What are the main differences between OKR and KPI?

Often, the OKRs (Objectives and Key Results) of management are compared with KPIs (Key Performance Indicators), and this comparison sparks debates and controversies. Distinguishing between these two acronyms related to goal measurement is not a simple matter, even though the former is a methodology that uses metrics to achieve objectives, while the latter is an indicator that evaluates the overall performance of an organization based on the set objectives.

<<<The role of middle managers in organizational change>>>

Today, both concepts are essential tools to accompany and measure actions that will lead to successful organizational goals. They complement each other to the extent that OKRs establish the strategic framework upon which KPIs are built. Therefore, although they are compared and one is often favored over the other, the truth is that both contribute to achieving objectives in one way or another.

In this article, we will analyze the main differences between OKRs and KPIs so that you can easily identify them and use each of them correctly in your company.

OKRs and KPIs

KPI is an acronym for Key Performance Indicator and is used to evaluate the performance of an organization, individual, program, action, project, etc., over time. Indicators should generally be linked to strategic goals, indicate where to concentrate resources, and be compared with objectives.

OKR is an acronym for Objectives and Key Results. Specifically speaking, an objective is linked to key results. OKR is a simplified approach that uses specific metrics to track the achievement of an objective. Typically, an organization will have three to five high-level objectives and three to five key results per objective.

Key results are numerically scored to obtain a clear evaluation of objective performance. On the other hand, OKRs are measurable, capable of being objectively scored on a scale of 0-1 or 0-100, time-bound, and potentially ambitious. If they are easily achieved, they were not ambitious enough.

<<<Checklist: KPIs for decision making in business management>>>

Main differences between OKRs and KPIs

The OKR methodology was popularized by Google and Intel but has also been implemented by successful companies like Amazon, LinkedIn, Spotify, and others for goal management. In general terms, while OKRs are a good choice for growth-focused organizations, organizational KPIs essentially refer to the key results used within an OKR framework.

KPIs represent a measurable value, while an OKR behaves as an objective or key result. More specifically, we can establish four significant differences between these two tools:

• KPIs (Key Performance Indicators) are metrics for measuring performance, while OKRs (Objectives and Key Results) are multiple key results oriented towards measuring specific objectives.
• KPIs are based on past results and current projects, while OKRs are based on the company's mission and aspirations.
• KPIs evaluate processes, projects, and goals depending on the organization's needs, while OKRs are evaluated quarterly or annually.
• Essentially, KPIs are dedicated to controlling and measuring a process, while OKRs prefer to motivate the team. For this reason, OKRs are key results achieved within a certain period, while KPIs are real-time indicators that provide instant results.

Although key results and key performance indicators may sound similar, it is important to remember that an OKR is a result, while a KPI is a measurement. Now, let's define the difference between an indicator and a measurement: a metric is an absolute number, whereas an indicator is strategic information that allows evaluating an organization's performance. For this reason, OKRs and KPIs complement each other. KPIs provide visibility into the performance of a business or process, while OKRs define the objectives and results that must be achieved.

Examples of OKRs and KPIs

When comparing OKRs with KPIs, it's important to provide clear examples. In the real world, there are often some gray areas, and in certain circumstances, a shift in terminology can turn a key result into a KPI (or vice versa).

An example of an OKR could be a key result aiming to "increase employee training by 50%." Counting the number of employees who successfully complete the training could also be a KPI. The OKR framework is simple and relies on tracking data. On the other hand, a KPI is usually a single data point, so there are cases where they overlap. Let's provide more specific examples of each.

Examples of OKRs

Let's imagine the national football team of a country (Mexico) has the objective of winning the FIFA World Cup 2022. To achieve this, they need to reach specific key results to advance to the quarter-finals.

A first key result could be forming an offensive team with skilled players that ensures the most victories without risking a late counterattack. A second key result would be qualifying for the World Cup through the elimination rounds. And a third key result could be intense training in the months leading up to the tournament, with a specific strategy for each opponent in the drawn category.

Each key result achieved by the team is a step closer to winning the title, which is the main objective they aspire to when starting the elimination and qualification rounds to play in the World Cup.

Examples of KPIs

KPIs are used to measure each key result achieved by the football team. For example, KPI indicators could measure the performance of players during training leading up to the World Cup once they have qualified through the elimination rounds. An indicator would evaluate if there were any injuries and the overall physical condition of the team, as well as the individual circumstances of each player.

Similarly, a KPI indicator would show the score obtained in each match, the number of goals scored and conceded, scoring opportunities, free kicks, penalties, team and opponent's fouls. KPIs would essentially measure real-time data, checked daily or at small intervals, from instances such as training before, during, and after the elimination rounds. They would assess the collective and individual performance of the players, providing a future outlook on the possibilities of achieving the final objective. Here, KPIs and OKRs complement each other by aligning processes and goals.

<<<How to develop a go-to-market strategy?>>>

In summary, the differences between OKRs and KPIs can sometimes be so blurred that they could easily be confused as tracking methodologies to obtain relevant numbers. However, OKRs are aimed at achieving key results to accomplish objectives, while KPI indicators measure the processes and tasks related to those key results. Implementing OKRs will help you have a specific direction for your organizational goals and stay on track. Identifying KPIs will enable you to measure your performance and evaluate the real possibilities of achieving those objectives.