If measuring and improving performance is a key priority for an organization, comparing OKR vs KPI is a popular topic for discussion. Most organizations believe that one can be replaced with the other and the two are mutually exclusive. However, on a closer look it becomes clear that despite overlap, OKR and KPI are quite different in what they seek to achieve and how they seek to achieve it.
While the broad focus for both of them is setting goals and measuring results, the approach, outcomes, and applicability are quite different. Through the course of this blog, we will focus on comparing OKR vs KPI by understanding the difference, how they work together, best practices to set OKRs and KPIs as well as a few top examples.
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OKR vs KPI: What is the difference?
As a first step, let’s deconstruct the terms and undertake a comparison of OKR vs KPI and then move on to understanding the difference between the two.
What is OKR: OKR Definition
Wondering what is an OKR? Well, OKR is a popular acronym for Objectives and Key Results, that seeks to provide organizations with a strategic framework focused on goal-setting and achievement. Going by the term itself, the meaning of OKR consists of two major activities.
The first one entails setting objectives or what an organization seeks to achieve. The second one revolves around key results, which involves identifying key indicators that determine whether or not an organization has been able to achieve its objectives. OKRs are often accompanied by an approach or initiative which seeks to guide the journey from objectives to key results.
What is KPI: KPI Definition
In our discussion of OKR vs KPI, like OKR, KPI is also an acronym, which when expanded corresponds to Key Performance Indicators focused on performance measurement. As the name suggests, KPIs seek to measure the success of a particular task or project.
KPIs generally fall within a framework of where an organization is going and helps gauge how effective and efficient it is in its journey. In short, KPIs focus on evaluating the performance of an organization towards its goals.
Differentiating OKR vs KPI
While OKRs and KPIs both seek to accelerate an organization’s journey towards success and growth, each one plays a distinct and important role. Let’s dive deep into comparing OKR vs KPI.
First, OKR is more of a goal-setting framework which helps organizations determine what needs to be done and how, while KPIs are focused on performance evaluation in the journey towards achievement of those goals. This suggests that KPIs enable organizations to measure their performance and identify gaps and challenges in the same. OKRs, on the other hand, empower organizations to set objectives to bridge those gaps and explore what needs to be changed, aligned, and altered to achieve the same.
Second, a comparison of OKR vs KPI indicates that by nature and scope, KPIs are sustainable over time and don’t change on a regular basis. Whereas, OKRs often have a short life and keep transforming regularly. This is majorly because KPIs are mostly standardized and relevant for almost all types of goals. However, objectives and related key results are constantly re-evaluated and adapted based on business priorities. Furthermore, as one objective is achieved, the existing OKRs reach their pinnacle and new OKRs are set.
Third, when comparing OKR vs KPI, a key difference appears in how they are seen by employees in the organization. For most employees, OKRs define what are the important company goals and what each one can do to achieve the same. On the other hand, KPIs help employees evaluate their productivity, enhance accountability and help create benchmarks for overall performance mapping. OKRs are generally aspirational and dynamic in nature, while KPIs are more achievable and closer to the ground.
In a nutshell, it is the intention behind the process that primarily sets OKRs and KPIs apart. OKRs help organizations determine what they seek to achieve and what success will look like, while KPIs highlight how well they are faring in their journey to success.
Top examples for OKR and KPI
With a comprehensive understanding of the difference between OKR and KPI, we should now have a look at a few examples to comprehend how the two manifest in real-world situations.
Examples of OKRs
Focused on identifying areas of improvement, setting goals against each, and defining expected results is what OKRs seek to determine. OKRs can be team specific or applicable to the organization as a whole. Some of the top OKP examples include:
Objective: Increase company’s bottom line
Key result 1: Increase revenue by 50%
Key result 2: Decrease cost/ expenditure by 20%
Initiative 1: Focus on marketing and outreach
Initiative 2: Create a healthy sales funnel
Objective: Increase customer engagement and satisfaction
Key result 1: Increase customer stickiness by 30%
Key result 2: Increase net promoter score from 80 to 90
Initiative 1: Create a seamless user experience
Initiative 2: Offer personalized service
Examples of KPIs
As a metric to gauge the level of performance, KPIs will be distinct and personal for each team or department within an organization. Some of the most common KPIs include:
Human resources team
- Voluntary turnover rate
- Engagement quotient
- Hiring time
- Customer lifetime value
- Sales call-conversion rate
How do OKRs and KPIs work together?
Focusing on just one of the two key performance management and enhancement approaches will seldom result in unparalleled growth and success. Therefore, organizations need to adopt a holistic view and leverage the complementary nature of OKR vs KPI. There are several ways in which OKRs and KPIs can work together to facilitate organizational success.
KPIs are a great starting point for organizations to understand where they are going wrong. It helps measure performance against a vetted benchmark and gauge if there is any gap. While organizations have this data and know what is going well and where improvement is needed, without OKRs, the improvements can seldom be achieved.
OKRs, thus, close the loop by taking the identified areas of improvement as base, creating an objective, key intended results, and initiatives to achieve the same. Therefore, KPIs help in identifying problem areas and OKRs enable organizations to create measurable outcomes to bridge the gaps.
Thus, there are two ways in which the comparison of OKR vs KPI transforms into a meaningful relationship.
Firstly, if an organization is unable to meet its KPI targets, it can set OKRs to work on specific areas of improvement.
Secondly, an organization seeking to achieve an ambitious target can fall back on OKRs to guide the way and unlock its potential.
Tracking and working on KPIs and OKRs together is integral for organizations to create a bigger picture and focus on optimizing performance at every level and improve on every step of the way.
OKR vs KPI: Best practices
When creating OKRs and KPIs, it is extremely important to follow some of the best practices to ensure maximum effectiveness.
When creating OKRs, there should be an alignment between the department, team, and organizational goals and objectives. While the specifics for each will be different, they must converge on a macro level.
Furthermore, it is important to have at least 2-5 key result areas and initiatives for each objective. Simply gauging the success of an objective with one result will seldom suffice. Organizations must strive to create aspirational OKRs, even if the path is unclear in the beginning.
On the KPIs front, it is important to be as specific as possible. The target KPIs must be backed by industry standards and evidence to generate confidence. This reflects the need to have KPIs that are attainable.
Finally, the KPIs should be actionable. The idea behind having KPIs is to measure and improve performance. However, if a KPI is unable to generate insights which can be the basis for action, their purpose is defeated.
What is common to the best practices in the OKR vs KPI debate is that both need to be communicated clearly and transparently to everyone. Unless employees understand what they seek to achieve, how they seek to achieve it, what success looks like, and how performance will be measured, even the best KPIs and OKRs will not bear fruit.
OKR vs KPI: Getting started with SuperBeings
Setting the right OKRs and KPIs can help organizations ensure that everyone is working in the same direction. In a race between OKR vs KPI, collaboration with SuperBeings can help magnify the impact. While OKRs can help in aligning the team members to a shared goal, SuperBeings helps ensure that the OKR lifecycle is seamless. With SuperBeings, organizations can leverage the value of OKRs to anticipate impending risks, realign strategy, and measure indicators and metrics which matter the most.
With an understanding of the importance of OKRs and KPIs, we empower organizations to make their objectives the center of attention with efforts, directing efforts from all corners towards achieving the intended results. This results in frictionless team work, leading to greater levels of engagement, collaboration and satisfaction.
SuperBeings, thus, enables organizations to not only work towards a collective mission with streamlined tracking and achievement of goals, but also augments employee experience in the process. Make OKRs a force multiplier with SuperBeings, request early access today!