Last updated 5 February 2021 ·
Heard of both OKRs and KPIs but unsure which to use when, where or how?
We’ve noticed there are countless articles out there explaining this topic to varying degrees so we thought it would be more helpful to create a simple, straightforward table comparison looking at OKRs vs KPIs in terms of background, usage, examples and more.
So here we have it… introducing our OKR vs KPI Comparison Factsheet
| KPI | OKR | |
|---|---|---|
| Meaning | KPI stands for Key Performance Indicator | OKR stands for Objectives and Key Results |
| Origin | The exact origin of KPIs is unknown, however, KPIs have been used for centuries within successful businesses and cultures all over the world. | OKRs were first invented by Andy Grove, co-founder of Intel, further developed by John Doer and made famous by Google. Google has used them since 1999 when they had only 40 people and continue to use them today with over 100,000 employees! |
| Key Characteristics |
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| Differences | KPIs tend to be more of an individual way to measure success regarding a particular project or process. They stand alone and are more concerned with improvements in ongoing measures, rather than one-off goals or larger business initiatives. | OKRs are all-encompassing within an organisation, aligning teams as the key strategic goals and objectives are cascaded throughout the entire business. Ideally, OKRs should be set at the top level of an organisation and then cascaded throughout the senior leadership team, heads of department, managers, all the way to frontline workers. Each level creates goals and objectives that correspond with that at the top so all teams are aligned in their focus on what really matters to drive the most desired results for the business. |
| Similarities | Both OKRs and KPIs are effective measures of success, both include measurable metrics which are set and then referred to later after an agreed timescale. | Both are effective ways to achieve higher performance and can be used together as part of an effective goal management and performance planning strategy. |
| Example One | A local sports centre may have the following KPIs:
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The same local sports centre may apply OKRs as follows: Objective: Increase awareness and raise the profile of the sports centre within the local area KR1: Increase the number of members by 10% in Q3 KR2: Increase member visits by 30% in Q3 |
| Example Two | Common Marketing KPIs include:
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Marketing OKRs could look something like this: Objective: Achieve record metrics in all areas of marketing KR1: Increase website visitors to over 500,000 consistently each quarter KR2: Grow the prospect database to 400,000 KR3: Increase the customer base to 300,000 KR4: Achieve over 15,000 product trials KR5: Achieve an NPS score of 60 or above |
| Example Three | CEO level KPIs might include:
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CEO level OKRs could look something like this: Objective: Achieving current year strategy outcome of 15% growth to £Xmil whilst maintaining our gross margin figure #% and delivering £profit KR1: Refine our UDP (unique and differentiating proposition) and communicate effectively to the market KR2: Clarify our ICA (Ideal Client Avatar) and revise all marketing assets to appeal to this individual KR3: The new digital marketing strategy is delivering 50 MQL’s (Marketing Qualified Leads) per month KR4: Develop 5 more strategic partners and receive X leads per month from them KR5: Launch our business referral programme and receive 20 Platinum referring customers |
| In Summary | KPIs are a metric-based performance measurement system used to monitor improvements | OKRs are a company-wide goal management system that aligns teams on what really matters to drive results. |
So, which of these should you choose?
Overall, KPIs are best suited when you are looking to measure the performance of something specific or measure improvements made in a repeated task. KPIs add a system of measurement to ongoing work, e.g. the number of visitors to the website. OKRs are more suitable when an organisation has ambitious growth plans to achieve within a given time frame, they have a larger vision and therefore require a framework with more depth which allows for wider alignment to overall business goals. For more information, read our blog on how to cascade your company vision effectively.
The true answer to this is a combination of both! KPIs and OKRs both have a place within an organisation, KPIs are measures of performance which can also be Key Results, allowing them to be included within a wider OKR planning piece. A key result details a specific outcome and are often best when they include actual measures of success.So there we have it, KPIs and OKRs actually complement each other. You should not necessarily choose between them, but find a way to leverage both in order to create the perfect, well-functioning organisation. Example One above shows how KPIs can work as key results, as long as they include measurable metrics. The most effective use of OKRs is when they are clearly defined at the top of the organisation, by the CEO and the Senior Leadership Team for example, and then cascaded throughout the entire organisation, aligning all teams and reminding them, on a daily basis, of the key direction and focus for the business. Teams will then know exactly what to work on to achieve the desired outcome and drive results. This does mean it’s vitally important to make sure the goals are set correctly at the CEO and SLT level. Such top level OKRs are usually all centred around 3 core objectives which are Strategy, Operations and People. Each of these areas of focus is then broken down into key results or goals detailing the actions required to address these areas. For more help on effective goal setting read another one of our blogs.
Reclaro offers a simple, OKR system based on the award-winning 1-3-5® methodology that allows strategic objectives to be recorded and effectively cascaded throughout the whole business increasing alignment, accountability and visibility of performance. The Team Overview Dashboard loads in 3 seconds and shows live performance data of all teams in the business, all in one single view. If you would like to find out more, please email pete@reclaro.com or book a demo today!
