When it comes to setting goals for your business, two terms that often come up are OKRs (Objectives and Key Results) and KPIs (Key Performance Indicators). You’ve probably heard these acronyms thrown around in meetings or read about them in articles, but do you know what they mean? More importantly, do you know which one you should be using to get the most out of your team and reach your business goals?
What Are OKRs?
OKRs are all about setting big, ambitious goals and then outlining measurable steps to achieve them. Think of it as a roadmap. You have a destination in mind (your objective), and the key results are the mile markers along the way that tell you how close you are to getting there.
Here’s the structure:
- Objective – This is the big goal. It should be clear, inspiring, and challenging.
- Key Results – These are the measurable outcomes that let you know if you’re on track to reach your objective. They should be specific, time-bound, and aggressive.
For example, an objective might be to “Expand our customer base in the next quarter.” The key results could look like:
- Increase the number of new leads by 20%.
- Improve customer retention by 10%.
- Launch two new marketing campaigns targeting new demographics.
Notice how the key results are clear and measurable. That’s the beauty of an OKR —it will push you to dream big but also keep you grounded with specific, trackable progress.
What Are KPIs?
KPIs, on the other hand, are all about measuring ongoing performance. Instead of focusing on big, transformative goals, KPIs are there to give you a snapshot of how your business is doing on a day-to-day basis. They are like your business health check, helping you monitor performance in key areas.
KPIs can cover just about any aspect of your business, from sales figures and customer satisfaction to website traffic and employee productivity. The key is that they are specific to your company’s regular operations.
For instance, if you’re running an e-commerce business, a KPI might be your shopping cart abandonment rate, while a retail store might track its foot traffic and average transaction value.
The Key Differences
While OKRs and KPIs might seem similar at first glance—they both involve measurement, after all—there are some significant differences between them. Here are a few ways they differ:
- Purpose – OKRs are used to set ambitious, forward-thinking goals. They’re for when you want to stretch beyond your current limits. KPIs, on the other hand, are used to measure how well your business is performing in specific areas over time.
- Scope – OKRs typically focus on big, company-wide objectives, while KPIs can be used to track the performance of individual departments, teams, or even processes.
- Timeframe – OKRs are generally short-term (quarterly or annual) and tied to strategic goals, while KPIs are often ongoing and don’t necessarily have an endpoint.
- Measurement – OKRs are all about achieving a specific result and then moving on to the next objective. KPIs, on the other hand, are more about monitoring continuous performance and spotting trends.
- Ambition – OKRs encourage teams to think big and take risks. They’re meant to be challenging and sometimes even a bit of a stretch. KPIs are more focused on what’s realistically achievable, giving you a clear picture of how things are going.
When to Use OKRs vs. KPIs
So, should you be using OKRs or KPIs? The answer isn’t necessarily one or the other. Both have their place, and many successful businesses use both to their advantage.
- Use OKRs when you want to drive growth – If you’re looking to push your business in a new direction or take on a bold new challenge, OKRs are your go-to. They’ll help you focus on big-picture objectives and give you the tools to measure progress toward those ambitious goals.
- Use KPIs when you want to measure performance – If you’re more interested in keeping a close eye on ongoing business operations or making sure your company is maintaining a certain standard, KPIs are what you need. They’ll give you clear metrics that can be tracked and monitored over time.
In fact, many businesses find that OKRs and KPIs work best when used together. OKRs help you set the goals, and KPIs help you measure the progress toward those goals. For example, if your objective is to increase customer satisfaction, a relevant KPI might be your Net Promoter Score (NPS), which you can track regularly to see how you’re doing.
Which Is Right for You?
The question of whether to use OKRs or KPIs comes down to what you’re trying to achieve. If your company is ready to innovate, take risks, and aim for transformational growth, OKRs are going to give you the structure and focus you need. But if you want to keep tabs on ongoing operations and make sure you’re performing at your best, KPIs are the way to go.
Here’s a thought: why not use both? Many companies blend OKRs and KPIs to strike a balance between long-term growth and short-term performance tracking. You can set OKRs to focus on future growth while relying on KPIs to keep your operations running smoothly in the present.
Ready to Make a Decision?
Whether you choose OKRs, KPIs, or a mix of both, the key is clarity. What are your priorities right now? Are you trying to move the needle with ambitious goals, or are you focused on optimizing your day-to-day performance? Once you’re clear on that, the choice between OKRs and KPIs becomes a lot easier.
Whatever you decide, just remember: setting the right goals and tracking the right metrics is crucial to your success. So, which will you start using?
