September 29, 2022

OKRs vs. KPIs

OKR (Objective Key Result) and KPI (Key Performance Indicator) are easily confused for one another, as both are 3 letter acronyms used to describe business metric goals. The key difference between OKRs and KPIs is the intention behind the goal setting.

Key Performance Indicators (KPIs)

KPI goals are attainable and typically represent the expected output of a project or series of projects added together. They take the form of a primary business metric like revenue, users, growth or profitability. Another common use of KPIs is to set an expected baseline goal, to ensure that the KPI doesn’t slip past a minimum performance level. For example, there might be an acceptable baseline conversion rate of 20% and only if it dips below that, will the KPI owner begin to investigate. 

Every team and company should have a set of primary and secondary KPIs that they measure regularly. 

Objective Key Results (OKRs)

OKR goals are more ambitious by nature and the idea behind this strategy is that by crafting aggressive OKRs, you can push your team (and yourself) to perform that much better. The Objective is an inspirational qualitative goal, most similar to an aspirational statement that teams can look to as a rallying cry and north star. Under each Objective, there can be 1 or more Key Results which serve as measurable quantitative (or sometimes, qualitative) milestones to show progress is made towards the aspirational Objective. Key Results can look like KPIs, except once they are set, the team will be expected to make maximum progress towards the goal and reflect about their performance.

Choosing for your organization

If you have a larger vision for innovation, OKRs are likely the better choice. They have greater depth that will allow you to stretch your goals further and allow your teams to be more creative on how they can reach those goals. OKRs were created by Andy Grove in the 1970s at Intel but their use has become more flexible over time to adapt to modern development. 

Regardless of which you pick, the bottom line is: The only way to improve, differentiate and build a stronger product offering is to measure and review performance. If you don't thoughtfully set objectives, or you set them without reviewing their performance at the end of a period, you’ll miss a priceless opportunity to learn and improve. The other common mistake is to just review them at the end! Their progress should be reviewed regularly to call the attention of the team when needed.

Remember, you need to intentionally create a space for folks to learn and grow from failures and successes, so make it a top priority to implement performance metrics. You’ll be surprised by how quickly you and your team will rise to reach them.