Think of the last time you learned something new. If, say, you decided to learn piano, you likely decided to practice regularly and maybe even enlisted the help of a piano teacher. After a year of practice, you won’t become a famous pianist, but you’ll undoubtedly have become better. How do you know? By hitting specific goals: mastering some scales, playing a song or two flawlessly, and being able to read music. There are demonstrable measurements of success you can point to that prove you’ve improved as a pianist.

It’s different when it comes to businesses, though. They’re complex and involve many people, which means many different definitions of what success looks like. And that’s a problem: With no strict definition of success, there’s no way of measuring improvements. 

This failure of definition is what OKRs and KPIs aim to provide: They define success so that everyone knows what they’re supposed to be doing to achieve excellence.

Don’t get the two confused, though—OKRs and KPIs are very different. OKRs apply to the business as a whole, and KPIs help measure specific activities contributing to that goal. In this article, we’ll break down the difference between OKR and KPI, provide OKR vs. KPI examples, and explain why both matter. 

What is an OKR?

OKR stands for objectives and key results. It is a goal-setting framework used by organizations to define and track objectives and their outcomes.

OKRs are typically set quarterly and spread throughout the organization to ensure alignment and accountability at all levels. The objectives part of OKRs are the overarching goals the org wants. These objectives should be ambitious, qualitative statements that inspire action and align with the organization's mission and vision. Key results, on the other hand, are specific, measurable outcomes that indicate progress toward achieving the objectives. 

This can be expressed in the OKR formula:

We will [objective] as measured by [these key results].

OKRs can be applied across various industries and organizational functions, such as, from product development to sales and marketing to strategic planning and beyond.

Examples of OKRs

Here are some examples of what that could look like in the real world:

Example 1:

Your company has been operating at a net negative for its first four years. It’s time to make some money. You’ve identified your objective, so now it’s time to identify how you’re going to reach that objective.

OKR: We will become profitable (objective) by decreasing financial waste (key result #1), increasing inflow by $3.5 billion (key result #2), and growing by 2 million customers (key result #3). 

Example 2:

Your employee retention isn’t great, and it’s costing you a lot of money and valuable institutional knowledge. Time to fix it. 

OKR: We will become a better workplace (objective) by increasing salaries (key result #1), targeting 25% growth (key result #2), and offering free career training (key result #3).

What is a KPI?

KPI stands for key performance indicators. It is a measurable value that demonstrates how effectively an organization is achieving key business objectives. KPIs help in monitoring progress toward organizational goals and identifying areas that may require improvement. The key results above are measured with KPIs.

To be effective, KPIs should be relevant, measurable, actionable, and timely.

Relevant: KPIs should be directly tied to the organization's objective. 

Measurable: KPIs must be quantifiable and measurable. Using numbers allows for objective assessment and comparison over time.

Actionable: KPIs should provide insights that can drive action and decision-making. They should help identify areas of strength and weakness so that appropriate interventions can be made. 

Timely: KPIs need to be measured at regular, frequent intervals.

Ideally, you’d use a KPI in conjunction with an OKR, so the same use cases above apply—KPIs are for everything from customer relationship management and employee performance evaluations to risk management and performance measurement. 

Examples of KPIs

We’ll use the above examples to add in KPIs.

Example 1:

We will become profitable (objective) by decreasing financial waste (key result #1), increasing inflow by $3.5 billion (key result #2), and growing by 2 million customers (key result #3). 

Each of those key results could be linked to a KPI. For instance, you could track conversion rates and customer churn rates to indicate how your key result to “grow by 2 million customers” is going. You could track your inflow by tracking the average revenue per customer, the revenue by product or service, or your profit margin.

Example 2:

We will become a better workplace (objective) by increasing salaries (key result #1), targeting 25% growth (key result #2), and offering free career training (key result #3).

What KPIs could be used for increasing salaries? Using a salary compression ratio, a salary equity ratio, or the salary budget utilization. For increasing headcount, you could track retention rates, employee turnover rates, net new hires, and/or time-to-fill. 

What is the difference between an OKR and a KPI?

They’re both acronyms, both three letters, and they’re related, so it’s very common for the two concepts to be confused. Here’s a quick summary of how they’re different:

OKRs

OKRs are primarily used for setting and tracking objectives and outcomes that drive strategic priorities and direction within an organization. Objectives are qualitative, aspirational goals that define what needs to be achieved, while key results are specific, measurable outcomes that indicate progress toward those objectives. 

KPIs

KPIs, on the other hand, are specific metrics used to measure performance and effectiveness in achieving specific goals or objectives. KPIs are typically quantitative and focus on tracking key areas of performance, such as financial metrics, operational efficiency, customer satisfaction, or employee engagement.

Again, ideally, KPIs are used in conjunction with an OKR to break it down even further for a higher chance of success.

Should you choose an OKR or KPI?

While it’s not typically an either/or situation, you can decide to use one or the other.

Choosing only OKRs

If your organization's goals are primarily strategic, aspirational, and focused on driving innovation, growth, or transformation (in other words, not quantitative), OKRs may be more suitable. OKRs are effective for setting ambitious objectives and defining outcomes that align with strategic priorities. If your goals are more general, use an OKR.

Choosing only KPIs

On the other hand, if your goals are more operational, tactical, or focused on specific performance metrics or targets, KPIs may be more appropriate. KPIs help measure performance and effectiveness in achieving specific objectives or outcomes. For example, if you only care about new subscribers, use a KPI.

The importance of measuring performance and progress 

Remember our piano learning example at the beginning of the blog—what if you did nothing but play the same scales every day? How would you know if you’re improving? You need to set specific objectives to know how you’re performing and if any progress is being made. Measurement is the key to improvement because it informs direction. In short, measuring tells you how to improve. 

How Lucidspark can help you set OKRs and KPIs 

Whether you choose an OKR or a KPI (or a combination of both), Lucidspark can help track your progress. Acting as a single source of truth for your org, Lucidspark makes it easy to promote transparency by sharing important goals, progress, and data with just a click.