KPI vs OKR: Understanding the Differences & How to Apply Them to Your Business

There's a good chance you've heard the word OKR at least once but don't really understand what it means. You might know it has something to do with goals and objectives, but doesn’t your team already have KPIs for measuring that?

It’s best practice for teams to focus on KPIs to measure growth in a company. However, it’s rare for teams to consider setting clear objectives and key results (OKRs) that can aid in that growth. Instead of fixating on measuring performance, OKRs can help teams determine how to improve it. 

In this article, you’ll read about the differences between KPIs and OKRs, some concrete examples of each metric, how to use them to benefit your business, and why using a visual dashboard can optimise KPI tracking and setting OKRs.

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What is the difference between KPIs and OKRs?

Key Performance Indicator (KPI) is a term that most organisations are familiar with, as it provides numerical targets set to achieve specific business goals. Objectives and Key Results (OKRs), however, are less widely used. But using these complementary metrics in tandem gives companies direction and helps them achieve business goals more easily. 

Let’s take a look at the definition and differences of each metric, along with some concrete examples.

What is a KPI?

KPI is an abbreviation for Key Performance Indicator, and it’s a quantifiable metric that helps measure the performance of your team’s work. Companies use KPIs to help set targets and get insight into past decisions and results.

Let’s take a look at some examples of KPIs across different departments and industries.

Marketing KPI examples:

• Increase social media engagement by 40% by the end of fiscal year
• Improve click-through rate to an average of 20% by March 2023
• Publish 8-10 social media posts per month

These KPIs can be set for quarterly, weekly, or even monthly reviews to measure the marketing team's performance. To track and measure these metrics, teams can benefit from building a marketing KPI dashboard that can help them visualise their progress.

Sales KPI examples:

• Close 5 deals per month for each client
• Increase prospect conversion rate by 15% in Q4 2022
• Gain 100-200 online inquiries per month

These sales KPIs are typical for any team focusing on bringing in more leads and clients to a business. These kinds of metrics can demonstrate how good your overall sales/lead generation strategies are.

Business KPI examples:

• Get 3-5 press features a month to improve publicity 
• Increase the customer retention rate to 80%-85% by EOY 2023
• Lower expenditures by 10% in December 2022

Most businesses can benefit from improving their client and employee retention rates, lowering expenditures and earning more press for their business. These business KPIs are ambitious goals that can only be achieved through meticulous planning.

Nonprofit KPI examples:

• Get 5 new donors per month
• Raise a minimum of $50,000 every quarter
• Lower miscellaneous expenses by $4,000 by December 2022

Even with the business's complexities, nonprofit KPIs are still essential. Team members must have standards to aim for that can be easily tracked and measured.

SaaS KPI examples:

• Improve the customer engagement score by 2% by March 2023
• Increase the lead-to-customer ratio by 5% in October 2022
• Maintain website traffic over 11,000 visitors per month 

By clearly laying out SaaS KPIs, performance metrics stop being so abstract and more standardised. The metrics listed above can lead to new customers and increased customer satisfaction.

What is an OKR?

OKR stands for Objectives and Key Results, and it’s a goal-setting framework used to provide teams and individuals with direction and context regarding their targets. It helps create alignment around measurable objectives and boost commitment to goals.

The Objective can be either realistic or ambitious, but it should clearly specify the goal that you want to achieve. The Key Results need to be measurable metrics that track your progression toward that goal. In other words, the Key Results help you gauge whether you've met your Objective or not.

Let’s take a look at some examples to put this framework into context.

Marketing OKR examples:

• Objective: Increase website organic traffic to a minimum of 2,000 visitors per month
  
• Key Result: Identify the least popular pages on your website, and optimise them for SEO
  
• Key Result: Diversify website content by including interactive videos and shareable content

So, once you’ve diversified your website content, identified the least popular pages, and optimised them for SEO, you should’ve been able to meet your Objective of increasing organic traffic to your website.

Sales OKR examples:

• Objective: Increase the prospect conversion rate by 15% by EOY
  
• Key Result: Offer 3-5 sales training a year to the people on the sales team with the poorest performance
  
• Key Result: Analyse which promotional offers can be improved to appeal to more qualified leads 

Business OKR examples:

• Objective: Increase the customer retention rate to 80%-85% by December 2022
  
• Key Result: Identify the most common reasons customers cancel contracts and find ways to resolve those issues (at least 3)
  
• Key Result: Offer customer loyalty programs that provide special discounts for those who stay with the business for longer periods of time

Nonprofit OKR examples:

• Objective: Raise a minimum of $50,000 every quarter
  
• Key Result: Organise 1-2 fundraising events every quarter with ticket prices at a minimum of $1,000 for attendees
  
• Key Result: Spread awareness through social media and publish online articles about the financial need to encourage donors to give

SaaS OKR examples:

• Objective: Increase website traffic to >10,000 unique visitors a month 
  
• Key Result: Start an SEO campaign to improve search engine rankings so that more prospects can find the website organically
  
• Key Result: Invest $2,000 in PPC ad campaigns during Q3 to increase website traffic

Managers should set OKRs to ensure that they don't just set ambitious goals but also take the necessary steps to achieve them. 

This goal-setting framework can help teams approach their work with more direction and increase their chances of success. 

OKRs simplify performance management by breaking objectives down into smaller, time-bound, attainable tasks. OKRs also increase employee and customer success for the same reason.

KPIs vs OKRs: Is one better than the other?

With KPIs and OKRs, it’s not a case of one being better than the other. When used properly, the two are complementary. 

This means that for every KR, there needs to be a KPI. For example, if your Objective is to grow team engagement, and your Key Result is to reach 90% in average work satisfaction surveys, then your KPI is high retention rates.

These two need to be used together to be effective. Because, for example, accompanying the sales team’s goals of closing 20 deals per month with actionable OKRs makes it easier to break down and achieve wider objectives. 

The ideal way to approach this is by combining KPIs and OKRs to improve overall performance. These two performance management strategies should not be considered mutually exclusive.

How to use KPIs and OKRs to benefit your business

Here are some actional tips for those who want to use KPIs and OKRs in business. We've also included a list of things to avoid so that you can help your team become as efficient as possible. 

KPI best practices 

3 things you should do:

• Use KPI dashboards to help your team visualise their progress (more on this later)
• Create realistic timelines for your goals
• Make the goals specific, clear, and actionable from the start of that period

3 things to avoid:

• Don’t set KPIs without discussing them with your team
• Avoid setting unrealistic expectations
• Don’t forget to track KPI metrics regularly to measure growth

OKR best practices 

3 things you should do:

• Set clear objectives. These can be realistic or ambitious
• Use key results to plan better and to break the objectives into smaller, attainable targets
• Make sure you have a way to record the progress and specific milestones

3 things to avoid:

• Don’t set objectives without specifying the key results 
• Stop focusing on the big picture alone and think about the small steps as well
• Avoid setting OKRs that are not going to ultimately lead to achieving company-wide KPIs

How businesses benefit from using OKRs & KPIs

With a combination of OKRs and KPIs, managers can understand what tasks need adjusting, what strategies need to be improved, and which employees need more support. KPIs help track performance and provide quantifiable results. OKRs provide context and help improve processes and motivate employees.

This strategy helps increase team productivity. 

“OKRs have benefitted us by helping both our teams and our individual employees set goals that are ambitious, aspirational, and exciting, but also ones that are also achievable and actionable…For businesses who are looking to take an honest look inwards at what’s working and what isn’t as effective as it can be, OKRs can be really valuable. It’s allowed us to evolve our frameworks as we grow at a realistic pace.” —Lauren Wakeling, UK Country Manager at CoursesOnline

Create a KPI dashboard (and reach your goals with OKRs)

Use business intelligence software like Trevor.io to create visual dashboards for tracking KPIs. OKRs can help define your goals and set actionable steps for boosting KPIs. 

With Trevor.io, you can build KPI dashboards for startups, nonprofits, marketing teams, and all kinds of businesses. KPI dashboards can help your business: 

• Improve overall performance. KPI dashboards paint a full picture of your business heath. Having visual access to your metrics, lets you discover trends, forecast future changes, and anticipate mistakes
• Make faster data-driven decisions. The only way to make timely informed decisions is by having easy access to data, KPI dashboards are a way of closing the gap between people and information
• Plan for future scenarios. KPI dashboards use your raw databases. That means you can use your historical data to forecast new strategies and test ideas
• Improve prioritisation and team alignment. Having shared-access to a KPI dashboard helps your team prioritise better because they know which are the most important metrics, and also, makes everyone move in the same direction
• Build a data-first culture. KPI dashboards simplify the way teams access their metrics. That leads to building a culture based on data

Since the person who designs KPI dashboards isn’t always the one who uses them, it’s important that the end-user pushes back and asks for changes until the dashboard meets their needs.   

Since Trevor.io has a shallow learning curve and it lets you invite as many users as you want without any additional costs. Everyone can build KPI dashboards that simplify their daily work and help them visualise their overall growth.

Want to see if Trevor.io would work for your team? Try it free for 2 weeks!

The importance of effectively using both OKRs and KPIs

When used correctly, KPIs and OKRs are complementary. So trying to choose and implement one over the other is counterproductive. It’s better to find ways to combine both to achieve greater results. Setting SMART goals is imperative for overall business growth, and OKRs can help your team achieve those objectives. 

What matters is that your team is constantly improving but using randomised health metrics isn’t enough to demonstrate that growth. Keep that OKR cycle moving, set clear objectives, define key results, and watch your business grow.

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Frequently asked questions about KPIs vs OKRs

Why are KPIs better than OKRs? 

KPIs are not objectively “better” than OKRs. KPIs can help teams measure growth but OKRs show teams how to actually achieve those metrics. Both KPIs and OKRs are equally important for highly efficient teams.

Can you have both KPIs and OKRs? 

You can set both KPIs and OKRS. In fact, using both is the most effective way to achieve company and personal goals because KPIs help you to inform and better measure your OKRs.

Can OKRs replace KPIs?

OKRs and KPIs are distinct concepts measuring different metrics, and they should be used in tandem. OKRs are meant to equip teams to achieve KPIs so it’s unproductive to replace one with the other.