OKRs vs. KPIs in Company Performance Management

Key takeaways

The differences between an OKR and a KPI distinguish how you can best use each to reach your goals.

• KPIs are metrics that you use to measure objectives you’re working to achieve. 

• OKRs serve as a comparatively larger framework, measuring several insights in your efforts to reach business objectives.

• You can use OKRs and KPIs to improve a wide range of business processes, including recruiting, employee retention, resource allocation, and decision-making.

Explore the similarities and differences between using OKR versus KPI strategies. If you’re interested in providing learning opportunities for your workforce to help them reach key business objectives, Coursera for Business offers expert-led courses where your employees can develop high-demand skills in a variety of training formats, such as Guided Projects and Professional Certificates.

What is an OKR vs. KPI?

At a high level, OKRs provide a framework for defining organizational goals and for measuring progress toward each one. Conversely, KPIs are standalone metrics you can apply to larger objectives, such as projects, programs, or initiatives. Understanding the distinction between OKRs and KPIs can help you learn how to utilize each and integrate them into your organizational strategy. 

What is a KPI?

Typically, KPIs are standalone performance metrics you can apply to your larger objectives. Companies and leaders align these metrics with strategic goals that help their organizations assess the effectiveness of their current practices in achieving their business objectives. Sometimes, your KPI might track specific employee productivity and can help you with periodic performance evaluations.

KPIs can provide a performance snapshot at different organizational levels and show how other areas perform. The metrics serve as a guide, alerting you to where to allocate resources effectively to improve performance and providing insight into areas that need adjustment. 

What are the benefits of KPIs?

You can expect several benefits when you implement KPIs into your business strategy. For one, KPIs easily allow you to measure your progress toward specific goals, providing clear tracking metrics for resources, employees, customer interactions, and more. Other benefits you might see include:

• The proactive ability to handle challenges 

• Insight to make data-driven adjustments 

• The ability to identify clear patterns to make predictions on future performance

• Automatic health checks for your organization

• Accountability for different teams

Example KPIs by industry

Different industries use different KPIs to track metrics relevant to their field. For example, you might see the following KPIs in these industries: 

Retail:

• Revenue by square foot: Measures the efficiency of the retail space used

• Conversions: Calculates the number of potential customers who make a purchase, converting from window-shopping to paying customers 

• Sales per employee: Assesses the productivity of the sales force

Human resources:

• Recruitment time: Tracks the efficiency of the hiring process

• Training effectiveness: Measures how well training programs teach intended skills

• Attrition rate: Tracks employee exit rate from the company, indicating overall workplace satisfaction and how well a company retains its talent

Health care:

• Patient wait time: Evaluates the efficiency of patient service

• Rate of procedure success: Tracks patient outcomes related to specific procedures

• Treatment charge average: Provides insight into the cost-effectiveness of medical treatments

How to define your company's KPIs

When you define KPIs for your workforce and organization, it’s vital to ensure you maximize the benefits of the measures you devote resources to. One way to do this is to employ the SMART framework, which stands for specific, measurable, achievable, relevant (or realistic), and time-bound. By ensuring your KPIs are well-defined, clear, aligned with your goals, and on a consistent assessment schedule, you have the tools in place to track your performance meaningfully.

When defining KPIs, you can organize your thoughts by asking a few key questions: 

• Who is responsible for achieving this KPI?

• What do they need to do to achieve or maintain this KPI?

• How will you measure the KPI?

These questions can help you frame the KPI in the broader organizational context and organize it within your mind to apply the SMART framework effectively. If answering these questions is challenging, it might be time to revise how you approach a specific KPI.

Tips for maximizing KPI benefits

To ensure your KPIs deliver the desired outcomes, you must approach their selection and management thoughtfully. The following suggestions can help you when choosing and defining your KPIs. 

Focus on core metrics. 

To avoid information overload, select KPIs that concentrate on areas that are top priority for your current goals. It helps focus workforce efforts rather than spreading resources too thinly. 

Set achievable targets. 

Your KPIs should be ambitious yet attainable. Unrealistic KPIs can demotivate teams and skew company insights. 

Leave room for adjustments.

Your business environment is dynamic, meaning you might need to shift strategies in response to market changes. Regularly review your progress and goals to adjust as needed.

What is an OKR?

An OKR pairs a strategic objective or a broad, high-level goal with several key results that you will use to measure whether you’ve met the objective. Rather than a single metric, an OKR is a strategic framework that aligns objectives and results toward a goal. OKRs are typically organization-oriented and set by leadership rather than tracking individual employee performance.

Typically, your OKR will include three to five objectives and one to three key results per objective. Your objectives should be high-level and immeasurable. Examples include goals such as “increase salesforce productivity to increase company profits” or “increase customer satisfaction to increase returning customers.” 

Objectives should take longer to achieve, often representing a longer-term organizational goal. Your key results then provide the measurement piece, such as “increase outgoing calls to potential customers by 15 percent next month” or “improve customer ratings by 10 percent over the next quarter.” When reviewing your OKRs, you should be able to use your key results to determine whether you have met your objective.  

What are the benefits of OKRs?

OKRs help your organization set meaningful goals and provide a framework for systematically achieving those goals. By implementing this framework, you might notice the following benefits:

• Improved alignment: OKRs ensure that everyone in the organization understands the top priorities and how their efforts contribute towards achieving them. 

• Improved decision-making: Accurate progress reports toward larger objectives help you decide how to adjust future objectives or initiatives.

• Improved resource allocation: OKRs provide a strategic plan that helps you know how and where to allocate your resources.

• Improved employee experience: OKRs can positively impact employee engagement and satisfaction. They provide employees with a view of what you expect of them, offer learning and growth experiences, and show how their work contributes to the organization’s success. 

• Improved business performance: By focusing on measurable results, your teams always work towards clearly defined outcomes, enhancing productivity and efficiency. Over time, this helps your teams work toward larger goals.

Example OKRs 

When you set OKRs, you should define a period to meet that objective. You might make these quarterly or annually to allow more time to meet higher-level targets. To illustrate, consider the following examples.

Example 1

Quarterly objective: Increase customer satisfaction to drive repeat business.

Quarterly key results: 

1. Send a discount offer to every customer who has made a purchase in the last six months.

2. Collect feedback from 20 customers each month.

3. Launch a new advertising campaign to target previous customers.

Example 2

Annual objective: Increase sales productivity to improve company profitability and sustainability.

Annual key results:

1. Fifty new leads for each sales employee.

2. Sell $1M in sales volume across all sales employees.

3. Execute 12 targeted lead campaigns. 

How to write OKRs

Writing OKRs involves carefully reviewing your overarching business goals and setting clear steps to achieve them. When starting, follow these steps:

Define the objective.

Start by defining a clear, concise, and aspirational objective. This qualitative statement should describe the intended accomplishment, focusing on the desired outcome and how it motivates and challenges the team.

Create a plan.

Next, designing a plan outlining the key actions or strategies to help you reach your objective is essential. The plan should involve specific people, teams, or stakeholders.

Implement the plan.

Next, mobilize your resources and teams to achieve critical results. Effective implementation requires good communication and coordination among all stakeholders.

Track progress.

Lastly, regularly monitor and evaluate the progress against each key result. Doing this will inform you about what’s working and what isn’t. Afterward, make adjustments as needed to stay on track.

Read more: OKR Examples for Learning and Development: How to Get Started

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