A lot of people think that OKR (Objectives and Key Results) and KPI (Key Performance Indicators) are interchangeable: three-letter abbreviations, both have the word “Key” in them, so they must be the same. That is probably the reason why we so often hear our customers at Weekdone say that they are switching from KPIs to OKRs.
Much like you can’t sing a dance or dance a tune, you can’t switch from KPIs to OKRs. Their purpose and use are completely different, and that is why you can and should use both.
So let’s take a step back and learn the difference between OKR and KPI with examples.
What is an OKR?
OKR (Objective and Key Results) is a goal-setting methodology that companies use to communicate their desired outcomes throughout the organization, focus on the most important areas that need improvement, and deliver valuable results for the business.
Each leader who implements OKRs has a strong sense of urgency to achieve organizational goals. This urgency requires extreme focus from the teams in the company and strong prioritising skills.
In a nutshell, writing OKRs is deciding what exactly you need to improve in your business and, based on that, how you will spend your time and resources in the next 3 months. It’s as much about saying “no” to opportunities, as it is about pursuing them. If you’re chasing 50 different outcomes, you will end up not achieving any of them.
So leaders and teams turn to OKRs when they’re looking to focus on the most impactful results they want to achieve, become more efficient and continuously improve their company.
It’s extremely important for leaders to set a unified direction for everyone in the company. This is the first step in the OKR goal-setting process. It is not enough to announce that the company goal is to make money and grow profitability. You have to be more specific than that and focus on improving particular areas one at a time. You can focus on fixing issues in internal communication, organize a new sales process or take the leap and expand to a different market. What has to be resolved and improved first for you to see the results in the nearest future?
Conducting in-depth analysis of opportunities and constraints relevant to the current situation is the incredible thing leaders do as a part of their day-to-day job. This analysis builds a strong foundation for further prioritizing and decision-making processes. Once the direction is clear, teams can write their Objectives and Key Results to make sure that the company is moving forward.
What is a KPI?
Key Performance Indicators (aka business metrics) are numbers that you look at to maintain a healthy business. You need to set numeric expectations of performance and set clear targets for the company, departments, teams and individuals. These indicators direct your attention towards what they are monitoring, and they simply tell you if you are meeting your targets or not.
For example, your sales team KPI might be a number of closed deals per week, and a target (expected level of performance) could be from 10 to 15 on average. So if you’re meeting the KPI target of at least 10 deals, it means you’re maintaining your efficiency.
In most companies, KPIs reflect revenue targets and month-on-month growth of various business metrics. You can track all of your regular business activities with KPIs, i.e.:
- customer acquisition cost,
- changes in website traffic,
- market share,
- employee turnover rate,
- customer satisfaction,
- number of new and recurring purchases,
- sales by region,
- a number of daily meetings you have with potential clients, etc.
These targets can be annual, quarterly, monthly, daily or even hourly, depending on what you wish to keep an eye on.
Numbers don’t lie, and looking at KPIs in retrospect helps you to make predictions for the future: which months are going to be good, which potential clients are more likely to become paying customers.
Analysing your performance against KPI targets allows you to understand how to keep your business going. Simply put, you cannot have a functional well-organized company if you are not measuring your KPIs.
However, having these numbers doesn’t really tell you directly how to improve them. You cannot grow a business by simply saying “we need to hit a higher revenue target”. And if you’re falling behind on your KPI targets, what exactly do you need to improve to put everything back on track?
This is where we begin to discuss the difference between OKR and KPI.
OKR vs. KPI: How can you tell the difference?
You cannot switch from KPIs to OKRs as they are not interchangeable and their purpose is completely different. If you want to grow, improve and sustain your business, you should learn to use both.
KPIs as “Health Metrics” help to identify where attention is needed.
Do you know how much money your business is capable of making on a monthly basis? That is your monthly revenue KPI, and if your target is $100,000, you would deem yourself in good shape if you were hitting it each month.
If suddenly revenue drops to $90,000, you would direct your attention to this and start digging into the “why”.
Normally, each team will have a KPI to measure their own efficiency and analyze if everything is working as it should. For example, let’s take a look at Company A whose sales team’s KPI target (health metric) is to bring 50 new paying customers each month.
KPIs are usually achieved with business-as-usual and as a part of the daily routine. In other words, when people are doing what their job description says they should be doing, they should be achieving these targets.
If in a given month, the team is bringing in at least 50 new customers, the team is hitting the KPI target and no extra attention is required. Whatever tactics they apply, it works.
But if new customers’ number drops below 50, then both the team and the company know an extra focus is needed to analyze what happened and what needs to be improved. So a sudden drop in your KPI suggests that you need an OKR to improve a particular area in your business.
KPIs as business-as-usual growth targets help to specify expectations for performance.
Companies also use KPI targets to maintain steady business growth. Normally, each company has a revenue target and month-on-month growth expectations. It may be a 5% or 20% month-on-month increase in revenue or client base. Remember, a target is the level of performance you want to achieve.
But what if the company wants to achieve explosive growth in the foreseeable future?
Let’s say, Company A has a revenue target in mind: they want to double their earnings in 5 months from now. This is a challenge that definitely requires an OKR goal-setting process.
As a first step, what would you need to improve, change and rethink as a Company to drive growth? Would you consider expanding your business to a new market, or increasing revenue per customer, or leveraging unconventional marketing channels, or looking for new audiences? You should choose a specific area to focus on and set it as a Company level Objective for a quarter.
When the Company level direction is clear, what can each team contribute to move the Company forward?
Team OKRs should align with the Company level overarching goal. If the Company direction is to increase the revenue per customer,
- Sales team can focus on upselling to new customers,
- Product Development can increase engagement of the client base and make sure that the product becomes indispensable,
- Marketing can develop new subscription offers and packages to make longer-term cooperation more appealing.
As you can see, KPIs and OKRs actually work together quite nicely: KPI being a starting point of a conversation about improvements to implement or problems to solve, and OKR specifying a focus area and measurable outcomes to be achieved to deliver on those improvements.
How OKRs and KPIs can coexist
OKRs focus on improvement and problem solving.
While KPIs are business metrics that reflect performance, OKR is a goal-setting method that helps you improve performance and drive change. So KPIs let you know what you need to analyze to determine the basis for your OKRs.
There are two specific instances when a KPI number suggests that an OKR is needed to address a particular issue:
- If you’re falling behind on your KPI target, you need an OKR to put everything back on track.
- If you want to achieve a more ambitious KPI target (like a big revenue number), you need OKRs that will guide you there.
OKRs are the bridges between where you are and where you want to be. The purpose of the OKR methodology is to single out improvement areas for the quarter and focus your teams’ attention on delivering valuable business results.
If you have discovered that you’re falling behind on your KPI targets, how do you identify the problem? How do you know what’s causing you trouble?
To understand why the team is falling behind, you need to analyse cause-effect relationships in your business environment and understand what’s changed. Sometimes the change you’re seeing is a by-product of a different issue that you need to solve first.
To get to the root cause of the problem, you should continuously ask “why” something is happening. So if your sales team KPI target is to close 50 new paying customers per month, and now they are only bringing 30, here’s how you start digging:
- Why are we not getting enough new paying customers?
- Because we are not closing enough deals.
- Why aren’t we closing enough deals?
- Because we have a competitor who is taking all our customers.
- Why are the customers choosing our competitor and what can we do to improve our product/service?
If you have discovered that the issue is indeed in customers choosing another offering, ask your teams to suggest their OKRs to increase the competitive strength of your product (company level Objective).
The focus area for different teams could be on
- improving certain aspects of your product/service,
- marketing activities that could attract more potential buyers,
- sales process,
- communication channels or something else.
Here’s an example of what team level OKRs might look like.
Product Team Objective:
Increase engagement in our product
- KR1: Increase average session duration from 10 min to 25 min
- KR2: Analyze competitor’s offering and implement top 3 improvement ideas.
- KR3: Increase average daily activity per user by 12%.
- Make a list to compare our product with the competitor and brainstorm ideas for improvement.
- Reach out to loyal customers and ask for feedback.
- Design and launch a “wow” feature to ignite discussions and trigger customer engagement.
Marketing Team Objective:
Leverage “social proof” to increase credibility and improve reputation
- KR1: Get at least 15,000 views on our testimonials page.
- KR2: Reach an average click-through rate of 20% in the communication campaign.
- KR3: Increase the number of shares on Linkedin from 30 to 1000.
- KR4: Reduce an average acquisition cost per customer from $100 to 20$.
- Partner up with thought leaders to promote our testimonials page.
- Reach out to power users and ask to share their success stories in video format.
- Brainstorm ideas for LinkedIn marketing.
Sales Team Objective:
Personalize sales approach and nurture new potential customers better
- KR1: Increase the number of touchpoints with a new lead from 3 to 6
- KR2: Increase follow up email open rate from 14% to 45%
- KR3: Reach 8/10 average score on customer satisfaction survey with at least 100 responses
- Update the customer journey map to improve the nurturing process.
- Take a course on best practice email approaches and consult with the Marketing team.
- Create different offers for different use cases, review the sales pitch.
If you need more team level OKR examples, you can browse our OKR examples database.
OKRs lead growth, change and innovation
According to best practices in implementing OKRs, the goal-setting process should begin at the company level. Top management decides on the focus area for three months. This focus area is a specific problem to be solved or an opportunity to pursue.
Teams write Objectives and Key Results based on their knowledge and expertise and align their OKRs with the overarching company goal. How can the team contribute to the overarching Company Objective? This is the starting point of a meaningful conversation.
Team Objectives should be ambitious, inspiring, qualitative and quarterly based.
Under each Objective, the team defines 3-5 Key Results – measurable outcomes that indicate success or failure of an Objective. Key Results should be clear, quantifiable, and hypothetically achievable. But keep in mind that Key Results are about pushing to be better and should not be easy.
Let’s look at another example of a company level goal.
Most leaders find it very tempting to write a company level Objective as: Increase revenue or Improve sales numbers.
These generic, non-specific, and, frankly, lazy Objectives will not bring any results. Leaders need to go deep into analyzing factors contributing to revenue growth and determine focus areas for the quarter.
If you know that your business relies strongly on customer reviews and word of mouth, you could focus on improving the quality of your service and making customer satisfaction your competitive advantage, but also give your fans more reasons to talk about you. Customer satisfaction leads to better reviews, higher retention numbers and it’s overall a good improvement area to consider.
So let’s say, the company level Objective might be: Improve customer satisfaction and give customers more reasons to say good things about our Company.
There are many things the teams can do to ensure that the company truly stands out in this area:
- Marketing can adjust the messaging and push a new communication campaign,
- Product Development can implement a new onboarding flow focusing on incorporating customer feedback,
- Business Development can choose new partners and affiliates with customer satisfaction in mind, etc.
Your social media marketing team might consider an Objective like this:
Increase community engagement on our Social Media pages
- KR1: Increase average # of comments under each post by 20%
- KR2: Convert 60% of new leads coming from influencers
- KR3: Increase average Instagram Stories views from 5,000 to 10,000 on average
This Team Objective is to increase community engagement, and it aligns with a higher level company goal – to give customers more reasons to say good things about the company.
If people spread the word and their excitement, along with good reviews about your service, it should attract more potential customers, increase the number of new deals, and eventually impact your revenue numbers. This is how you would start moving towards your ambitious KPI target.
This KPI number growth might not be immediate but success is not a single leap from zero to hero. It’s a process of fixing weaknesses and strengthening your best features. So if this OKR didn’t impact your business the way you wanted it to, you can analyze what worked and what didn’t, and come up with a better approach, and a better Team OKR for the next quarter.
OKR is a learning path, and it takes a few quarters to learn how to leverage your strengths and find your weaknesses. By analyzing your OKR progress in retrospect (in an OKR quarterly review), you are figuring out and documenting exactly HOW you are most likely to improve your business and achieve your ambitious KPI targets.
No, Key Results are not the same as KPIs
The difference between Key Results and KPIs is a hot topic and there’s much debate going on. The bottom line is that you want to improve your business and deliver valuable results instead of getting caught up in definitions. Here we offer the answers that our customers found most useful and practical to save you some time and help you improve your business.
Both Key Results and Key Performance Indicators are measurable and both reflect a team’s performance. What’s different, however, is what exactly you measure and how you come up with those measurements.
KPIs reflect performance but don’t tell you what needs to change or improve to drive growth of those numbers. They are high level business metrics that you analyze with precise frequency (yearly, quarterly, monthly, weekly, etc.).
When you see the numbers dropping below target, you should go deep into analysis, identify bottlenecks and constraints, determine what needs to be changed, fixed or improved.
And once you’ve decided on which area needs improvement, you write an Objective focused on that area and Key Results to measure how close you’re getting to this Objective. So Key Results are specific to a particular focus area represented by an Objective.
There are always a million things a team could do to improve a KPI number, and that is why the Objective of your Team OKR has to be specifically focused on a valuable improvement area.
If everything is a priority, nothing is. So choose wisely and direct your team’s attention towards specific outcomes.
Let’s say company A’s Customer Success team has a KPI target of 100 meetings per quarter. They realize that to onboard more customers and increase customer lifetime value, they need to have more meetings. So they decide to pursue a much higher KPI target of 300 meetings per quarter. This is an explosive KPI growth target.
What exactly do they need to focus on to deliver on this KPI target?
- Will they focus on new customers or the ones who subscribed in the past 6 months?
- When are the customers more likely to book a meeting? What has to be true for them to have interest?
- How will the team approach this: through email communication, in-product notifications or a landing page?
- Where in the sales funnel the changes should happen: early on when potential customers are still learning about the service or somewhere in the middle when they discover its value hands-on?
- Would it be more impactful to focus on long-term customers and engage them more often?
- How many meetings per customer is enough to make sure continuous usage and engagement?
- If customers are not booking follow ups, is it because of the bad first impression? Should the team consider improving the sales pitch and demo approach?
So… what does it mean exactly “to increase the number of meetings” and why is that important?
In the reasoning process and in team discussions, it will become clear that some areas are more impactful than others, and you have more faith and confidence in some ideas for delivering actual change.
Place your bid on the highest impact idea and define how you will measure success of achieving this Objective. These measurable outcomes will be your Key Results.
By the way, you can use this spreadsheet to keep a record of the ideas for Team OKRs: download free template. Some OKRs might be impossible to deliver in the current quarter, so you can always mark them for the next one. That is if they are still relevant by then.
So we’ve established that Key Results should be narrowly focused to pinpoint what outcomes you need to achieve to reach the Objective.
To continue with our example, let’s imagine that the Customer Success team decided to focus on the customers who subscribed in the past 3 months and increase engagement with them. The team will apply different tactics to deliver on the desirable outcomes. But which outcomes are desirable here?
Usually companies think that the KPI should be one of the Key Results under the Objective, but this isn’t the best practice.
Instead of writing “increase the number of meetings from 100 to 300” (which is just reiterating the KPI target), try to identify an outcome that the team can influence on an ongoing basis. Something that they can track every week and take action when the progress is at risk, for example: “increase the number of follow-up meetings booked [a specific type of a meeting] from 7 to 21 per week [measurable on a weekly basis]”.
Remember, you should have at least 2-3 and no more than 5 Key Results per Objective. So what other outcomes will the team try to deliver?
Customer Success Team Objective:
Increase engagement with new paying customers
- KR1: Increase open rate of our in-product communication from 4% to 15%
- KR2: Increase the number of follow-up meetings booked from 7 to 21 per week
- KR3: Achieve service quality rating 9 out of 10 based on the after meeting anonymous poll
- KR4: Reduce average response time from 5h to 1h
Now, when the team has drafted the Key Results, look at them and ask yourself: do you know what the team will do next? Is there an action plan that will move the needle on these Key Results? Numbers won’t change without an action plan.
- Analyse open rate from previous quarter and draft new copies for in-app messages.
- Personalize outgoing communication.
- Create a high quality FAQ section and stock answers to speed up responses.
- Survey our high engagement customers to ask what they like in our services.
So, for OKRs to work, you need to define the Objective so clearly that it would shape the thought process and prioritisation framework for the entire quarter. Knowing the actual outcomes helps the team to choose the right tasks to work on, and not to waste their time on pursuing everything that comes to mind. Everyone should stay focused.
Let’s use another example for a marketing team.
If your marketing team KPI is to bring 2000 qualified leads to your website per month, and now they are falling behind on this number, your first impulse might be to create an Objective: Increase the number of high quality leads, with the first Key Result being: increase the number of qualified leads from 1500 to 2000.
Reiterating your KPI targets in your Key Results will not help you achieve them. So consider a closer look into the reasons behind the KPI changes and maybe there’s a different approach or a better path you could take.
A KPI simply lets you know that there is an issue, but Key Results should be measuring success or failure of your Objective. So if the Objective is really to Increase the number of qualified leads, what outcomes would you like to deliver and what Key Results should you consider?
Perhaps 50% of the new leads were coming from a free ebook. However, this ebook is now 5 years old and over the years the percentage of leads has been going down regularly.
You may want to write a Key Result to focus on updating the ebook and generating downloads of the new edition.
Other Key Results may be about diversifying your communication channels and nurturing leads for them to reach your qualification criteria.
Marketing Team Objective: Increase the number of high quality leads
- KR1: Reach 3000 downloads of the updated version of the free ebook.
- KR2: Increase traffic from software review platforms from 500 to >2000 leads.
- KR3: Reach >2000 reads per article on our new blog content.
If you’re struggling to write measurable Key Results, you might want to learn the difference between outputs (what you do) and outcomes (what you need to achieve).
Don’t confuse OKR and KPI
There shouldn’t really be the word “versus” between OKR and KPI since they do not compete for your preference. They coexist very well and you should use both frameworks in your business but for completely different purposes. Use OKRs for goal-setting and improving your business and KPIs for monitoring general business performance.
Most companies choose to track their KPI targets in a spreadsheet where you can be as detailed as needed: Company KPI -> Department KPI -> Team KPI -> Individual KPI, and track those per year, quarter, month, week, day or even per hour.
For improvement-oriented and focused goal-setting, you should definitely use OKRs. The OKR methodology offers great benefits for organizations. The best way to achieve success with the methodology is by using dedicated software like Weekdone that allows company-wide transparency, effective communication of priorities, and, most importantly, alignment of Objectives.