Objectives and Key Results (OKR) and Key Performance Indicators (KPI) are two popular frameworks used by organizations to measure and track performance.
However, there is often confusion around how OKR and KPI differ.
This guide will provide an overview of OKR and KPI, highlight the key features of each, and identify differences between the two frameworks.
It will also provide examples to help illustrate OKR and KPI in action.
Background Overview on OKR and KPI
OKR and KPI are both tools used to set goals, track progress, and measure results. However, they serve different purposes:
- OKR – A goal-setting framework that defines objectives and key results. Objectives are qualitative goals, while key results are quantitative metrics used to measure progress towards the objectives.
- KPI – Performance measures used to evaluate the success of an organization, team, or individual in meeting key business objectives. KPIs track progress towards predetermined goals.
Features of OKR and KPI
OKR Features:
- Qualitative, aspirational objectives
- Quantitative, measurable key results
- Time-bound (e.g. quarterly)
- Ambitious stretch goals
- Transparent to entire organization
KPI Features:
- Quantitative metrics tied to objectives
- Measurable and easy to monitor
- Focus on past performance
- Tracks progress towards goals
- Specific targets to reach
10 Differences Between OKR and KPI
- Purpose – OKR drives continuous improvement, KPI measures progress towards goals
- Scope – OKR aligned to organizational objectives, KPIs focus on department/team goals
- Measurement – OKR measures ongoing progress, KPI evaluates success based on targets
- Timeframe – OKR uses short cycles (quarterly), KPIs often annual
- Ambition – OKR goals are aspirational, KPI targets based on current ability
- Adaptability – OKR fluid, updated frequently, KPIs locked for set periods
- Transparency – OKR visible to all employees, KPIs often confidential
- Accountability – OKR team-based accountability, KPIs individual accountability
- Completion – OKR may not reach goal, KPI expected to reach target
- Reward – OKR not directly rewarded, KPI achievement may be rewarded
Opportunities and Challenges
Using OKR and KPI together provides focus and alignment from company objectives down to individual performance.
However, organizations should be careful not to conflate the two frameworks.
Challenges can arise if teams try to retrofit KPIs to match OKRs, rather than developing aligned but distinct metrics.
OKR Examples
Objective: Expand market share in the Northeast region
Key Results:
- Increase sales by 20% in New York and Boston
- Acquire 5 new major customers
- Conduct 100 meetings with prospective clients
KPI Examples
Objective: Increase customer retention
KPI: Reduce customer churn rate to less than 2%
Summary
OKR and KPI are complementary frameworks that allow organizations to set strategic goals and regularly track performance when executed properly.
While they have some similarities, there are important differences between the aspirational objectives of OKR and the performance measurement focus of KPI.
Organizations will benefit most when OKR and KPI are aligned but remain distinct.
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