OKRs versus KPIs in performance management

OKRs and KPIs get discussed as though you have to pick one. You do not. They do different jobs, and the organisations that get the most out of either tend to run both.

What OKRs are

Objectives and Key Results. The Objective is a high level goal, ambitious but reachable. The Key Results are the quantified measures that tell you whether you got there. They are usually set quarterly and, importantly, published, so everyone can see what everyone else is working towards.

A software team might set an objective of launching a mobile app with 10,000 downloads in the first quarter, with key results of finishing development inside the quarter, holding a 4.5 star rating on both app stores, and reaching 5,000 downloads in the first month. A marketing team might aim to raise website traffic by 20% in a quarter, with key results of 10% growth each from blog, social and paid search.

What KPIs are

A Key Performance Indicator is a single metric tracking progress against a specific goal, and it can sit at any level: a person, a team, a department, the whole organisation. KPIs are usually reviewed monthly or weekly, which is the point of them. They exist to surface a problem while there is still time to do something about it.

Revenue, profit, customer satisfaction, employee turnover, traffic, leads generated, conversion rate, cost per acquisition, return on investment. All KPIs.

How they differ

Focus

OKRs are about outcomes. KPIs are about performance against a measure.

Timeframe

OKRs quarterly. KPIs monthly or weekly.

Ambition

OKRs are deliberately stretching. KPIs are specific and measurable, and usually expected to be met.

Visibility

OKRs are typically public across the organisation. KPIs typically are not.

What they are

OKRs are a goal setting framework. KPIs are a performance management framework.

Using them together

The natural arrangement is OKRs setting direction and KPIs tracking the journey. An objective of growing revenue 10% in a quarter is monitored through traffic, lead generation and conversion rate. When the app launch team is not generating enough leads from its landing page, that shows up in a KPI long before the quarter ends, and the campaign or the page copy can change.

What makes the combination work is unglamorous. Tie both to the business strategy rather than to departmental convenience. Keep the targets stretching but reachable, because a target nobody believes in is ignored. Make the goals specific, measurable and time bound. Review progress on a rhythm rather than when someone remembers. Be open about the numbers across the organisation. Use what you find to recognise good work rather than only to catch problems. And change the targets when the facts change, which is a sign of a working system rather than a failing one.

When to lean on OKRs

When the goals are aspirational, when teams need aligning around something common, when you want progress visible and collaborative, and when the organisation is growing fast or changing shape. In those conditions the transparency does more work than the measurement.

When to lean on KPIs

When you need to know how things are going now, when early warning matters, when you want to benchmark against competitors or an industry standard, and when recognition and reward need something defensible behind them.

Where this fits in the certificate

Goals and objectives, OKRs included, are Module 4 of the Certificate in Performance Management, and the module on the performance management cycle covers the review rhythm that makes either framework function. The free trial module opens one module in full.

Worth reading alongside this: Harvard Business Review on using OKRs for teams rather than individuals, and Forbes on why KPIs often fail and how to fix them.