OKR and KPI: The difference between the 2 solutions and how to apply OKR and KPI effectively

Most of us are surely familiar with the terms OKR and KPI in corporate goal management. Both concepts are effective performance evaluation methods chosen by many individuals and organizations. However, between OKR and KPI, which is the superior solution? Should businesses use one solution to manage goals, or combine both of these indicators? Let’s find the answer in the article below.

I- The Concepts of OKR and KPI

1. The Concept of KPI

KPI stands for Key Performance Indicator, a metric used to better understand how performance measures are functioning. KPIs, as the name suggests, are measurable indicators or values used to assess the progress of an individual or organization against certain desired outcomes. KPIs are about identifying key metrics that can be used to drive organizational behavior.

2. The Concept of OKR

OKR is a goal-setting tool used by individuals or teams to achieve important objectives. OKRs aim to bring about sustainable changes in performance to achieve your goals. It is a collaborative framework that uses specific measurable values to track the achievement of your goals.

II- The Difference Between OKR and KPI

1. Similarities

• Both must be specific, clear, and measurable. We recommend using Red-Yellow-Green success criteria for every key result and performance indicator.
• Help businesses focus on truly important metrics. Both acronyms contain the letter K for Key – meaning they both require you to make choices to focus on the few most important things. You should have 3-5 key results at any given time and no more than 8-12 KPIs.
• Users can use OKRs and KPIs for the company, departments or teams, and individuals with a specific project.
• Support business operations by aligning personnel to execute clearly defined and effectively measured goals.
• They are set for an individual or a team, but even those within a team need an owner responsible for the results.

2. The Difference Between OKR and KPI

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3. Should businesses choose KPIs or OKRs?

Now that you know the difference between OKRs and KPIs, you are probably wondering whether to use OKRs or KPIs for the best results. This is a question that not only you but also many others are pondering between these two solutions. If your organization is more focused on stability than growth, KPIs may be more suitable to ensure that you are meeting all the metrics you have set.

For example: If your organization is looking to scale or improve a previously implemented plan or project, KPIs might be a better choice. They are simple and allow you to add a measurement system to your ongoing projects and processes.

However, if your business has a larger vision or is looking to change its overall direction, OKRs are the better choice. The OKR method allows you to expand your goals further and be more creative in planning and achieving them.

Read more: What is a KRI? Differentiating the terms KRI, PI, and KPI in business management in the simplest, most understandable way

4. How do OKRs and KPIs work together?

KPIs and OKRs can be combined and work well together. If a KPI result indicates a need for improvement, it can become a “key result” of a new or existing OKR. For example, if KPI results show that sales are high, a company might develop an OKR to improve overall business profitability, marketing, or customer service, all of which would include key results based on meeting existing KPIs.

Similarly, achieving an OKR goal may indicate the need to develop new KPIs to measure the company’s new reality. As you can see, applying both the OKR method and KPIs requires consistent communication between managers and employees to share, provide feedback, and discuss progress to identify potential opportunities and challenges. If a business knows how to use them correctly, both OKRs and KPIs are effective tools for evaluating goals.

=> See More: TOP 10 effective KPI management software for Businesses

5. Examples of OKRs and KPIs

Examples of OKRs

OKRs are a bit more specific and ambitious than KPIs but can also be applied to the entire organization, to individual employees, or to specific projects. The ultimate result you are looking for is the achievement of each goal you initially set. You will see through these examples that OKRs are more competitive goals that define and measure the success level of each objective you set out to achieve. Check them out below:

Personal OKR

• Objective: Increase online presence and following by 30%
• Key Result 1: Increase posting frequency to 5 times daily on Twitter, 5 times daily on TikTok, 3 times daily on Instagram, and 3 times daily on Facebook.
• Key Result 2: Establish a stronger social media presence by posting on platforms at least 1-2 times per day
• Key Result 3: Follow influencers with at least 5,000 followers and leave comments on popular posts on several different platforms.
• Key Result 4: Gain 30 followers on Twitter by posting about trending topics and 20 followers on TikTok by using trending sounds and trends at least twice a week.

Sales Department OKR:

• Objective: Increase revenue by 10%
• Key Result 1: Attract at least 50 new potential customers.
• Key Result 2: Acquire 20 new customers.
• Key Result 3: Increase marketing qualified leads by 15%.
• Key Result 4: Increase customer retention rate to 70%.
• Key Result 5: Follow up after one week with each customer to increase satisfaction level
• Follow up after one week with each customer to increase customer satisfaction by 15%.

Marketing Department OKR

• Objective: Increase blog traffic by 25%
• Key Result 1: Increase Twitter followers from 2,500 to 3,000 by December 1, 2021.
• Key Result 2: Be referenced in 3 content articles on top industry online publications.
• Key Result 3: Increase blog subscribers from 3,000 to 4,150.
• Key Result 4: Publish 100 new blog posts in Q3.

KPI Examples

KPIs help measure an organization’s success by examining the performance metrics and work results of the organization, its employees, specific projects, and various departments. These metrics are used to measure the company’s success as well as its business initiatives. Below are some examples of KPIs at each of these levels: 

For the organizational level: 

KPIs are reflected in performance, revenue, public opinion, employee satisfaction, competitive advantage, and innovation.

For individuals

KPIs evaluate employees on performance, attendance, punctuality, communication, and commitment.

Specific projects – i.e., integrating a new software tool

Employee and management attitudes, impact on productivity, ROI effectiveness

Technology Department

KPIs are evaluated based on monthly recurring revenue, customer retention rate, problem resolution time, as well as necessary reports

Human Resources Department

For the HR department, KPIs are reflected in talent acquisition, recruitment rate, employee retention, as well as employee satisfaction, training, and development.

III- The Process of Transitioning from KPI to OKR

To transition from KPI to OKR, follow the steps below

Step 1: Set Objectives

Since these two types of goals are different, you cannot simply copy them from your KPIs. Therefore, you need to carefully review your KPI methods and incorporate them into your objective groups. 

Step 2: Create Key Results from KPIs

Once you have set your objectives, you can use your KPIs as key results in the model. Therefore, you need to ensure you don’t have too many KPIs for one objective to avoid overload, making it easier to implement and execute.

Step 3: Define the Key Results to be Achieved

To accurately assess the key results to be achieved, you should apply the SMART model to evaluate the set objectives. This will help you define key results that are measurable, achievable, and time-bound.

Therefore, you need to answer the following questions: 

• S (Specific): Are those results specifically defined and easy for team members to understand?
• M (Measurable): Can the success or failure of those objectives be measured?
• A (Achievable): Can these results be realistically achieved?
• R (Relevant): Evaluate the relevance of your objectives. Do you have enough resources and time, and will that objective bring profit to the company?
• T (Time-bound): What is the timeframe for completing the objective, and can you achieve it within the set period?

IV- 1Office – The Solution for Effective Business Goal Management

1Office is a goal management software within the 1Office business management suite that helps manage KPI/OKR goals comprehensively and effectively, suitable for businesses in today’s Industry 4.0 era. With many smart features, the software helps you digitize the entire workflow and manage everything centrally on one platform. This helps managers allocate, track, and evaluate goals easily.