OKR vs KPI: How They Differ and Why You Need Both to Be Successful
Confused between an OKR vs KPI?
OKRs and KPIs are a dynamic duo in the world of goal setting and performance measurement.
However, just like any great duo, they have to play different roles to execute a mission flawlessly.
While OKR takes a close look at processes and the bigger picture, KPI focuses on the outcome and attainable goals.
In this article, we’ll take a look at each of them in detail, how they differ in approach, and how they can be used together. We’ll also highlight a project management tool that can handle both methods.
In order for us to investigate the differences between OKRs vs KPIs properly, we need to take on the role of two famous detectives from 221B Baker St. So, put on your top hat and get ready for some good ol’ clue spotting 🎩
- What Are OKRs?
- What Are KPIs?
- Differences between OKR and KPI
- How OKRs and KPIs Can Work Together to Achieve Business Goals
Let’s get sleuthing! 🔎
What Are OKRs?
Note: We’ll cover what OKRs and KPIs are first to help you better understand what they are and how to use them. However, if you’re just looking for a comparison between the two, skip ahead to our handy comparison chart.
OKR stands for objective and key results.
It’s a goal-setting framework that helps you develop goals and devise a way to measure them.
Let’s break down OKRs even further into two components.
Your objectives are the specific goals you want to achieve, and the key results are the metrics that track your progress towards meeting those goals.
Once you complete your key results, you achieve your objectives.
You’re essentially a detective who needs to gather all the clues (key results) before solving the case (the objective).
OKRs are usually used to set quarterly goals.
So every quarter, you need to complete an OKR cycle that has three simple steps:
- Set: create great goals for your company. These goals should be inspiring and actionable
- Align: ensure that each team’s objectives align with the company strategy
- Achieve: ensure teams are working towards and tracking their OKRs. You can do this by having weekly check-ins
What Are the Different Types of OKRS?
The OKR framework is all about being Agile and creating OKR goals that work for you, so of course, there are different kinds:
- Aspirational OKR: Similar to a stretch goal, aspirational OKRs are glorious goals that you want to achieve, but you know you might not achieve completely
- Committed OKR: these are the targets you’re expected to meet
- Strategic OKR: focuses on the larger vision and are usually long-term
- Tactical OKR: these are for more low-level teams working on individual short-term projects
- Individual OKRs: these focus on tracking individual employee performance and boosting employee engagement in the OKR process
How Do I Set OKRs?
Here’s all you need to do to implement the OKR methodology:
When setting up your OKRs, you should always have some way to ensure that the goal is achievable.
To do this, you need to follow this simple formula:
I will: (objective)
As measured by: (set of key results)
Here’s an OKR example:
OKR Objective: I will increase my company’s annual revenue by 50% as measured by:
Key Result 1: Acquiring 100 new customers
Key Result 2: Increasing marketing leads by 40%
Key Result 3: Increasing customer retention to 90%
By accomplishing the above sales goals (key results), you achieve your objective.
And if you need help with goal management, try out ClickUp’s Goals feature.
With ClickUp’s Goals, you can create Goals and split them into smaller Targets.
Once you set a Target, you can check how well you’re doing by tracking how your progress in achieving that Target (key result) has contributed to your Goal (objective).
Here’s a table to unboggle your brain:
|OKR Terminology||ClickUp Terminology|
Basically, when you’re setting up Goals in ClickUp, you’re actually setting up OKR Objectives, and when you’re setting up Targets in ClickUp, you’re setting up OKR Key Results.
You can also use Goal Folders to keep all your new and existing goals in one place.
You can also use Folders to group your weekly goals and align business objectives. This helps you unify your company as everyone knows what’s going on and how they can contribute to the company’s largest goals.
But that’s not the only kind of Goal you can track in ClickUp.
Common OKR Mistakes
Although OKRs are a source of inspiration for companies, there are a few common mistakes that can make your objectives unattainable:
1. Building OKRs in a vacuum
Building OKRs in a vacuum means that you’re making decisions without paying attention to what other departments of your business are doing.
Your objectives won’t really align with your organizational objective.
So, when building OKRs, you can either use a top-down or bottom-up approach.
For example, Managing directors set a bunch of high-level OKRs for department managers who set smaller OKRs for teams, and so on.
You should also communicate your OKRs to your entire company. This way, cross-functional teams and individuals have a common goal and can be transparent about what tasks and projects they’re working on.
This sort of transparency encourages collaboration and accountability.
2. Not setting challenging objectives
This goes against the entire OKR framework!
Setting ambitious goals is a critical success factor. If you aren’t ambitious enough, how can you expect your team to reach its full potential and reach for the moon? 🌚
Learn the 7 steps to efficiently set team goals.
3. Setting unclear key results
Your key results determine how successful your objectives turn out to be. So setting vague key results will lead to ineffective objectives. Here’s an example of an unclear personal KR:
Objective: Wake up earlier (Why?)
- Set an alarm (When?)
- Go to bed earlier (At what time?)
- Write down things to do (What things and why?)
KRs should be super specific, follow Mycroft’s advice, and…
What Are KPIs?
KPI stands for key performance indicator.
KPI goals only target key business objectives.
Hence the name 😉
The KPI framework focuses on the outcome and not activities.
For example, KPIs care about how the detective solved the case rather than the number of hours that detective put into that case.
KPIs are a great tool to track the overall performance of a company and to keep team members accountable.
You can keep your team members even more accountable by using ClickUp’s Reports.
With ClickUp’s detailed reports, you’ll have everything you need for performance management.
Here are the amazingly-detailed reports you can use to track your team’s performance:
- Task Completed Report: determines how many tasks each team member has completed
- Worked On Report: see the number of tasks each member worked on a specific day, week, or month
- Who’s Behind Report: identify the team member who needs to step up their game by visualizing the number of “work in progress” or unfinished tasks
- Time Tracked Report: determine how much time each team member takes to complete a task
Looking for more reports? Check out our ultimate guide on KPI reports.
What Are the Different Types of KPIs?
Here are the five most-used KPIs:
- Quantitative indicators: these are indicators that can be measured by a number. For example, the number of cases solved
- Qualitative indicators: these are characteristics of a business. For example, opinions and traits. A common qualitative indicator is employee satisfaction
- Leading indicators: these predict the outcome of a process and confirm long-term trends. For example, the number of new cases
- Lagging indicators: these are used to measure the success or failure of a process at the end of a time period
- Input indicators: these measure the number of resources used. For example, the number of experiments you conducted to solve a case
BTW, here are some more resource management tips!
How Do I Set KPIs?
Specific: While you achieve your goals and objectives, KPIs are there to measure your performance to the T. But to get accurate results, your KPIs need to be as specific as possible.
Measurable: Every KPI you set needs to be measurable, so you can easily see how things are going. This way, you can verify if things are on the right track.
Relevant: As you’re using KPIs to track performance over key areas, your KPI metric must be relevant to whatever you’re doing.
Here are some KPI examples for common goals:
- Solving cases faster: decrease the time taken to solve cases by 8% by August 2020
- Obtaining more clients: increase online merchandise sales to $500,000 by November 2020
- Boost organic web traffic: increase website traffic by 30% by July 2020
- Increasing revenue: increase our annual revenue by 7% by December 2020
However, to track your KPIs efficiently, you’re going to need a KPI dashboard.
But don’t worry, after much sleuthing, we’ve uncovered that ClickUp has the perfect Dashboards just for you.
Let’s take a look:
Each Dashboard can have different Custom Widgets. Use them to monitor a chosen performance metric in a style of your choice.
Here’s are all the widgets you can choose from in ClickUp:
- Line Chart
- Bar Chart
- Pie Chart
- Battery Chart
- Calculation (to calculate sums, averages, and other numerical data)
With all these Widgets, your detectives have all the gadgets and gizmos they need! 📈
Common KPI Mistakes
If you don’t set your KPIs properly, they’ll end up looking fantastic on paper but not so fantastic when you actually try to implement them.
To help you avoid this, let’s take a look at the two common KPI mistakes:
1. Not having enough KPIs
You need to have more than one KPI. If you’re only looking at half the picture, you’ll only get half the results!
2. Being too vague
Being specific is important for any performance management framework.
Sometimes KPIs fail because they aren’t that specific.
For example, just saying: solving more cases or obtaining more clients doesn’t really cut it 💇
KPIs aren’t ideas of what you think success looks like.
For your KPIs to be a success, they need to have specific indicators that are relevant to your company objective and can be measured over time.
You need the following:
So, Our KPI is: Decrease time taken to solve cases by 8% by August 2020 so that our detectives have more time to solve other cases.
This is a specific KPI because the detectives know who needs to do it, what’s expected of them, when they need to do it and why they’re doing it.
Differences between OKR and KPI
Here’s a chart summarizing all the differences between OKR and KPI:
|Focus||The OKR process focuses on goal setting||KPI focuses on the outcome of a process|
|Approach||OKRs have a larger vision but are always quantifiable and have a timeline||KPIs aim to improve or scale a specific project. They focus on strategic objectives and targets|
|Process||Set a goal and track the completion process||Evaluates the performance of an ongoing process|
|Structure||Consists of objectives that have key results under them. Complete the key results to achieve your objective||Includes business-specific key performance indicators. For example, Net Promoter Score is a customer loyalty KPI|
|Goals||OKRs are usually more ambitious and push your team to achieve more!||KPIs are usually more attainable and realistic|
How OKRs and KPIs Can Work Together to Achieve Business Goals
Apart from the fact that both OKRs and KPIs are used to measure performance in your company, here are a few other reasons why you need both:
1. You need to use goal-setting tools to implement performance metrics
Without both, you’re missing out on the opportunity to perform even better.
You can use an OKR software to accomplish this.
Sherlock and Watson certainly agree.
2. They’re connected
A successful KPI could be a key result in an OKR.
For example, your objective in your OKR is to become a market leader in the advertising industry, and your measurable result is to increase your staff by 50%. In order to measure this key result, you need to count the number of employees you have.
And how are you going to measure that increase in your staff?
With a KPI formula.
3. They complement each other
KPIs help you set attainable goals and keep your team accountable, whereas OKRs help you inspire and encourage your team to reach for more ambitious results.
Like a cherry to your sundae 🍧
You just gotta have both!
Now that we’ve closed the case between KPI vs OKR, let’s take a final look at the clues we found 📝
KPIs and OKRs both help you measure performance, but in different ways: KPIs are grounded, like Watson, whereas OKRs are more ambitious, like Sherlock.
And using both of them is like having both by your side; no goal is too complicated for this powerful duo to reach!
But to help you achieve even better results, you need a project management tool like ClickUp.
If you need help with setting and managing your OKRs and KPIs, ClickUp can help you every step of the way with features like Goals, Team Reporting, and Dashboards.
Like Sherlock’s brilliant brain, ClickUp’s is the perfect tool to help you plan meticulously and think outside the box.
Get ClickUp for free today to feel like this every time you achieve your objectives: