Last updated on 28th March 2023
In this article we’re going to look at OKR vs KPI to find out what the difference is between the two.
Both OKRs and KPIs are used to help companies and individuals set goals that can hopefully make them more productive and, in turn, more successful.
Goal setting – in any form – can be great for our mental health. According to our Project Management Statistics 2021, 95% of people feel having a list of tasks to do each day is good for their mental health.
So, with that in mind, let’s take a look at the difference between OKRs and KPIs to see how you can apply them to your business.
What is a KPI?
KPI stands for key performance indicator. A KPI is a measurable performance metric that helps teams know what to aim for and helps businesses to evaluate their success.
As long as your KPIs are quantitative so that you can track progress and understand what success looks like, you can use them to measure the success of anything, from onboarding new employees to the ROI of your marketing campaigns.
KPIs should always be tailored to your business and what you want to achieve. They should be clear, relevant and walk the line between challenging and attainable. This means it should never be impossible to reach a KPI. If KPIs seem unrealistic then this will just work to demotivate your team and make you less productive, instead of more.
Let’s take a look at some KPI examples from different industries to better understand what they look like in action.
1. Patient wait time
A KPI for a healthcare company could be patient wait time. This is something that’s simple, clear, easy to measure and also makes a huge difference to customer satisfaction. After all, the shorter the wait time, the happier customers will be.
2. Employee turnover
A typical KPI for a HR department could be employee turnover. This means measuring how many employees leave over a given period. By better understanding employee turnover, HR departments can work to reduce this number and therefore reduce all costs associated with losing employees and training new ones.
3. Grow sales
This final example is a real KPI from the supermarket chain, Tesco. In their Annual Report and Financial Statements 2022, “Grow sales” was listed as one of their big 6 KPIs.
For each KPI they also included the headings:
- Why it is important
- What we measure
- How we performed
These are great questions to ask yourself when coming up with your own KPIs!
If you’re curious, Tesco measured “group sales” – which refers to revenue excluding sales made at petrol filling stations – and found that sales rose 3%.
What is an OKR?
OKR stands for objectives and key results. It’s a goal-setting framework or methodology typically used by companies to define measurable yet ambitious goals, and track their outcomes.
Usually OKRs are set at different levels. So you might have company OKRs, team OKRs, and even individual OKRs.
A key defining factor of OKRs is that they are aggressive ‘reach-for-the-stars’ types of goals. The idea isn’t necessarily to reach your objective, but rather to benefit from the progress you make on your way to achieving it.
Great OKRs are quantifiable, timelined, and inspiring. It should be a dream that everyone in the company can work towards together and feel good about the strides made, rather than bad about falling short.
Let’s take a look at some different OKR examples to better understand what they look like in action. Note that the ‘objective’ is the big-picture goal and the ‘key results’ represent measurable ways to reach that target.
1. Objective: “Be the number one project management tool on the market”
Key result 1: Increase market share by 20% by next year
Key result 2: Invest an additional $1 million into research & development
Key result 3: Obtain 500 5 star reviews by the end of the year
2. Objective: “Double revenue in the next five years”
Key result 1: Increase repeat customers by 25%
Key result 2: Acquire 100 new customers
Key result 3: Increase social media presence by 1,000 followers per account
3. Objective: “Create the lowest carbon footprint in our industry”
Key result 1: Supply chain and shipping infrastructure 100% zero waste
Key result 2: Pay 100% carbon offset for calculated carbon dioxide emissions
Key result 3: 25% of material is compostable
Key result 4: 75% of material is biodegradable
This last example is actually a real OKR from the sustainable footwear and apparel company, Allbirds. This OKR aligns with their mission statement to “make better things in a better way.”
OKR vs KPI: What’s the difference?
OKRs and KPIs are both ways to set goals and measure progress and success at your company. The biggest difference between the two is that KPIs are obtainable and used to measure the success of your project(s) and/or company, whereas OKRs are much more ambitious.
KPIs should be used to measure ongoing progress, whereas OKRs are for big picture stuff to help give you a sense of direction for where you want to take your business in the future.
There’s absolutely no need to choose between the two when it comes to setting goals for your teams. In fact, both OKRs and KPIs should have a place in your business.
We hope that’s cleared up the difference between OKRs and KPIs for you! Both have their place in ambitious and productive businesses.
If you’re all ready to start setting your OKRs and KPIs and you’re looking for some inspiration, check out this article: Professional Goals for Work: 16 Examples for 2023.