progress, or purpose. While KPIs typically monitor the status quo, OKRs are designed to help your company move forward on something strategically important.

OKR vs. KPI: Which One Is Better?

You won't be the only one if you wonder which one is better to use—OKRs or KPIs. OKRs are a method of setting systemic goals, whereas KPIs are metrics. They complement each other well when used correctly.

Let’s take a look at the following example. Your organization should support its SaaS product uptime of 99%. This is a metric that represents an important measurement to track. Simply said, this is a KPI. Yes, KPIs are critical for the business's success, but they won’t make a significant change. KPIs are more like “business as usual,” they don’t move the needle that much in terms of new opportunities, and they don’t always make good OKRs.

However, there are times when a KPI can become an OKR—when you want to change it. Using the same example above, if your SaaS product is down 50% of the time and “create an excellent technical product” is the Objective, one of its Key Results might include stabilizing its uptime—from 50% to 99%, which in this example is also a KPI.

After this example, we can directly answer the question of which one is better—OKR or KPI? Both are important as, when used correctly, they can complement each other's success.

Why Is It Important to Measure Performance?

Your business needs to measure and review performance as it is the only way to improve. When you fail to set objectives, or you put them but do not review them, you miss a valuable opportunity to learn and improve. 

By implementing performance metrics, you can learn from both failures and successes. As a result, you may be pleasantly surprised by how rapidly you and your team achieve your OKRs.

Can OKRs Replace KPIs?

While KPIs are considered business as usual (BAU), it is still important to have KPIs in order to track the critical metrics for your business. KPIs can become your OKRs if it’s a metric that you want to change substantially. 

We will use an example of a sales team who felt behind on their KPI to contact new clients within the usual period. This KPI can become an OKR for a short period of time so the sales team can focus their attention on improving that metric. The moment they show that they can meet this metric, it can be again downgraded to a KPI. This way, the management will still pay attention to the metric, but it doesn’t need to be part of the OKRs for the long run.

Can You Have KPIs and OKRs?

Yes, you can have both KPIs and OKRs. You can think of KPIs as your business’ current health metrics, whereas OKRs are your most valuable measurements of future success. 

Let’s once again use the example mentioned above for the SaaS product uptime, where “create an excellent technical product” is the Objective. To do this, your team will adopt several KRs (key results) to define a well-functioning product. These KRs are common KPIs for many SaaS products, but in this case, they were very ambitious, thus acting like KRs rather than the typical KPIs.

What Are Some Common Mistakes to Avoid with KPIs?

Here are some of the most common scenarios when KPI mistakes occur.

  • The KPIs are stand-alone targets or goals. Focus on the fact that KPIs are indicators and measures of what is happening with your business.
  • Your KPIs are tracking vanity indicators rather than leading indicators, which can show you the current state of your business and how to improve it.
  • You are measuring the wrong thing simply because you have to measure something.

What Are Some Common Mistakes to Avoid with OKRs?

Here are some common mistakes repeated to OKRs.

  • Being too focused on the Objective. If you set your Objective as a stand-alone metric, your teams may focus too narrowly on the number rather than on learning. Pair Objectives with measurable Key Results and analyze disparities with your eyes on learning how to improve performance.
  • A failure to distinguish between ambitious and committed OKRs.
    Having only moonshots OKRs. Ambitious goals might demotivate your team, especially in the beginning—mix moonshots with roofshots OKRs.
  • “Not trying hard enough” OKRs (or business as usual OKRs).

In Summary

OKRs and KPIs are two different approaches to measuring a company’s performance. When implemented correctly, they can complement each other. Just make sure that you understand the difference between OKRs and KPIs:

  • KPIs are metrics that represent your business health.
  • OKRs are your most valuable measurements of future success.

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